BASIS OF PRESENTATION

 

The accompanying unaudited interim condensed consolidated financial statements and related notes 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 rules and regulations of the United States Securities and Exchange Commission (“SEC”) for Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2013 and notes thereto contained in the Company’s Annual Report on Form 10-K as filed with the SEC on May 5, 2014.

 

PRINCIPLES OF CONSOLIDATION

 

The condensed consolidated financial statements include the accounts of CCGI and its wholly-owned subsidiaries, including Beam Charging LLC (“Beam”), EV Pass LLC, 350 Green LLC “(350 Green”) and Blink Network LLC (“Blink”). Beam was acquired on February 26, 2013, EV Pass LLC was acquired on April 3, 2013, 350 Green was acquired on April 22, 2013, Blink was acquired on October 16, 2013 as a result of an asset purchase agreement with Electric Transportation Engineering Corporation of America (“ECOtality”). Accordingly, the operating results of these businesses are included from their respective acquisition dates. All intercompany transactions and balances have been eliminated in consolidation.

 

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. Significant estimates used in these financial statements include, but are not limited to, equity compensation, warranty reserves, inventory valuations, deferred tax valuation allowances, intangible assets, goodwill and estimates of future electric car sales and the effects thereon the economic useful lives of long-lived assets. Estimates and judgments are based on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from those estimates. To the extent there are material differences between these estimates and actual results, future financial statement presentation, financial condition, results of operations and cash flows will be affected.

 

RESTRICTED CASH

 

At June 30, 2014, the Company had a $210,585 certificate of deposit at a financial institution which serves as collateral for a letter of credit as a landlord’s security deposit for pending rental of current and additional office space, currently in negotiations, in Miami Beach, Florida.

 

ACCOUNTS RECEIVABLE

 

Accounts receivable are carried at their contractual amounts, less an estimate for uncollectible amounts. Management estimates the allowance for bad debts based on existing economic conditions, the financial conditions of the customers, and the amount and the 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. There is no collateral held by the Company for accounts receivable nor does any accounts receivable serve as collateral for any of the Company’s borrowings.

 

INVENTORIES

 

Inventory is stated at the lower of cost or market. Cost is determined on a first-in, first-out basis. The Company writes down inventory for potentially excess and obsolete items after evaluating historical sales, future demand, market conditions and expected product life cycles to reduce inventory to its estimated net realizable value. Such provisions are made in the normal course of business and charged to cost of goods sold in the statement of operations as deemed necessary. Future demand or market conditions are solely based on the Company’s projections of future car sales and the related demand for its products and services. Due to the nascent stage of the electric car charging industry, the Company has determined that inventory write-downs are not required at this time. If future inventory write-downs would be required, they would be reflected in costs of goods sold in the period the revision is made. At the point of the loss recognition, a new, lower-cost basis for that inventory would be established, and subsequent changes in facts and circumstances would not result in the restoration or increase to that newly established cost basis.

 

As of June 30, 2014 and December 31, 2013, inventory was comprised solely of electric charging stations and related parts that are available for sale or warranty requirements.

 

FIXED ASSETS

 

Fixed assets are carried at historical cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the estimated useful lives of the assets, as set forth in the table below.

 

		Useful Lives  (in Years)
Computer software and office and computer equipment		3-5 years
Machinery and equipment, automobiles, furniture & fixtures		3-10 years
Installed Level 2 electric vehicle charging stations		3 years
Installed Level 3 (DC Fast Chargers (“DCFC”)) electric vehicle charging stations		5 years

 

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 results 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 on a straight line basis over their remaining estimated useful lives.

 

EV CHARGING STATIONS

 

EV Charging Stations represents the depreciable cost of charging devices that have been installed on the premises of participating owner/operator properties or earmarked to be installed. Upon sale, replacement or retirement, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the condensed consolidated statements of operations. The Company held approximately $1,197,000 and $1,135,000 in EV charging stations that were not placed in service as of June 30, 2014 and December 31, 2013, respectively. The Company will begin depreciating this equipment when installation is substantially complete. In conjunction with the acquisition of Blink Network LLC, in October 2013, the Company’s management determined that the Company is no longer a development stage company as it has established the business and corresponding revenue generating opportunities through its principal operations. EV charging station depreciation, formerly classified as general and administrative expenses is now classified as cost of revenues. Depreciation expense pertaining to EV charging stations for the three months and six months ended June 30, 2014 is $727,745 and $1,446,234, respectively. EV charging station depreciation of $490,151 and $604,760 for the three months and six months ended June 30, 2013 was recorded in general and administrative expenses.

