10-K 1 f10k2013_carcharginggroup.htm ANNUAL REPORT f10k2013_carcharginggroup.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
 
x    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2013

or
 
o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____________ to _____________

Commission File No. 333-149784
 
CAR CHARGING GROUP, INC.
(Exact name of registrant as specified in its charter)
 
Nevada
 
03-0608147
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
1691 Michigan Avenue, Suite 601
   
Miami Beach, Florida
 
33139
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: (305) 521-0200
 
Securities registered under Section 12(b) of the Exchange Act:
   
Title of each class:
Name of each exchange on which registered:
None
None
 
Securities registered under Section 12(g) of the Exchange Act:
None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
       
Large accelerated filer
o
Accelerated filer
o
       
Non-accelerated filer
o
Smaller reporting company
x
(Do not check if a smaller reporting company)
     
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, June 30, 2013: $36,634,694.
 
As of April 25, 2014, the registrant had 77,697,633 common shares issued and outstanding.
 
Documents Incorporated by Reference: None.
 


 
 

 
 
TABLE OF CONTENTS
 
PART I
   
     
1
     
6
     
9
     
9
     
9
     
10
     
PART II
   
     
10
     
16
     
17
     
23
     
F-1
     
24
     
25
     
25
     
PART III
   
     
26
     
30
     
33
     
36
     
37
     
PART IV
   
     
38
     
40
 
 
 

 
 
FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts.

From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public.  Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors.  Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

For discussion of factors that we believe could cause our actual results to differ materially from expected and historical results see “Item 1A — Risk Factors” below.

PART I
 
 
Overview
 
Car Charging Group, Inc. (OTCQB: CCGI, “Car Charging” or “Company”) is a pioneer in nationwide public electric vehicle (EV) charging services, enabling EV drivers to easily recharge at locations throughout the United States. Headquartered in Miami Beach, FL with offices in San Jose, CA; New York, NY; and Phoenix, AZ; CarCharging’s business model is designed to accelerate the adoption of public EV charging.
 
CarCharging offers various options to commercial and residential property owners for EV charging services. Our typical business model provides a comprehensive turnkey program where CarCharging owns and operates the EV charging equipment; manages the installation, maintenance, and related services; and shares a portion of the EV charging revenue with the property owner. Alternatively, property partners can share in the equipment and installation expenses with CarCharging operating and managing the EV charging stations and providing network connectivity. For properties interested in purchasing and owning EV charging stations, CarCharging can also provide EV charging hardware, site recommendations, connection to the Blink Network, and management and maintenance services.

Through its subsidiary, Blink Network LLC, CarCharging also provides residential EV charging solutions for single-family homes. For more information, please visit www.BlinkHQ.com.

CarCharging has strategic partnerships across multiple business sectors including multi-family residential and commercial properties, parking garages, shopping malls, retail parking, and municipalities. CarCharging’s partners include, but are not limited to Walgreens, IKEA, Wal-Mart, Simon Property Group, Equity One, Equity Residential, Forest City, Cinemark USA, Fox Studios, Facebook, PayPal, Kimpton Hotels and Restaurants, Mayo Clinic, San Diego Padres, University of Pennsylvania, Ace Parking, Central/USA Parking, Icon Parking, Rapid Parking, Parking Concepts, CVS, Related Management, Pennsylvania Turnpike Commission, Pennsylvania Department of Environmental Protection, City of Phoenix (AZ), City of Philadelphia (PA), and City of Miami Beach (FL).
 
CarCharging is committed to creating a robust, feature-rich network for EV charging and is hardware agnostic. CarCharging owns the Blink Network, and owns and operates EV charging equipment manufactured by Blink, Aerovironment, ChargePoint, General Electric, Nissan, and SemaConnect. CarCharging’s Level II charging stations are compatible with EVs sold in the United States including the Tesla Model S, Nissan LEAF, Chevy Volt, Mitsubishi i-Miev, Toyota Prius Plug-In, Honda Fit EV, and Toyota Rav4 EV, as well as many others scheduled for release over the next few years.
 
 
1

 
 
Our revenues are primarily derived from hardware sales, public EV charging services, government grants, state and federal rebates, and marketing incentives. EV charging fees are based either on an hourly rate or a per kilowatt-hour rate, and are calculated based on a variety of factors, including local electricity tariffs, convenience of location, competitive services, and the prices of other fuels (such as gasoline). We are also implementing subscription plans to include electricity for single-family homes, multifamily residential homes, and our public charging locations.
 
We purchase all of the Company’s EV charging stations through our wholly-owned subsidiary, eCharging Stations, LLC. Stations are then installed and maintained through competitively bid subcontractor agreements with certified local vendors, to maintain the lowest installation and long-term costs possible. It is our belief that automobile manufacturers are scheduled to mass produce and sell more models of electric vehicles to the public sometime after the second half of 2014. Accordingly, at that time we anticipate that there will be a significant increase in the use of our EV charging stations.
 
As a result of our acquisitions of four competitors, we currently have approximately 5,200 level 2 charging units and 105 DC Fast Charging EV Devices installed. As a result of recent partnerships with EV manufacturers, our network has broadened its offerings and includes units from numerous manufacturers, in addition to ChargePoint, whose charging units we have solely used in the past.
 
To generate leads and enter into additional strategic partnership agreements with property owners, we have utilized the services of independent contractors and in house personnel. We have found that by following this model, we are better able to stimulate growth, control cash-flow, and minimize costs. Accordingly, our independent contractors are able to close and maintain client relationships, as well as coordinate EV charging station installations and operations.
 
In order to provide complete charging services to EV drivers, the Company also provides residential EV charging solutions, through its subsidiary, Blink Network LLC, Blink designs and sells its own residential and dedicated parking space equipment. Residential EV charging equipment provides EV drivers with an additional charging option beyond public EV charging stations.
 
HISTORY
 
The Company was incorporated in October 2006 in Nevada under the name New Image Concepts, Inc. with the intention of providing personal consultation services to the general public.  On December 7, 2009, we entered into a Share Exchange Agreement with Car Charging, Inc., a Delaware corporation (the “Share Exchange”).  
 
Following the Share Exchange we amended our Articles of Incorporation to (1) change our name to Car Charging Group, Inc. and to (ii) authorize 20,000,000 shares of preferred stock.  Additionally, we filed a Certificate of Designation designating the rights of the authorized preferred stock of the Company (the “Series A Convertible Preferred Stock”).  On June 29, 2012, we increased our authorized preferred stock to 40,000,000 shares.

During February 2011, we decreased our issued and outstanding common stock through a one-for-fifty (1:50) reverse stock-split (the “Reverse Stock-Split”).  All share and per share amounts included in this Report and our consolidated financial statements have been adjusted retroactively to reflect the effects of the Reverse Stock-Split.

Corporate Structure

Car Charging Group, Inc. is the parent company of Car Charging, Inc., a Delaware corporation, which serves as the main operating company and is, in turn, the parent company of several distinct wholly-owned subsidiary operating companies including but not limited to eCharging Stations LLC, and the acquisitions of Blink Network LLC, Beam Charging LLC, EV Pass LLC and 350Green LLC during 2013.
 
 
2

 
 
Industry Overview
 
We anticipate that the electric vehicle industry is expected to accelerate over the next several years for various reasons including rising gasoline prices, environmental awareness, and greenhouse gases. Additionally, states such as California have passed laws requiring significant reduction in greenhouse gas emissions from passenger vehicles.  While hybrid automobiles are attaining improved gas mileage, they remain a severe pollutant.
 
Large-scale market penetration and consumer adoption is likely to occur over the next few years due mainly to the following five reasons.
 
1.
U.S. legislative programs provides incentives to grow the industry
 
There has been a concerted effort on the part of the federal, state and local governments to foster the EV industry, supporting both the vehicles and the necessary charging infrastructure.  There have been an unprecedented number of loans and grants to insure this segment succeeds.  The Ford Motor Company was awarded a $5.9 billion loan in June of 2009.   Tesla Motors received, and subsequently repaid, a $465 million loan to build its plant in Fremont California and to support its production of its Model S 4-door sedan.  Both of the aforementioned loans came from the US Government’s $25 billion program dedicated to the development of electric/plug-in hybrid vehicles.
 
Whether it is for the development of a new car, or for startup companies looking to capitalize on new infrastructure technologies, governments have committed to spending billions of dollars to ensure that the EV industry as a whole will succeed.
 
