NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
1.
BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
Car
Charging Group, Inc. (“CCGI”) was incorporated on October 3, 2006 under the laws of the State of Nevada as New Image
Concepts, Inc. On December 7, 2009, New Image Concepts, Inc. changed its name to Car Charging Group, Inc.
CCGI,
through its wholly-owned subsidiaries (collectively, the “Company” or “Car Charging”), acquires and installs
electric vehicle (“EV”) charging stations and shares servicing fees received from customers that use the charging
stations with the property owner(s), on a property by property basis. In addition, the Company sells hardware and enters into
individual arrangements for this purpose with various property owners, which may include municipalities, garage operators, hospitals,
multi-family properties, shopping malls and facility owner/operators.
2.
GOING CONCERN AND MANAGEMENT’S PLANS
As
of December 31, 2016 , the Company had a cash balance, a working capital deficiency and an accumulated deficit of $5,898,
$21,184,871 and $81,071,782 , respectively. During the years ended December 31, 2016 and 2015 , the Company incurred
net losses of $7,699,127 and $8,244,924, respectively. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern within a year after the issuance date of this filing.
Since
inception, the Company’s operations have primarily been funded through proceeds received in equity and debt financings.
Although management believes that the Company has access to capital resources, there are currently no commitments in place for
new financing at this time, except as described below, and there is no assurance that the Company will be able to obtain funds
on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will
enable the Company to complete its development initiatives or attain profitable operations. If the Company is unable to obtain
additional financing on a timely basis, it may have to curtail its development, marketing and promotional activities, which would
have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately
the Company could be forced to discontinue its operations and liquidate.
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America (“U.S. GAAP”), which contemplate continuation of the Company as a going concern and
the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements
do not include any adjustment that might become necessary should the Company be unable to continue as a going concern.
Subsequent
to December 31, 2016, the Company received an aggregate of $1,252,667 associated with the issuances of convertible and non-convertible
notes payable. In addition, pursuant to a convertible note, an additional $1,294,900 of funding could be released to the Company
upon the completion of certain contractually defined milestones. See Note 11 – Notes Payable – Convertible Notes and
Other, Note 18 – Subsequent Events – Convertible Note and Note 18 – Subsequent Events - Non-Convertible Notes
– Related Party for additional details. There can be no assurance that the Company will be successful in attaining the defined
milestones.
The Company
is currently funding its operations on a month-to-month basis. While there can be no assurance that it will be successful, the
Company is in active negotiations to raise additional capital.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the accounts of CCGI and its wholly-owned subsidiaries, including Car Charging, Inc.,
Beam Charging LLC (“Beam”), EV Pass LLC (“EV Pass”), Blink Network LLC (“Blink”) and Car Charging
China Corp. (“Car Charging China”). All intercompany transactions and balances have been eliminated in consolidation.
Through
April 16, 2014, 350 Green LLC (“350 Green”) was a wholly-owned subsidiary of the Company in which the Company had
full voting control and was therefore consolidated. Beginning on April 17, 2014, when 350 Green’s assets and liabilities
were transferred to a trust mortgage, 350 Green became a Variable Interest Entity (“VIE”). The consolidation guidance
relating to accounting for VIEs requires an enterprise to perform an analysis to determine whether the enterprise’s variable
interest or interests give it a controlling financial interest in a variable interest entity and perform ongoing reassessments
of whether an enterprise is the primary beneficiary of a VIE. The Company determined that it is the primary beneficiary of 350
Green, and as such, 350 Green’s assets, liabilities and results of operations are included in the Company’s consolidated
financial statements.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
USE
OF ESTIMATES
Preparation
of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the
financial statements. The Company’s significant estimates used in these financial statements include, but are not limited
to, stock-based compensation, accounts receivable reserves, warranty reserves, inventory valuations, the valuation allowance related
to the Company’s deferred tax assets, the carrying amount of intangible assets, estimates of future EV sales and the effects
thereon, fair value of derivative liabilities and the recoverability and useful lives of long-lived assets. Certain of
the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic
conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could
cause actual results to differ from those estimates.
CASH
The
Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents
in the consolidated financial statements. The Company has cash on deposits in several financial institutions which, at times,
may be in excess of FDIC insurance limits. The Company has not experienced losses in such accounts.
ACCOUNTS
RECEIVABLE
Accounts
receivable are carried at their contractual amounts, less an estimate for uncollectible amounts. As of December 31, 2016
and 2015 , there was an allowance for uncollectable amounts of $42,349 and $140,998 , respectively. Management
estimates the allowance for bad debts based on existing economic conditions, the financial conditions of the customers, and the
amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due
date. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have
been exhausted.
INVENTORIES
Inventory
is comprised of electric charging stations and related parts, which are available for sale or for warranty requirements. Inventories
are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Inventory that is sold to third
parties is included within cost of sales and inventory that is installed on the premises of participating owner/operator properties,
where the Company retains ownership, is transferred to fixed assets at the carrying value of the inventory. The Company periodically
reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete, if any, are written down
to net realizable value. Based on the aforementioned periodic reviews, the Company recorded an inventory reserve for slow-moving,
excess or obsolete inventories of $154,000 and $290,000 as of December 31, 2016 and 2015 , respectively.
As
of December 31, 2016 and 2015 , the Company’s inventory was comprised solely of finished goods and parts that
are available for sale.
FIXED
ASSETS
Fixed
assets are stated at cost, net of accumulated depreciation and amortization which is recorded commencing at the in-service date
using the straight-line method over the estimated useful lives of the assets, as set forth in the following table:
Asset
|
|
Useful
Lives
(In
Years)
|
|
|
|
|
|
Computer
software and office and computer equipment
|
|
|
3
- 5
|
|
Machinery
and equipment, automobiles, furniture and fixtures
|
|
|
3
- 10
|
|
Installed
Level 2 electric vehicle charging stations
|
|
|
3
|
|
Installed
Level 3 (DC Fast Chargers (“DCFC”)) electric vehicle charging stations
|
|
|
5
|
|
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
FIXED
ASSETS
- CONTINUED
When
fixed assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in the statements of operations for the respective period. Minor additions and repairs are
expensed in the period incurred. Major additions and repairs which extend the useful life of existing assets are capitalized and
depreciated using the straight-line method over their remaining estimated useful lives.
EV
charging stations represents the cost, net of accumulated depreciation, of charging devices that have been installed on the premises
of participating owner/operator properties or are earmarked to be installed. The Company held approximately $48,000 and $29,000
in EV charging stations that were not placed in service as of December 31, 2016 and 2015 , respectively.
The
Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. The Company assesses the recoverability of its long-lived assets by monitoring current
selling prices of car charging units in the open market, the adoption rate of various auto manufacturers in the EV market and
projected car charging utilization at various public car charging stations throughout its network in determining fair value. An
impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual
disposition are less than its carrying amount. See Note 6 – Fixed Assets for additional details.
CAPITALIZED
SOFTWARE DEVELOPMENT COSTS
The
Company capitalizes software development costs in accordance with Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Codification (“ASC”) Topic 985 “Software”. Capitalization of software development
costs begins upon the determination of technological feasibility. The determination of technological feasibility and the ongoing
assessment of the recoverability of these costs requires considerable judgment by management with respect to certain external
factors, including anticipated future gross product revenues, estimated economic life and changes in hardware and software technology.
Historically, software development costs incurred subsequent to the establishment of technological feasibility have not been material.
INTANGIBLE
ASSETS
Intangible
assets were acquired in conjunction with the acquisitions of Beam, EV Pass, and Blink during 2013 and were recorded at their fair
value at such time. Trademarks are amortized on a straight-line basis over their useful life of ten years. Patents are amortized
on a straight-line basis over the lives of the patent (twenty years or less), commencing when the patent is approved and placed
in service on a straight- line basis.
SEGMENTS
The
Company operates a single segment business as disclosed in the notes to the consolidated financial statements. The Company’s
chief operating decision maker views the Company’s operating performance on a consolidated basis as its only business is
the sale and distribution of electric vehicle charging machines and revenues that it earns from customers who use machines connected
to its network, whether owned by the Company or third party hosts.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
DERIVATIVE
FINANCIAL INSTRUMENTS
The
Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify
as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the FASB ASC. The accounting
treatment of derivative financial instruments requires that the Company record the conversion options and warrants at their fair
values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair
value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. Conversion
options are recorded as a discount to the host instrument and are amortized as interest expense over the life of the underlying
instrument. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification
changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
The
Binomial Lattice Model was used to estimate the fair value of the warrants that are classified as derivative liabilities on the
consolidated balance sheets. The model includes subjective input assumptions that can materially affect the fair value estimates.
The expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of
the warrants.
SEQUENCING
POLICY
Under
ASC 815-40-35, the Company has adopted a sequencing policy whereby, in the event that reclassification of contracts from equity
to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient
authorized shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with
the earliest grants receiving the first allocation of shares.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
The
Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements
and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements.
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may
be used to measure fair value:
Level
1 — quoted prices in active markets for identical assets or liabilities
Level
2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
The
carrying amounts of the Company’s financial instruments , such as cash and cash equivalents , accounts receivable
and accounts payable approximate fair values due to the short-term nature of these instruments. The carrying amount of
the Company’s notes payable approximates fair value because the effective yields on these obligations, which include contractual
interest rates, taken together with other features such as concurrent issuance of warrants, are comparable to rates of returns
for instruments of similar credit risk.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
REVENUE
RECOGNITION
The
Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable
and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have
been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Accordingly, when a customer completes use of a charging station, the service can be deemed rendered and revenue may be recognized
based on the time duration of the session or kilowatt hours drawn during the session. Sales of EV stations are recognized upon
shipment to the customer, free on board shipping point, or the point of customer acceptance.
Governmental
grants and rebates pertaining to revenues and periodic expenses are recognized as income when the related revenue and/or periodic
expense are recorded. Government grants and rebates related to EV charging stations and their installation are deferred and amortized
in a manner consistent with the related depreciation expense of the related asset over their useful lives.
For
arrangements with multiple elements, which is comprised of (1) a charging unit, (2) installation of the charging unit, (3) maintenance
and (4) network fees, revenue is recognized dependent upon whether vendor specific objective evidence (“VSOE”) of
fair value exists for separating each of the elements. The Company determined that VSOE exists for both the delivered and
undelivered elements of the company’s multiple-element arrangements. The Company limited their assessment
of fair value to either (a) the price charged when the same element is sold separately or (b) the price established by management
having the relevant authority.
CONCENTRATIONS
During
the year ended December 31, 2016, revenues generated from Entity C represented approximately 13% of the Company’s total
revenue.
During the year
ended December 31, 2015, revenues generated from Entity A and Entity C represented approximately 18% and 16% of the Company’s
total revenue, respectively. The Company generated grant revenues from a governmental agency (Entity A) and charging
service revenues from a customer (Entity C). As of December 31, 2016, accounts receivable from Entity C were 18% of total accounts
receivable.
RECLASSIFICATIONS
Certain
prior year balances have been reclassified in order to conform to current year presentation. These reclassifications
have no effect on previously reported results of operations or loss per share .
STOCK-BASED
COMPENSATION
The
Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award.
For employees, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is
measured on the measurement date and re-measured on vesting dates and interim financial reporting dates until the service period
is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange
for the award, usually the vesting period. Awards granted to non-employee directors for their service as a director are treated
on the same basis as awards granted to employees. The Company computes the fair value of equity-classified warrants and options
granted using the Black-Scholes option pricing model.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
INCOME
TAXES
The
Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included
in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes
it is more likely than not that the assets will not be realized. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in the Statements of Operations in the period that includes the enactment date. As of December 31,
2016 and 2015 , the Company maintained a full valuation allowance against its deferred tax assets since it is more
likely than not that the future tax benefit on such temporary differences will not be realized.
The
Company recognizes the tax benefit from an uncertain income tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized
in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood
of being realized upon ultimate settlement by examining taxing authorities. The Company has open tax years going back to 2013
which may be subject to audit by federal and state authorities. The Company’s policy is to recognize interest and penalties
accrued on uncertain income tax positions in interest expense in the Company’s consolidated statements of operations. As
of December 31, 2016 and 2015, we had no liability for unrecognized tax benefits. The Company does not expect the unrecognized
tax benefits to change significantly over the next 12 months.
NET
LOSS PER COMMON SHARE
Basic
net loss per common share is computed by dividing net loss by the weighted average number of vested shares of Common Stock outstanding
during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number vested of
shares of Common Stock, plus the net impact of shares of Common Stock (computed using the treasury stock method), if dilutive,
resulting from the exercise of outstanding stock options and warrants, plus the conversion of preferred stock and convertible
notes.
The
following Common Stock equivalents are excluded from the calculation of weighted average dilutive shares of Common Stock because
their inclusion would have been anti-dilutive:
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
Preferred
stock
|
|
|
1,053,004
|
|
|
|
967,563
|
|
Warrants
|
|
|
1,095,115
|
|
|
|
1,220,872
|
|
Options
|
|
|
149,233
|
|
|
|
155,633
|
|
Convertible
notes
|
|
|
16,332
|
|
|
|
977
|
|
Total
potentially dilutive shares
|
|
|
2,313,684
|
|
|
|
2,345,045
|
|
COMMITMENTS
AND CONTINGENCIES
Liabilities
for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it
is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
LITIGATION
AND DISPUTES
The
Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
RECENTLY
ISSUED ACCOUNTING STANDARDS
In
May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,”
(“ASU 2014-09”). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605 - Revenue Recognition (“ASC
605”) and most industry-specific guidance throughout ASC 605. The standard requires that an entity recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or services. The guidance in ASU 2014-09 was revised in July 2015
to be effective for interim periods beginning on or after December 15, 2017 and should be applied on a transitional
basis either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially
applying ASU 2014-09 recognized at the date of initial application. In 2016, FASB issued additional ASUs that clarify the implementation
guidance on principal versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10),
and on narrow-scope improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteria and other
technical corrections (ASU 2016-20). The Company has not yet selected a transition method and is currently evaluating the
impact of the adoption of these ASUs on its consolidated financial position and results of operations.
In
July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” (“ASU
2015-11”). ASU 2015-11 amends the existing guidance to require that inventory should be measured at the lower of cost and
net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably
predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using
last-in, first-out or the retail inventory method. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016,
including interim periods within those fiscal years. The adoption of ASU 2015- 011 is not expected to have a material
impact on our consolidated financial statement or disclosures.
In
February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires
an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also
require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the
amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December
15, 2018, with early adoption permitted. The Company is currently evaluating ASU 2016-02 and its impact on its consolidated financial
statements.
In
March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)” (“ASU 2016-09”).
ASU 2016-09 requires an entity to simplify several aspects of the accounting for share-based payment transactions, including the
income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash
flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. The adoption
of ASU 2016- 009 is not expected to have a material impact on our consolidated financial statement or
disclosures.
In
August 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)
2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments” (“ASU
2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified
in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. ASU 2016-15 requires
adoption on a retrospective basis unless it is impracticable to apply, in which case the Company would be required to apply the
amendments prospectively as of the earliest date practicable. The Company is currently evaluating ASU 2016- 15 and its
impact on its consolidated financial statements or disclosures.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
4.
ECOTALITY ESTATE ACQUISTION
On
December 31, 2014, the United States Bankruptcy Court, District Arizona (“Bankruptcy Court”) issued a Confirmation
Order Pursuant to Bankruptcy Rule 9024 in the Bankruptcy case, in regards to: Electric Transportation Engineering Corporation
(Case No. 13-626), confirming a Plan of Reorganization of Electric Transport Engineering Corporation, whereby the Official Committee
of Unsecured Creditors of the estate (“Creditors”) would own 50% of the Reorganized Electric Transport Engineering
Corporation (“Reorganized ETEC”) in consideration, of foregoing the amounts formerly owed by the estate and the Company
would own the remaining 50% of the Reorganized ETEC. The initial consideration as of December 31, 2014 was $1,000,000, consisting
of an initial payment of $275,000 (including $70,000 to be paid on behalf of the estate directly to their professional service
providers and $94,035 representing forbearance of a Blink receivable from the estate) and a subsequent cash payment of $725,000.
On April 10, 2015, the consideration was amended to $1,200,000 consisting of an initial payment of $375,000 (including $280,965
to be paid on behalf of the estate directly to their professional service providers and $94,035 representing forbearance of
a Blink network receivable from the estate) and a subsequent cash payment of $825,000 to the Creditors secured by 8,250 shares
of Series B Convertible Preferred Stock issued in 2015 under the amendment. See Note 14 – Stockholders’ Deficiency
– Preferred Stock - Series B Convertible Preferred Stock for additional details.
As
of December 31, 2016 and 2015 , the ECOtality estate consisted of no material assets, liabilities or business other
than deferred tax assets associated with carryforward net operating losses (“NOLs”). Given that, as of December 31,
2016 and 2015 , there was no implemented plan to realize the benefit of those NOLs, the Company recorded a full valuation
allowance against such deferred tax assets.
5.
ASSETS AND LIABILITIES TRANSFERRED TO TRUST MORTGAGE – 350 GREEN
SUMMARY
On
April 17, 2014, the Company’s Board of Directors executed a resolution to form a trust mortgage relating to
350 Green. On May 29, 2014, the Company and EVSE Management LLC (“EVSE”) entered into a Management Services Agreement
and on June 27, 2014, EVSE purchased certain assets from 350 Green for total consideration of $860,836 which included a note receivable
from Car Charging in the amount of $314,598. On September 8, 2014, the Company entered into an agreement among the trustee of
350 Green, an attorney, 350 Green and the Company whereby the Company would pay the legal fees incurred in connection with an
action brought by 350 Green against JNS Power and Control Systems, Inc. (“JNS”). On September 30, 2014, the Company
(“Assignor”) entered into an Assignment Agreement with Green 350 Trust Mortgage LLC (“Assignee”), an entity
formed by the trustee for the sole purpose to entering into this transaction, under which Assignor, the sole member of 350 Green,
irrevocably assigned, sold and transferred 100% of the limited liability company membership interests in 350 Green to Assignee
and Assignee accepted such transfer for nominal consideration of $100.
Through
April 16, 2014, 350 Green was a wholly-owned subsidiary of the Company in which the Company had full control and was consolidated.
Beginning on April 17, 2014, 350 Green was deemed to be a VIE and, therefore, we continued to consolidate 350 Green. On July 8,
2015, the Company and the trustee of 350 Green agreed to settle the note receivable in the amount of $314,598 for $25,000 in full
satisfaction of the note. On September 9, 2015, the United States Court of Appeals for the Seventh Circuit of Chicago, Illinois
affirmed the ruling of the United States District Court for the Northern District of Illinois in the matter of JNS Power &
Control Systems, Inc. v. 350 Green, LLC in favor of JNS. See Note 17 – Commitments and Contingencies – Litigation
and Disputes for additional details.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
5.
ASSETS AND LIABILITIES TRANSFERRED TO TRUST MORTGAGE – 350 GREEN – CONTINUED
The
following amounts pertaining to 350 Green are included in the consolidated statements of operations for the year ended
December 31, 2015:
|
|
For
the Years Ended
December
31, 2015
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
|
|
|
|
Cost
of Revenues
|
|
|
(209,086
|
)
|
|
|
|
|
|
Gross
Profit
|
|
|
209,086
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
Other
operating expenses
|
|
|
-
|
|
General
and administrative expenses
|
|
|
25,114
|
|
Loss
on sale/replacement of EV charging stations
|
|
|
-
|
|
Total
Operating Expenses
|
|
|
25,114
|
|
|
|
|
|
|
Income
From Operations
|
|
|
183,972
|
|
|
|
|
|
|
Other
Income (Expense):
|
|
|
|
|
Interest
income
|
|
|
6,352
|
|
Gain
on settlement of accounts payable
|
|
|
155,770
|
|
Gain
on settlement of debt
|
|
|
314,598
|
|
Loss
on settlement of note receivable
|
|
|
(271,092
|
)
|
|
|
|
|
|
Total
Other Income, net
|
|
|
205,628
|
|
|
|
|
|
|
Net
Income
|
|
$
|
389,600
|
|
The
following current liabilities pertaining to 350 Green are included in the consolidated balance sheets:
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
3,728,193
|
|
|
$
|
3,908,009
|
|
Accrued
expenses
|
|
|
5,969
|
|
|
|
5,969
|
|
Total
|
|
$
|
3,734,162
|
|
|
$
|
3,913,978
|
|
The
following represents the change in the balance of the non-controlling interest:
|
|
For
the Years Ended
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
Beginning
balance
|
|
$
|
(4,011,130
|
)
|
|
$
|
(4,400,730
|
)
|
Net
income of 350 Green
|
|
|
-
|
|
|
|
389,600
|
|
Assumption
of liability of 350 Green by Car Charging Group, Inc.
|
|
|
179,816
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
(3,831,314
|
)
|
|
$
|
(4,011,130
|
)
|
On
June 29, 2015, 350 Green recorded a $155,770 gain on the settlement of fees payable to a network operator that originated prior
to 2015.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
6.
FIXED ASSETS
Fixed
assets consist of the following:
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
EV
charging stations
|
|
$
|
4,687,294
|
|
|
$
|
4,805,340
|
|
Software
|
|
|
464,997
|
|
|
|
464,997
|
|
Automobiles
|
|
|
132,751
|
|
|
|
132,751
|
|
Office
and computer equipment
|
|
|
125,992
|
|
|
|
126,459
|
|
Machinery
and equipment
|
|
|
71,509
|
|
|
|
71,509
|
|
|
|
|
5,482,543
|
|
|
|
5,601,056
|
|
Less:
accumulated depreciation
|
|
|
(4,726,861
|
)
|
|
|
(4,100,163
|
)
|
Fixed
assets, net
|
|
$
|
755,682
|
|
|
$
|
1,500,893
|
|
Depreciation
and amortization expense related to fixed assets was $851,516 and $925,039 for the years ended December 31, 2016
and 2015 , respectively, of which $805,606 and $847,384 , respectively, was recorded within cost of sales in
the accompanying consolidated statements of operations.