 

SOFTWARE

 

Amortization expense for the three months and six months ended June 30, 2014 pertaining to network software was $24,409 and $48,817 respectively and is recorded as Cost of Revenue. There was no amortization expense pertaining to network software for the three months and six months ended June 30, 2013. Non network software amortization for the three months ended June 30, 2014 and 2013 and the six months ended June 30, 2014 and 2013 was $2,486 and $9,395, respectively, and $4,973 and $9,395 respectively.

 

OFFICE AND COMPUTER EQUIPMENT

 

Depreciation expense for the three months ended June 30, 2014 and 2013 was $1,150 and $12,078, respectively. Depreciation expense for the six months ended June 30, 2014 and 2013 was $10,445 and $15,946, respectively.

 

AUTOMOBILES

 

The Company operates seven electrically-charged enabled automobiles. Depreciation expense for the three months ended and six months ended June 30, 2014 and 2013 was $14,098, $5,734, $24,766 and $11,469, respectively.

 

MACHINERY AND EQUIPMENT

 

Depreciation expense classified as Cost of Revenue for the three months ended and six months ended June 30, 2014 and 2013 was $2,979, $0, $5,959 and $0, respectively.

 

IMPAIRMENT OF LONG-LIVED ASSETS

 

The Company’s long-lived assets, which include EV Charging Stations, office and computer equipment, automobiles, machinery and equipment, network software and finite lived intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

 

As the industry is in its nascent stages and heavily dependent upon electric vehicle car sales, 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 electric vehicle market and projected car charging utilization at various public car charging stations throughout its network in determining fair value.. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. Based on this review, there has been no impairment of long lived assets, except for goodwill as discussed below, during the three months and six months ended June 30, 2014.

 

GOODWILL

 

Goodwill represents the premium paid over the fair value of the intangible and net tangible assets acquired in business combinations. The Company is required to assess the carrying value of its reporting units that contain goodwill at least on an annual basis. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur, and determination of the Company’s weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. On April 17, 2014, the Company’s Board of Directors approved the formation of a Trust Mortgage, a binding contract between 350 Green and a trustee, to serve as fiduciary for the benefit of all creditors of 350 Green, whereby 350 Green (the “Trustee”) confers upon the trustee the authority and power to manage the operations and assets of the business in a manner that will maximize recovery for 350 Green’s creditors. The Trust Mortgage and the acts of the Trustee are not binding upon the creditors of 350 Green. As a result of this event, the Company’s management had reassessed the carrying value of the goodwill related to the 350 Green acquisition, $3,299,379, and determined that it had been fully impaired.

 

DERIVATIVE INSTRUMENTS

 

The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Topic 815 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date or as triggering events occur and recorded as a liability. The change in fair value is recorded in the Statement of Operations as a component of other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

 

FAIR VALUE OF FINANCIAL INSTRUMENTS

 

U.S. GAAP for fair value measurements establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three levels. The fair value hierarchy gives the highest priority to quoted market prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Level 2 inputs are inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, deposits and advanced commissions, prepaid expenses, accounts payable and accrued expenses, approximate their fair values because of the short maturity of these instruments. The Company’s notes payable approximates the fair value of such instrument based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangement at June 30, 2014 and December 31, 2013.

 

The Company revalues its warrants payable to the former members of Beam Charging and the warrants to investors who were issued warrants and warrant units in conjunction with stock sales during the fourth quarter of 2013 at every reporting period and recognizes gains or losses in the condensed consolidated statement of operations that are attributable to the change in the fair value of the these liabilities. The Company has no other assets or liabilities measured at fair value on a  recurring basis. The development and determination of the unobservable input for Level 3 fair value measurements and the fair value calculation are the responsibility of the Company’s Chief Financial Officer and approved by the Chief Executive Officer.

 

REVENUE RECOGNITION

 

The Company applies Topic 605 of the FASB Accounting Standards Codification for revenue recognition. The Company will recognize 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, F.O.B. shipping point, the point of customer acceptance.