2.
Maintain a relatively low cost when compared to gasoline
 
At the beginning of the 20th Century, electricity generally cost over $0.20 per kilowatt-hour, and could have been as high as $0.40 per kilowatt-hour. During that same time period, gasoline could be purchased for $0.05 per gallon. The spread between gasoline and electricity continues to widen. In 2010, the average retail price of gasoline in the U.S. was $2.74, and by 2013, the average retail price increased to $3.50, while the average cost of electricity is $0.12 per kilowatt-hour. According to the U.S. Department of Energy, a 2013 Nissan Leaf averages 3.45 miles per kilowatt hour with an electricity cost of approximately $0.12 for 3.45 miles; whereas based on U. S. Department of Energy, the 2013 average city/highway miles per gallon cost of a subcompact car (23 miles per gallon) to drive 3.45 miles at $3.50 per gallon is $0.52.
 
Concurrently, major utility companies are working on upgrading their infrastructure to make it easier to charge an electric vehicle. The “smart-grid” investment that many utilities have already made will provide ample information to predict the required power requirements needed to support a widespread EV infrastructure.
 
 
3

 
 
3.
Diverse variety of vehicles at various price points from the major auto manufacturers
 
Most of the major car manufacturers have launched or are committed to offer an electric vehicle by 2015. General Motors, Ford, Audi, Chrysler, Nissan, Honda, BMW, Mercedes, and Tesla, are just some of the examples of the car manufacturers committed to making the electric vehicle industry a successful enterprise. As car manufacturers increase the number of electric vehicles they produce each year, we believe the purchase price for such vehicles will continue to decline. For example, the Nissan dropped the price of the 2013 LEAF model by more than $6,000 than from the previous model. The price reduction makes the LEAF comparable in price to the Toyota Prius, and leases have been made available for as little as $139 per month.
 
4.
Battery costs decrease while recharge life increases
 
Battery technology is advancing at a rapid pace.  Not only are battery costs per kilowatt-hour decreasing rapidly, but at the same time the size and weight of the battery are also decreasing. All three variables are necessary components required to drive down the costs of an electric vehicle. Additionally, battery lifespan is critical to EV acceptance, and many companies such as Axeon, Panasonic, and LG Chem are leading the way towards increased battery capacity and longevity.
 
5.
EV Infrastructure that supports consumer driving habits
 
Consumers are fickle and do not want to alter their daily routine or driving habits. While many believe that most EV charging will be initially completed at home, the need for a robust, pervasive public EV charging infrastructure is required to eliminate range anxiety.
 
Strategically placed public and residential charging eliminates the need for drivers to go out of their way to recharge  their car.  Public car charging stations will be located in popular destination locations where drivers currently park, whether it be for 20 minutes at a local Walgreens, for a few hours while parking at work, or at home overnight, the recharging infrastructure build-out will be more than sufficient for nearly all drivers.
 
Equipment and Network Utilized
 
CarCharging is committed to creating a robust, feature-rich network for EV charging and is hardware agnostic. CarCharging owns and operates EV charging equipment manufactured by Blink, Aerovironment, ChargePoint, General Electric, Nissan, and SemaConnect. CarCharging’s Level II charging stations are compatible with EVs sold in the United States including the Tesla Model S, Nissan LEAF, Chevy Volt, BMW i3 and i8, Mitsubishi i-Miev, Toyota Prius Plug-In, Honda Fit EV, and Toyota Rav4 EV, as well as many others scheduled for release over the next few years. CarCharging utilizes several EV charging networks, including the Blink Network, the software that operates, monitors, and tracks the Blink stations and all of its charging data, which CarCharging owns; as well as ChargePoint, SemaConnect, and General Electric.
 
Competition

Competition in the EV charging industry is limited, and CarCharging’s competitive advantages are our strategic partnerships with property owners/managers and that we own and operate our EV charging stations and the Blink network.  Other EV service equipment manufacturers offer direct distribution or work with independent distributors, including:
 
 
·
ChargePoint manufactures EV charging equipment and operates the ChargePoint network, but they do not own the stations on the network.
 
 
·
General Electric currently offers a Level 2 (220 Volt) Networked Charging Station and a Watt Station home charger.
 
 
·
NRG offers home and public charging at fixed monthly rates, and currently only offers this in Dallas/Ft Worth and Houston, Texas and now in California. They anticipate a 20-city rollout of EV charging station infrastructure, with an emphasis on monthly subscriptions, although they currently operate 170 charging stations.
 
 
4

 
 
Customers

CarCharging has strategic partnerships across multiple business sectors including multi-family residential and commercial properties, parking garages, shopping malls, retail parking, and municipalities.  CarCharging’s partners include, but are not limited to Walgreens, IKEA, Wal-Mart, Simon Property Group, Equity One, Equity Residential, Forest City, Cinemark USA, Fox Studios, Facebook, PayPal, Kimpton Hotels and Restaurants, Mayo Clinic, San Diego Padres, University of Pennsylvania, Ace Parking, Central/USA Parking, Icon Parking, Rapid Parking, Parking Concepts, CVS, Related Management, Pennsylvania Turnpike Commission, Pennsylvania Department of Environmental Protection, City of Phoenix (AZ), City of Philadelphia (PA), and City of Miami Beach (FL). CarCharging is currently establishing relationships with all of the Blink hosts.
 
Sales and Marketing 

When evaluating our future, we believe the most important consideration is the number of locations we contract with to install charging stations.  We could contract with a parking garage which contains 600 spaces, but only install one charging station upon the signing of our contract. That location now represents 599 other potential charging locations that will yield future potential revenues in an essential EV market. We will have minimum capital requirements to secure future charging station spots in that location, and will only install other charging stations as the market warrants. We are able to monitor the usage of the charging stations. As each market develops, we can increase the number of charging stations installed at each location.
 
We employ a direct sales team located both on the east and west coast, as well as a team of independent contractors located throughout the United States actively pursuing and closing deals.
 
To promote and sell the Company’s services to property owners, parking companies, and EV drivers, CarCharging also utilizes marketing and communication channels including press releases, email marketing, websites (www.CarCharging.com, www.BlinkNetwork.com, www.BlinkHQ.com), and social media. Additionally, CarCharging has a joint marketing agreement with Nissan to support Nissan’s dealerships and help educate potential LEAF consumers on public EV charging stations.

Government/Regulatory Approval
 
Local regulations for installation of EV charging stations vary from city to city.  Compliance with such regulation(s) may cause installation delays, but these issues are standard and expected for any product that requires construction as part of its installation.
 
Currently, the Company charges customers by the kilowatt-hour for its services in energy deregulated states and hourly for its services in energy regulated states so as not to be treated as a regulated public utility.  California, Colorado, Florida, Hawaii, Maryland, Minnesota, Oregon, Virginia, and Washington have determined that companies that sell EV charging services to the public will not be regulated as utilities, therefore allowing us to charge based on kilowatt usage.  These individual state determinations are not binding on any other regulator or jurisdiction; however, they demonstrate a trend in the way states view the industry.  Other jurisdictions are in the process of adopting such reforms.

Employees 
 
We currently have 37 full-time employees.

Intellectual Property

On March 29, 2012, the Company entered into an exclusive Patent License Agreement with Michael D. Farkas, our Chief Executive Officer, and Balance Holdings, LLC whereby the Company agreed to pay 10% of the gross profits received by the Company from commercial sales and/or use of the filed utility patent applications for the following inventions:
 
Electric Vehicle Supply Equipment (“EVSE”) Parking Bumper: An inductive charging station in the form of a parking bumper that will reduce the visual and physical clutter in already-congested parking lots and garages (Patent Application Number: 13600058). Today, inductive charging equipment for EVs are primarily in the form of charging plates, on top of which EVs park.  The placement of the EV over the charging plates can be misaligned; therefore, reducing the efficiency of the charge.  Additionally, for multi-level parking garages, the installation of the charging plates can cause structural issues, which causes the installation to be very expensive, if not impossible.  To resolve these issues, and provide property owners and EV drivers with a simpler, less expensive solution, CarCharging conceived of the idea for an inductive parking bumper.  This original invention intends to deliver the charge through equipment generally utilized in parking lots and/or parking garages, which is familiar to most drivers and conforms to standard parking practice.
 