On
April 2, 2015, the Company was notified by a host to remove 304 level 2 charging stations from its various locations throughout
the United States, installed by 350 Green prior to the Company’s acquisition of 350 Green which is currently owned by EVSE.
The customer alleged material breaches by 350 Green of the Charging Station License Agreement between the parties. As a result
of the notification, the Company performed an impairment test on those specific charging stations and concluded they were fully
impaired. On July 10, 2015, the Company sold 142 of these charging stations with no remaining carrying value of $0 to
a competitor for an aggregate purchase price of $106,700, resulting in a gain of $106,700 recorded in other (expense) income.
During
the year ended December 31, 2015, the Company disposed of fixed assets with a net book value of $25,133 which resulted in a
loss on disposal of $25,133 during 2015, which was included within other (expense) income in the consolidated statements of operations.
During
the year ended December 31, 2016, the Company disposed of fixed assets with a net book value of $17,557 which resulted in a loss
on disposal of $17,557 during 2016, which was included within other (expense) income in the consolidated statements of operations.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
7.
INTANGIBLE ASSETS
Intangible
assets consist of the following:
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
Trademarks
|
|
$
|
17,580
|
|
|
$
|
17,580
|
|
Patents
|
|
|
132,661
|
|
|
|
132,661
|
|
|
|
|
150,241
|
|
|
|
150,241
|
|
Less:
accumulated amortization
|
|
|
(33,759
|
)
|
|
|
(23,444
|
)
|
Intangible
assets, net
|
|
$
|
116,482
|
|
|
$
|
126,797
|
|
Amortization
expense related to intangible assets was $10,315 and $10,316 for the years ended December 31, 2016 and 2015 ,
respectively.
The
estimated future amortization expense is as follows:
For
the Years Ended
December
31,
|
|
Patents
|
|
|
Trademarks
|
|
|
Total
|
|
2017
|
|
$
|
7,804
|
|
|
$
|
2,511
|
|
|
$
|
10,315
|
|
2018
|
|
|
7,804
|
|
|
|
2,511
|
|
|
|
10,315
|
|
2019
|
|
|
7,804
|
|
|
|
2,511
|
|
|
|
10,315
|
|
2020
|
|
|
7,804
|
|
|
|
1,144
|
|
|
|
8,948
|
|
2021
|
|
|
7,804
|
|
|
|
-
|
|
|
|
7,804
|
|
Thereafter
|
|
|
68,785
|
|
|
|
-
|
|
|
|
68,785
|
|
|
|
$
|
107,805
|
|
|
$
|
8,677
|
|
|
$
|
116,482
|
|
8.
OTHER ASSETS
Other
assets consist of the following:
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
34,057
|
|
|
$
|
73,513
|
|
Inventory
conversion costs
|
|
|
51,730
|
|
|
|
51,716
|
|
Other
|
|
|
3,786
|
|
|
|
6,814
|
|
|
|
$
|
89,573
|
|
|
$
|
132,043
|
|
9.
ACCRUED EXPENSES
SUMMARY
Accrued
expenses consist of the following:
|
|
December
31
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Registration
rights penalty
|
|
$
|
967,928
|
|
|
$
|
728,750
|
|
Accrued
consulting fees
|
|
|
184,800
|
|
|
|
916,925
|
|
Accrued
host fees
|
|
|
1,308,897
|
|
|
|
873,544
|
|
Accrued
professional, board and other fees
|
|
|
1,381,399
|
|
|
|
1,069,341
|
|
Accrued
wages
|
|
|
241,466
|
|
|
|
187,779
|
|
Accrued
commissions
|
|
|
445,000
|
|
|
|
-
|
|
Warranty
payable
|
|
|
338,000
|
|
|
|
223,988
|
|
Accrued
taxes payable
|
|
|
511,902
|
|
|
|
355,949
|
|
Accrued
payroll taxes payable
|
|
|
122,069
|
|
|
|
-
|
|
Warrants
payable
|
|
|
155,412
|
|
|
|
77,761
|
|
Accrued
issuable equity
|
|
|
862,377
|
|
|
|
324,894
|
|
Accrued
interest expense
|
|
|
273,838
|
|
|
|
83,843
|
|
Dividend
payable
|
|
|
1,150,100
|
|
|
|
293,200
|
|
Other
accrued expenses
|
|
|
12,788
|
|
|
|
10,750
|
|
|
|
$
|
7,955,976
|
|
|
$
|
5,146,724
|
|
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
9.
ACCRUED EXPENSES – CONTINUED
REGISTRATION
RIGHTS PENALTY
In
connection with the sale of the Company’s Common Stock and warrants during the year ended December 31, 2013, the
Company granted the purchasers and the placement agents registration rights on the Common Stock and warrants within 60 days of
the date of the sale of the stock, as amended. The Stock Purchase Agreement (“SPA”) provided for a penalty provision
of 1% of the gross proceeds for each month that the shares are not registered, not to exceed 10%. The Securities and Exchange
Commission (“SEC”) notified the Company that it could not review its registration statement until such time as the
Company furnished two years of audited financial statements of 350 Green and ECOtality as the acquisitions were deemed significant.
The Company sought a waiver of the audit requirement but the SEC denied the granting of a waiver. On February 5, 2015, the holders
of a majority of the shares affected by the registration rights penalty granted the Company the option to satisfy the accrued
registration rights penalty and related interest as of December 23, 2014 totaling $1,724,823 in Series C Convertible Preferred
Stock with a stated value of $100 per share, in lieu of cash. The Company elected this option which required the Company to pay
a 20% premium causing the liability to increase to $1,850,188, exclusive of interest of $219,600. On February 10, 2015, the Company
issued 20,414 shares of Series C Convertible Preferred Stock and on March 31, 2015, the Company issued the remaining 283 shares
of Series C Convertible Preferred Stock, such that there was no liability related to the 2013 SPA as of December 31, 2015.
In
connection with the sale of the Company’s Series C Convertible Preferred Stock, the Company granted the purchasers certain
registration rights. As of December 31, 2015, the Company had not yet filed a registration statement under the Securities
Act of 1933. On November 7, 2016, the Company filed a registration statement under the Securities Act of 1933 but, as of December
31, 2016, the registration statement has not been declared effective by the SEC. The registration rights agreements entered into
with the Series C Convertible Preferred Stock purchasers provide that the Company has to pay liquidated damages equal to 1% of
all Series C subscription amounts received on the date the Series C resale registration statement was due to be filed pursuant
to such registration rights agreements. The Company is required to pay such penalty each month thereafter until the resale registration
statement is filed and once filed the Company has 30 days for the registration statement to be deemed effective otherwise the
penalty resumes each month until the terms are met. The maximum liquidated damages amount is 10% of all Series C subscription
amounts received. Failure to pay such liquidated damages results in interest on such damages at a rate of 18% per annum becoming
due. As a result, the Company accrued $967,928 and $728,750 of Series C Convertible Preferred Stock registration rights
damages at December 31, 2016 and 2015, respectively.
OBLIGATION
TO U.S. DEPARTMENT OF ENERGY
Additionally,
during 2014, the U.S. Department of Energy (“DOE”) notified the Company that it continues to have a property
interest in the 107 installed DCFCs if the fair market value of each DCFC had a market value in excess of $5,000 on October 16,
2013, the date of the Blink purchase agreement approved by the bankruptcy court. The DOE requested documentation describing the
data, assumption and methodologies that the Company used to determine the value as of the closing date. The Company provided the
DOE with additional documentation and calculations supporting its belief that each DCFC acquired as of the closing date of the
Blink purchase agreement approved by the bankruptcy court had a fair market value of less than $5,000. On May 5, 2015, the DOE
notified the Company that it agreed with the Company’s analysis and had determined that the DOE’s interest in the
DCFCs was extinguished. As a result, the Company reversed the $1,833,896 accrued liability in the second quarter of 2015 commensurate
with the date of the DOE notification which resulted in a gain during 2015 of $1,833,896 which was included in other income
in the consolidated statement of operations.
DUE
TO CREDITORS COMMITTEE OF THE ECOTALITY ESTATE
On
April 10, 2015, the consideration associated with the strategic transaction to acquire a 50% interest in the Reorganized Electric
Transportation Engineering Corporation of America (“ECOtality”) was amended to an aggregate of $1,200,000, consisting
of an initial payment of $375,000 (including $280,965 to be paid on behalf of the estate directly to their professional service
providers and $94,035 representing forbearance of a Blink network receivable from the estate) and the issuance of 8,250 shares
of Series B Convertible Preferred Stock. During the year ended December 31, 2015, the Company paid $210,965 and issued the Series
B Convertible Preferred Stock, such that there was no liability as of December 31, 2015.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
9.
ACCRUED EXPENSES – CONTINUED
ACCRUED
PROFESSIONAL, BOARD AND OTHER FEES
Accrued
professional, board and other fees consist of investment banking fees, professional fees, bonuses, board of director fees,
network fees, installation costs and other miscellaneous fees. As of December 31, 2016 and 2015 , accrued investment
banking fees were $860,183 and $762,300 , respectively, which were payable in cash. See Note 13 – Fair Value
Measurement and Note 14 – Stockholders’ Deficiency – Preferred Stock - Series C Convertible Preferred Stock
for additional details.
On
September 22, 2016, the Company was released from a $503,125 liability pursuant to a September 10, 2012 consulting agreement,
such that it recognized a gain on forgiveness of accrued expenses of $503,125 during the year ended December 31, 2016.
On
December 29, 2016, the Company was released from a $337,500 liability pursuant to a December 10, 2012 professional service agreement,
such that it recognized a gain on forgiveness of accrued expenses of $337,500 during the year ended December 31, 2016.
WARRANTY
PAYABLE
The
Company provides a limited product warranty against defects in materials and workmanship for its Blink residential and commercial
chargers, ranging in length from one to two years. The Company accrues for estimated warranty costs at the time of revenue recognition
and records the expense of such accrued liabilities as a component of cost of sales. Estimated warranty costs are based on historical
product data and anticipated future costs. Should actual failure rates differ significantly from estimates, the impact of these
unforeseen costs would be recorded as a change in estimate in the period identified. Warranty expenses for the years ended December
31, 2016 and 2015 were $118,978 and $111,656 , respectively.
WARRANTS
PAYABLE
As
of December 31, 2016 and 2015, the Company accrued $155,412
and $77,761, respectively, related to warrants payable, of which, $151,148 and $77,735, respectively, related to investment
banking fees which were payable in warrants. See Note 13 – Fair Value Measurement and Note 13 – Stockholders’
Deficiency – Preferred Stock – Series C Convertible Preferred Stock for additional details.
ACCRUED
ISSUABLE EQUITY
In
connection with the issuance of a convertible note payable during 2016, the Company is obligated to issue to the purchaser shares
of Common Stock equal to 48% of the consideration paid by the purchaser. The Company must issue such shares on the earlier of
(i) the fifth (5th) trading day after the pricing of the Public Offering and (ii) May 15, 2017. As of March 31, 2017, the purchaser
paid aggregate consideration of $1,805,100 to the Company but the Company had not yet issued the Common Stock to the purchaser.
As a result, the Company accrued the $866,448 obligation. See Note 11 – Notes Payable – Convertible and Other Notes
for additional details.
See
Note 17 Commitments and Contingencies – Employment Agreements for additional information regarding accrued issuable equity.
10.
ACCRUED PUBLIC INFORMATION FEE
In
accordance with certain securities purchase agreements, the Company is required to be compliant with Rule 144(c)(1) of the SEC,
as defined, so as to enable investors to sell their holdings of Company shares in accordance with the securities purchase agreements.
In the event of the Company’s noncompliance with Rule 144(c)(1) at any time after the six-month anniversary of the offering,
the investors are entitled to receive a fee of 1% of the aggregate subscription amount of the purchaser’s securities, plus
an additional 1% for every pro rata 30-day period that the Company is not in compliance (payable in cash or in kind). As of December
31, 2016 and 2015, the Company had accrued $3,005,277 and $2,433,734, respectively, as a result of periods of noncompliance
with Rule 144(c)(1). As of December 31, 2016, the Company was in compliance with Rule 144(c)(1).
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
11.
NOTES PAYABLE
CONVERTIBLE
AND OTHER NOTES
On
February 20, 2015, the Company renegotiated the terms of a $200,000 secured convertible note such that the due date was extended
to March 31, 2015. In connection with the extension, the Company issued the investor an immediately vested five-year warrant to
purchase 8,000 shares of the Company’s Common Stock at an exercise price of $50.00 per share. The warrant had an issuance
date fair value of $23,641, which was recognized as amortization of debt discount during the year ended December 31, 2015.
On
May 1, 2015, the Company further renegotiated the terms of the $200,000 secured convertible note such that: (i) the unpaid balance
would accrue interest at the rate of 2% per month effective April 1, 2015 and (ii) the maturity date was extended to June 1, 2015.
In connection with the extension, the Company: (i) issued the lender an immediately vested five-year warrant to purchase 1,000
shares of the Company’s Common Stock at $50.00 per share with an issuance date fair value of $13,516 which was recorded
as a derivative liability and (ii) extended the expiration dates of warrants issued in October 2012 to purchase 3,000 shares of
the Company’s Common Stock at an exercise price of $50.00 per share to the lender and its affiliates from October 2015 to
October 2017 and recorded incremental compensation cost of $12,954.
On
November 9, 2015, the Company further renegotiated the terms of the $200,000 secured convertible note such that: (i) the Company
shall pay the lender $61,000 comprised of $50,000 of principal and interest of $11,000; (ii) interest payable on the note accrues
interest at a rate of 1.5% per month effective April 1, 2015 and (iii) the maturity date was extended to February 29, 2016. In
connection with the extension, the Company issued the lender an immediately vested five-year warrant to purchase 5,600 shares
of the Company’s Common Stock at $50.00 per share with an issuance date fair value of $7,959 which was recorded as a derivative
liability. As of December 31, 2016 and 2015, the Company made an aggregate of $150,000 of principal repayments to the lender,
such that a principal balance of $50,000 was outstanding and is currently past due.
The
Company entered into a securities purchase agreement, dated October 7, 2016, with a purchaser. In accordance with its terms, the
securities purchase agreement became effective upon (i) execution of the purchase agreement, note and warrant, and (ii) delivery
of an initial advance pursuant to the note of $500,000. Pursuant to the agreement, the purchaser purchased from the Company (i)
a promissory note in the aggregate principal amount of up to $3,725,000, due and payable on the earlier of February 15, 2017 or
if the Listing Approval End Date (as defined in the note) is February 28, 2017, March 31, 2017, or the third business day after
the closing of the Public Offering (as defined in the securities purchase agreement), and (ii) a warrant to purchase 14,286 shares
of the Company’s Common Stock at an exercise price per share equal to the lesser of (a) 80% of the per share price of the
Common Stock in the Company’s contemplated Public Offering, (b) $35.00 per share, (c) 80% of the unit price in the Public
Offering (if applicable), d) the exercise price of any warrants issued in the Public Offering, or (e) the lowest conversion price,
exercise price, or exchange price, of any security issued by the Company that is outstanding on October 13, 2016. Additionally,
pursuant to the securities purchase agreement, on the fifth (5th) trading day after the pricing of the Public Offering, but in
no event later than February 28, 2017, or, if the Listing Approval End Date is February 28, 2017, in no event later than March
31, 2017, the Company shall deliver to the purchaser such number of duly and validly issued, fully paid and non-assessable Origination
Shares (as defined in the securities purchase agreement) equal to 48% of the consideration paid by the purchaser, divided by the
lowest of (i) $35.00 per share, or (ii) the lowest daily closing price of the Common Stock during the ten days prior to delivery
of the Origination Shares (subject to adjustment for stock splits), or (iii) 80% of the Common Stock offering price of the Public
Offering, or (iv) 80% of the unit price offering price of the Public Offering (if applicable), or (v) the exercise price of any
warrants issued in the Public Offering. The securities purchase agreement and promissory note were subsequently amended. See Note
18 Subsequent Events – Convertible Notes for additional information.
Pursuant
to the note, the purchaser is obligated to provide the Company additional $250,000 or $500,000 advances under the note as certain
milestones, contained in the funding schedule within the note, are achieved (the “Additional Advances”). In the event
of an Additional Advance, the Company shall deliver an additional warrant (“Additional Warrant”) within three (3)
days of such advances with the following terms: (i) an aggregate exercise amount equal to 100% of the principal sum attributable
to the Additional Advance (ii) at the per share exercise price then in effect on the warrant, and (iii) the number of shares for
which the Additional Warrant is exercisable equal to the aggregate exercise amount for the Additional Warrant divided by the exercise
price. The purchaser may, at its election, exercise any of the warrants pursuant to a cashless exercise.
If
the Company fails to repay the balance due under the note, or issues a Variable Security (as defined in the note) up to and including
the date of the closing of the Public Offering, the purchaser has the right to convert all or any portion of the outstanding note
into shares of Common Stock, subject to the terms and conditions set forth in the note. All amounts due under the note become
immediately due and payable upon the occurrence of an event of default as set forth in the note.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
11.
NOTES PAYABLE – CONTINUED
CONVERTIBLE
AND OTHER NOTES – CONTINUED
On
October 13, 2016, the Company received the initial amount of $500,000 borrowed under the note. Upon the achievement of certain
milestones in November 2016, an Additional Advance of $500,000 was received by the Company on November 28, 2016. Pursuant to the
terms of the securities purchase agreement, the Company is required to repay an aggregate of $1,064,286 to the purchaser in connection
with the advances received during 2016. The $64,286 difference between the principal amount and the cash received was recorded
as debt discount and is being accreted to interest expense over the term of the note.
In
connection with the advances, five-year warrants to purchase an aggregate of 28,572 shares of Common Stock were issued with an
aggregate issuance date fair value of $185,468, which was recorded as a derivative liability. The aggregate exercise price of
the warrants is $1,000,000. As of December 31, 2016, the Company had not issued the Origination Shares associated with the advances
to-date and, as a result, accrued for the $480,000 obligation as of December 31, 2016. See Note 9 – Accrued Expenses –
Accrued Issuable Equity. The conversion option of the note was determined to be a derivative liability. The aggregate issuance
date fair value of the warrants, Origination Shares, conversion option, placement agent fees and other issuance costs was $1,290,446,
which was recorded as a debt discount against the principal amount of the note. The $290,446 of debt discount in excess of the
principal was recognized immediately and the remaining $1,000,000 of debt discount is being recognized over the term of the note.
During
the year ended December 31, 2016, the Company made aggregate principal repayments of $13,988 associated with a non-convertible
note payable.
CONVERTIBLE
AND OTHER NOTES - RELATED PARTY
During
the year ended December 31, 2016, the Company issued convertibles notes payable in the aggregate principal amount of $600,000
to a company wholly-owned by the Company’s Executive Chairman of the Board of Directors. Notes payable with an aggregate
principal amount of $495,000 are to be repaid upon the earlier of (i) the sixty (60) day anniversary of the date of issuance or
(ii) the date on which the Company has received at least $1,000,000 in financing from third parties. A note payable with a principal
amount of $105,000 was repaid upon the date at which the Company has received payment under an existing grant with the Pennsylvania
Turnpike. Interest on the notes accrues at a rate of 18% annually and is payable at maturity. The unpaid principal and accrued
interest are convertible at the election of the holder into shares of Common Stock at $35.00 per share. These notes are secured
by substantially all of the assets of the Company. In connection with the notes issuances, the Company issued five-year immediately
vested warrants to purchase an aggregate of 3,000,000 shares of Common Stock not subject to split at an exercise price of $0.70
per share with an aggregate issuance date fair value of $204,465, which was recorded as a debt discount. In connection with the
Company’s sequencing policy, the warrants were determined to be derivative liabilities and the conversion options were also
determined to be a derivative liability, however, their fair value was de minimis.
During
the years ended December 31, 2016 and 2015, the Company made aggregate principal repayments of $125,000 and $115,000, respectively,
associated with convertible and other notes payable to the same related party. As of the date of filing, convertible notes payable
to a company wholly-owned by the Company’s Executive Chairman of the Board of Directors with an aggregate principal amount
of $495,000 were outstanding and were past due. The Company has not satisfied this debt and is in negotiations with the Executive
Chairman to extend the maturity dates of such notes. On November 14, 2016, the Company received notices of default with respect
to notes payable to a company wholly-owned by the Executive Chairman with an aggregate principal balance of $410,000 which included
demands for payment of the outstanding principal and interest within seven days. As of the date of filing there have been no further
developments in respect to the demand for payment on these notes payable.
Amortization
of debt discount for the years ended December 31, 2016 and 2015 was $962,412 and $63,473 , respectively, related
to convertible notes payable.
INTEREST
EXPENSE
Interest
expense on notes payable for the years ended December 31, 2016 and 2015 was $256,098 and $82,565, respectively.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
12.
DEFERRED REVENUE
The
Company is the recipient of various private and governmental grants, rebates and marketing incentives. Reimbursements of periodic
expenses are recognized as income when the related expense is incurred. Private and government grants and rebates related to EV
charging stations and their installation are deferred and amortized in a manner consistent with the recognition of the related
depreciation expense of the related asset over their useful lives.
Grant,
rebate and incentive revenue recognized during the years ended December 31, 2016 and 2015 was $332,672 and $1,169,149 ,
respectively.