 

The Company entered into a joint marketing agreement with Nissan North America for which among other matters requires the Company to build, own, operate and maintain a network of 48 fast chargers throughout the United States and create an auto dealer network promotion and referral program so as to facilitate sales of electric vehicles to their potential customers. Payments received under the agreement on March 29, 2013 of $782,880 were deferred and will be recognized ratably over the life of the chargers once installed. The Company identified the obligation to install and maintain the chargers and the obligation to create a referral and promotion program as separate elements under the agreement but determined that they did not qualify as separate units of accounting for purposes of recognizing revenue. The multiple deliverables are not separate units of accounting because Nissan North America has not delineated specific amounts of the revenue to particular elements of the agreement and the Company is unable to estimate the fair value or the selling price of the respective deliverables. Nissan extended the deadline requiring the Company create an auto dealer network promotion and referral program and to install the network by  December 31, 2014. Six of the fast chargers have been installed as of June 30, 2014 and $7,249 and $12,232 of revenue has been recognized during the three months ended and six months ended June 30, 2014. No revenue was recognized during the three months ended and the six months ended June 30, 2013. Nissan reserves the right of repossession of any non operational chargers and any and all full remedies under the law in the event the chargers are not installed by the required deadline. 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.

 

RECLASSIFICATION

 

As a result of the Company emergence from a developmental stage company, EV charging station depreciation and Blink Network software amortization, formerly classified as general and administrative expenses are now classified as Cost of Revenues in the condensed consolidated statement of operations for the three months ended June 30, 2014. Depreciation and amortization expense for the three months ended and six months ended June 30, 2013 was recorded as general and administrative expenses as the Company was still in the developmental stage. Additionally, the assets and liabilities of 350 Green have been separately presented on the condensed consolidated balance sheets as of June 30, 2014 and December 31, 2013 (see Note 5).   

 

STOCK-BASED COMPENSATION FOR OBTAINING EMPLOYEE SERVICES

 

Stock based awards granted to employees have been accounted for as required by Topic 718 “Compensation – Stock Compensation” of the FASB Accounting Standards Codification  (“ASC topic 718”). Under ASC topic 718 stock based awards are valued at fair value on the date of grant, and that fair value is recognized over the requisite service period. The Company values its stock based awards using the Black-Scholes option valuation model.

 

EQUITY INSTRUMENTS ISSUED TO PARTIES OTHER THAN EMPLOYEES FOR ACQUIRING GOODS OR SERVICES

 

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Topic 505 section 50 of the FASB Accounting Standards Codification (“ASC Section 505-50”). Pursuant to ASC Section 505-50, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. The equity instrument is remeasured each reporting period until a measurement date is reached.

 

INCOME TAXES

 

The Company follows Topic 740 of the FASB Accounting Standards Codification, (“ASC Section 740”) which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events 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 June 30, 2014, 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.

 

ASC Section 740 also addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC Section 740, the Company may recognize 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 fifty percent (50%) likelihood of being realized upon ultimate settlement by examining taxing authorities. ASC Section 740 also provides guidance on de-recognition, classification, between interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company has open tax years going back to 2010 through 2012 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 Statement of Operations.

 

NET LOSS PER COMMON SHARE

 

Net loss per common share is computed pursuant to Topic 260 of the FASB Accounting Standards Codification. Basic net loss per common share is computed by dividing net loss by the weighted average number of 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 of shares of common stock and potentially outstanding shares of common stock during the period.

 

The following table shows the number of potentially outstanding dilutive shares excluded from the diluted net loss per share calculation for the six months ended June 30, 2014 and 2013, as they were anti-dilutive.

 

		2014			2013
Convertible notes			—			199,856
Preferred stock issued			25,000,000			25,000,000
Warrants			44,032,962			9,375,658
Options			7,324,665			4,484,950
Total Potential Dilutive Shares			76,357,687			39,060,464

  

COMMITMENTS AND CONTINGENCIES

 

The Company follows Topic 450 of the FASB Accounting Standards Codification to report accounting for 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.

 

SEGMENT REPORTING

 

The Company operates in only one segment - public electric vehicle charging services at locations throughout the United States. Accordingly, segment related information is not reported in the Current Report on Form 10-Q.

 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

There have been no accounting pronouncements or changes in accounting pronouncements during the quarter ended June 30, 2014 that are expected to have a material impact on the Company’s financial position, results of operations or cash flows during calendar year 2014. Accounting pronouncements that became effective during the quarter ended June 30, 2014 did not have a material impact on disclosures or on the Company’s financial position, results of operations or cash flows.