Multiple Simultaneous Electric Vehicle Charging: Through the use of a toggle unit, processor, and multiple plugs which allows multiple EVs to plug into the station simultaneously and charge as the current becomes available (Provisional Patent Application Number: 61695839). Utilizing this innovative toggle feature, EV charging stations will have the ability to charge several vehicles sequentially without the physical insertion or removal of plugs during the charging process.   This feature improves the process of current EV charging stations; reduces potential strain on the energy grid; and reduces EV charging equipment, network, and energy costs.
 
Currently, an EV battery begins to charge as soon as it is plugged into an EV charging station and the session is activated.  In instances where the station is occupied for long periods of time such as overnight at multifamily or mixed-use properties, other EV drivers are not able to charge their EV.  This can cause frustration for EV owners and limit their use of the charging station.  Alternatively, EV charging stations with two or more plugs charge EVs simultaneously which can strain the energy grid.
 
CarCharging’s groundbreaking EV charging station provisional patent optimizes the efficiency of the EV station through the use of a toggle unit, processor, and multiple plugs.  The toggle unit activates the charging current from the station to the first of multiple plugs attached to the charging station.  Then, the processor detects when charging is complete, and the toggle unit deactivates the first plug and activates the next plug.  This process permits multiple EVs to plug into the station simultaneously and charge as the current becomes available.  This novel design also reduces the internal components of current EV charging stations, thereby reducing equipment and network costs.
 
The Company has not paid nor incurred any royalties to date under this Licensing Agreement.
 
Additionally, CarCharging, through a wholly-owned subsidiary owns all of the intellectual property listed on Exhibit 99.1.
 
Other Information
 
We maintain our principal offices at 1691 Michigan Avenue, Suite 601, Miami Beach, Florida, 33139. Our telephone number is (305) 521-0200. A Silicon Valley office was also recently established to house our marketing and sales departments and to provide improved support for west coast operations. Our website is  www.CarCharging.com;  we can be contacted by email at info@CarCharging.com.

 
5

 
 
 
The following risk factors are the most significant risk factors deemed by the Company, however, they are not the only risk factors affecting the Company.

Relating to Our Business
 
WE HAVE A LIMITED OPERATING HISTORY THAT YOU CAN USE TO EVALUATE US, AND THE LIKELIHOOD OF OUR SUCCESS MUST BE CONSIDERED IN LIGHT OF THE PROBLEMS, EXPENSES, DIFFICULTIES, COMPLICATIONS AND DELAYS FREQUENTLY ENCOUNTERED BY A SMALL DEVELOPING COMPANY.
 
We were incorporated in Nevada in October, 2006. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the potentially highly competitive environment in which we will operate. Since we have a limited operating history, we cannot assure you that our business will be profitable or that we will ever generate sufficient revenues to meet our expenses and support our anticipated activities.
 
WE NEED TO MANAGE GROWTH IN OPERATIONS TO MAXIMIZE OUR POTENTIAL GROWTH AND ACHIEVE OUR EXPECTED REVENUES AND OUR FAILURE TO MANAGE GROWTH WILL CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUE.
 
In order to maximize growth in our current and potential markets, we believe that we must expand our marketing operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures and management information systems. We will also need to effectively train, motivate and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.
 
In order to achieve the above-mentioned targets, the general strategies of our Company are to maintain and search for hard-working employees who have innovative initiatives; as well as to keep a close eye on expansion opportunities through merger and/or acquisition.
 
IF WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS.
 
If adequate additional financing is not available on reasonable terms, we may not be able to undertake expansion or continue our marketing efforts and we would have to modify our business plans accordingly. There is no assurance that additional financing will be available to us.
 
In connection with our growth strategies, we may experience increased capital needs; accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products and/or services by our competition; (iii) the level of our investment in research and development;  (iv) the amount of our capital expenditures, including acquisitions, and (v) our growth. We cannot assure you that we will be able to obtain capital in the future to meet our needs.
 
Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
 
OUR FUTURE SUCCESS IS DEPENDENT, IN PART, ON THE PERFORMANCE AND CONTINUED SERVICE OF OUR OFFICERS.
 
We are presently dependent to a great extent upon the experience, abilities and continued services of Michael D. Farkas, Andy Kinard and Jack Zwick, our management team.  The loss of services of Mr. Farkas, Mr. Kinard or Mr. Zwick could have a material adverse effect on our business, financial condition or results of operation.
 
 
6

 
 
NEED FOR ADDITIONAL EMPLOYEES

Our future success also depends upon our ability to attract and retain highly qualified personnel. Expansion of our business and the management and operation of the Company will require additional managers and employees with industry experience, and our success will be highly dependent on our ability to attract and retain skilled management personnel and other employees. There can be no assurance that we will be able to attract or retain highly qualified personnel. As our industry continues to evolve, competition for skilled personnel with the requisite experience will be significant. This competition may make it more difficult and expensive to attract, hire and retain qualified managers and employees.
 
WE ARE IN AN INTENSELY COMPETITIVE INDUSTRY AND THERE CAN BE NO ASSURANCE THAT WE WILL BE ABLE TO COMPETE WITH OUR COMPETITORS WHO MAY HAVE GREATER RESOURCES.
 
The Company could face strong competition from competitors in the EV charging services industry who could duplicate the model.  These competitors may have substantially greater financial, marketing and development resources and other capabilities than the Company. In addition, there are very few barriers to enter into the market for our services.  There can be no assurance, therefore, that any of our competitors, many of whom have far greater resources, will not independently develop services that are substantially equivalent or superior to our services.  Therefore, an investment in the Company is very risky and speculative due to the competitive environment in which the Company operates.
 
OUR FUTURE SUCCESS IS DEPENDENT UPON THE FUTURE GENERATION OF A MARKET FOR OUR SERVICE
 
The Company currently remains and will continue to remain in a position of dependence on the creation and sustainability of the electric car market.  While a vast majority of the major car manufacturers have made strong financial commitments to the electric vehicle industry going forward, there is no guaranty that the industry will become viable.  Without a fleet of electric vehicles on the road needing recharging, there exists no opportunity for the Company to provide its intended service.  Therefore, an investment in the Company is very risky and speculative due to the uncertain future of the electric vehicle market.
 
Risks Associated with Our Common Stock
 
IF WE FAIL TO ESTABLISH AND MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL, WE MAY NOT BE ABLE TO REPORT OUR FINANCIAL RESULTS ACCURATELY OR PREVENT FRAUD.  ANY INABILITY TO REPORT AND FILE OUR FINANCIAL RESULTS ACCURATELY AND TIMELY COULD HARM OUR REPUTATION AND ADVERSELY IMPACT THE TRADING PRICE OF OUR COMMON STOCK.
 
Effective internal control is necessary for us to provide reliable financial reports and prevent fraud.  If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed.  As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operations and access to capital.  We have carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level  due to the material weaknesses described below. 
 
A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCOAB”) Audit Standard No. 5, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following  material weaknesses which have caused management to conclude that as of December 31, 2013 our internal controls over financial reporting (“ICFR”) were not effective at the reasonable assurance level:
 
1.  
We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the year ended December 31, 2013. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
 
2.  
We do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner.  In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
   
3.
We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non–financial and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness.
   
4.
We have determined that oversight over our external financial reporting and internal control over our financial reporting by our audit committee is ineffective.  The audit committee has not provided adequate review of the Company’s SEC’s filings and consolidated financial statements and has not provided adequate supervision and review of the Company’s accounting personnel or oversight of the independent registered accounting firm’s audit of the Company’s consolidated financial statement.
 
To address these material weaknesses, management has performed additional analyses and other procedures to ensure that the financial statements included herein are fairly presented.
 
OUR COMMON STOCK IS QUOTED ONLY ON THE OTC BULLENTIN BOARD (“OTCQB”), WHICH MAY HAVE AN UNFAVORABLE IMPACT ON OUR STOCK PRICE AND LIQUIDITY.
 
Our common stock is quoted on the OTCQB. The OTCQB is a significantly more limited market than the New York Stock Exchange or the NASDAQ Stock Market. The quotation of our shares on the OTCQB may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.
 
 
7

 
 
There can be no assurance that there will be an active market for our shares of common stock either now or in the future. Market liquidity will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result holders of our securities may not find purchasers for our securities should they to desire to sell them. Consequently, our securities should be purchased only by investors having no need for liquidity in their investment and who can hold our securities for an indefinite period of time.
 
OUR SHARES OF COMMON STOCK ARE VERY THINLY TRADED, AND THE PRICE MAY NOT REFLECT OUR VALUE AND THERE CAN BE NO ASSURANCE THAT THERE WILL BE AN ACTIVE MARKET FOR OUR SHARES OF COMMON STOCK EITHER NOW OR IN THE FUTURE.
 