Deferred
revenue consists of the following:
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Nissan
|
|
|
78,832
|
|
|
$
|
144,072
|
|
NYSERDA
|
|
|
2,690
|
|
|
|
90,021
|
|
CEC
|
|
|
16,588
|
|
|
|
84,274
|
|
NV
Energy Commission
|
|
|
2,626
|
|
|
|
17,626
|
|
PA
Turnpike
|
|
|
47,135
|
|
|
|
64,747
|
|
AFIG-PAT
|
|
|
119,453
|
|
|
|
-
|
|
Prepaid
Network and Maintenance Fees
|
|
|
176,745
|
|
|
|
130,083
|
|
Green
Commuter
|
|
|
128,000
|
|
|
|
500,000
|
|
Other
|
|
|
128,126
|
|
|
|
2,480
|
|
Total
deferred revenue
|
|
|
700,195
|
|
|
|
1,033,303
|
|
Deferred
revenue, non-current portion
|
|
|
(99,495
|
)
|
|
|
(109,180
|
)
|
Current
portion of deferred revenue
|
|
$
|
600,700
|
|
|
$
|
924,123
|
|
It
is anticipated that deferred revenue as of December 31, 2016 will be recognized over the next three years as follows:
For
the Year Ending
|
|
|
|
December
31,
|
|
Revenue
|
|
|
|
|
|
2017
|
|
$
|
600,700
|
|
2018
|
|
|
72,954
|
|
2019
|
|
|
26,541
|
|
Total
|
|
$
|
700,195
|
|
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
13.
FAIR VALUE MEASUREMENT
See
Note 9 – Accrued Expenses – Warrants Payable and Note 13 – Stockholders’ Deficiency – Preferred
Stock – Series C Convertible Preferred Stock for additional details associated with issuance costs which included an obligation
to issue investment banker warrants. See Note 14 – Stockholders’ Deficiency for details associated with warrants classified
as derivative liabilities that were issued in connection with the sale of Common Stock and Series C Convertible Preferred Stock.
See Note 11 – Notes Payable – Convertible and Other Notes for warrants classified as derivative liabilities that were
issued in connection with a convertible note.
Assumptions
utilized in the valuation of Level 3 liabilities are described as follows:
|
|
For
the Year Ended
|
|
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
0.58%
- 1.38%
|
|
|
|
0.02%
- 1.30%
|
|
Expected
term (years)
|
|
|
2.28
- 5.00
|
|
|
|
1.00
- 5.05
|
|
Expected
volatility
|
|
|
114%
- 156%
|
|
|
|
84%
- 105%
|
|
Expected
dividend yield
|
|
|
0.00%
|
|
|
|
0.00%
|
|
The
following table sets forth a summary of the changes in the fair value of Level 3 warrant liabilities that are measured at fair
value on a recurring basis:
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
Derivative
Liabilities
|
|
|
|
|
|
|
|
|
Beginning
balance as of January 1,
|
|
$
|
1,350,881
|
|
|
$
|
3,635,294
|
|
Issuance
of warrants
|
|
|
957,115
|
|
|
|
501,259
|
|
Change
in classification
|
|
|
-
|
|
|
|
281,403
|
|
Change
in fair value of derivative liability
|
|
|
(724,893
|
)
|
|
|
(3,067,075
|
)
|
Ending
balance as of December 31,
|
|
$
|
1,583,103
|
|
|
$
|
1,350,881
|
|
|
|
|
|
|
|
|
|
|
Warrants
Payable
|
|
|
|
|
|
|
|
|
Beginning
balance as of January 1,
|
|
$
|
77,761
|
|
|
$
|
63,533
|
|
Provision
for new warrant issuances
|
|
|
-
|
|
|
|
6,059
|
|
Accrual
of other warrant obligations
|
|
|
81,603
|
|
|
|
221,709
|
|
Change
in fair value of warrants payable
|
|
|
(3,952
|
)
|
|
|
(201,621
|
)
|
Issuance
of warrants
|
|
|
-
|
|
|
|
(11,919
|
)
|
Ending
balance as of December 31,
|
|
$
|
155,412
|
|
|
$
|
77,761
|
|
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
13.
FAIR VALUE MEASUREMENT – CONTINUED
Assets
and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:
|
|
December
31, 2016
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,583,103
|
|
|
$
|
1,583,103
|
|
Warrants
Payable
|
|
|
-
|
|
|
|
-
|
|
|
|
155,412
|
|
|
|
155,412
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,738,515
|
|
|
$
|
1,738,515
|
|
|
|
December
31, 2015
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,350,881
|
|
|
$
|
1,350,881
|
|
Warrants
payable
|
|
|
-
|
|
|
|
-
|
|
|
|
77,761
|
|
|
|
77,761
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,428,642
|
|
|
$
|
1,428,642
|
|
14.
STOCKHOLDERS’ DEFICIENCY
AUTHORIZED
CAPITAL
As
of December 31, 2016, the Company was authorized to issue 500,000,000 shares of Common Stock, $0.001 par value, and 40,000,000
shares of preferred stock, $0.001 par value. The holders of the Company’s Common Stock are entitled to one vote per share.
The preferred stock is designated as follows: 20,000,000 shares to Series A Convertible Preferred Stock; 10,000 shares to Series
B Convertible Preferred Stock; 250,000 shares to Series C Convertible Preferred Stock; and 19,740,000 shares undesignated.
OMNIBUS
INCENTIVE PLANS
On
November 30, 2012, the Board of the Company, as well as a majority of the Company’s shareholders, approved the Company’s
2012 Omnibus Incentive Plan (the “2012 Plan”), which enables the Company to grant stock options, stock appreciation
rights, restricted stock, restricted stock units, phantom stock and dividend equivalent rights to associates, directors, consultants,
and advisors of the Company and its affiliates, and to improve the ability of the Company to attract, retain, and motivate individuals
upon whom the Company’s sustained growth and financial success depend, by providing such persons with an opportunity to
acquire or increase their proprietary interest in the Company. Stock options granted under the 2012 Plan may be Non-Qualified
Stock Options or Incentive Stock Options, within the meaning of Section 422(b) of the Internal Revenue Code of 1986, except that
stock options granted to outside directors and any consultants or advisers providing services to the Company or an affiliate shall
in all cases be Non-Qualified Stock Options. The 2012 Plan is to be administered by the Board, which shall have discretion over
the awards and grants thereunder. The aggregate maximum number of shares of Common Stock for which stock options or awards may
be granted pursuant to the 2012 Plan is 5,000,000, adjusted as provided in Section 11 of the 2012 Plan. The 2012 Plan expired
on December 1, 2014. As of December 31, 2016 and 2015, 66,400 stock options had been issued and are outstanding to employees
and consultants. All options vest ratably over three years from date of issuance, December 27, 2012, and expire in five years
from date of issuance.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
14.
STOCKHOLDERS’ DEFICIENCY – CONTINUED
OMNIBUS
INCENTIVE PLANS
- CONTINUED
On
January 11, 2013, the Board of the Company approved the Company’s 2013 Omnibus Incentive Plan (the “2013 Plan”),
which enables the Company to grant stock options, stock appreciation rights, restricted stock, restricted stock units, phantom
stock and dividend equivalent rights to associates, directors, consultants, and advisors of the Company and its affiliates, and
to improve the ability of the Company to attract, retain, and motivate individuals upon whom the Company’s sustained growth
and financial success depend, by providing such persons with an opportunity to acquire or increase their proprietary interest
in the Company. Stock options granted under the 2013 Plan may be non-qualified stock options or incentive stock options, within
the meaning of Section 422(b) of the Internal Revenue Code of 1986, except that stock options granted to outside directors and
any consultants or advisers providing services to the Company or an affiliate shall in all cases be non-qualified stock options.
The 2013 Plan is to be administered by the Board, which shall have discretion over the awards and grants thereunder. The aggregate
maximum number of shares of Common Stock for which stock options or awards may be granted pursuant to the 2013 Plan is 5,000,000,
adjusted as provided in Section 11 of the 2013 Plan. No awards may be issued after December 1, 2015. The 2013 Plan was approved
by a majority of the Company’s shareholders on February 13, 2013. As of December 31, 2016 and 2015, options to purchase
44,967 and 47,033, shares of Common Stock respectively were outstanding to employees, respectively, and 27,472 and 27,472 shares
of Common Stock, respectively, were outstanding to consultants of the Company.
On
March 31, 2014, the Board of the Company approved the Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”),
which enables the Company to grant stock options, stock appreciation rights, restricted stock, restricted stock units, phantom
stock and dividend equivalent rights to associates, directors, consultants, and advisors of the Company and its affiliates, and
to improve the ability of the Company to attract, retain, and motivate individuals upon whom the Company’s sustained growth
and financial success depend, by providing such persons with an opportunity to acquire or increase their proprietary interest
in the Company. Stock options granted under the 2014 Plan may be non-qualified stock options or incentive stock options, within
the meaning of Section 422(b) of the Internal Revenue Code of 1986, except that stock options granted to outside directors and
any consultants or advisers providing services to the Company or an affiliate shall in all cases be non-qualified stock options.
The option price must be at least 100% of the fair market value on the date of grant and if issued to a 10% or greater shareholder
must be 110% of the fair market value on the date of the grant. The 2014 Plan is to be administered by the Board, which shall
have discretion over the awards and grants thereunder. The aggregate maximum number of shares of Common Stock for which stock
options or awards may be granted pursuant to the 2014 Plan is 5,000,000, adjusted as provided in Section 11 of the 2014 Plan.
No awards may be issued after December 1, 2016. The 2014 Plan was approved by a majority of the Company’s shareholders on
April 17, 2014. As of December 31, 2016 and 2015, options to purchase 34,167 and 39,300 shares of Common Stock were outstanding
to employees, respectively, and 50,448 and 50,448 shares of Common Stock were outstanding to consultants of the Company, respectively.
On
February 10, 2015, the Board of the Company approved the Company’s 2015 Omnibus Incentive Plan (the “2015 Plan”),
which enables the Company to grant stock options, stock appreciation rights, restricted stock, restricted stock units, phantom
stock and dividend equivalent rights to associates, directors, consultants, and advisors of the Company and its affiliates, and
to improve the ability of the Company to attract, retain, and motivate individuals upon whom the Company’s sustained growth
and financial success depend, by providing such persons with an opportunity to acquire or increase their proprietary interest
in the Company. Stock options granted under the 2015 Plan may be non-qualified stock options or incentive stock options, within
the meaning of Section 422(b) of the Internal Revenue Code of 1986, except that stock options granted to outside directors and
any consultants or advisers providing services to the Company or an affiliate shall in all cases be non-qualified stock options.
The option price must be at least 100% of the fair market value on the date of grant and if issued to a 10% or greater shareholder
must be 110% of the fair market value on the date of the grant. The 2015 Plan is to be administered by the Board, which shall
have discretion over the awards and grants thereunder. The aggregate maximum number of shares of Common Stock for which stock
options or awards may be granted pursuant to the 2015 Plan is 5,000,000, adjusted as provided in Section 11 of the 2015 Plan.
No awards may be issued after March 11, 2017. The 2015 Plan was approved by a majority of the Company’s shareholders on
April 21, 2015. As of December 31, 2016 and 2015, options to purchase 3,700 and 2,900 shares of Common Stock were outstanding
to employees, respectively, and 9,788 and 9,788 shares of Common Stock were outstanding to consultants of the Company, respectively.
As of December 31, 2016, there were 86,012 securities available for future issuance under the 2015 Plan.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
14.
STOCKHOLDERS’ DEFICIENCY – CONTINUED
PREFERRED
STOCK
SERIES
A CONVERTIBLE PREFERRED STOCK
On
March 24, 2016, the Company issued 500,000 shares of Series A Convertible Preferred Stock to the Company’s Chief Operating
Officer in connection with his March 24, 2015 employment agreement. The $500,000 of aggregate fair value of the shares was recognized
over the one year service period. The Company recognized $114,754 and $385,246 of stock-based compensation expense during the
years ended December 31, 2016 and 2015, respectively, related to the award which is included within stock-based compensation on
the consolidated statement of changes in stockholders’ deficiency.
The
Series A Convertible Preferred Stock have a par value of $0.001 and are convertible into 2.5 shares of Common Stock for
every Series A Convertible Preferred share so long as Series C Convertible Preferred Stock is outstanding. The Series A Convertible
Preferred Stock has no redemption rights. The Series A Convertible Preferred Stock shall have no liquidation preference so long
as the Series C Convertible Preferred Stock shall be outstanding. Up until December 23, 2014 (the date of issuance of Series C
Convertible Preferred Stock), the Series A Convertible Preferred Stock had five times the vote of a share of its Common Stock
equivalent. At the point in time that the Series C Convertible Preferred Stock is no longer outstanding, the super voting
rights are automatically reinstated.
See
Note 17 – Commitments and Contingencies – Employment Agreement for details associated with the issuance of Series
A Convertible Preferred Stock.
SERIES
B CONVERTIBLE PREFERRED STOCK
On
April 21, 2015, the Company designated 10,000 shares of Series B Convertible Preferred Stock with a par value of $0.001 and a
stated value of $100 per share. The Series B Convertible Preferred Stock has no voting rights except under limited conditions.
The holders of Series B Convertible Preferred Stock and the holders of Series C Convertible Preferred Stock, shall proportionately
be entitled to receive out of the assets, whether capital or surplus, of the Company an amount in cash equal to the stated value
for each respective share of Series B Convertible Preferred Stock or Series C Convertible Preferred Stock before any payments
or distributions are made to holders of Series A Convertible Preferred Stock or holders of Common Stock. As of December 31, 2015,
the liquidation preference for the 8,250 issued and outstanding shares of Series B Convertible Preferred Stock was equal to $825,000.
The holder of the Series B Convertible Preferred Stock is entitled to redeem: (i) 2,750 shares on December 31, 2016; (ii) 2,750
shares on December 31, 2017; and (iii) 2,750 shares on December 31, 2018. However, the Company may choose not to honor the redemption
request, in which case the holder becomes entitled to immediately, or anytime thereafter, convert the Series B Convertible Preferred
Stock into Common Stock by dividing the aggregate stated value by the conversion price. The conversion price is equal to the average
closing price of the prior 30 trading days as of the date of the request to convert. The Company may, at any time, elect to redeem
all or part of the Series B Convertible Preferred Stock at the stated value.
During
the year ended December 31, 2015, the Company issued 8,250 shares of Series B Convertible Preferred Stock to the Creditors of
ECOtality as partial consideration for the strategic transaction to acquire a 50% interest in ECOtality. In addition, the parties
entered into a tax sharing agreement which stipulates that any benefit that CCGI realizes from the use of the ECOtality net operating
loss carryforwards (“NOLs”), up to $925,000, must be paid to the ECOtality estate and such payments would result in
the cancellation of a commensurate stated value amount of Series B Convertible Preferred Stock. After reviewing the terms of the
Series B Convertible Preferred Stock and the embedded conversion option (“ECO”), the Company determined that the Series
B Convertible Preferred Stock is classified as temporary equity and the ECO is not bifurcated, is not accounted for as a derivative
and is not a beneficial conversion feature. The temporary equity classification of the Series B Convertible Preferred Stock is
in accordance with ASC 480-10-s99 - Distinguishing Liabilities from Equity – Overall – SEC Materials and Accounting
Series Release (“ASR”) 268 – Presentation in Financial Statements of “Redeemable Preferred Stock”,
as the Company does not control settlement by delivery of its own shares of Common Stock because there is no cap on the number
of shares of Common Stock that could potentially be issuable upon redemption and therefore cash settlement is presumed.
On
December 31, 2016, the Company received a notice of redemption from the creditors committee of the ECOtality estate to redeem
2,750 shares of Series B Convertible Preferred Stock for $275,000. As of December 31, 2016, the redemption amount remained outstanding.
The Company has the option to settle the redemption request either by the repayment in cash or by the issuance of shares of Common
Stock. As of December 31, 2016, the liquidation preference for the Series B Convertible Preferred Stock amounted to $825,000.
See Note 4 – Ecotality Estate Acquisition
for additional details. See Note 14 – Stockholders’ Deficiency – Common Stock for details associated with the
exchange of Series B Convertible Preferred Stock for Common Stock.
SERIES
C CONVERTIBLE PREFERRED STOCK
See
Note 4 – Ecotality Estate Acquisition and Note 9 – Accrued Expenses – Due to Creditors Committee of the ECOtality
Estate for additional details. See Note 14 – Stockholders’ Deficiency – Common Stock for details associated
with the exchange of Series B Convertible Preferred Stock for Common Stock .
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
14.
STOCKHOLDERS’ DEFICIENCY – CONTINUED
PREFERRED
STOCK
- CONTINUED
On
December 23, 2014, a total of 250,000 shares of Series C Convertible Preferred Stock have been designated for issuance under the
Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock (the “Series C Certificate of
Designation”). The shares of Series C Convertible Preferred Stock have a stated value of $100 per share with an initial
conversion price of $35.00 per common share (subject to adjustment as provided in the Series C Certificate of Designation). The
Series C Convertible Preferred Stock may, at the option of the purchaser, be converted at any time or from time to time into fully
paid and nonassessable shares of Common Stock at the conversion price in effect at the time of conversion (“Holder
Redemption Request”); provided, that a holder of Series C Convertible Preferred Stock may at any given time convert only
up to that number of shares of Series C Convertible Preferred Stock so that, upon conversion, the aggregate beneficial ownership
of the Company’s Common Stock as calculated, (pursuant to Rule 13d-3 of the Securities Exchange Act) of such purchaser
and all persons affiliated with such purchaser, is not more than 9.99% of the Company’s Common Stock then outstanding.
The number of shares into which one share of Series C Convertible Preferred Stock shall be convertible is determined by dividing
the stated value of $100 per share by the initial Conversion Price of $35.00 per common share (subject to appropriate adjustment
for certain events, as defined). Shares of the Series C Convertible Preferred Stock shall receive dividends at a quarterly rate
payable in either cash or additional shares of Series C Convertible Preferred Stock. If the dividend is paid in cash, the quarterly
dividend payment shall be equal to 2% of the stated value per share for each of the then outstanding shares of Series C Convertible
Preferred Stock (the “Cash Dividend Rate”). If, however, the quarterly dividend is paid in shares of Series C Convertible
Preferred Stock, the quarterly dividend payment shall be equal to 2.5% of the stated value per share for each of the then outstanding
shares of Series C Convertible Preferred Stock (the “Stock Dividend Rate”). In the event that the Company chooses
to not honor the Holder Redemption Request, the Cash Dividend Rate and the Stock Dividend Rate shall thereafter be increase by
a multiple of two, commencing in the first quarter following the Holder Redemption Request. In the event of a liquidation, the
Series C Convertible Preferred Stock is also entitled to a liquidation preference equal to the stated value plus any accrued and
unpaid dividends. Except as otherwise required by law, the holders of shares of Series C Convertible Preferred Stock shall vote
on an as-if-converted-to-common-stock basis with the Common Stock . However, as long as any shares of Series C Convertible
Preferred Stock are outstanding, the Company shall not take certain actions, as defined, without the prior written consent of
at least 60% of the then outstanding Series C Convertible Preferred Stock. At any time following the second anniversary following
the issuance of the Series C Convertible Preferred Stock, at the option of the holder, each share of Series C Convertible Preferred
Stock shall be redeemable at the option of the holder for an amount equal to the stated value plus all accrued but unpaid dividends
plus 1% per month, compounded monthly from the closing date.
The
Series C Convertible Preferred Stock holders shall be entitled to receive out of the assets, whether capital or surplus, of the
Company an amount in cash equal to the stated value, plus any accrued and unpaid dividends thereon at the Cash Dividend Rate and
any other fees or liquidated damages then due and owing thereon under the Series C Certificate of Designation, for each share
of Series C Convertible Preferred Stock before any distribution or payment shall be made to the holders of Series A Convertible
Preferred Stock or any junior securities, and if the assets of the Company shall be insufficient to pay in full such amounts,
then the entire assets to be distributed to the holders shall be ratably distributed among the holders in accordance with the
respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. After payment of the
stated value, plus any accrued and unpaid dividends thereon, to each holder, the remaining balance of any proceeds from the Liquidation
shall be allocated to the holders, holders of Series A Convertible Preferred Stock and holders of any Common Stock on an
as-if-converted-to-common-stock basis.
The
Series C Convertible Preferred Stock is not mandatorily redeemable, because the instrument does not embody an unconditional obligation
requiring the issuer to redeem the instrument at a specified or determinable date or upon an event that is certain to occur. The
Series C Convertible Preferred Stock is contingently redeemable anytime following the second anniversary of its issuance. Accordingly,
the Series C Convertible Preferred Stock is be classified as permanent equity. Because the embedded conversion option is clearly
and closely related to the equity host, even though it has adjustment provisions that causes it not to be indexed to the Company’s
own stock, it is not bifurcated and is not accounted for as a derivative liability.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
14.
STOCKHOLDERS’ DEFICIENCY – CONTINUED
PREFERRED
STOCK
– CONTINUED
SERIES
C CONVERTIBLE PREFERRED STOCK – CONTINUED
On
December 23, 2014, the Company entered into a securities purchase agreement with certain investors for an aggregate of $6,000,000
(the “Aggregate Subscription Amount”). Pursuant to the securities purchase agreement, the Company issued the following
to the purchasers: (i) 60,000 shares of Series C Convertible Preferred Stock convertible into 171,429 shares of the Company’s
Common Stock , par value $0.001; and (ii) warrants to purchase an aggregate of 171,429 shares of Common Stock at
an exercise price of $1.00 per share that contain exercise price reset provisions. In addition, 250 shares of Series C Convertible
Preferred Stock convertible into 714 shares of Common Stock , with a value of $25,000, were issued as compensation to purchasers
for legal fees. The release of the Aggregate Subscription Amount to the Company was subject to the Company meeting certain milestones.