Our shares of common stock are very thinly traded, and the price, if traded, may not reflect our value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. The market liquidity will be dependent on the perception of our operating business and any steps that our management might take to increase awareness of the Company with investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock as collateral for loans.
 
FUTURE ISSUANCE OF OUR COMMON STOCK, OPTIONS AND WARRANTS COULD DILUTE THE INTERESTS OF EXISITNG STOCKHOLDERS.
 
We may issue additional shares of our common stock, options and warrants in the future. The issuance of a substantial amount of common stock, options and warrants could have the effect of substantially diluting the interests of our current stockholders. In addition, the sale of a substantial amount of common stock in the public market, or the exercise of a substantial number of warrants and options either in the initial issuance or in a subsequent resale by the target company in an acquisition which received such common stock as consideration or by investors who acquired such common stock in a private placement could have an adverse effect on the market price of our common stock.
 
THE APPLICATION OF THE SECURITY AND EXCHANGE COMMISSION’S  “PENNY STOCK” RULES TO OUR COMMON STOCK COULD LIMIT TRADING ACIVITY IN THE MARKET, AND OUR STOCKHOLDERS MAY FIND IT MORE DIFFICULT TO SELL THEIR STOCK.
 
Our common stock continues to trade at less than $5.00 per share and is therefore subject to the Securities and Exchange Commission’s (“SEC”) penny stock rules. Penny stocks generally are equity securities with a price of less than $5.00. Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.
 
WE DO NOT INTEND TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE, AND YOU MUST RELY ON INCREASES IN THE MARKET PRICES OF OUR COMMON STOCK FOR RETURNS ON YOUR INVESTMENT.
 
For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.
 
 
8

 
 

This information is not required for smaller reporting companies.

 
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 is for a term of 39 months beginning on March 1, 2012 and ending May 31, 2015. Additionally, the Company has a three-year lease for an office in San Jose, California beginning on April 1, 2012 and ending April 30, 2015 and a five year sublease for office and warehouse space in Phoenix, Arizona beginning December 1, 2013 and ending November 30, 2018 and one year office sharing license for office space in New York, New York beginning January 16, 2014 and ending January 31, 2015.
 
 
On July 31, 2013, the Company participated in an arbitration with a former consultant regarding certain compensatory matters.  On August 29, 2013, the Arbitrator rendered a decision on the matter, requiring the consultant to return all of the shares of Company stock that it had previously been issued as compensation.  The Company was required to reissue a lower amount of Company stock to the consultant as compensation for actual services rendered.  The consultant returned the previously issued shares as of September 30, 2013 and the Company issued the lower amount of Company stock in October 2013.
 
On September 24, 2013 the Court issued a ruling in the consolidated lawsuits of Car Charging Group, Inc. v. JNS Holdings Corporation, and JNS Power & Control Systems, Inc. v. 350 Green, LLC (the “Court Order”) in the U.S. District Court in the Northern District of Illinois.  The Court granted the motion of JNS Holdings Corporation and JNS Power & Control Systems, Inc. (collectively, “JNS”) for specific performance of an Asset Purchase Agreement (the “APA”) entered into between JNS and the former owners of 350 Green, LLC (“350 Green”), Tim Mason and Mariana Gerzanych, in April 2013. Pursuant to the Court Order, 350 Green was required to transfer certain assets and liabilities (the “Assets and Liabilities”) in the Chicago area to JNS, and may be required to pay JNS’ costs and attorneys’ fees as well as indemnify JNS for certain costs incurred with regard to the Assets and Liabilities.
 
The Court Order does not transfer, amend or modify Car Charging Group, Inc.’s ownership of 350 Green; it only requires transfer of ownership of those certain Assets and Liabilities that were listed in the Asset Purchase Agreement entered into between JNS and 350 Green.  Car Charging Group, Inc. still owns all of 350 Green’s other assets, in states including, but not limited to: California, Oregon, Pennsylvania, Missouri, Kansas, Maryland, Colorado, Georgia, Utah, Florida, Ohio, Indiana, and Washington.
 
The Company also plans to appeal the Court Order and to vigorously defend its position that the APA is invalid and unenforceable.
 
On November 27, 2013, the Synapse Sustainability Trust (“Synapse”) filed a complaint against the Company and Michael D. Farkas, the Company’s CEO, alleging various causes of action regarding compliance under certain agreements that governed the sale of Synapse’s assets to CCGI in the Supreme Court of the State of New York, County of Onondaga. On or about January 7, 2014, CCGI filed its Answer and Affirmative Defenses. CCGI moved to dismiss Count V, breach of contract, because the Note contains an arbitration clause. Further, Farkas has moved to dismiss the Complaint for lack of personal jurisdiction.  On March 17, 2014, the Court dismissed Mr. Farkas from the action due to a lack of personal jurisdiction and dismissed Plaintiff’s Count V based on the existence of the Arbitration Clause contained in the Note. In the Court's letter decision issued on March 17, 2014, the Court granted Defendants' Motion to Dismiss the Complaint/Count V against Michael Farkas, and dismissed Count VI against CCGI.  Accordingly, the Court granted Plaintiff's Contempt Motion in part, and denied it in part, and scheduled a hearing on the contempt issue for May 13th, 2014.  The parties are trying to negotiate a settlement. Although the Company can not predict the outcome of these negotiations, it is the Company’s opinion that any accrual for potential loss is not warranted at this time.
 
On or about December 6, 2013, the Company filed a Complaint against Tim Mason and Mariana Gerzanych in the U.S. District Court for the Southern District of New York, alleging claims for Breach of Contract, Fraud in the Inducement, Civil Conspiracy to Commit Fraud, Unjust Enrichment, and Breach of Fiduciary Duty.  These claims were in relation to the Company’s purchase of 350 Green, LLC, and the documents entered into (and allegedly breached by Gerzanych and Mason) related thereto.  The Defendants in this case were recently served with the court documents, and the Company intends to litigate this case vigorously.
 
350 Green, LLC
 
There have been five lawsuits filed by creditors of 350 Green regarding unpaid claims. These 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, and only 350 Green, that potentially could file lawsuits at some point in the future. On April 24, 2014, the Company entered into an agreement with a firm to administer the financial affairs of 350 Green LLC under a Trust Mortgage resulting in all assets and liabilities of 350 Green LLC being transferred to the Trust.
 
General Litigation
 
 From time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business. As such the Company is required to assess the likelihood of any adverse outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of the provision required for these commitments and contingencies, if any, which would be charged to earnings, is made after careful analysis of each matter. The provision may change in the future due to new developments or changes in circumstances. Changes in the provision could increase or decrease the Company’s earnings in the period the changes are made. It is the opinion of management, after consultation with legal counsel, that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
 
 
9

 
 

Not applicable
 
PART II
 
 
Market Information
 
Our common stock has traded on the OTC Bulletin Board system under the symbol “CCGI” since December 2009. The OTCBB is a quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (“OTC”) equity securities. An OTCBB equity security generally is any equity that is not listed or traded on a national securities exchange.
 
Price Range of Common Stock

The following table sets forth, for the periods indicated, the high and low bid prices per share for our common stock as reported by the OTCBB quotation service. These bid prices represent prices quoted by broker-dealers on the OTCBB quotation service. The prices reflect inter-dealer quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions.
 
Quarter ended
 
Low Price
   
High Price
 
             
December 31, 2013
  $ 0.71     $ 1.94  
September 30, 2013
  $ 1.07     $ 2.00  
June 30, 2013
  $ 1.05     $ 1.39  
March 31, 2013
  $ 1.13     $ 1.60  
                 
December 31, 2012
  $ 1.25     $ 2.00  
September 30, 2012
  $ 0.60     $ 1.60  
June 30, 2012
  $ 0.77     $ 1.85  
March 31, 2012
  $ 1.26     $ 2.08  
 
 
10

 
 
Security Holders
 
As of April 25, 2014 there were approximately 226 stockholders of record. Because shares of our common stock are held by depositaries, brokers and other nominees, the number of beneficial holders of our shares is substantially larger than the number of stockholders of record.
 
Dividends
 
To date, we have not declared or paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future.
 
Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.
 
Securities Authorized for Issuance under Equity Compensation 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 “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 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 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 Plan is 5,000,000, adjusted as provided in Section 11 of the Plan.  The Plan expires on December 1, 2014.  As of December 31, 2013, 4,050,000 stock options had been issued to employees and consultants of the Company under the Plan which are all outstanding.  All options vest ratably over three years from date of issuance, December 27, 2012 and expire in five years from date of issuance.  The following table provides further information regarding the Plan.

 
 
 
 
Plan Category
 
Number of securities to be
issued upon exercise of
outstanding options
 warrants and rights
   
Weighted-average
exercise price of
outstanding options
warrants and rights
   
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities reflected in
 column (a))
 
   
(a)
   
(b)
   
(c)
 
Equity compensation plans approved by security holders
   
  4,050,000
   
$
1.49
     
  950,000
 
Equity compensation plans not approved by security holders
   
   --
     
   --
     
   --
 
Total
   
4,050,000
   
$
1.49
     
950,000
 
 
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 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 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 Plan is 5,000,000, adjusted as provided in Section 11 of the Plan. The Plan expires on December 1, 2015. The Plan was approved by a majority of the Company’s shareholders on February 13, 2013. As of December 31, 2013, 935,665 stock options and 1,223,621 shares of common stock had been issued to employees and consultants of the Company.  All options vest ratably over three years from date of issuance, and expire in five years from date of issuance.  The following table provides further information regarding the Plan.
 
 
 
 
 
Plan Category
 
Number of securities to be
issued upon exercise of
outstanding options
 warrants and rights
   
Weighted-average
exercise price of
outstanding options
warrants and rights
   
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities reflected in
 column (a))
 
   
(a)
   
(b)
   
(c)
 
Equity compensation plans approved by security holders
   
  893,665
   
$
1.16
     
  2,882,714
 
Equity compensation plans not approved by security holders
   
   --
     
   --
     
   --
 
Total
   
893,665
   
$
1.16
     
2,882,714
 
 
 
11

 
 
The following table accounts for the Company’s Plan option activity for the years ended December 31, 2012 and December 31, 2013:
 
   
Number of Shares
   
Weighted Average
 Exercise Price
 
Options outstanding at January 1, 2012
   
--
   
$
--
 
Options granted
   
4,500,000
   
$
1.49
 
Options exercised
   
--
   
$
--
 
Options canceled/forfeited
   
--
   
$
--
 
Options outstanding December 31, 2012
   
4,500,000
   
$
1.49
 
Options granted
   
935,665
   
$
1.16
 
Options exercised
           
--
 
Options canceled/forfeited
   
(492,000
)
 
$
1.46
 
Options outstanding at December 31, 2013
   
4,943,665
   
$
1.43
 
 
The number of options exercisable as of December 31, 2013 was 2,154,665 with a weighted average remaining contract life of 3.84 years and a weighted average exercise price of $1.42. None of the outstanding options as of December 31, 2012 were exercisable.  The aggregate intrinsic value of the options outstanding as of December 31, 2013 and 2012 based on a closing price of $1.25 and $1.60 was $118,800 and $525,000 respectively.
 
Options outstanding as of December 31, 2013
 
 
Range of Exercise Price
   
 
Number Outstanding
   
Weighted Average
Contractual Life
 (in years)
   
Weighted Average
 Exercise Price
 
$ 0.50 - $1.61       4,943,665       4.09     $ 1.43  
                             
Options outstanding as of December 31, 2012
 
 
Range of Exercise Price
   
 
Number Outstanding
   
Weighted Average
Contractual Life
 (in years)
   
Weighted Average
 Exercise Price
 
$ 1.46 - $1.61       4,500,000       4.99     $ 1.49  

 
12

 
 
The following table accounts for the Company’s warrant activity for the years ended December 31, 2012 and December 31, 2013:
 
   
Number of Shares
   
Weighted Average
 Exercise Price
 
Warrants outstanding at January 1, 2012
   
10,918,968
   
$
3.68
 
Warrants granted
   
1,197,800
   
$
1.61
 
Warrants exercised
   
--
   
$
--
 
Warrants canceled/forfeited
   
(820,800
)
 
$
4.72
 
Warrants outstanding December 31, 2012
   
11,295,968
   
$
3.50
 
Warrants granted
   
35,016,334
   
$
1.37
 
Warrants exercised
   
--
     
--
 
Warrants canceled/forfeited
   
(8,417,165
)
 
$
4.03
 
Warrants outstanding at December 31, 2013
   
37,895,137
   
$
1.42
 
 
The number of warrants exercisable as of December 31, 2013 was 37,873,337 and 11,019,168 were exercisable as of December 31, 2012.
 
Warrants outstanding as of December 31, 2013
 
 
Range of Exercise Price
   
 
Number Outstanding
   
Weighted Average
Contractual Life
 (in years)
   
Weighted Average
 Exercise Price
 
$ 0.50 - $30.00       37,895,137       3.69     $ 1.42  
                             
 
 
Warrants exercisable as of December 31, 2013
 
 
Range of Exercise Price
   
 
Number Outstanding
   
Weighted Average
Contractual Life
 (in years)
   
Weighted Average
 Exercise Price
 
$ 0.50 - $30.00       37,873,337       3.69     $ 1.42  
 
Warrants outstanding as of December 31, 2012
 
 
Range of Exercise Price
   
 
Number Outstanding
   
Weighted Average
Contractual Life
 (in years)
   
Weighted Average
 Exercise Price
 
$ 1.00 - $51.50       11,295,968       2.14     $ 3.50  
 
Warrants exercisable as of December 31, 2012
 
 
Range of Exercise Price
   
 
Number Outstanding
   
Weighted Average
Contractual Life
 (in years)
   
Weighted Average
 Exercise Price
 
$ 1.00 - $51.50       11,019,168       1.66     $ 3.56  
 
Unregistered Sales of Equity Securities and Use of Proceeds

On December 18, 2012, the Company entered into an employment agreement with an individual to serve as member of the Company’s Board of Directors for a period of three years. As part of his compensation, the Company issued 50,000 shares of its common stock at a $1.49 per share and issued an option to purchase 12,000 shares of its common stock at a price of a $1.50 per share under the Company’s 2013 Omnibus Incentive Plan. The options vests in full as of January 11, 2015 and expires on January 11, 2018.  Additionally, the Company issued the Director options to purchase 25,000 shares of the Company’s common stock at prices ranging from $0.90 - $1.56 for the attendance of meetings of the Board of Directors and Committees of the Board of the Directors during the year ended December 31, 2013.  The options vest two years from issuance and expire five years from date of issuance.
 
On January 14, 2013, the Company entered into a consulting agreement with a firm to provide strategic planning services for a year. As part of the firm’s fee, the Company issued 250,000 shares of its common stock at a price of $1.49.

 
13

 
 
On February 5, 2013, the Company entered into a binding memorandum of understanding with a firm to develop application software. As part of its fee, the firm was issued 113,636 shares of the Company’s common stock at a price of $1.32 per share. This fee is recorded as Other Assets on the Company’s balance sheet as of December 31, 2013.

On February 19, 2013, the Company retained an individual to serve on the Company’s Board of Directors for three years subject to the Board of Directors approval. As part of the agreement and the individual’s compensation, the Company was obligated to issue him 50,000 shares of the Company’s common stock valued at $71,000 under the 2013 Omnibus Plan. As the Company’s Board of Directors did not approve his appointment to the Board of Directors until April 3, 2013 in conjunction with the Company’s acquisition of EV Pass LLC, at which time he was issued 50,000 shares of common stock at $1.42 per share and options to purchase 12,000 shares at $1.43 per share which vest two years from date of grant and expire five years from date of grant. Both shares and options were issued from the 2013 Omnibus Incentive Plan.  Additionally, the Company issued the Director options to purchase 30,000 shares of the Company’s common stock at prices ranging from $0.90 - $1.56 for the attendance of meetings of the Board of Directors and Committees of the Board of the Directors during the year ended December 31, 2013.  The options were issued under the Company’s 2013 Omnibus Incentive Plan, vest two years from issuance and expire five years from date of issuance.  On October 10, 2013, the individual resigned from the Board of Directors.

During the year ended December 31, 2013, the Company issued the Chairman of the Board of Directors options under the Company’s 2013 Omnibus Incentive Plan to purchase 10,000 shares of the Company’s common stock at prices ranging from $1.22 - $1.31 for the attendance of meetings of the Board of Directors and Committees of the Board of the Directors during the year ended December 31, 2013.  The options vest two years from issuance and expire five years from date of issuance.