The aggregate issuance date fair value of the warrants totaled $529,905 using the Binomial Lattice Model, which was recorded as
a debit to preferred stock discount and a credit to derivative liabilities, and the net carrying value of the preferred stock
is $5,470,096 (the $6,000,000 subscription amount, less the $529,904 preferred stock discount, or 9% and 91% of the $6,000,000
subscription amount, respectively). The aggregate of $530,000 of issuance costs were allocated amongst the instruments and (a)
91% or $483,192 was allocated to the preferred stock and was debited to additional paid in capital; and (b) 9% or $46,808 was
allocated to the derivative liabilities and was recognized immediately. The aggregate preferred stock discount of $1,013,096 (warrants
of $529,904 plus allocated issuance costs of $483,192) will not be amortized until/if redemption becomes probable. On December
23, 2014, all the initial closing conditions were met so the Company received $2,000,000 of the Aggregate Subscription Amount
and the remaining $4,000,000 was deposited into an escrow account which was recorded as a charge to additional paid-in capital.
During the year ended December 31, 2015, the Company did not meet certain defined milestones by their targeted completion dates.
Notwithstanding, the purchasers released an aggregate of $3,000,000 of the Aggregate Subscription Amount to the Company during
the year ended December 31, 2015. Pursuant to an election of the purchasers, $1,000,000 was returned to the purchasers in July
2015 from escrow and was not provided to the Company, such that the Company received an aggregate of $5,000,000 of the Aggregate
Subscription Amount, as compared to the $6,000,000 originally contemplated. The return of escrowed funds did not require the purchasers
to return any portion of the shares of Series C Convertible Preferred Stock.
On
July 24, 2015, the Company entered into a securities purchase agreement with a purchaser for net proceeds of an aggregate of $710,740
(gross proceeds of $830,000 less issuance costs of $119,260 which, as of December 31, 2015, had not been paid and were included
within accrued expenses). Pursuant to the securities purchase agreement, the Company issued the following to the purchaser: (i)
9,223 shares of Series C Convertible Preferred Stock, and (ii) a five-year warrants to purchase 26,378 shares of Common Stock
for an exercise price of $50.00 per share with an issuance date fair value of $88,905 which was recorded as a derivative liability.
In
July 2015, the Company agreed to pay a consultant an aggregate of $10,000 in cash and issue to the consultant 300 shares of Series
C Convertible Preferred Stock at a fair value of $30,000.
On
October 14, 2015, the Company entered into a securities purchase agreement with a purchaser for net proceeds of an aggregate of
$954,540 (gross proceeds of $1,100,000 less issuance costs of $145,460 which, as of December 31, 2015, had not been paid and were
included within accrued expenses). Pursuant to the securities purchase agreement, the Company issued the following to the purchaser:
(i) 18,333 shares of Series C Convertible Preferred Stock, and (ii) a five-year warrant to purchase 52,380 shares of Common
Stock for an exercise price of $50.00 per share with an issuance date fair value of $79,411 which was recorded as a derivative
liability.
In
connection with sales of Series C Convertible Preferred Stock during the year ended December 31, 2015, the Company incurred issuance
costs which included an obligation to issue investment banker warrants to purchase 10% of the securities sold. The warrant obligation
had an aggregate fair value of $221,709 on the date of the sale of the Series C Convertible Preferred Stock. See Note 13 –
Fair Value Measurement.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
14.
STOCKHOLDERS’ DEFICIENCY – CONTINUED
PREFERRED
STOCK
– CONTINUED
SERIES
C CONVERTIBLE PREFERRED STOCK – CONTINUED
On
March 11, 2016, the Company entered into a securities purchase agreement with a purchaser for gross proceeds of an aggregate of
$2,900,040 (“Subscription Amount”), of which, $650,040 was paid to the Company at closing and the remaining $2,250,000
(“Milestone Amounts”) was payable to the Company upon the completion of certain milestones (“Milestones”),
as specified in the agreement. Through December 30, 2016, based on the Company’s achievement of certain of the milestones
prior to the June 24, 2016 deadline, net proceeds of an aggregate of $1,147,950 (gross proceeds of $1,267,160 less issuance costs
of $197,160, of which, as of December 31, 2016, $149,658 had not been paid and was included within accrued expenses) of the Subscription
Amount had been paid to the Company. See Note 9 – Accrued Expenses – Warrants Payable and Note 12 – Fair Value
Measurement for additional details. As a result, the Company issued the following to the purchaser during the year ended December
31, 2016: (i) 21,120 shares of Series C Convertible Preferred Stock and (ii) five-year warrants to purchase an aggregate of 60,341
shares of Common Stock at an exercise price of $50.00 per share with an issuance date fair value of $167,956 which was recorded
as a derivative liability.
On
March 11, 2016, the Company entered into a securities purchase agreement with a purchaser for net proceeds of an aggregate of
$85,285 (gross proceeds of $99,960 less issuance costs of $14,675, of which, as of December 31, 2016, $9,677 had not been paid
and was included within accrued expenses). See Note 9 – Accrued Expenses – Warrants Payable and Note 13 – Fair
Value Measurement for additional details. Pursuant to the securities purchase agreement, the Company issued the following to the
purchaser: (i) 1,666 shares of Series C Convertible Preferred Stock, and (ii) a five-year warrant to purchase 4,760 shares of
Common Stock for an exercise price of $50.00 per share with an issuance date fair value of $10,458 which was recorded as a derivative
liability.
On
March 24, 2016, the Company issued 750 shares of Series C Convertible Preferred Stock to the Company’s Chief Operating Officer
in connection with his March 24, 2015 employment agreement. The $75,000 of aggregate fair value of the shares was recognized over
the one year service period. The Company recorded $17,213 of stock-based compensation expense during the year ended December 31,
2016, respectively, related to the award which is included within stock-based compensation on the consolidated statement of changes
in stockholders’ deficiency.
During
the year ended December 31, 2016, the Company issued 444 shares of Series C Convertible Preferred Stock with a fair value of $39,964
to the Company’s Executive Chairman of the Board in satisfaction of amounts previously owed which was accrued for as of
December 31, 2015, which is included within Series C convertible preferred stock issued as compensation to the Executive Chairman
on the consolidated statement of changes in stockholders’ deficiency.
During
the years ended December 31, 2016 and 2015, 6,116 and 6,777 shares of Series C Convertible Preferred Stock were
issued as payment of dividends in kind. As of December 31, 2016 and 2015 , the Company recorded a dividend payable
liability on the shares of Series C Convertible Preferred Stock of $1,150,100 and $293,200 , respectively. See
Note 9 – Accrued Expenses.
In
the event of a liquidation, the Series C Convertible Preferred Stock is also entitled to a liquidation preference equal to the
stated value plus any accrued and unpaid dividends, which, as of December 31, 2016 , was equal to $16,192,700.
See
Note 9 – Accrued Expenses – Registration Rights Penalty, Note 13 – Fair Value Measurement, Note 17 – Commitments
and Contingencies – Employment Agreement and Note 18 – Subsequent Events for details associated with the issuance
of Series C Convertible Preferred Stock and warrants.
NON-CONTROLLING
INTERESTS
350
Green is not owned by the Company but is deemed to be a VIE where the entirety of its results of operations are consolidated in
the Company’s financial statements.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
14.
STOCKHOLDERS’ DEFICIENCY – CONTINUED
STOCK-BASED
COMPENSATION
The
Company recognized stock-based compensation expense related to preferred stock, Common Stock, stock options and warrants for the
years ended December 31, 2016 and 2015 of $784,457 and $4,065,830, respectively which is included within compensation expense
on the consolidated statement of operations. As of December 31, 2016, there was $78,884 of unrecognized stock-based compensation
expense that will be recognized over the weighted average remaining vesting period of 0.5 years.
STOCK
OPTIONS
In
accordance with the agreements of the respective non-employee members of the Board of the Directors, in addition to a cash fee,
the Company is required to issue an option to purchase 100 shares of Common Stock for each Board meeting and each committee meeting
of the Board of Directors. The options vest in two years from the date of issuance, expire five years from the date of issuance
and have an exercise price of $0.01 above the closing price of the Company’s Common Stock on the date of the grant.
During
the year ended December 31, 2015, the Company issued options to purchase 1,800 shares of the Company’s Common Stock (500
shares under the 2014 Plan and 1,300 shares under the 2015 Plan) at exercise prices ranging from $9.50 to $21.00 per share to
members of the Board of Directors as compensation for attending Board meetings during the time. During the year ended December
31, 2016, the Company issued options to purchase 1,400 shares of the Company’s Common Stock under the 2015 Plan at exercise
prices ranging from $15.50 to $16.50 per share to members of the Board of Directors as compensation for attending Board meetings
during the time.
On
November 13, 2015, the Company issued five-year options to purchase an aggregate of 20,400 shares of the Company’s Common
Stock under the 2014 Plan at $31.50 per share to employees for services rendered. The options had a grant date fair value of $76,731
and vest as follows: 6,800 on the date of issuance, 6,800 on the first anniversary of the date of issuance, 6,800 on the second
anniversary of the date of issuance 6,800 on the third anniversary of the date of issuance.
On
November 17, 2015, the Company issued a five-year option to purchase 5,000 shares of the Company’s Common Stock under the
2014 Plan at $52.50 per share to an employee for services rendered. The option vested immediately and had a grant date fair value
of $297.
During
the year ended December 31, 2015, the Company issued five-year options to purchase 1,100 shares of the Company’s Common
Stock at exercise prices ranging from $8.50 to $19.50 per share to a member of the Board of Directors as compensation for attending
meetings of the OPFIN Committee. The options vested immediately and had a grant date fair value of $7,820, which was recognized
immediately. During the year ended December 31, 2016, the Company issued five-year options to purchase 1,200 shares of the Company’s
Common Stock at exercise prices ranging from $7.50 to $24.50 per share to a member of the Board of Directors as compensation for
attending meetings of the OPFIN Committee. The options vested immediately and had a grant date fair value of $10,446, which was
recognized immediately.
The
weighted average estimated fair value of the options granted during the year ended December 31, 2016 was $3.50 per share. The
weighted average estimated fair value of the options granted during year ended December 31, 2015 was $11.50 per share.
In
applying the Black-Scholes option pricing model to stock options granted, the Company used the following assumptions:
|
|
For
the Years Ended
|
|
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Risk
free interest rate
|
|
|
0.73%
- 0.90 %
|
|
|
|
0.63%
- 1.12 %
|
|
Expected
term (years)
|
|
|
2.50
|
|
|
|
2.50
- 5.00
|
|
Expected
volatility
|
|
|
102%
- 118 %
|
|
|
|
87%
- 128 %
|
|
Expected
dividends
|
|
|
0.00%
|
|
|
|
0.00%
|
|
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
14.
STOCKHOLDERS’ DEFICIENCY – CONTINUED
STOCK
OPTIONS
– CONTINUED
A
summary of the option activity during the years ended December 31, 2016 and 2015 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
of
|
|
|
Exercise
|
|
|
Life
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
In
Years
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2014
|
|
|
153,813
|
|
|
$
|
62.00
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
23,800
|
|
|
|
30.00
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited/expired
|
|
|
(21,980
|
)
|
|
|
59.00
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2015
|
|
|
155,633
|
|
|
$
|
57.50
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,600
|
|
|
|
19.00
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited/expired
|
|
|
(9,000
|
)
|
|
|
38.00
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2016
|
|
|
149,233
|
|
|
$
|
58.00
|
|
|
|
2.0
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2016
|
|
|
138,520
|
|
|
$
|
59.00
|
|
|
|
2.0
|
|
|
$
|
-
|
|
The
following table presents information related to stock options at December 31, 2016:
|
|
Options
Outstanding
|
|
|
Options
Exercisable
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Range
of
|
|
Average
|
|
|
Outstanding
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
Exercise
|
|
|
Number
of
|
|
|
Remaining
Life
|
|
|
Number
of
|
|
Price
|
|
Price
|
|
|
Options
|
|
|
In
Years
|
|
|
Options
|
|
$7.50
- $25.00
|
|
$
|
18.50
|
|
|
|
7,700
|
|
|
|
2.7
|
|
|
|
7,700
|
|
$27.50
- $50.00
|
|
|
40.00
|
|
|
|
46,900
|
|
|
|
2.8
|
|
|
|
37,587
|
|
$50.50
- $65.50
|
|
|
58.50
|
|
|
|
27,933
|
|
|
|
2.8
|
|
|
|
26,533
|
|
$66.00
- $80.50
|
|
|
74.50
|
|
|
|
66,700
|
|
|
|
1.0
|
|
|
|
66,700
|
|
|
|
|
|
|
|
|
149,233
|
|
|
|
2.0
|
|
|
|
138,520
|
|
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
14.
STOCKHOLDERS’ DEFICIENCY – CONTINUED
STOCK
WARRANTS
See
Note 11 – Notes Payable for details associated with the issuance of warrants. See Note 9 – Accrued Expenses –
Warrants Payable and Note 13 – Fair Value Measurement for details associated with the issuances of warrants to the former
members of Beam and for the relevant warrant valuation assumptions. See Note 13 – Stockholders’ Deficiency
– Preferred Stock - Series C Convertible Preferred Stock for details associated with issuances of warrants in connection
with a securities purchase agreement.
On
February 25, 2015, the Company entered into an agreement with certain investors in the October 2013 financing whereby the investors
were issued warrants to purchase 66,735 shares of the Company’s Common Stock at an exercise price of $35.00 per share which
vested immediately, expire five years from the date of issuance and contain weighted average anti-dilution and fundamental transaction
provisions, as defined. These additional warrants represent the warrants the investors would have received as a result of the
December 23, 2014 financing had they not previously surrendered their anti-dilution protection during 2014. The warrants, which
were classified as derivative liabilities, had an aggregate fair value of $275,908, which was recognized immediately. Additionally,
as a result of the December 23, 2014 financing, the exercise price of warrants to purchase an aggregate of 392,000 shares of Common
Stock issued to the October 2013 and December 2013 investors was reduced to $35.00 per share. As the warrants are classified as
derivative liabilities, the impact of the modification was included within change in fair value of warrant liabilities on the
consolidated statement of operations during the year ended December 31, 2015.
During
the year ended December 31, 2016, the Company agreed to extend the maturity date of warrants to purchase an aggregate of 51,800
shares of Common Stock with an exercise price of $112.50 per share by eighteen (18) months in exchange for the warrant holders’
consent to rescind a fundamental transactions provision. As a result, the Company recorded warrant modification expense of $6,838
during the year ended December 31, 2016.
During
the year ended December 31, 2016, the Company recorded warrant modification expense of $457 related to the extension of the expiration
date of warrants to purchase 500 shares of Common Stock.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
14.
STOCKHOLDERS’ DEFICIENCY – CONTINUED
STOCK
WARRANTS
– CONTINUED
The
following table accounts for the Company’s warrant activity for the years ended December 31, 2016 and 2015 :
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
of
|
|
|
Exercise
|
|
|
Life
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
In
Years
|
|
|
Value
|
|
Outstanding,
December 31, 2014
|
|
|
1,081,766
|
|
|
$
|
64.00
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
166,600
|
|
|
|
43.50
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited/expired
|
|
|
(27,495
|
)
|
|
|
77.50
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2015
|
|
|
1,220,871
|
|
|
$
|
54.00
|
[1]
|
|
|
|
|
|
|
|
|
Issued
|
|
|
153,772
|
|
|
|
41.50
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited/expired
|
|
|
(279,528
|
)
|
|
|
85.50
|
|
|
|
|
|
|
|
|
|
Outstanding,
December 31, 2016
|
|
|
1,095,115
|
|
|
$
|
44.00
|
|
|
|
2.3
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
December 31, 2016
|
|
|
1,095,115
|
|
|
$
|
44.00
|
|
|
|
2.3
|
|
|
$
|
-
|
|
[1]
|
During
2015, the exercise price of warrants to purchase an aggregate of 392,000 shares of Common Stock was reduced to $35.00 per
share from exercise prices ranging from $50.00 to $52.50 per share.
|
The
following table presents information related to stock warrants at December 31, 2016 :
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Range
of
|
|
Average
|
|
|
Outstanding
|
|
|
Average
|
|
|
Exercisable
|
|
Exercise
|
|
Exercise
|
|
|
Number
of
|
|
|
Remaining
Life
|
|
|
Number
of
|
|
Price
|
|
Price
|
|
|
Warrants
|
|
|
In
Years
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$7.50
- $25.00
|
|
$
|
7.50
|
|
|
|
100
|
|
|
|
3.0
|
|
|
|
100
|
|
$25.00
- $50.00
|
|
|
39.00
|
|
|
|
943,554
|
|
|
|
2.5
|
|
|
|
943,554
|
|
$50.50
- $75.00
|
|
|
52.50
|
|
|
|
86,881
|
|
|
|
0.6
|
|
|
|
86,881
|
|
$75.50
- $112.50
|
|
|
112.50
|
|
|
|
64,580
|
|
|
|
1.0
|
|
|
|
64,580
|
|
|
|
|
|
|
|
|
1,095,115
|
|
|
|
2.3
|
|
|
|
1,095,115
|
|
COMMON
STOCK
See
Note 17 – Commitments and Contingencies – Employment Agreements for details associated with issuances of Common
Stock pursuant to employment agreements.
On
February 3, 2015, the Company issued 50,000 fully vested shares of the Company’s Common Stock to a consultant to
advise the Company about corporate governance matters. The consulting services expense valued at $50,000 was accrued for as of
December 31, 2014.
On
April 1, 2015, the Company issued 51,586 fully vested shares of its Common Stock to its then Chief Financial Officer as
compensation for the period from November 2014 through April 2015 valued at $21,600, of which $7,200 were accrued for as of December
31, 2014.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
14.
STOCKHOLDERS’ DEFICIENCY – CONTINUED
COMMON
STOCK
– CONTINUED
On
April 10, 2015, the Company issued 8,658 fully vested shares of its Common Stock to a consulting firm for services rendered by
a financial consultant for the period of December 2014 through March 2015 valued at $170,100, of which $16,739 was accrued for
as of December 31, 2014.
On
April 24, 2015, as part of a litigation settlement, two former members of Beam were issued an aggregate of 2,000 fully vested
shares of the Company’s Common Stock valued at $17.50 per share for an aggregate fair value of $35,000.
During
the year ended December 31, 2015, the Company offered the remaining seven former Beam members shares of the Company’s Common
Stock as consideration for surrendering their anti-dilution benefit contained in the original Beam acquisition agreement. As a
result, three members accepted the Company’s offer and the Company issued an aggregate of 57 fully vested shares of the
Company’s Common Stock valued at $898.
During
the year ended December 31, 2015, the Company issued 3,690 fully vested shares of the Company’s Common Stock to members
of the Board of Directors as compensation for attending Board meetings. The shares had a grant date fair value of $68,999 based
on the trading price of the Company’s Common Stock on the dates of the respective meetings.
During
the year ended December 31, 2015, the Company issued an aggregate of 1,445 of fully vested shares of the Company’s Common
Stock at the respective closing market price on the date of the respective meetings to a member of the Board of Directors for
attendance of meetings of the newly formed OPFIN Committee. The shares had an aggregate grant date fair value of $21,003 which
was recognized immediately.
In
March 2016, one of the former members of Beam returned 4,846 shares of the Company’s Common Stock to the Company in exchange
for cash of $45,000. The shares of Common Stock were cancelled by the Company in March 2016.
During
the year ended December 31, 2016, the Company issued 15,000 shares of common to the Company’s Chief Operating Officer in
connection with his March 24, 2015 employment agreement. The $300,000 of aggregate fair value of the shares was recognized over
the one year service period. The Company recognized $68,852 of stock-based compensation expense during the year ended December
31, 2016 related to the award which is included within stock-based compensation on the consolidated statement of changes in stockholders’
deficiency.
During
the year ended December 31, 2016, the Company issued an aggregate of 6,962 shares of Common Stock to the Company’s Board
of Directors as compensation for their attendance at various Board and OPFIN Committee meetings, of which, 3,883 shares were issued
for 2016 meetings and 3,078 shares were issued for 2015 meetings. The shares had an aggregate grant date fair value of $65,982,
of which, $35,924 was recognized during the year ended December 31, 2016 and is included within stock-based compensation on the
consolidated statement of changes in stockholders’ deficiency and $30,058 was recognized during the year ended December
31, 2015 and was included within stock-based compensation on the consolidated statement of changes in stockholders’ deficiency
as of December 31, 2015.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
15.
INCOME TAXES
The
Company is subject to U.S. federal and various state income taxes.
The
income tax provision (benefit) for the years ended December 31, 2016 and 2015 consists of the following:
|
|
For
The Years Ended
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
Federal:
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
(2,562,884
|
)
|
|
|
(3,704,115
|
)
|
|
|
|
|
|
|
|
|
|
State
and local:
|
|
|
|
|
|
|
|
|
Current
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
|
(301,516
|
)
|
|
|
1,496,815
|
|
|
|
|
(2,864,400
|
)
|
|
|
(2,207,300
|
)
|
Change
in valuation allowance
|
|
|
2,864,400
|
|
|
|
2,207,300
|
|
Income
tax provision (benefit)
|
|
$
|
-
|
|
|
$
|
-
|
|
No
current tax provision has been recorded for the years ended December 31, 2016 and 2015 because the Company had net
operating losses for federal and state tax purposes. The net operating loss carryovers may be subject to annual limitations under
Internal Revenue Code Section 382, and similar state provisions, should there be a greater than 50% ownership change as determined
under the applicable income tax regulations. The amount of the limitation would be determined based on the value of the company
immediately prior to the ownership change and subsequent ownership changes could further impact the amount of the annual limitation.