On February 27, 2013, in conjunction with its acquisition of Beam LLC, the Company issued 1,265,822 fully vested shares of its common stock at $1.30 per share.

On March 8, 2013, the Company entered into a contract with a firm to provide investor relations consulting services. The Company issued 150,000 shares of its common stock under the 2013 Omnibus Incentive Plan at $1.28 per share covering the six month period ended September 8, 2013.
 
As part of its acquisition of 350Green LLC in April 2013, the Company issued an aggregate of 107,513 shares of its common stock at $1.19 per share to third parties to pay off debt owed to these parties by 350Green LLC.

On April 1, 2013, the Company issued 150,000 options under the 2013 Omnibus Incentive Plan to a company for the procurement of investor capital. The options expire in five years from date of issuance and have an exercise price of $0.50.

On April 3, 2013, in conjunction with its acquisition of EV Pass LLC, the Company issued 671,141 shares of its common stock at $1.18 per share.

On April 19, 2013, the Company reached a settlement with its former Chief Financial Officer and issued 220,000 shares of its common stock at $1.20 per share as part of the settlement.

On April 23, 2013, in conjunction with its acquisition of 350Green LLC, the Company issued 604,838 shares of its common stock at $1.19 per share.

On April 29, 2013, the Company issued 2,200,000 warrants to a company that is owned by the Chief Executive Officer of the Company and is a shareholder of the Company. The warrants vest immediately, expire three years from date of issuance and have an exercise price of $1.31.

On June 6, 2013, the Company issued to a consultant 19,231 shares of its common stock at a price of $1.30 per share under the Company’s 2013 Omnibus Incentive Plan for business development services.

 
14

 
 
On June 10, 2013, the Company and the holder of the Company’s Series B Preferred Shares entered into an exchange agreement whereby the holder would surrender the 1,000,000 shares of the Company’s Series B Preferred Shares, and all conversion rights and option rights contained in the February 6, 2012 agreement in exchange for 2,500,000 shares of the Company’s $0.001 par value common stock and a warrant to purchase 600,000 shares of the Company’s common stock at $2.25 per share which vest immediately and expire in three years from date of issuance. The exchange of shares occurred in July 2013.

On June 11, 2013, the Company issued a firm 6,060 shares of its common stock at a price of $1.65 for consulting services.

On August 1, 2013, the Company issued 15,000 shares of its common stock under the Company’s 2012 Omnibus Incentive Plan to an employee as compensation at a price of $1.30 per share and valued at $19,500.
 
On August 11, 2013, the Company and the holder of the $150,000 of past due convertible notes agreed to convert the note and accrued interest thereon on the basis of $0.50 per share thereby issuing 330,000 shares of the Company’s common stock and issue 330,000 warrants exercisable at $2.25 per share which vest immediately and expire on August 11, 2016.
 
On August 12, 2013, the Company issued 25,000 shares of its common stock under the Company’s 2013 Omnibus Incentive Plan at a price of $1.50 per share and valued at $37,500 for legal services.
 
On August 13, 2013, the Company issued 10,000 shares of its common stock under the Company’s 2013 Omnibus Incentive Plan at a price of $1.50 per share valued at $15,000 for acquisition advisory services.

On August 26, 2013, the Company issued 3,433,335 warrants to a company that is owned by the Chief Executive Officer of the Company and is a shareholder of the Company to replace a grant of 3,433,335 warrants which had recently expired. The warrants vest immediately, expire three years from date of issuance and have an exercise price of $1.29.

On August 26, 2013, the Company issued 10,000 options to the President of the Company and 686,665 options to an employee of the Company under the Company’s 2013 Omnibus Incentive Plan to replace options which had recently expired. The options vest immediately, expire three years from date of issuance and have an exercise price of $1.28.

In conjunction with an arbitrator’s decision on August 28, 2013, a former consultant of the Company returned 250,000 shares of the Company’s common stock previously issued for consulting services valued at $450,000 and issued 62,500 shares at a price of $1.26 per share.

On October 17, 2013, the Company issued 8,332 shares of the Company’s common stock under the Company’s 2013 Omnibus Incentive Plan to two attorneys valued at a price of $1.20 per share and valued at $9,998.
 
In conjunction with a consulting agreement with a firm for business development services entered into by the Company on August 15, 2012, the Company issued 18,246 shares of its common stock to the firm at an average price of $1.37 during the year ended December 31, 2013. Additionally, the Company settled an account payable with the firm by issuing 60,993 shares of its common stock at $1.40 per share, resulting in a loss upon settlement of $47,856.

In conjunction with a consulting agreement entered into by the Company for advisory services on September 10, 2012 the Company awarded under the Company’s 2013 Omnibus Incentive Plan consisting of 112,500 shares of the Company’s common stock in January 2013. Additionally, the firm is to receive 87,500 shares of the Company’s common stock monthly during the period of April 1, 2013 through September 1, 2013 for a total of 637,500 shares under the 2013 Omnibus Incentive Plan During the year ended December 31, 2013 Company issued 287,500 shares of its common stock to the firm at an average price of $1.29 per share. The remaining 350,000 shares valued at $503,125 are recorded as an accrued expense as of December 31, 2013.
 
On December 3, 2012, the Company entered into consulting agreement with a firm to provide financial advisory services commencing in January 2013. In conjunction with this agreement, the Company issued 13,393 shares of its common stock at an average price of $1.49 per share during the year ended December 31, 2013.

In conjunction with a consulting agreement which the Company entered into on December 10, 2012 with a firm, the Company issued 42,150 shares of its common stock to the firm for consulting services at an average price of $1.41 per share for services rendered during the year ended December 31, 2013.

In conjunction with a social media marketing agreement entered into by the Company on December 19, 2012, the Company issued 18,561 shares of its common stock at average price of $1.35 per share as a fee for the year ended December 31, 2013.

 
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On January 1, 2013, prior to the approval of 2013 Omnibus Incentive Plan, the Company granted and issued a firm a restricted stock award under the Company’s 2013 Omnibus Incentive Plan consisting of 137,499 shares of the Company’s common stock and an additional 45,833 shares of the Company’s common stock monthly during the period of April 13, 2013 through September 13, 2013 for a total of 412,497 shares under the 2013 Omnibus Incentive Plan in conjunction with a consulting agreement entered into by the Company for advisory services on September 13, 2012. During the year ended December 31, 2013, the firm was issued a  restricted stock award under the Company’s 2013 Omnibus Incentive Plan consisting of for a total of 274,998 shares of the Company’s common stock at an average price of $1.29 per share for services rendered during the year ended December 31, 2013.  The remaining 137,499 shares valued at $187,000 are recorded as an accrued expense as of December 31, 2013.
 
On July 3, 2013, the Company entered into an agreement with a firm to financial advisory services whereby the Company issued 325,000 shares of the Company’s common stock at an average price of $1.27 valued at $412,500 during the year ended December 31, 2013.

During the period of January 2013 through March 22, 2013, the Company sold 4,990,000 shares of its common stock and warrants to purchase 4,990,000 shares of the Company’s common stock at $2.25 per share which vest immediately and expire three years from date of issuance.

During the period of July 1, 2013 through September 30, 2013 the Company sold 2,550,000 shares of its common stock and warrants to purchase 2,550,000 shares of the Company’s common stock at $2.25 per share which vest immediately and expire three years from date of issuance.

On October 11, 2013, in conjunction with the purchase of the Blink Network, and certain assets and liabilities relating to the Blink Network, the Company sold 7,142,857 shares of its common stock and warrants to purchase 7,142,857 shares of the Company’s common stock at a $1.00 per share which vest immediately and expire five years from the date of issue.  In conjunction with this issuance, the Company issued two warrants to two principals at an investment firm to purchase a total of 714,285 shares of common stock at $0.87 shares.  The warrants vest immediately and expire five years from the date of issue.

On October 17, 2013, the Company sold 642,857 shares of its common stock and warrants to purchase 642,857 shares of the Company’s common stock at $1.00 per share which vest immediately and expire five years from date of issuance.

On December 9, 2013, the Company sold 10,000,000 shares of its common stock and warrants to purchase 10,000,000 shares of the Company’s common stock at $1.05 per share which vest immediately and expire five years from date of issuance.  In conjunction with this sale, the Company issued a total of 988,000 units to three individuals and two firms.  The unit entitles the holder that in consideration of payment of $1.00, the holder receives one share of the Company’s common stock and a warrant to purchase an additional share of the Company’s common stock at $1.05.  The unit vests immediately and expires in five years from date of issuance.  In conjunction with this issuance, the Company issued an additional 2,000,000 shares of its common stock at a price of $1.71 per share to a firm in settlement of a memorandum of understanding between the parties.  Additionally, the Company issued 112,000 fully vested common shares to a shareholder/placement agent at a price of $1.71 per share based on the market price on the date of issuance.