An ownership change pursuant to Section 382 may have occurred in the past or could happen in the future, such that the NOLs available
for utilization could be significantly limited. The Company will perform a Section 382 analysis in the future. The related increase
in the deferred tax asset was offset by the valuation allowance.
A
reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
|
|
For
The Years Ended
|
|
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
Tax
benefit at federal statutory rate
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
State
income taxes, net of federal benefit
|
|
|
(4.0
|
)%
|
|
|
(4.0
|
)%
|
Permanent
differences
|
|
|
1.2
|
%
|
|
|
(11.1
|
)%
|
Prior
period adjustments
|
|
|
0.0
|
%
|
|
|
(1.1
|
)%
|
Other
|
|
|
(0.4
|
)%
|
|
|
23.4
|
%
|
Change
in valuation allowance
|
|
|
37.2
|
%
|
|
|
26.8
|
%
|
Effective
income tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The
Company has determined that a valuation allowance for the entire net deferred tax asset is required. A valuation allowance is
required if, based on the weight of evidence, it is more likely than not that some or the entire portion of the deferred tax asset
will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a full
valuation allowance is necessary to reduce the deferred tax asset to zero, the amount that will more likely not be realized.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
15.
INCOME TAXES – CONTINUED
The
tax effects of temporary differences that give rise to deferred tax assets are presented below:
|
|
For
The Years Ended
|
|
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred
Tax Assets:
|
|
|
|
|
|
|
|
|
Net
operating loss carryforwards
|
|
$
|
22,496,500
|
|
|
$
|
20,237,500
|
|
Stock-based
compensation
|
|
|
4,571,900
|
|
|
|
4,624,700
|
|
Provision
for warrant liability
|
|
|
-
|
|
|
|
-
|
|
Accruals
|
|
|
2,295,200
|
|
|
|
1,581,900
|
|
Goodwill
|
|
|
2,318,500
|
|
|
|
2,318,500
|
|
Intangible
assets
|
|
|
426,400
|
|
|
|
474,000
|
|
Allowance
for doubtful accounts
|
|
|
16,100
|
|
|
|
53,600
|
|
Tax
credits
|
|
|
478,300
|
|
|
|
448,300
|
|
Gross
deferred tax assets
|
|
|
32,602,900
|
|
|
|
29,738,500
|
|
Deferred
Tax Liabilities:
|
|
|
|
|
|
|
|
|
Fixed
assets
|
|
|
(772,300
|
)
|
|
|
(772,300
|
)
|
Gross
deferred tax liabilities
|
|
|
(772,300
|
)
|
|
|
(772,300
|
)
|
Net
deferred tax assets
|
|
|
31,830,600
|
|
|
|
28,966,200
|
|
Valuation
allowance
|
|
|
(31,830,600
|
)
|
|
|
(28,966,200
|
)
|
Deferred
tax asset, net of valuation allowance
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Changes
in valuation allowance
|
|
$
|
2,864,400
|
|
|
$
|
2,207,300
|
|
At
December 31, 2016 and 2015 , the Company had net operating loss carry forwards for federal and state income tax purposes
of approximately $59.5 million and $53.3 million, respectively, which may be used to offset future taxable
income through 2035, subject to the Company filing delinquent tax returns as described herein. As described in Note 17 - Commitments
and Contingencies - Taxes, the Company has not filed its federal and state corporate income tax returns for the years ended December
31, 2014 and 2015. Accordingly, approximately $15.2 million and $10.6 million of the federal and state NOLs described herein will
not be available to offset future taxable income until the outstanding tax returns are filed with the respective federal and state
tax authorities.
The
Company’s tax returns are subject to examination by tax authorities beginning with the year ended December 31, 2013 .
16.
RELATED PARTIES
The
Company paid commissions to a company owned by its Executive Chairman , such company is referred to as “FGI”,
totaling $0 and $47,750
,
respectively, during the years ended December 31, 2016 and 2015 for
business development related to installations of EV charging stations by the Company in accordance with the support services
contract. These amounts are recorded as compensation on the consolidated statements of operations. These amounts were paid
pursuant to a Fee/Commission Agreement entered into by the Company and FGI on November 17, 2009.
FGI
and the Company’s Chief Operating Officer (“COO”) have made certain claims for historical unpaid unquantifiable
compensation pursuant to their Fee/Commission Agreements with the Company. During November 2016, the Company’s Board of
Directors quantified the total claims to be approximately $475,000 for each party and, upon further analysis, determined the Company’s
reasonable estimate of the aggregate liability is $445,000 (estimated as $277,000 payable in cash and $168,000 payable in stock
options) which was accrued and is included within accrued expenses on the consolidated balance sheet as of December 31, 2016.
In
addition, FGI has made a claim that expired warrants to purchase an aggregate of 114,667 shares of Common Stock should be replaced
pursuant to an agreement with the Company. As of December 31, 2016, the fair value of the warrant claim is estimated to be approximately
$686,000.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
16.
RELATED PARTIES – CONTINUED
The
Company incurred accounting and tax service fees totaling $0 and $33,018 , respectively for the years ended December
31, 2016 and 2015, respectively, provided by a company that is partially owned by the Company’s former Chief
Financial Officer
.
This expense was recorded as general and administrative expense in the consolidated statements of operations.
See
Note 11 - Notes Payable – Convertible and Other Notes – Related Party and Note 17 – Commitments and Contingencies
– Patent License Agreement.
17.
COMMITMENTS AND CONTINGENCIES
OPERATING
LEASE
The
Company’s corporate headquarters is located in Miami Beach, Florida. The Company currently leases space located at 1691
Michigan Avenue, Suite 601, Miami Beach Florida 33139. The lease was for a term of 39 months beginning on March 1, 2012 and ended
May 31, 2015. Monthly lease payments were approximately $12,000 for a total of approximately $468,000 for the total term of the
lease. The lease had been extended through August 1, 2015 at a cost of $13,928 per month. On July 31, 2015, the lease was further
amended such that the amended lease term begins on August 1, 2015 and ends on September 30, 2018. Monthly lease payments are approximately
$20,000 for a total of approximately $755,000 for the total term of the lease. Additionally, the Company had a three-year lease
for an office in San Jose, California beginning on April 1, 2012 and ended April 30, 2015 with monthly lease payments of approximately
$2,500 for a total of approximately $92,000 for the total term of the lease. The lease was extended to April 30, 2016 at a monthly
rental cost of $3,009. The Company also has a five year sublease for office and warehouse space in Phoenix, Arizona beginning
December 1, 2013 and ending November 30, 2018. On February 28, 2017, the Company vacated the Phoenix, Arizona space and has
no further obligation in connection with the sublease.
The
minimum future aggregate
minimum lease payments , net of sublease income, for these leases based on their initial terms as of December 31, 2016
are:
For
the Year Ending
|
|
|
|
December
31,
|
|
Amount
|
|
|
|
|
|
2017
|
|
$
|
225,577
|
|
2018
|
|
|
216,725
|
|
Total
|
|
$
|
442,302
|
|
Total
rent expense , net of sublease income, for the years ended December 31, 2016 and 2015 was $250,886
and $472,744, respectively, and is recorded in other operating expenses.
SUBLEASE
AGREEMENT
On
July 28, 2016, the Company (“Sublandlord”) entered into a sublease agreement with Balance Labs, Inc. (“Subtenant”)
(an entity controlled by the Company’s Executive Chairman of the Board of Directors) pursuant to which the Company agreed
to sublease a portion of its Miami, Florida corporate headquarters to Subtenant. The term of the sublease agreement is from August
1, 2016 to September 29, 2018, subject to earlier termination upon written notice of termination by the landlord or Sublandlord.
Throughout the term of the agreement, Subtenant shall pay to Sublandlord fixed base rent and operating expenses equal to 50% of
Sublandlord’s obligation under its primary lease agreement, resulting in monthly base rent payments ranging from approximately
$7,500 to $8,000 per month, for a total of approximately $200,000 for the total term of the sublease agreement.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
17.
COMMITMENTS AND CONTINGENCIES – CONTINUED
PATENT
LICENSE AGREEMENT
On
March 29, 2012, the Company, as licensee (the “Licensee”) entered into an exclusive patent license agreement with
the Executive Chairman of the Board and Balance Holdings, LLC (an entity controlled by the Executive Chairman) (collectively,
the “Licensor”), whereby the Company agreed to pay a royalty of 10% of the gross profits received by the Company from
commercial sales and/or use of two provisional patent applications, one relating to an inductive charging parking bumper and one
relating to a process which allows multiple EVs to plug into an EV charging station simultaneously and charge as the current becomes
available.
On
March 11, 2016, the Licensee and the Licensor entered into an agreement related to the March 29, 2012 patent license agreement.
The parties acknowledged that the Licensee has paid a total of $8,525 in registration and legal fees for the U.S. Provisional
Patent Application No. 61529016 (the “Patent Application”) (related to the inductive charging parking bumper) to date.
Effective March 11, 2016, the patent license agreement, solely with respect to the Patent Application and the parties’ rights
and obligations thereto, was terminated. The Executive Chairman of the Board agreed to be solely responsible for all future costs
and fees associated with the prosecution of the patent application. In the event the Patent Application is successful, the Executive
Chairman of the Board shall grant a credit to the Licensee in the amount of $8,525 to be applied against any outstanding amount(s)
owed to him. If the Licensee does not have any outstanding payment obligations to the Executive Chairman of the Board at the time
the Patent Application is approved, the Executive Chairman of the Board shall remit the $8,525 to the Licensee within twenty (20)
days of the approval. The parties agreed to a mutual release of any claims associated with the patent license agreement. As of
December 31, 2016, the Company has not paid nor incurred any royalty fees related to this patent license agreement.
EMPLOYMENT
AGREEMENTS
On
December 23, 2014, in connection with the closing and as a condition to the closing of the securities purchase agreement, the
Company entered into an amended and restated employment agreement with its then Chief Executive Officer, Michael D. Farkas. The
amendment provides that Mr. Farkas shall have a salary of Forty Thousand Dollars ($40,000) per month. However, for such time as
any of the Aggregate Subscription Amount is still held in escrow, Mr. Farkas shall receive Twenty Thousand Dollars ($20,000) in
cash and the remaining amount of his compensation: (i) shall be deferred; and (ii) must be determined by the compensation committee
of the Company’s Board of Directors to be fair and equitable. Additionally, beginning on the date that the
Aggregate Subscription Amount is released from escrow and continuing for so long as the Series C Convertible Preferred Stock remains
issued and outstanding, Mr. Farkas’ salary shall only be paid in cash if doing so would not put the Company in a negative
operating cash flow position.
On
March 24, 2015, the Company entered into an employment agreement with Mr. Ira Feintuch to serve as the Company’s Chief Operating
Officer for an initial three year term renewable annually unless written notice is provided 60 days prior to the renewal term.
In consideration thereof, Mr. Feintuch is to receive an annual salary of $250,000 and shall participate in all benefit programs
of the Company. In addition, Mr. Feintuch will receive 1,000,000 shares of Series A Convertible Preferred Stock, 1,500 shares
of Series C Convertible Preferred Stock and 30,000 shares of Common Stock. The stock awards are payable 50% upon the signing of
the employment agreement and 50% upon the one year anniversary of the employment agreement. The total fair value of the stock
awards was $1,750,000, of which $875,000 was recognized immediately upon issuance and the remaining $875,000 will be recognized
over the one year service period. The Company estimated the fair value of the Common Stock and Series C Convertible Preferred
Stock based on observed prices of sales and/or exchanges of identical securities within the last six months. The Company estimated
the fair value of the Series A Convertible Preferred Stock based on observed prices of sales and/or exchanges of similar securities
within the last six months. In addition, options to purchase an aggregate of 29,913 shares of Common Stock held by Mr. Feintuch
with exercise prices ranging from $50.00 to $73.00 per share had their expiration dates extended to March 24, 2018, such that
the value of modified options on the modification date was an aggregate of $192,147, which was $47,536 higher than the value of
the original options on the modification date. As a result, the Company recorded option modification expense of $47,536 during
the year ended December 31, 2015.
Effective
July 24, 2015, the Company amended its employment agreement with Mr. Michael D. Farkas, such that Mr. Farkas was appointed the
Company’s Chief Visionary Officer and shall no longer serve as the Company’s Chief Executive Officer. Mr. Farkas will
continue to serve as the Company’s Executive Chairman of the Board of Directors. The employment agreement had a four month
term. The amended employment agreement specified the following: (i) in the event of a sale of the Company within one year of July
24, 2015, Mr. Farkas shall be entitled to receive an incentive payment equal to 1% of the gross sale price; (ii) in satisfaction
of amounts previously owed to Mr. Farkas, the Company is to issue 4,444 shares of Series C Convertible Preferred stock valued
at $400,000 (of which, as of December 31, 2015, 4,000 shares had been issued and as of December 31, 2016 , the remaining
444 shares had been issued by the Company ); and (iii) all outstanding options and warrants shall vest immediately.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
17.
COMMITMENTS AND CONTINGENCIES – CONTINUED
EMPLOYMENT
AGREEMENTS
- CONTINUED
On
July 29, 2015 (the “Effective Date”), the Company entered into an employment agreement with Mr. Michael J. Calise
to serve as the Company’s Chief Executive Officer, pursuant to which Mr. Calise will be compensated at the rate of $275,000
per annum. In addition, Mr. Calise will be entitled to receive (1) 71,688 options with an exercise price of $35.00 per share,
(2) 31,760 options with an exercise price of $50.00 per share, (3) 528 options with an exercise price of $75.00 per share, (4)
5,759 options with an exercise price of $100.00 per share and (5) 30 options with an exercise price of $150.00 per share. The
option quantities were derived from a percentage of the total options and warrants outstanding on the Effective Date (the “Underlying
Instruments”) and can be adjusted downward on a pro rata basis as a result of an expiration or amendment of the Underlying
Instruments. Each of the options shall vest and become exercisable at the rate of 25% of the total number of shares on the twelve
(12) month anniversary of the Effective Date and 1/16 of the total number of shares each quarter thereafter on each quarterly
anniversary of the Effective Date, however, no option shall be exercisable prior to the exercise of the Underlying Instruments.
The options shall have a four (4) year term from each of the respective vesting dates. The option grant requires stockholder approval
of an increase in the number of shares authorized to be issued pursuant to the Company’s equity incentive plan. Pursuant
to ASC 718, the options are not deemed to be granted until stockholder approval is obtained. As of December 31, 2016, the Company
had not obtained stockholder approval and, accordingly, (i) the options are not considered outstanding as of December 31, 2016
and (ii) the Company accrued approximately $152,000 and $55,000 of compensation expense related to the contractual obligation
to issue options which is included within accrued expenses as accrued issuable equity on the consolidated balance sheet as of
December 31, 2016 and 2015, respectively.
In
addition, Mr. Calise will receive a signing bonus consisting of (i) 220,588 shares of the Company’s Common Stock
valued at $75,000 and (ii) a $25,000 cash payment. Within thirty (30) days of Mr. Calise’s acceptance of this position,
Mr. Calise and the Board of the Directors will mutually set the Key Performance Indicators (“KPIs”) for Mr. Calise’s
annual performance bonus. Mr. Calise will be initially eligible to receive an annual performance bonus in the amount of $100,000.
Any entitled annual performance bonus shall be payable in January after the end of each year, and awarded for meeting the KPIs
mutually set by Mr. Calise and the Board of Directors for the prior calendar year. Mr. Calise and the Board of Directors
will meet at the beginning of each calendar year for set the KPIs and the annual bonus amount for that calendar year. Mr.
Calise may receive an additional bonus in the form of cash and/or stock, at the discretion of the Board of Directors, or pursuant
to one or more written plans adopted by the Board of Directors. Mr. Calise is entitled to paid time off of 20 days per
annum. Upon termination by the Company other than for cause, death, disability, or if Mr. Calise resigns for good reason, Mr.
Calise will be entitled to: (i) a lump sum payment equal to nine (9) months of salary, then in effect, (ii) a prorated annual
performance bonus, (iii) reimbursement of COBRA premiums for a period of (12) months and (iv) (9) months of accelerated vesting
with respect to Mr. Calise’s then-outstanding equity awards. In addition to the preceding termination benefits, if Mr. Calise
is terminated three months or less prior to, or upon, or within twelve months following a change of control, Mr. Calise will be
entitled to accelerated vesting of then-outstanding equity awards ranging from an additional three months up to 100% acceleration
of vesting. The Company and Mr. Calise expect to resolve the options and KPI bonus due to Mr. Calise pursuant to his employment
agreement prior to the closing of the Registered Offering.
BUSINESS
AGREEMENTS
On
April 2, 2015, Nissan North America (“Nissan”) notified the Company of the termination of the joint marketing agreement
with the Company as a result of the Company’s material default of the agreement in 2015. As a result, Nissan notified the
Company of its intent to repossess the 31 uninstalled fast chargers currently held at a third party facility that had a carrying
amount of $462,552 and was included within other assets and deferred revenue on the consolidated balance sheet as of December
31, 2014. The parties reached an agreement on July 23, 2015 that Nissan would take possession of 28 uninstalled fast chargers
held at the third party facility, at which time the amount included within other assets and deferred revenue was written off.
On
May 19, 2015, the Company entered into an agreement to purchase 15,000 chargers over three years pending: (i) the submission of
a purchase order for 15,000 chargers to be delivered in a mutually agreed product delivery forecast, (ii) the payment of an initiation
fee, as defined, (iii) sign off on a mutually agreed product schedule and (iv) a three year delivery forecast. The value of the
chargers in the aggregate is in the range of $10.3 million to $16.5 million depending on model and ordering quantity of respective
model. On June 26, 2015, the Company paid the initiation fee of $83,000 in full.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
17.
COMMITMENTS AND CONTINGENCIES – CONTINUED
TAXES
The
Company has not filed its Federal and State corporate income tax returns for the years ended December 31, 2014 and 2015. The Company
has sustained losses for the years ended December 31, 2014 and 2015. The Company has determined that no tax liability, other than
required minimums, has been incurred.
The
Company is also delinquent in filing and, in certain instances, paying sales taxes collected from customers in specific states
that impose a tax on sales of the Company’s products. The Company has accrued a $139,000 liability as of December 31, 2016
related to this matter.
The
Company is currently delinquent in remitting approximately $244,000 of federal and state payroll taxes withheld from employees
as of March 31, 2017.
LITIGATION
AND DISPUTES
On
July 28, 2015, a Notice of Arbitration was received stating ITT Cannon has a dispute with Blink for the manufacturing and purchase
of 6,500 charging cables by Blink, who has not taken delivery or made payment on the contract price of $737,425. ITT Cannon also
seeks to be paid the cost of attorney’s fees as well as punitive damages. The parties have agreed on a single arbitrator
and are working to schedule the arbitration. The Company contends that the product was not in accordance with the specifications
in the purchase order and, as such, believes the claim is without merit. The parties have agreed on a single arbitrator. The
arbitration hearing is currently scheduled for February 6, 2017 through February 8, 2017. The parties delayed the arbitration
hearing until May 10. The parties began initial depositions in February and will continue into the first week of March. In parallel
however, the parties had settlement discussions on February 28, 2017. As of March 27, 2016, a term-sheet with settlement features
was offered by Car Charging to ITT in stock valued at $175,000. The amount of shares will be determined and priced on the day
of closing of our contemplated public offering. For this, ITT would relinquish to Car Charging all of the remaining inventory
of the EV charging cable assemblies originally valued at $737,425. Typical stock restrictions and/or stock bleed out agreements
may be imposed affecting the final settlement figure.
On
April 8, 2016, Douglas Stein filed a Petition for Fee Arbitration with the State Bar of Georgia against the Company for breach
of contract for failure to pay invoices in the amount of $178,893 for legal work provided. The invoices have been accrued for
in the periods in which the services were provided. The Company has responded to the claim and is simultaneously pursuing settlement
options. The parties failed to settle after numerous attempts. On February 15, 2017, the case was brought to the Georgia Arbitration
Committee. On February 26, 2017, The Stein Law firm was awarded a summary judgment for $178,893. The Company may appeal the decision
and/or offer stock and/or cash in exchange for the awarded judgment at a later date.
On
May 18, 2016, the Company was served with a complaint from Solomon Edwards Group, LLC for breach of written agreement and unjust
enrichment for failure to pay invoices in the amount of $172,645 for services provided, plus interest and costs. The invoices
have been accrued for in the periods in which the services were provided. The Company has responded to the claim and is simultaneously
pursuing settlement options.
From
time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business.
350
GREEN, LLC
350
Green
lawsuits relate
solely to alleged pre-acquisition unpaid debts of 350 Green. Also, there are other unpaid creditors, aside from those noted above,
that claim to be owed certain amounts for pre-acquisition work done on behalf of 350 Green solely, that potentially could file
lawsuits at some point in the future.
On
August 7, 2014, 350 Green received a copy of a complaint filed by Sheetz, a former vendor of 350 Green alleging breach of contract
and unjust enrichment of $112,500. The complaint names 350 Green, 350 Holdings LLC and CCGI in separate breach of contract counts
and names all three entities together in an unjust enrichment claim. CCGI and 350 Holdings will seek to be dismissed from the
litigation, because, as the complaint is currently plead, there is no legal basis to hold CCGI or 350 Green liable for a contract
to which they are not parties. As of December 31, 2016 and 2015, an amount of $112,500 is included in accounts payable of 350
Green. The parties held a mediation conference on May 15, 2015, but no settlement was reached. The Company settled with
Sheetz in principal on February 10, 2017 with the formal documentation being signed on March 1, 2017. The settlement involved
a combination of DC charging equipment, installation, charging services, shared driver charging revenue and maintenance for two
systems in exchange for no further legal action amongst 350 Green, 350 Holdings or the Company.
On
September 9, 2015, the United States Court of Appeals for the Seventh Circuit of Chicago, Illinois affirmed the ruling of the
United States District Court for the Northern District of Illinois in the matter of JNS Power & Control Systems, Inc. v. 350
Green, LLC in favor of JNS, which affirmed the sale of certain assets by 350 Green to JNS and the assumption of certain 350 Green
liabilities by JNS. On April 7, 2016, JNS amended the complaint to add the Company alleging an unspecified amount of lost
revenues from the chargers, among other matters, caused by the defendants. Plaintiff also seeks indemnity for its unspecified
costs in connection with enforcing the Asset Purchase Agreement in courts in New York and Chicago. The parties concluded their
efforts to mediate a settlement before Magistrate Judge Kim without achieving a settlement. Settlement discussions are ongoing
between the parties. The next status hearing on the matter is set for May 31, 2017.
On
February 23, 2017, Blink entered into an Exclusive Electronic Vehicle Charging Services Agreement with Sheetz for a five (5) year
term. Pursuant to the agreement, Blink shall remit to Sheetz gross revenue generated by electric vehicle charging fees and advertising,
minus (i) any and all taxes, (ii) 8% transaction fees, (iii) $18.00 per charger per month; and (iv) any electricity costs incurred
by Blink ((i), (ii), (iii), and (iv) being referred to as the “Service Fees”). In the event the aggregate gross revenues
are insufficient to cover the Service Fees incurred in a given month by the charging stations, such unpaid Service Fees will accrue
to the following month. The agreement is subject to an automatic five year renewal unless written notice for the contrary is provided.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
17.
COMMITMENTS AND CONTINGENCIES – CONTINUED
LITIGATION
AND DISPUTES
– CONTINUED
OTHER
MATTER
On
May 12, 2016, the SEC filed a complaint with the United States District Court in the Central District of California wherein the
SEC alleges that an attorney who previously served as securities counsel to the Company was involved in a fraudulent scheme to
create and sell seven (7) public “shell” companies. The SEC’s complaint indicates that one of the shell companies,
New Image Concepts, Inc. (“NIC”) was the subject of the Company’s December 7, 2009 reverse merger, wherein following
the merger, NIC was renamed Car Charging Group, Inc. The Company is not named as a defendant in the SEC’s complaint and,
based on internal review and discussions, there were and are no continuing affiliations between any employees, directors, or investors
of the pre-merger shell company and the Company. The Company has determined that no current or past employees of the Company were
involved with the former shell company and it does not expect any additional actions to be necessary with respect to this matter.
18.
SUBSEQUENT EVENTS
RELATED
PARTY
On
February 7, 2017, a company in which the Company’s Executive Chairman has a controlling interest purchased the following
securities from a stockholder of the Company for $1,000,000: 142,852 shares of Common Stock, 114,491 shares of Series C Preferred
Stock, warrants to purchase 524,604 shares of the Company’s Common Stock, and all rights, claims, title, and interests in
any securities of whatever kind or nature issued or issuable as a result of the stockholder’s ownership of the Company’s
securities.
NON-CONVERTIBLE
NOTES - RELATED PARTY
On
February 10, 2017, the Company issued a promissory note in the principal $22,567, to a company in which the Company’s Executive
Chairman has a controlling interest, which bears interest at 10% per annum payable upon maturity. The promissory note is payable
on the earlier of May 9, 2017, or the closing date of a public offering of the Company’s securities, which raises gross
proceeds of at least $10,000,000. This note may be prepaid in whole or in part at any time without penalty or premium.
On
February 14, 2017, the Company issued a promissory note in the principal $25,000, to a company in which the Company’s Executive
Chairman has a controlling interest, which bears interest at 10% per annum payable upon maturity. The promissory note is payable
on the earlier of May 15, 2017, or the closing date of a public offering of the Company’s securities, which raises gross
proceeds of at least $10,000,000. This note may be prepaid in whole or in part at any time without penalty or premium.
CONVERTIBLE
NOTES
Issuances
On
February 10, 2017, the Company received an additional advance of $225,100 under the Note. Pursuant to the terms of the Note, the
Company issued a warrant to purchase 6,431 shares of the Company’s Common Stock.
On
February 27, 2017, the Company received an additional advance of $300,000 under the Note. Pursuant to the terms of the Note, the
Company issued a warrant to purchase 8,571 shares of the Company’s Common Stock.
On
March 14, 2017, the Company received an additional advance of $250,000 under the Note. Pursuant to the terms of the Note, the
Company issued a warrant to purchase 7,143 shares of the Company’s Common Stock.
On
March 24, 2017, the Company received an additional advance of $30,000 under the Note. Pursuant to the terms of the Note, the Company
issued a warrant to purchase 857 shares of the Company’s Common Stock.
On
April 5, 2017, the Company received an additional advance of $400,000 under the Note. Pursuant to the terms of the Note, the Company
issued a warrant to purchase 11,429 shares of the Company’s Common Stock.
Amendment
With
respect to the securities and purchase agreement dated October 7, 2016, on March 23, 2017, the parties agreed to amend the terms
of the securities and purchase agreement and promissory note as follows:
The
maturity date of the note is the earlier of May 15, 2017 or third business day after the closing of the Public Offering.
With
respect to the Origination Shares, on the fifth (5th) trading day after the pricing of the Public Offering, but in no event later
than May 15, 2017, or, if the Listing Approval End Date is February 28, 2017, in no event later than March 31, 2017, the Company
shall deliver to the purchaser such number of duly and validly issued, fully paid and non-assessable Origination Shares equal
to 48% of the consideration paid by the purchaser, divided by the lowest of (i) $35.00 per share, or (ii) the lowest daily closing
price of the Common Stock during the ten days prior to delivery of the Origination Shares (subject to adjustment for stock splits),
or (iii) 80% of the Common Stock offering price of the Public Offering, or (iv) 80% of the unit price offering price of the Public
Offering (if applicable), or (v) the exercise price of any warrants issued in the Public Offering. In the event that the Public
Offering is not completed before May 15, 2017, so long as purchaser owns any of the Origination Shares at the time of a subsequent
public offering where the pricing terms above would result in a lower Origination Share pricing, the Origination Shares pricing
shall be subject to a reset based on the same above pricing terms (such that the Origination Shares issuance price would be reduced
and the number of Origination Shares issued would be increased to equal the Origination Dollar Amount). Unless otherwise agreed
by both parties, at no time will the Company issue to the purchaser such number of Origination Shares that would result in the
purchaser owning more than 9.99% of the number of shares of Common Stock outstanding of the Issuer immediately after giving effect
to the issuance of the Origination Shares.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2016 AND 2015
18.
SUBSEQUENT EVENTS – CONTINUED
CONVERTIBLE
NOTES
- CONTINUED
Amendment
- Continued
The
purchaser conditionally waives the defaults for the Company’s failure to meet the original maturity date of the note and
delivery date for the Origination Shares, but the purchaser does not waive any damages, fees, penalties, liquidated damages, or
other amounts or remedies otherwise resulting from such defaults (which damages, fees, penalties, liquidated damages, or other
amounts or remedies the Investor may choose in the future to assess, apply or pursue in its sole discretion) and the purchaser’s
conditional waiver is conditioned on the Company’s not being in default of and not breaching any term of the note or the
securities purchase agreement or any other Transaction Documents (as defined in the securities purchase agreement) at any time
subsequent to the date of the amendment. If the Company triggers an event of default or breaches any term of the note, the securities
purchase agreement, or the Transaction Documents at any time subsequent to the date of the amendment, the purchaser may issue
a notice of default for the Company’s failure to meet the original maturity date of the note and delivery date of the Origination
Shares.
Release
of Liability
On
March 24, 2017, the Company was released from a $23,927 liability pursuant to a professional service agreement, such that it recognized
a gain on forgiveness of accounts payable of $23,928 during the three months ended March 31, 2017.
REVERSE
STOCK SPLIT
A
1:50 reverse stock split of the Company’s common stock will be effected in connection with the pricing of the Company’s
offering discussed in the registration statement of which these financial statements are a part (the “Reverse Stock Split”).
With the exception of the securities that are not affected by the Reverse Stock Split, all share and per share information has
been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
Condensed
Consolidated Balance Sheets
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
|
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,988
|
|
|
$
|
5,898
|
|
Accounts
receivable and other receivables, net
|
|
|
170,186
|
|
|
|
128,315
|
|
Inventory,
net
|
|
|
310,639
|
|
|
|
394,825
|
|
Prepaid
expenses and other current assets
|
|
|
94,893
|
|
|
|
84,631
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
578,706
|
|
|
|
613,669
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets, net
|
|
|
637,211
|
|
|
|
755,682
|
|
Intangible
assets, net
|
|
|
113,903
|
|
|
|
116,482
|
|
Deferred
public offering costs
|
|
|
617,437
|
|
|
|
335,475
|
|
Other
assets
|
|
|
59,133
|
|
|
|
89,573
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
2,006,390
|
|
|
$
|
1,910,881
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
3,864,105
|
|
|
$
|
3,500,267
|
|
Accounts
payable [1]
|
|
|
3,728,193
|
|
|
|
3,728,193
|
|
Current
portion of accrued expenses
|
|
|
6,987,808
|
|
|
|
7,955,976
|
|
Accrued
expenses [1]
|
|
|
5,969
|
|
|
|
5,969
|
|
Current
portion of accrued public information fee
|
|
|
-
|
|
|
|
3,005,277
|
|
Derivative
liabilities
|
|
|
2,338,790
|
|
|
|
1,583,103
|
|
Convertible
notes payable, net of debt discount of $671,977 and $501,981 as of March 31, 2017 and December 31, 2016, respectively
|
|
|
1,253,674
|
|
|
|
581,274
|
|
Convertible
notes payable - related party
|
|
|
542,567
|
|
|
|
495,000
|
|
Notes
payable
|
|
|
342,781
|
|
|
|
342,781
|
|
Current
portion of deferred revenue
|
|
|
504,077
|
|
|
|
600,700
|
|
Total
Current Liabilities
|
|
|
19,567,964
|
|
|
|
21,798,540
|
|
Accrued
expenses, net of current portion
|
|
|
3,150,212
|
|
|
|
-
|
|
Accrued
public information fee, net of current portion
|
|
|
3,005,277
|
|
|
|
-
|
|
Deferred
revenue, net of current portion
|
|
|
86,762
|
|
|
|
99,495
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
25,810,215
|
|
|
|
21,898,035
|
|
|
|
|
|
|
|
|
|
|
Series
B Convertible Preferred Stock, 10,000 shares designated, 8,250 shares issued and outstanding as of March 31, 2017 and December
2016
|
|
|
825,000
|
|
|
|
825,000
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Deficiency:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value, 40,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
Series
A Convertible Preferred Stock, 20,000,000 shares designated, 11,000,000 shares issued and outstanding as of March 31, 2017
and December 31, 2016
|
|
|
11,000
|
|
|
|
11,000
|
|
Series
C Convertible Preferred Stock, 250,000 shares designated, 150,426 shares issued and outstanding as of March 31, 2017 and December
31, 2016
|
|
|
150
|
|
|
|
150
|
|
Common
Stock, $0.001 par value, 500,000,000 shares authorized, 1,609,530 shares issued and outstanding as of March 31, 2017 and December
31, 2016
|
|
|
1,610
|
|
|
|
1,610
|
|
Additional
paid-in capital
|
|
|
63,359,243
|
|
|
|
64,078,182
|
|
Accumulated
deficit
|
|
|
(84,169,514
|
)
|
|
|
(81,071,782
|
)
|
|
|
|
|
|
|
|
|
|
Total
Car Charging Group Inc. - Stockholders’ Deficiency
|
|
|
(20,797,511
|
)
|
|
|
(16,980,840
|
)
|
Non-controlling
interest [1]
|
|
|
(3,831,314
|
)
|
|
|
(3,831,314
|
)
|
|
|
|
|
|
|
|
|
|
Total
Stockholder’s Deficiency
|
|
|
(24,628,825
|
)
|
|
|
(20,812,154
|
)
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Deficiency
|
|
$
|
2,006,390
|
|
|
$
|
1,910,881
|
|
[1]
- Related to 350 Green, which became a variable interest entity of the Company on April 17, 2014.
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
Condensed
Consolidated Statements of Operations
(unaudited)
|
|
For
The Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Charging
service revenue - company-owned charging stations
|
|
$
|
267,874
|
|
|
$
|
292,743
|
|
Product
sales
|
|
|
153,587
|
|
|
|
290,205
|
|
Grant
and rebate revenue
|
|
|
32,810
|
|
|
|
99,780
|
|
Warranty
revenue
|
|
|
34,849
|
|
|
|
20,025
|
|
Network
fees
|
|
|
49,238
|
|
|
|
43,119
|
|
Other
|
|
|
57,262
|
|
|
|
94,265
|
|
|
|
|
|
|
|
|
|
|
Total
Revenues
|
|
|
595,620
|
|
|
|
840,137
|
|
|
|
|
|
|
|
|
|
|
Cost
of Revenues:
|
|
|
|
|
|
|
|
|
Cost
of charging services - company-owned charging stations
|
|
|
26,563
|
|
|
|
51,978
|
|
Host
provider fees
|
|
|
54,447
|
|
|
|
111,790
|
|
Cost
of product sales
|
|
|
78,512
|
|
|
|
153,786
|
|
Network
costs
|
|
|
141,584
|
|
|
|
156,001
|
|
Warranty
and repairs and maintenance
|
|
|
19,148
|
|
|
|
71,116
|
|
Depreciation
and amortization
|
|
|
112,153
|
|
|
|
202,104
|
|
|
|
|
|
|
|
|
|
|
Total
Cost of Revenues
|
|
|
432,407
|
|
|
|
746,775
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
163,213
|
|
|
|
93,362
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
997,357
|
|
|
|
1,463,779
|
|
Other
operating expenses
|
|
|
242,941
|
|
|
|
344,803
|
|
General
and administrative expenses
|
|
|
313,708
|
|
|
|
268,904
|
|
Lease
termination costs
|
|
|
300,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
1,854,006
|
|
|
|
2,077,486
|
|
|
|
|
|
|
|
|
|
|
Loss
From Operations
|
|
|
(1,690,793
|
)
|
|
|
(1,984,124
|
)
|
|
|
|
|
|
|
|
|
|
Other
(Expense) Income:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(140,661
|
)
|
|
|
(35,238
|
)
|
Amortization
of discount on convertible debt
|
|
|
(614,901
|
)
|
|
|
-
|
|
Gain
on settlement of accounts payable
|
|
|
23,928
|
|
|
|
-
|
|
Loss
on settlement reserve
|
|
|
(175,000
|
)
|
|
|
-
|
|
Change
in fair value of warrant liabilities
|
|
|
(464,289
|
)
|
|
|
(2,014,408
|
)
|
Loss
on disposal of fixed assets
|
|
|
-
|
|
|
|
(2,831
|
)
|
Investor
warrant expense
|
|
|
-
|
|
|
|
(5,827
|
)
|
Non-compliance
penalty for delinquent regular SEC filings
|
|
|
-
|
|
|
|
(220,864
|
)
|
Non-compliance
penalty for SEC registration requirement
|
|
|
(36,016
|
)
|
|
|
(137,500
|
)
|
|
|
|
|
|
|
|
|
|
Total
Other Expense
|
|
|
(1,406,939
|
)
|
|
|
(2,416,668
|
)
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
(3,097,732
|
)
|
|
|
(4,400,792
|
)
|
Dividend
attributable to Series C shareholders
|
|
|
(754,900
|
)
|
|
|
(318,400
|
)
|
Net
Loss Attributable to Common Shareholders
|
|
$
|
(3,852,632
|
)
|
|
$
|
(4,719,192
|
)
|
|
|
|
|
|
|
|
|
|
Net
Loss Per Share
|
|
|
|
|
|
|
|
|
-
Basic and Diluted
|
|
$
|
(2.39
|
)
|
|
$
|
(2.96
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Shares of Common Stock Outstanding
|
|
|
|
|
|
|
|
|
-
Basic and Diluted
|
|
|
1,609,530
|
|
|
|
1,591,691
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
Condensed
Consolidated Statements of Changes in Stockholders’ Deficiency
For
the Three Months Ended March 31, 2017
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
|
|
|
|
|
|
|
Convertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Controlling
|
|
|
Total
|
|
|
|
Preferred-A
|
|
|
Preferred-C
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Interest
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
Deficiency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2016
|
|
|
11,000,000
|
|
|
$
|
11,000
|
|
|
|
150,426
|
|
|
$
|
150
|
|
|
|
1,609,530
|
|
|
$
|
1,610
|
|
|
$
|
64,078,182
|
|
|
$
|
(81,071,782
|
)
|
|
$
|
(3,831,314
|
)
|
|
$
|
(20,812,154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,961
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35,961
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Series
C convertible preferred stock dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
of dividends earned
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(754,900
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(754,900
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,097,732
|
)
|
|
|
-
|
|
|
|
(3,097,732
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- March 31, 2017
|
|
|
11,000,000
|
|
|
$
|
11,000
|
|
|
|
150,426
|
|
|
$
|
150
|
|
|
|
1,609,530
|
|
|
$
|
1,610
|
|
|
$
|
63,359,243
|
|
|
$
|
(84,169,514
|
)
|
|
$
|
(3,831,314
|
)
|
|
$
|
(24,628,825
|
)
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
Condensed
Consolidated Statements of Cash Flows
(unaudited)
|
|
For
The Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash
Flows From Operating Activities
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(3,097,732
|
)
|
|
$
|
(4,400,792
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
123,131
|
|
|
|
218,041
|
|
Accretion
of interest expense
|
|
|
75,872
|
|
|
|
-
|
|
Amortization
of discount on convertible debt
|
|
|
614,901
|
|
|
|
-
|
|
Change
in fair value of warrant liabilities
|
|
|
464,289
|
|
|
|
2,014,408
|
|
Provision
for bad debt
|
|
|
19,848
|
|
|
|
33,754
|
|
Loss
on disposal of fixed assets
|
|
|
-
|
|
|
|
2,831
|
|
Gain
on settlement of accounts payable
|
|
|
(23,928
|
)
|
|
|
-
|
|
Non-compliance
penalty for delinquent regular SEC filings
|
|
|
-
|
|
|
|
220,864
|
|
Non-compliance
penalty for SEC registration requirement
|
|
|
36,016
|
|
|
|
137,500
|
|
Non-cash
compensation:
|
|
|
|
|
|
|
|
|
Convertible
preferred stock
|
|
|
-
|
|
|
|
131,967
|
|
Common
Stock
|
|
|
60,000
|
|
|
|
107,853
|
|
Options
|
|
|
107,248
|
|
|
|
315,599
|
|
Warrants
|
|
|
-
|
|
|
|
5,827
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable and other receivables
|
|
|
(61,719
|
)
|
|
|
(70,574
|
)
|
Inventory
|
|
|
82,311
|
|
|
|
148,706
|
|
Prepaid
expenses and other current assets
|
|
|
(10,262
|
)
|
|
|
155,573
|
|
Other
assets
|
|
|
30,440
|
|
|
|
37,965
|
|
Accounts
payable and accrued expenses
|
|
|
905,806
|
|
|
|
376,284
|
|
Deferred
revenue
|
|
|
(109,356
|
)
|
|
|
(258,843
|
)
|
|
|
|
|
|
|
|
|
|
Total
Adjustments
|
|
|
2,314,597
|
|
|
|
3,577,755
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Operating Activities
|
|
|
(783,135
|
)
|
|
|
(823,037
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Investing Activities
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(206
|
)
|
|
|
(5,836
|
)
|
|
|
|
|
|
|
|
|
|
Net
Cash Used In Investing Activities
|
|
|
(206
|
)
|
|
|
(5,836
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds
from sale of shares of Series C Convertible
|
|
|
|
|
|
|
|
|
Preferred
stock and warrants
|
|
|
-
|
|
|
|
900,000
|
|
Payments
of future public offering costs
|
|
|
(24,720
|
)
|
|
|
(45,000
|
)
|
Payments
of debt issuance
costs
|
|
|
(39,000
|
)
|
|
|
-
|
|
Bank
overdrafts, net
|
|
|
(4,912
|
)
|
|
|
-
|
|
Proceeds
from issuance of convertible note payable
|
|
|
805,100
|
|
|
|
-
|
|
Proceeds
from issuance of notes payable to a related party
|
|
|
47,567
|
|
|
|
-
|
|
Repayment
of notes and convertible notes payable
|
|
|
(3,604
|
)
|
|
|
(23,434
|
)
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
780,431
|
|
|
|
831,566
|
|
|
|
|
|
|
|
|
|
|
Net
(Decrease) Increase In Cash
|
|
|
(2,910
|
)
|
|
|
2,693
|
|
|
|
|
|
|
|
|
|
|
Cash
- Beginning of Period
|
|
|
5,898
|
|
|
|
189,231
|
|
|
|
|
|
|
|
|
|
|
Cash
- Ending of Period
|
|
$
|
2,988
|
|
|
$
|
191,924
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
Condensed
Consolidated Statements of Cash Flows — Continued
(unaudited)
|
|
For
The Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2017
|
|
|
2016
|
|
Supplemental
Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
Cash
paid during the years for:
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
$
|
44
|
|
|
$
|
131
|
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Return
and retirement of Common Stock in connection with settlement
|
|
$
|
-
|
|
|
$
|
45,000
|
|
Issuance
of Common Stock for services previously accrued
|
|
$
|
-
|
|
|
$
|
20,991
|
|
Accrual
of contractual dividends on Series C Convertible Preferred Stock
|
|
$
|
754,900
|
|
|
$
|
318,400
|
|
Issuance
of Series C Convertible Preferred Stock in satisfaction of contractual dividends
|
|
$
|
-
|
|
|
$
|
(611,600
|
)
|
Transfer
of inventory to fixed assets
|
|
$
|
1,875
|
|
|
$
|
-
|
|
Warrants
issued as debt discount in connection with issuances of notes payable
|
|
$
|
4,479
|
|
|
$
|
-
|
|
Accrual
of deferred public offering costs
|
|
$
|
257,242
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
Car
Charging Group, Inc. (“CCGI”) was incorporated on October 3, 2006 under the laws of the State of Nevada as New Image
Concepts, Inc. On December 7, 2009, New Image Concepts, Inc. changed its name to Car Charging Group, Inc.