During the period of March 22, 2013 through June 12, 2013, the Company issued 848,000 warrants to a shareholder in connection with the procurement of investor capital. The warrants vest immediately and expire five years from date of issuance; 424,000 warrants have an exercise price of $0.50 and the remaining 424,000 warrants have an exercise price of $2.25.  During the period of July 18, 2013 through September 18, 2013, the Company issued the shareholder an additional 360,000 warrants in connection with the procurement of investor capital.  The warrants vest immediately and expire five years from date of issuance; 180,000 warrants have an exercise price of $0.50 and the remaining 180,000 warrants have an exercise price of $2.25.  In conjunction with the sale of 10,000,000 shares of common stock of the Company in December 2013, the shareholder was issued 112,000 shares of the Company’s common stock valued at $1.71, warrants to purchase 112,000 shares of the Company’s common stock at $1.05 per share which vest immediately and expire five years from date of issuance.

These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1934, as amended (the “Securities Act”). These shares of our common stock qualified for exemption under Section 4(2) since the issuance shares by us did not involve a public offering. In addition, the recipients had the necessary intent as required by Section 4(2) since they agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.

 
We are not required to provide the information required by this Item because we are a smaller reporting company.
 
 
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The following discussion and analysis of the results of operations and financial condition for the years ended December 31, 2013 and the fiscal year ended December 31, 2012 should be read in conjunction with our consolidated financial statements and the notes to those consolidated  financial statements that are included elsewhere in this Annual Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors.  See “Forward-Looking Statements.”
 
Overview
 
Car Charging Group, Inc. (“CarCharging”) is a pioneer in nationwide public electric vehicle (EV) charging services, enabling EV drivers to easily recharge at locations throughout the United States. Headquartered in Miami Beach, FL with offices in San Jose, CA; New York, NY; and Phoenix, AZ; CarCharging’s business model is designed to accelerate the adoption of public EV charging.
 
CarCharging offers various options to commercial and residential property owners for EV charging services. Our typical business model provides a comprehensive turnkey program where CarCharging owns and operates the EV charging equipment; manages the installation, maintenance, and related services; and shares a portion of the EV charging revenue with the property owner. Alternatively, property partners can share in the equipment and installation expenses with CarCharging operating and managing the EV charging stations and providing network connectivity. For properties interested in purchasing and owning EV charging stations, CarCharging can also provide EV charging hardware, site recommendations, connection to the Blink Network, and management and maintenance services.
 
Through its subsidiary, Blink Network, CarCharging also provides residential EV charging solutions for single-family homes.  For more information, please visit www.BlinkHQ.com.
 
CarCharging has strategic partnerships across multiple business sectors including multi-family residential and commercial properties, parking garages, shopping malls, retail parking, and municipalities.  CarCharging’s partners include, but are not limited to Walgreens, IKEA, Wal-Mart, Simon Property Group, Equity One, Equity Residential, Forest City, Cinemark USA, Fox Studios, Facebook, PayPal, Kimpton Hotels and Restaurants, Mayo Clinic, San Diego Padres, University of Pennsylvania, Ace Parking, Central/USA Parking, Icon Parking, Rapid Parking, Parking Concepts, CVS, Related Management, Pennsylvania Turnpike Commission, Pennsylvania Department of Environmental Protection, City of Phoenix (AZ), City of Philadelphia (PA), and City of Miami Beach (FL).
 
CarCharging is committed to creating a robust, feature-rich network for EV charging and is hardware agnostic.  CarCharging owns the Blink network, and owns and operates EV charging equipment manufactured by Blink, Aerovironment, ChargePoint, Efacec, General Electric, Nissan, and SemaConnect. CarCharging’s Level II charging stations are compatible with EVs sold in the United States including the Tesla Model S, Nissan LEAF, Chevy Volt, Mitsubishi i-Miev, Toyota Prius Plug-In, Honda Fit EV, and Toyota Rav4 EV, as well as many others scheduled for release over the next few years.
 
 
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In order to provide complete charging services to EV drivers, the Company also provides residential EV charging solutions, through its subsidiary, Blink Network LLC. Blink designs and sells its own residential and dedicated parking space equipment. Residential EV charging equipment provides EV drivers with an additional charging option beyond public EV charging stations.
 
Our revenues are primarily derived from hardware sales, public EV charging services, government grants, state and federal rebates, and marketing incentives.  EV charging fees are based either on an hourly rate or a per kilowatt-hour rate, and are calculated based on a variety of factors, including local electricity tariffs, strength of location, competitive services, and the prices of other fuels (such as gasoline).  We are also implementing subscription plans to include electricity for single-family homes, multifamily residential homes, and our public charging locations.

We purchase all of the Company’s EV charging stations through our wholly-owned subsidiary, eCharging Stations, LLC.  Stations are then installed and maintained though competitively bid subcontractor agreements with certified local vendors, to maintain the lowest installation and long-term costs possible.  It is anticipated that automobile manufacturers are scheduled to mass produce and sell more models of electric vehicles to the public sometime after the second half of 2014.  Accordingly, at that time we anticipate that there will be a significant increase in the use of our EV charging stations.
 
As a result of our acquisitions of four competitors, we currently have approximately 5,200 level 2 charging units and 105 DC Fast Charging EV Devices installed. As a result of recent partnerships with EV manufacturers, our network has broadened its offerings and includes units from numerous manufacturers, in addition to ChargePoint, whose charging units we have solely used in the past.
 
To generate leads and enter into additional strategic partnership agreements with property owners, we have utilized the services of independent contractors and in house personnel. We have found that by following this model, we are better able to stimulate growth, control cash-flow, and minimize costs.  Accordingly, our independent contractors are able to close and maintain client relationships, as well as coordinate EV charging station installations and operations.
 
Recent Financings

2013 Private Placements

During the period of January 2013 through March 22, 2013, the Company sold 4,990,000 shares of its common stock at $0.50 per share and warrants to purchase 4,990,000 shares of the Company’s common stock at an exercise price of $2.25 per share which vest immediately and expire three years from date of issuance for gross proceeds of $2,495,000.

During the period of July 1, 2013 through September 30, 2013 the Company sold 2,550,000 shares of its common stock at $0.50 per share  and warrants to purchase 2,550,000 shares of the Company’s common stock at an exercise price of $2.25 per share which vest immediately and expire three years from date of issuance for gross proceeds of $1,275,000.

On October 11, 2013, in conjunction with the purchase of the Blink Network, and certain assets and liabilities relating to the Blink Network, the Company sold 7,142,857 shares of its common stock at $0.70 per share and warrants to purchase 7,142,857 shares of the Company’s common stock at an exercise price of $1.00 per share which vest immediately and expire five years from the date of issue for gross proceeds of $5,000,000.

On October 17, 2013 the Company sold 642,857 shares of its common stock at $0.70 per share and warrants to purchase 642,857 shares of the Company’s common stock at an exercise price of $1.00 per share which vest immediately and expire five years from date of issuance for gross proceeds of $450,000.

On December 9, 2013 the Company sold 10,000,000 shares of its common stock at a $1.00 per share and warrants to purchase 10,000,000 shares of the Company’s common stock at an exercise price of $1.05 per share which vest immediately and expire five years from date of issuance for gross proceeds of $10,000,000.

Demand Notes

During 2013, the Company had borrowed $440,000, and fully repaid $450,117, inclusive of interest at 12% per annum, for working capital purposes from a company of which the Company’s CEO is a controlling party and now owns the Company.
 
In February 2013, the Company had borrowed $2,000 from a shareholder on an unsecured basis with interest at 12% due on demand.  The loan was paid in full in eight days with accrued interest thereon of $5.
 
 
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Results of Operations
 
The results of operations include the operations of Beam Charging LLC for the period of February 26, 2013, the acquisition date, through December 31, 2013, EV Pass LLC for the period of April 3, 2013, the acquisition date, through December 31, 2013, 350Green LLC for the period of April 22, 2013, acquisition date, through December 31, 2013, and Blink Network LLC for the period of October 16, 2013 through December 31, 2013.
 