CCGI,
through its wholly-owned subsidiaries (collectively, the “Company” or “Car Charging”), acquires and installs
electric vehicle (“EV”) charging stations and shares servicing fees received from customers that use the charging
stations with the property owner(s), on a property by property basis. In addition, the Company sells hardware and enters into
individual arrangements for this purpose with various property owners, which may include municipalities, garage operators, hospitals,
multi-family properties, shopping malls and facility owner/operators.
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions
to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required
by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting
only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial
statements of the Company as of March 31, 2017 and for the three months then ended. The results of operations for
the three months ended March 31, 2017 are not necessarily indicative of the operating results for the full year ending
December 31, 2017 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and related disclosures of the Company as of December 31, 2016 and for
the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on April
14, 2017 .
2.
GOING CONCERN AND MANAGEMENT’S PLANS
As
of March 31, 2017 , the Company had a cash balance, a working capital deficiency and an accumulated deficit of $2,988,
$18,989,258 and $84,169,514, respectively. During the three months ended March 31, 2017, the Company incurred a net
loss of $3,097,732. These conditions raise substantial doubt about the Company’s ability to continue as a going concern
within a year after the issuance date of this filing.
Since
inception, the Company’s operations have primarily been funded through proceeds received in equity and debt financings.
Although management believes that the Company has access to capital resources, there are currently no commitments in place for
new financing at this time, except as described below, and there is no assurance that the Company will be able to obtain funds
on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will
enable the Company to complete its development initiatives or attain profitable operations. If the Company is unable to obtain
additional financing on a timely basis, it may have to curtail its development, marketing and promotional activities, which would
have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately
the Company could be forced to discontinue its operations and liquidate.
The
accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation
of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business.
The condensed consolidated financial statements do not include any adjustment that might become necessary should the Company be
unable to continue as a going concern.
Subsequent
to March 31, 2017 , the Company received an aggregate of $695,000 associated with the issuance of a convertible
note payable. In addition, pursuant to a convertible note, an additional $999,900 of funding could be released
to the Company upon the completion of certain contractually defined milestones. See Note 5 – Notes Payable –
Convertible and Other and Notes and Note 10 – Subsequent Events – Convertible Note for additional details. There
can be no assurance that the Company will be successful in attaining the defined milestones. The Company is currently funding
its operations on a month-to-month basis. While there can be no assurance that it will be successful, the Company is in active
negotiations to raise additional capital.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES
OF CONSOLIDATION
The
condensed consolidated financial statements include the accounts of CCGI and its wholly-owned subsidiaries, including Car Charging,
Inc., Beam Charging LLC (“Beam”), EV Pass LLC (“EV Pass”), Blink Network LLC (“Blink”) and
Car Charging China Corp. (“Car Charging China”). All intercompany transactions and balances have been eliminated in
consolidation.
Through
April 16, 2014, 350 Green LLC (“350 Green”) was a wholly-owned subsidiary of the Company in which the Company had
full voting control and was therefore consolidated. Beginning on April 17, 2014, when 350 Green’s assets and
liabilities were transferred to a trust mortgage, 350 Green became a Variable Interest Entity (“VIE”). The consolidation
guidance relating to accounting for VIEs requires an enterprise to perform an analysis to determine whether the enterprise’s
variable interest or interests give it a controlling financial interest in a variable interest entity and perform ongoing reassessments
of whether an enterprise is the primary beneficiary of a VIE. The Company determined that it is the primary beneficiary of 350
Green, and as such, 350 Green’s assets, liabilities and results of operations are included in the Company’s condensed
consolidated financial statements.
USE
OF ESTIMATES
Preparation
of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the
financial statements. The Company’s significant estimates used in these financial statements include, but are not limited
to, stock-based compensation, accounts receivable reserves, warranty reserves, inventory valuations, the valuation allowance related
to the Company’s deferred tax assets, the carrying amount of intangible assets, estimates of future EV sales and the effects
thereon, derivative liabilities and the recoverability and useful lives of long-lived assets. Certain of the Company’s
estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It
is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual
results to differ from those estimates.
ACCOUNTS
RECEIVABLE
Accounts
receivable are carried at their contractual amounts, less an estimate for uncollectible amounts. As of March 31, 2017,
and December 31, 2016, there was an allowance for uncollectable amounts of $19,848 and $42,349, respectively.
Management estimates the allowance for bad debts based on existing economic conditions, the financial conditions of the customers,
and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual
due date. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have
been exhausted.
INVENTORIES
Inventory
is comprised of electric charging stations and related parts, which are available for sale or for warranty requirements. Inventories
are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Inventory that is sold to third
parties is included within cost of sales and inventory that is installed on the premises of participating owner/operator properties,
where the Company retains ownership, is transferred to fixed assets at the carrying value of the inventory. The Company periodically
reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete, if any, are written down
to net realizable value. Based on the aforementioned periodic reviews, the Company recorded an inventory reserve for slow-moving,
excess or obsolete inventories of $188,000 and $154,000 as of March 31, 2017 and December 31, 2016, respectively.
As
of March 31, 2017, and December 31, 2016, the Company’s inventory was comprised solely of finished goods and
parts that are available for sale.
FIXED
ASSETS
Fixed
assets are stated at cost, net of accumulated depreciation and amortization which is recorded commencing at the in-service date
using the straight-line method over the estimated useful lives of the assets. Accumulated depreciation and amortization as of
March 31, 2017 and December 31, 2016 was $4,870,795 and $4,726,861, respectively.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
INTANGIBLE
ASSETS
Intangible
assets were acquired in conjunction with the acquisitions of Beam, EV Pass, and Blink during 2013 and were recorded at their fair
value at such time. Trademarks are amortized on a straight-line basis over their useful life of ten years. Patents are amortized
on a straight-line basis over the lives of the patent (twenty years or less), commencing when the patent is approved and placed
in service on a straight-line basis. Accumulated amortization related to intangible assets as of March 31, 2017 and December
31, 2016 was $36,339 and $33,759, respectively.
DERIVATIVE
FINANCIAL INSTRUMENTS
The
Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify
as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the FASB ASC . The accounting
treatment of derivative financial instruments requires that the Company record the conversion options and warrants at their fair
values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair
value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. Conversion
options are recorded as a discount to the host instrument and are amortized as interest expense over the life of the underlying
instrument. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification
changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
The
Binomial Lattice Model was used to estimate the fair value of the warrants that are classified as derivative liabilities on the
condensed consolidated balance sheets. The model includes subjective input assumptions that can materially affect the fair value
estimates. The expected volatility is estimated based on the most recent historical period of time equal to the weighted average
life of the warrants.
SEQUENCING
POLICY
Under
ASC 815-40-35, the Company has adopted a sequencing policy whereby, in the event that reclassification of contracts from equity
to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient
authorized shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with
the earliest grants receiving the first allocation of shares.
FAIR
VALUE OF FINANCIAL INSTRUMENTS
The
Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements
and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and
expands disclosures about fair value measurements.
ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may
be used to measure fair value:
Level
1 — quoted prices in active markets for identical assets or liabilities
Level
2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level
3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
The
carrying amounts of the Company’s financial instruments , such as cash and cash equivalents, accounts receivable and
accounts payable approximate fair values due to the short-term nature of these instruments. The carrying amount of the Company’s
notes payable approximates fair value because the effective yields on these obligations, which include contractual interest rates,
taken together with other features such as concurrent issuance of warrants, are comparable to rates of returns for instruments
of similar credit risk.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
REVENUE
RECOGNITION
The
Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable
and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have
been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
Accordingly, when a customer completes use of a charging station, the service can be deemed rendered and revenue may be recognized
based on the time duration of the session or kilowatt hours drawn during the session. Sales of EV stations are recognized upon
shipment to the customer, free on board shipping point, or the point of customer acceptance.
Governmental
grants and rebates pertaining to revenues and periodic expenses are recognized as income when the related revenue and/or periodic
expense are recorded. Government grants and rebates related to EV charging stations and their installation are deferred and amortized
in a manner consistent with the related depreciation expense of the related asset over their useful lives.
For
arrangements with multiple elements, which is comprised of (1) a charging unit, (2) installation of the charging unit, (3) maintenance
and (4) network fees, revenue is recognized dependent upon whether vendor specific objective evidence (“VSOE”) of
fair value exists for separating each of the elements. The Company determined that VSOE exists for both the delivered and
undelivered elements of the company’s multiple-element arrangements. The Company limited their assessment
of fair value to either (a) the price charged when the same element is sold separately or (b) the price established by management
having the relevant authority.
CONCENTRATIONS
During
the three months ended March 31, 2017 and 2016, revenues generated from Entity C represented approximately 10% and 13%,
respectively, of the Company’s total revenue. During the three months ended March 31, 2017, revenues generated
from Entity D represented approximately 16% of the Company’s total revenue. The Company generated charging
service revenues from a customer (Entity C) and equipment sales revenue from a customer (Entity D). As of March 31, 2017, and
December 31, 2016, accounts receivable from Entity C were 11% and 18%, respectively, of total accounts receivable.
RECLASSIFICATIONS
Certain
prior year balances have been reclassified in order to conform to current year presentation. These reclassifications have no effect
on previously reported results of operations or loss per share.
STOCK-BASED
COMPENSATION
The
Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award.
For employees, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is
measured on the measurement date and re-measured on vesting dates and interim financial reporting dates until the service period
is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange
for the award, usually the vesting period. Awards granted to non-employee directors for their service as a director are treated
on the same basis as awards granted to employees. The Company computes the fair value of equity-classified warrants and options
granted using the Black-Scholes option pricing model.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
NET
LOSS PER COMMON SHARE
Basic
net loss per common share is computed by dividing net loss by the weighted average number of vested shares of Common Stock outstanding
during the period. Diluted net loss per share of Common Stock is computed by dividing net loss by the weighted average number
vested of shares of Common Stock, plus the net impact of shares of Common Stock (computed using the treasury stock method), if
dilutive, resulting from the exercise of outstanding stock options and warrants, plus the conversion of preferred stock and convertible
notes.
The
following Common Stock equivalents are excluded from the calculation of weighted average dilutive shares of Common Stock because
their inclusion would have been anti-dilutive:
|
|
March
31,
|
|
|
|
2017
|
|
|
2016
|
|
Preferred
stock
|
|
|
1,065,289
|
|
|
|
1,012,710
|
|
Warrants
|
|
|
1,118,018
|
|
|
|
1,157,624
|
|
Options
|
|
|
148,233
|
|
|
|
154,000
|
|
Convertible
notes
|
|
|
17,002
|
|
|
|
1,020
|
|
Total
potentially dilutive shares
|
|
|
2,348,542
|
|
|
|
2,325,354
|
|
COMMITMENTS
AND CONTINGENCIES
Liabilities
for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it
is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
LITIGATION
AND DISPUTES
The
Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements.
4.
ACCRUED EXPENSES
SUMMARY
Accrued
expenses consist of the following:
|
|
March
31, 2017
|
|
|
December
31, 2016
|
|
|
|
(unaudited)
|
|
|
|
|
Registration
rights penalty
|
|
$
|
1,003,944
|
|
|
$
|
967,928
|
|
Accrued
consulting fees
|
|
|
181,800
|
|
|
|
184,800
|
|
Accrued
host fees
|
|
|
1,395,650
|
|
|
|
1,308,897
|
|
Accrued
professional, board and other fees
|
|
|
1,447,629
|
|
|
|
1,381,399
|
|
Accrued
wages
|
|
|
230,000
|
|
|
|
241,466
|
|
Accrued
commissions
|
|
|
500,000
|
|
|
|
445,000
|
|
Warranty
payable
|
|
|
333,000
|
|
|
|
338,000
|
|
Accrued
taxes payable
|
|
|
556,687
|
|
|
|
511,902
|
|
Accrued
payroll taxes payable
|
|
|
246,818
|
|
|
|
122,069
|
|
Warrants
payable
|
|
|
202,980
|
|
|
|
155,412
|
|
Accrued
issuable equity
|
|
|
1,306,862
|
|
|
|
862,377
|
|
Accrued
interest expense
|
|
|
338,582
|
|
|
|
273,838
|
|
Accrued
lease termination costs
|
|
|
300,000
|
|
|
|
-
|
|
Accrued
settlement reserve costs
|
|
|
175,000
|
|
|
|
-
|
|
Dividend
payable
|
|
|
1,905,000
|
|
|
|
1,150,100
|
|
Other
accrued expenses
|
|
|
14,068
|
|
|
|
12,788
|
|
Total
accrued expenses
|
|
$
|
10,138,020
|
|
|
$
|
7,955,976
|
|
Accrued
expenses, net of current portion
|
|
|
3,150,212
|
|
|
|
-
|
|
Current
portion of accrued expenses
|
|
$
|
6,987,808
|
|
|
$
|
7,955,976
|
|
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4
.
ACCRUED EXPENSES - CONTINUED
REGISTRATION
RIGHTS PENALTY
In
connection with the sale of the Company’s Series C Convertible Preferred Stock, the Company granted the purchasers certain
registration rights. On November 7, 2016, the Company filed a registration statement under the Securities Act of 1933 but,
as of March 31, 2017, the registration statement had not been declared effective by the SEC. The registration rights
agreements entered into with the Series C Convertible Preferred Stock purchasers provide that the Company has to pay liquidated
damages equal to 1% of all Series C subscription amounts received on the date the Series C resale registration statement was due
to be filed pursuant to such registration rights agreements. The Company is required to pay such penalty each month thereafter
until the resale registration statement is filed and once filed the Company has 30 days for the registration statement to be
deemed effective otherwise the penalty resumes each month until the terms are met . The maximum liquidated damages amount is
10% of all Series C subscription amounts received. Failure to pay such liquidated damages results in interest on such damages
at a rate of 18% per annum becoming due. As a result, the Company accrued $1,003,944 and $967,928 of Series C Convertible
Preferred Stock registration rights damages at March 31, 2017 and December 31, 2016, respectively. Subsequent to March 31,
2017, the Company issued Series C Convertible Preferred Stock in satisfaction of the liability. See Note 10 – Subsequent
Events - Series C Convertible Preferred Stock for additional details.
ACCRUED
PROFESSIONAL, BOARD AND OTHER FEES
Accrued
professional, board and other fees consist of investment banking fees, professional fees, bonuses, board of director fees, network
fees, installation costs and other miscellaneous fees. As of March 31, 2017 and December 31, 2016, accrued investment banking
fees were $860,183, which were payable in cash.
ACCRUED
COMMISSIONS
See
Note 8 – Related Parties for additional details.
WARRANTY
PAYABLE
The
Company provides a limited product warranty against defects in materials and workmanship for its Blink residential and commercial
chargers, ranging in length from one to two years. The Company accrues for estimated warranty costs at the time of revenue recognition
and records the expense of such accrued liabilities as a component of cost of sales. Estimated warranty costs are based on historical
product data and anticipated future costs. Should actual failure rates differ significantly from estimates, the impact of these
unforeseen costs would be recorded as a change in estimate in the period identified. Warranty expenses for the three months ended
March 31, 2017 and 2016 were $19,147 and $71,116, respectively.
ACCRUED
ISSUABLE EQUITY
In
connection with the issuance of a convertible note payable in 2016, the Company is obligated to issue to the purchaser shares
of Common Stock equal to 48% of the consideration paid by the purchaser. The Company must issue such shares on the earlier of
(i) the fifth (5th) trading day after the pricing of the Public Offering and (ii) May 15, 2017. As of March 31, 2017, the purchaser
paid aggregate consideration of $1,805,100 to the Company but the Company had not yet issued the Common Stock to the purchaser.
As a result, the Company accrued the $866,448 obligation. See Note 5 – Notes Payable – Convertible and Other Notes
for additional details.
Subsequent
to March 31, 2017, the Company issued 11,503 shares of Common Stock in satisfaction of $230,000 of the liability. See Note 10
– Subsequent Events - Common Stock for additional details.
RELEASE
OF LIABILITY
On
March 24, 2017, the Company was released from a $23,928 liability pursuant to a professional service agreement, such that it recognized
a gain on forgiveness of accounts payable of $23,928 during the three months ended March 31, 2017.
ACCRUED
LEASE TERMINATION COSTS
See
Note 9 – Commitments and Contingencies – Operating Lease for additional details.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED)
5.
NOTES PAYABLE
CONVERTIBLE
AND OTHER NOTES
Amendment
of Promissory Note
With
respect to the securities and purchase agreement dated October 7, 2016, on March 23, 2017, the parties agreed to amend the terms
of the securities and purchase agreement and promissory note as follows:
The
maturity date of the note is the earlier of May 15, 2017 or third business day after the closing of the Public Offering. Subsequent
to March 31, 2017, the maturity date was extended to the earlier of June 15, 2017 or the third business day after the closing
of the Public Offering. See Note 10 – Subsequent Events – Convertible Notes for additional details.
With
respect to the Origination Shares, on the fifth (5th) trading day after the pricing of the Public Offering, but in no event later
than May 15, 2017, or, if the Listing Approval End Date is February 28, 2017, in no event later than March 31, 2017, the Company
shall deliver to the purchaser such number of duly and validly issued, fully paid and non-assessable Origination Shares equal
to 48% of the consideration paid by the purchaser, divided by the lowest of (i) $35.00 per share, or (ii) the lowest daily closing
price of the Common Stock during the ten days prior to delivery of the Origination Shares (subject to adjustment for stock
splits), or (iii) 80% of the Common Stock offering price of the Public Offering, or (iv) 80% of the unit price offering
price of the Public Offering (if applicable), or (v) the exercise price of any warrants issued in the Public Offering. In the
event that the Public Offering is not completed before May 15, 2017, so long as purchaser owns any of the Origination Shares at
the time of a subsequent public offering where the pricing terms above would result in a lower Origination Share pricing, the
Origination Shares pricing shall be subject to a reset based on the same above pricing terms (such that the Origination Shares
issuance price would be reduced and the number of Origination Shares issued would be increased to equal the Origination Dollar
Amount). Unless otherwise agreed by both parties, at no time will the Company issue to the purchaser such number of Origination
Shares that would result in the purchaser owning more than 9.99% of the number of shares of Common Stock outstanding of
the Issuer immediately after giving effect to the issuance of the Origination Shares.
The
purchaser conditionally waives the defaults for the Company’s failure to meet the original maturity date of the note and
delivery date for the Origination Shares, but the purchaser does not waive any damages, fees, penalties, liquidated damages,
or other amounts or remedies otherwise resulting from such defaults (which damages, fees, penalties, liquidated damages, or other
amounts or remedies the Investor may choose in the future to assess, apply or pursue in its sole discretion) and the purchaser’s
conditional waiver is conditioned on the Company’s not being in default of and not breaching any term of the note or the
securities purchase agreement or any other Transaction Documents (as defined in the securities purchase agreement) at any time
subsequent to the date of the amendment. If the Company triggers an event of default or breaches any term of the note, the securities
purchase agreement, or the Transaction Documents at any time subsequent to the date of the amendment, the purchaser may issue
a notice of default for the Company’s failure to meet the original maturity date of the note and delivery date of the Origination
Shares.
Issuances
With
respect to the securities and purchase agreement dated October 7, 2016, as amended on March 23, 2017, during the three months
ended March 31, 2017, the Company received additional advances of an aggregate of $805,100 under the note, such that, as of March
31, 2017, an aggregate of $1,805,100 had been advanced to the Company by the purchaser. Pursuant to the terms of the securities
purchase agreement, the Company is required to repay an aggregate of $856,856 to the purchaser in connection with the advances
received during the three months ended March 31, 2017. The $51,756 difference between the principal amount and the cash received
was recorded as debt discount and is being accreted to interest expense over the term of the note.
Pursuant
to the terms of the note, during the three months ended March 31, 2017, the Company issued five-year warrants to purchase an aggregate
of 23,003 shares of the Company’s Common Stock with an issuance date fair value of an aggregate of $44,795, which was recorded
as a derivative liability. The aggregate exercise price of the warrants is $805,100. As of March 31, 2017, the Company had not
issued the Origination Shares (as defined in the securities purchase agreement) associated with the advances to-date and, as a
result, accrued for the $866,448 obligation as of March 31, 2017. See Note 4 – Accrued Expenses – Accrued Issuable
Equity. The conversion option of the note was determined to be a derivative liability. The aggregate issuance date fair value
of the warrants, Origination Shares, conversion option, placement agent fees and other issuance costs in connection with the advances
during the three months ended March 31, 2017 was $819,868, which was recorded as a debt discount against the principal amount
of the note. The $18,213 of debt discount in excess of the principal was recognized immediately and the remaining $801,655 of
debt discount is being recognized over the term of the note.
During
the three months ended March 31, 2017 , the Company made aggregate principal repayments of $3,604 associated
with a non-convertible note payable.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5.
NOTES PAYABLE - CONTINUED
CONVERTIBLE
AND OTHER NOTES - RELATED PARTY
As
of the date of filing, convertible notes payable to a company wholly-owned by the Company’s Executive Chairman of the Board
of Directors with an aggregate principal amount of $495,000 were outstanding and were past due. The Company has not satisfied
this debt and is in negotiations with the Executive Chairman to extend the maturity dates of such notes. On November 14, 2016,
the Company received notices of default with respect to notes payable to a company wholly-owned by the Executive Chairman with
an aggregate principal balance of $410,000 which included demands for payment of the outstanding principal and interest within
seven days. As of the date of filing there have been no further developments in respect to the demand for payment on these notes
payable.
On
February 10, 2017, the Company issued a promissory note in the principal amount of $22,567, to a company in which the Company’s
Executive Chairman has a controlling interest, which bears interest at 10% per annum payable upon maturity. The promissory note
is payable on the earlier of May 9, 2017, or the closing date of a public offering of the Company’s securities, which raises
gross proceeds of at least $10,000,000. This note may be prepaid in whole or in part at any time without penalty or premium. As
of the date of filing, the note is past due. The Company has not satisfied this debt and is in negotiations with the Executive
Chairman to extend the maturity dates of such notes.
On
February 14, 2017, the Company issued a promissory note in the principal amount of $25,000, to a company in which the Company’s
Executive Chairman has a controlling interest, which bears interest at 10% per annum payable upon maturity. The promissory note
is payable on the earlier of May 15, 2017, or the closing date of a public offering of the Company’s securities, which raises
gross proceeds of at least $10,000,000. This note may be prepaid in whole or in part at any time without penalty or premium. As
of the date of filing, the note is past due. The Company has not satisfied this debt and is in negotiations with the Executive
Chairman to extend the maturity dates of such notes.
INTEREST
EXPENSE
Interest
expense for the three months ended March 31, 2017 and 2016 was $140,661 and $35,238, respectively.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6.
FAIR VALUE MEASUREMENT
See
Note 4 – Accrued Expenses – Warrants Payable for additional details associated with issuance costs which included
an obligation to issue investment banker warrants. See Note 5 – Notes Payable – Convertible and Other Notes for
warrants classified as derivative liabilities that were issued in connection with a convertible note.
Assumptions
utilized in the valuation of Level 3 liabilities are described as follows:
|
|
For
the Three Months Ended
|
|
|
|
March
31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Risk-free
interest rate
|
|
|
1.47
- 1.50 %
|
|
|
|
0.87%
- 1.16 %
|
|
Expected
term (years)
|
|
|
1.53
- 5.00
|
|
|
|
2.53
- 4.28
|
|
Expected
volatility
|
|
|
149%
- 155 %
|
|
|
|
114%
- 119 %
|
|
Expected
dividend yield
|
|
|
0.00%
|
|
|
|
0.00%
|
|
The
following table sets forth a summary of the changes in the fair value of Level 3 warrant liabilities that are measured at fair
value on a recurring basis:
Derivative
Liabilities
|
|
|
|
Beginning
balance as of January 1, 2017
|
|
$
|
1,583,103
|
|
Issuance
of warrants
|
|
|
334,487
|
|
Change
in fair value of derivative liability
|
|
|
421,200
|
|
Ending
balance as of March 31, 2017
|
|
$
|
2,338,790
|
|
|
|
|
|
|
Warrants
Payable
|
|
|
|
|
Beginning
balance as of January 1, 2017
|
|
$
|
155,412
|
|
Provision
for new warrant issuances
|
|
|
-
|
|
Accrual
of other warrant obligations
|
|
|
4,479
|
|
Change
in fair value of warrants payable
|
|
|
42,486
|
|
Ending
balance as of March 31, 2017
|
|
$
|
202,377
|
|
Assets
and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:
|
|
March
31
, 2017
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,338,790
|
|
|
$
|
2,338,790
|
|
Warrants
Payable
|
|
|
-
|
|
|
|
-
|
|
|
|
202,377
|
|
|
|
202,377
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,541,167
|
|
|
$
|
2,541,167
|
|
|
|
December
31, 2016
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,583,103
|
|
|
$
|
1,583,103
|
|
Warrants
payable
|
|
|
-
|
|
|
|
-
|
|
|
|
155,412
|
|
|
|
155,412
|
|
Total
liabilities
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,738,515
|
|
|
$
|
1,738,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7.
STOCKHOLDERS’ DEFICIENCY
PREFERRED
STOCK
SERIES
A CONVERTIBLE PREFERRED STOCK
The
Series A Convertible Preferred Stock shall have no liquidation preference so long as the Series C Convertible Preferred Stock
shall be outstanding.
SERIES
B CONVERTIBLE PREFERRED STOCK
On
December 31, 2016, the Company received a notice of redemption from the creditors committee of the ECOtality estate to redeem
2,750 shares of Series B Convertible Preferred Stock for $275,000. As of March 31, 2017, the redemption amount remained outstanding.
The Company has the option to settle the redemption request either by the repayment in cash or by the issuance of shares of Common
Stock.
As
of March 31, 2017 , the liquidation preference for the Series B Convertible Preferred Stock amounted to $825,000.
SERIES
C CONVERTIBLE PREFERRED STOCK
As
of March 31, 2017, and December 31, 2016, the Company recorded a dividend payable liability on the shares of Series C Convertible
Preferred Stock of $1,905,000 and $1,150,100, respectively. See Note 4 – Accrued Expenses. Subsequent to March 31, 2017,
the Company issued Series C Convertible Preferred Stock in satisfaction of the liability. See Note 10 – Subsequent Events
- Series C Convertible Preferred Stock for additional details.
In
the event of a liquidation, the Series C Convertible Preferred Stock is also entitled to a liquidation preference equal to the
stated value plus any accrued and unpaid dividends, which, as of March 31, 2017, was equal to $16,947,600.
NON-CONTROLLING
INTERESTS
350
Green is not owned by the Company but is deemed to be a VIE where the entirety of its results of operations are consolidated in
the Company’s financial statements.
STOCK-BASED
COMPENSATION
The
Company recognized stock-based compensation expense related to preferred stock, Common Stock, stock options and warrants for the
three months ended March 31, 2017 and 2016 of $167,248 and $561,246, respectively, which is included within compensation expense
on the condensed consolidated statement of operations. As of March 31, 2017, there was $30,947 of unrecognized stock-based compensation
expense that will be recognized over the weighted average remaining vesting period of 0.25 years.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8.
RELATED PARTIES
See
Note 5 - Notes Payable – Convertible and Other Notes – Related Party.
A
company owned by its
Executive Chairman, such company is referred to as “FGI”, and the Company’s Chief Operating Officer (“COO”)
have made certain claims for historical unpaid compensation pursuant to their Fee/Commission Agreements with the Company. During
November 2016, the Company’s Board of Directors quantified the total claims to be approximately $475,000 for each party
and, upon further analysis, determined the Company’s reasonable estimate of the aggregate liability is $500,000 (estimated
as $375,000 payable in cash and $125,000 payable in stock options). The Company’s Board of Directors continues to investigate
this claim, but has not reached any conclusions or new estimates of the aggregate liability. The estimated aggregate liability
of $500,000 was accrued and is included within accrued expenses on the condensed balance sheet as of March 31, 2017. See Note
4 – Accrued Expenses.
In
addition, FGI has made a claim that expired warrants to purchase an aggregate of 114,667 shares of Common Stock should be replaced
pursuant to an agreement with the Company. As of March 31, 2017, the fair value of the warrant claim is estimated to be approximately
$686,000. The Company’s Board of Directors is currently investigating this claim, but at this time, the range of possible
settlement amounts ranges from $0 to $686,000, with no amount being more likely than another amount. Accordingly, the Company
has not made any accrual for a settlement of this claim as of March 31, 2017.
On
February 7, 2017, a company in which the Company’s Executive Chairman has a controlling interest purchased the following
securities from a stockholder of the Company for $1,000,000: 142,857 shares of Common Stock, 114,491 shares of Series C Preferred
Stock, warrants to purchase 524,604 shares of the Company’s Common Stock, and all rights, claims, title, and interests in
any securities of whatever kind or nature issued or issuable as a result of the stockholder’s ownership of the Company’s
securities.
9.
COMMITMENTS AND CONTINGENCIES
OPERATING
LEASE
On
February 28, 2017, the Company vacated the Phoenix, Arizona space and has no further obligation in connection with the sublease.
Total
rent expense, net of sublease income, for the three months ended March 31, 2017 and 2016 was $56,548 and $79,871, respectively,
and is recorded in other operating expenses on the condensed consolidated statements of operations .
On
March 20, 2017, in connection with the Company’s Miami Beach, Florida lease, the Company’s landlord filed a complaint
for eviction with the Miami-Dade County Court against the Company as a result of the Company’s default under the lease for
failing to pay rent, operating expenses and sales taxes of approximately $175,000, which represents the Company’s obligations
under the lease through March 31, 2017, which was accrued for as of March 31, 2017. As a result of the action taken by the landlord,
as of March 31, 2017, the Company accrued an additional $300,000, which represents the fair value of the Company’s rent
obligation through the end of the lease.
TAXES
The
Company has not filed its Federal and State corporate income tax returns for the years ended December 31, 2014 and 2015. The Company
has sustained losses for the years ended December 31, 2014 and 2015. The Company has determined that no tax liability, other than
required minimums, has been incurred.
The
Company is also delinquent in filing and, in certain instances, paying sales taxes collected from customers in specific states
that impose a tax on sales of the Company’s products. The Company has accrued an approximate $216,000 liability as of March
31, 2017 and December 31, 2016 related to this matter.
The
Company is currently delinquent in remitting approximately $247,000 and $244,000 as of March 31, 2017 and December 31, 2016, respectively,
of federal and state payroll taxes withheld from employees. On March 29, 2017, the Company sent a letter to the Internal Revenue
Service (“IRS”) notifying the IRS of its intention to resolve the delinquent taxes upon the receipt of additional
working capital.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9.
COMMITMENTS AND CONTINGENCIES – CONTINUED
LITIGATION
AND DISPUTES
On
July 28, 2015, a Notice of Arbitration was received stating ITT Cannon has a dispute with Blink for the manufacturing and purchase
of 6,500 charging cables by Blink, which had not taken delivery or made payment on the contract price of $737,425. ITT
Cannon also seeks to be paid the cost of attorney’s fees as well as punitive damages. The Company contends that the product
was not in accordance with the specifications in the purchase order and, as such, believes the claim is without merit. The parties
have agreed on a single arbitrator. The arbitration hearing is currently scheduled for July 26, 2017 through July 28, 2017.
The parties began initial depositions in February and will continue through the period leading to the arbitration hearing. In
parallel however, the parties had settlement discussions on February 28, 2017. As of May 8, 2017, settlement agreement drafts
have been exchanged between Blink, Car Charging and ITT reflecting stock valued at $200,000 and, as a result, the Company accrued
for the liability as of March 31, 2017. The amount of shares will be determined and priced on the day of closing of our contemplated
public offering. For this, ITT would relinquish to Car Charging all of the remaining inventory of the EV charging cable assemblies
originally valued at $737,425. Typical stock restrictions and/or stock bleed out agreements may be imposed affecting the final
settlement figure. On May 10, 2017, the parties had a case management conference in which they informed the arbitrator that they
are attempting to settle the case.
On
April 8, 2016, Douglas Stein filed a Petition for Fee Arbitration with the State Bar of Georgia against the Company for breach
of contract for failure to pay invoices in the amount of $178,893 for legal work provided. The invoices have been accrued for
in the periods in which the services were provided. The Company has responded to the claim and is simultaneously pursuing settlement
options. The parties failed to settle after numerous attempts. On February 15, 2017, the case was brought to the Georgia Arbitration
Committee. On February 26, 2017, The Stein Law firm was awarded a summary judgment for $178,893. The Company may appeal the decision
and/or offer stock and/or cash in exchange for the awarded judgment at a later date.
On
May 18, 2016, the Company was served with a complaint from Solomon Edwards Group, LLC for breach of written agreement and unjust
enrichment for failure to pay invoices in the amount of $172,645 for services provided, plus interest and costs. The invoices
have been accrued for in the periods in which the services were provided. The Company has responded to the claim and is simultaneously
pursuing settlement options. Subsequent to March 31, 2017, the Company issued 7,281 shares of Common Stock to Solomon Edwards
Group, LLC in partial satisfaction of the past due amount, which amount is included in Note 10 – Subsequent Events –Common
Stock.
From
time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business.
350
GREEN, LLC
350
Green lawsuits relate solely to alleged pre-acquisition unpaid debts of 350 Green. Also, there are other unpaid creditors, aside
from those noted above, that claim to be owed certain amounts for pre-acquisition work done on behalf of 350 Green solely, that
potentially could file lawsuits at some point in the future.
On
August 7, 2014, 350 Green received a copy of a complaint filed by Sheetz, a former vendor of 350 Green alleging breach of contract
and unjust enrichment of $112,500. The complaint names 350 Green, 350 Holdings LLC and CCGI in separate breach of contract counts
and names all three entities together in an unjust enrichment claim. CCGI and 350 Holdings will seek to be dismissed from the
litigation, because, as the complaint is currently plead, there is no legal basis to hold CCGI or 350 Green liable for a contract
to which they are not parties. As of March 31, 2017 and December 31, 2016, an amount of $112,500 is included in accounts payable
of 350 Green. The parties held a mediation conference on May 15, 2015, but no settlement was reached. The Company settled with
Sheetz in principal on February 10, 2017 with the formal documentation being signed on March 1, 2017. The settlement involved
a combination of DC charging equipment, installation, charging services, shared driver charging revenue and maintenance for two
systems in exchange for no further legal action amongst 350 Holdings or the Company.
On
September 9, 2015, the United States Court of Appeals for the Seventh Circuit of Chicago, Illinois affirmed the ruling of the
United States District Court for the Northern District of Illinois in the matter of JNS Power & Control Systems, Inc. v. 350
Green, LLC in favor of JNS, which affirmed the sale of certain assets by 350 Green to JNS and the assumption of certain 350 Green
liabilities by JNS. On April 7, 2016, JNS amended the complaint to add the Company alleging an unspecified amount of lost
revenues from the chargers, among other matters, caused by the defendants. Plaintiff also seeks indemnity for its unspecified
costs in connection with enforcing the Asset Purchase Agreement in courts in New York and Chicago. On April 28, 2017 , the
parties concluded their efforts to mediate a settlement before Magistrate Judge Kim without achieving a settlement. Settlement
discussions are ongoing between the parties. The next status hearing on the matter is set for May 31, 2017.
CAR
CHARGING GROUP, INC. & SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10.
SUBSEQUENT EVENTS
CONVERTIBLE
NOTES
Issuances
With
respect to the securities and purchase agreement dated October 7, 2016, as amended on March 23, 2017 and May 15, 2017, subsequent
to March 31, 2017, the Company received additional advances of an aggregate of $695,000 under the note. Pursuant to the terms
of the note, the Company issued warrants to purchase an aggregate of 19,857 shares of the Company’s Common Stock with an
aggregate exercise price of $695,000.
Amendment
of Promissory Note
With
respect to the securities and purchase agreement dated October 7, 2016, as amended on March 23, 2017, on May 15, 2017, the parties
agreed to amend the terms of the securities and purchase agreement and promissory note as follows:
The
maturity date of the note is the earlier of June 15, 2017 or third business day after the closing of the Public Offering.
With
respect to the Origination Shares, on the fifth (5th) trading day after the pricing of the Public Offering, but in no event later
than June 15, 2017, the Company shall deliver to the purchaser such number of duly and validly issued, fully paid and non-assessable
Origination Shares equal to 48% of the consideration paid by the purchaser, divided by the lowest of (i) $35.00 per share, or
(ii) the lowest daily closing price of the Common Stock during the ten days prior to delivery of the Origination Shares (subject
to adjustment for stock splits), or (iii) 80% of the Common Stock offering price of the Public Offering, or (iv) 80% of the unit
price offering price of the Public Offering (if applicable), or (v) the exercise price of any warrants issued in the Public Offering.
In the event that the Public Offering is not completed before June 15, 2017, so long as purchaser owns any of the Origination
Shares at the time of a subsequent public offering where the pricing terms above would result in a lower Origination Share pricing,
the Origination Shares pricing shall be subject to a reset based on the same above pricing terms (such that the Origination Shares
issuance price would be reduced and the number of Origination Shares issued would be increased to equal the Origination Dollar
Amount). Unless otherwise agreed by both parties, at no time will the Company issue to the purchaser such number of Origination
Shares that would result in the purchaser owning more than 9.99% of the number of shares of Common Stock outstanding of the Issuer
immediately after giving effect to the issuance of the Origination Shares.
The
purchaser conditionally waives the defaults for the Company’s failure to meet the original and previously amended maturity
date of the note and delivery date for the Origination Shares, but the purchaser does not waive any damages, fees, penalties,
liquidated damages, or other amounts or remedies otherwise resulting from such defaults (which damages, fees, penalties, liquidated
damages, or other amounts or remedies the Investor may choose in the future to assess, apply or pursue in its sole discretion)
and the purchaser’s conditional waiver is conditioned on the Company’s not being in default of and not breaching any
term of the note or the securities purchase agreement or any other Transaction Documents (as defined in the securities purchase
agreement) at any time subsequent to the date of the amendment. If the Company triggers an event of default or breaches any term
of the note, the securities purchase agreement, or the Transaction Documents at any time subsequent to the date of the amendment,
the purchaser may issue a notice of default for the Company’s failure to meet the original maturity date of the note and
delivery date of the Origination Shares.
SERIES
C CONVERTIBLE PREFERRED STOCK
Subsequent
to March 31, 2017, the Company issued an aggregate of 61,740 shares of Series C Convertible Preferred Stock in satisfaction of
aggregate liabilities of approximately $6,200,000 associated with the Company’s registration rights penalty, public information
fee and Series C Convertible Preferred Stock dividends.
COMMON
STOCK
Subsequent
to March 31, 2017, the Company issued an aggregate of 21,166 shares of Common Stock in satisfaction of aggregate liabilities of
$386,900 associated with certain professional and other consulting fee agreements.
EXCHANGE
OF WARRANTS AND SERIES C CONVERTIBLE PREFERRED STOCK
Subsequent
to March 31, 2017, the Company sent out letters to various holders of warrants and Series C Convertible Preferred Stock that contained
an offer for the holder to (i) exchange their exiting warrants for Common Stock of the Company and (ii) exchange their existing
Series C Preferred Shares for Common Stock of the Company. As of the date of filing, holders had agreed to (i) exchange warrants
to purchase an aggregate of 45,700 shares of Common Stock for an aggregate of 45,700 shares of Common Stock (the “Warrant
Exchange”) and (ii) exchange an aggregate of 6,811 shares of Series C Convertible Preferred Stock for Common Stock based
upon a formula defined in the agreement (the “Series C Preferred Shares Exchange”). The Warrant Exchange is effective
immediately and the Series C Preferred Shares Exchange is effective upon closing of the Public Offering. The Series C Preferred
Shares shall be exchanged for Common Stock using the following formula: the number of shares of Series C Convertible Preferred
Stock owned multiplied by a factor of 115 and divided by 80% of the price per share of Common Stock sold in the Public Offering.
The holders also agreed to not, without prior written consent of the underwriter, sell or otherwise transfer any shares of Common
Stock or any securities convertible into Common Stock for a period of 270 days from the effective date of the Series C Preferred
Shares Exchange. As of the date of filing, the Company had not issued the Common Stock in connection with Warrant Exchange.
LITIGATION
AND DISPUTES
On
June 13, 2017, Blink and ITT Cannon agreed to a settlement agreement in connection with the dispute discussed in Note 9 –
Commitments and Contingencies – Litigation and Disputes. The parties agree as follows: (a) the Blink purchase order dated
May 7, 2014 for 6,500 charging cables is terminated, cancelled and voided; (b) three (3) business days following the closing date
of a public offering of the Company’s securities and listing of such securities on the Nasdaq Capital Market, the Company
shall issue to ITT Cannon shares of the same class of the Company’s securities with an aggregate value of $200,000; and
(c) within seven (7) calendar days of the valid issuance of the shares in item (b) above, ITT Cannon shall ship and provide the
remaining 6,500 charging cables to Blink and dismiss the arbitration without prejudice.
350
GREEN, LLC
On
May 18, 2017, each of 350 Green and Green 350 Trust Mortgage LLC filed to commence an assignment for the benefit of creditors,
which results in their residual assets being controlled by an assignee in a judicial proceeding. As a result, as of May 18, 2017,
350 Green is no longer a variable interest entity of the Company and, accordingly, 350 Green’s approximately $3.7 million
of liabilities will be deconsolidated from the Company’s financial statements.
OPERATING
LEASE
On
May 22, 2017, the Company entered into a lease for 11,457 square feet of office and warehouse space in Phoenix, Arizona beginning
June 1, 2017 and ending July 31, 2019. Monthly lease payments range from approximately $6,300 to $6,600 (with the Company paying
approximately $6,300 in total during the first three months of the lease) for a total of approximately $155,000 for the total
term of the lease.
REVERSE
STOCK SPLIT
A
1:50 reverse stock split of the Company’s common stock will be effected in connection with the pricing of the Company’s
offering discussed in the registration statement of which these financial statements are a part (the “Reverse Stock Split”).
With the exception of the securities that are not affected by the Reverse Stock Split, all share and per share information has
been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented, unless otherwise indicated.
2,162,162
Shares of Common
Stock
Warrants
to Purchase 2,162,162 Shares of Common Stock
PROSPECTUS
Joseph
Gunnar & Co.
The
date of this Prospectus is ______, 2017