Comparison of the years ended December 31, 2013 and December 31, 2012

Revenues

We have generated revenues of $327,971 from service fees related to installed EV Charging Stations for the year ended December 31, 2013 as compared to $16,743 in service fees for the year ended December 31, 2012. The increase in service fees is primarily attributable to the four acquisitions during the year.  While the Company’s primary strategy is to earn revenue through the installation and maintenance of EV Charging Stations, the Company will sell EV Charging Stations on occasions when the opportunity presents itself.  During the year ended December 31, 2012, we sold 69 EV charging stations to a customer for a total price of $235,726 and at a gross profit of $41,670.  During the year ended December 31, 2013, we sold ten EV charging stations for a total price of $47,636 and at a profit of $11,440.  Additionally, we received grants, rebates and incentives totaling $882,933 to defray the cost of equipment and installation of 108 charging stations during 2013. The rebates, incentive and grants are deferred and amortized in a manner consistent with the depreciation expense of the related assets over their useful lives. As a result we amortized $90,796 into revenue during the year ended December 31, 2013 and $5,595 for the year ended December 31, 2012.  We intend to vigorously seek additional grants, rebates, subsidies and equipment manufacturer incentives as a cost effective means of reducing our capital investment in the purchase and installation of charging stations.
 
Cost of Revenues

Cost of revenues primarily consists of depreciation of installed charging stations, amortization of the Blink Network infrastructure, the cost of charging station goods and related services sold, electricity reimbursements and revenue share payments to hosts.  Cost of revenues for the year ended December 31, 2013 of $3,286,672 exceeded cost of revenues for the year ended December 31, 2012 of $199,092 primarily because in 2012, the Company was in the developmental stage and depreciation was considered general and administrative expense.  The acquisition of Blink Network LLC, the commencement of the execution of its operational plans and the additional depreciation related to the number of installed charging stations acquired as a result of the four acquisitions completed during 2013 were the main factors that increased the cost of revenues for 2013.
 
Operating Expenses

Operating expenses consists of selling, marketing and advertising, payroll, administrative, finance and professional expenses.

Compensation expense increased by $8,658,653 from $2,367,313 for the year ended December 31, 2012 to $11,025,966 for the year ended December 31, 2013.  The increase was attributable to an increase in non –cash compensation expense related to warrants and options granted under both our Omnibus Incentive Plans and non-Plan grants pursuant to existing compensation agreements, recognition of a full year of expenses associated with the 2012 Omnibus Incentive Plan as opposed to a shorter period in the year ended December 31, 2012, and as a result of the increased number of employees due to the four acquisitions completed during the year.
 
Other operating expenses increased by $514,714 from $547,353 for the year ended December 31, 2012 to $1,062,067 for the year ended December 31, 2013.  The increase was attributable to an increase in office and warehouse space costs, insurance expenses, travel expenses and taxes as a result of the four acquisitions completed during the year.
 
General and administrative expenses increased by $2,155,877 from $2,321,197 for the year ended December 31, 2012 to $4,477,074 for the year ended December 31, 2013.  The increase was primarily as a result of an increase in stock and warrants issued to consultants, and an increase in professional fees as a result of the acquisitions offset by the inclusion of EV charging station depreciation of $234,364 in the year ended December 31, 2012 and included in cost of revenue in the year ended December 31, 2013.

Operating Loss

Our operating loss for the year ended December 31, 2013 increased by $14,208,485 from $5,176,891 for the year ended December 31, 2012 to $19,385,376 for the year ended December 31, 2013.  The increase was attributable to an increase in operating expenses and a decrease in gross profit.
 
Other Income (Expense)

Other income (expense) increased by $4,639,190 from other expense of $112,719 for the year ended December 31, 2012 to other expense of $4,751,909 for the year ended December 31, 2013.  The increase was primarily attributable to:
 
 
·
A gain from the change in fair value of a derivative liability of $1,794,693 associated with warrants and warrant units issued to investors and placement agents in conjunction with sale of shares of our common stock during the fourth quarter of 2013 and a change in the fair value of the warrant liability associated with the anti-dilution protection offered the sellers associated with the Beam acquisition.
 
·
An expense incurred of $3,420,000 by the issuance of 2,000,000 shares of our common stock in settlement of a financing agreement.
 
·
A warrant expense of $1,480,000 representing anti-dilution protection offered the sellers associated with the Beam acquisition.
 
·
An expense attributable to a debt conversion expense of $687,286 as result of the fair value of the conversion of notes payable into common stock and warrants on conversion terms more favorable than the fair value of the conversion terms when the notes were initially issued.
 
·
An impairment loss of $606,685 related to intangible assets acquired from the EV Pass acquisition.
 
·
A $47,856  loss sustained by issuing shares of common stock in settlement of an account payable, an increase in interest expense $64,680 due to debt incurred in connection with the acquisitions and an increase in amortization of discount on convertible notes payable of $70,043.
 
 
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Net Loss
 
Our net loss for the year ended December 31, 2013 increased by $18,847,675 to $24,137,285 as compared to $5,289,610 for the year ended December 31, 2012. The increase was attributable to a net increase in operating expenses of $11,329,244, a decrease in gross profit of $2,879,241 and an increase of other expense of $4,639,190. Our net loss attributable to common shareholders for the year ended December 31, 2013 increased by $21,679,505 from $5,289,610 to $26,969,115 for the aforementioned reasons and for the deemed dividend of $2,831,830 attributable to the fair value of the conversion terms of Series B Preferred shares into common shares and warrants on terms more favorable than the fair value of the initial conversion terms by which the Series B shares were initially issued.  Our net loss per common share attributable to common shareholders-basic and diluted for the year ended December 31, 2013 was $(0.49)  whereas the basic and fully diluted net loss per common share attributable to common shareholders for the year ended December 31, 2012 was $(0.13).
 
Liquidity and Capital Resources
 
During 2013, we have financed our activities from sales of our capital stock and from loans from related parties.  A significant portion of the funds raised from the sale of capital stock has been used to cover working capital needs such as personnel, office expenses and various consulting and professional fees.
 
For the years ended December 31, 2013 and 2012, we used cash of $3,789,542 and $2,351,641 for operations, respectively. Our cash use for 2013 was primarily attributable to our net loss of $24,137,285 offset by non cash reconciling items of $18,101,853 and changes in operating assets and liabilities of $2,245,890. During the year ended December 31, 2013, cash used for investing activities consisted of $1,138,222 for purchases of electric vehicle charging stations, $2,867 for the purchase of computer equipment, $163,292 the purchase of a note receivable related to the Beam acquisition and the cash paid for our acquisitions of $3,325,607, net of cash acquired. Net cash outflows for investing activities were $712,353 for the year ended December 31, 2012 which were primarily for capital expenditures. Cash provided by financing activities for the year ended December 31, 2013 was $16,243,453 of which $17,265,509 was from the sale of shares of our common stock, net of issuance costs and the proceeds from non-convertible notes totaling $442,000 offset by the repayment of notes of $1,464,056. Cash flows from financing activities for the year ended December 31, 2012 totaled $2,670,551 provided primarily by the net proceeds from the sale of shares of our common stock and preferred stock and the issuance of convertible debt for the year ended December 31, 2012. The net increase in cash during the year ended December 31, 2013 was $7,823,923 as compared with a net decrease of $393,443 for the year ended December 31, 2012.
 
At December 31, 2013, we had $7,837,339 in cash resources to meet current obligations. In addition, as of December 31, 2013, we had a net working capital deficit of $13,292,372. Historically, we have been dependent on debt and equity raised from individual investors to sustain our operations. The Company has obtained financing commitments totaling $6,000,000 through December 31, 2014 from three existing shareholders, in the event additional financing is necessary. Our management believes that we have sufficient resources to fund our operations through at least December 31, 2014.
 
 
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Subsequent Events
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).
 
 
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Critical Accounting Policies
 
a.  Impairment of Long Lived Assets

The Company’s long-lived assets, which include EV charging stations, office and computer equipment, automobiles, intangible assets, and machinery and equipment 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 comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. 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 future discounted cash flows or 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. The Company determined that other than intangible assets acquired from EV Pass LLC, there were no other impairments of long-lived assets as of December 31, 2013 or December 31, 2012.
 
b. 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 810 of the FASB Accounting Standards Codification and Topic 815 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative, if required to be bifurcated, is marked-to-market each balance sheet date 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.
 
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
 
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.
 
c. Fair value of financial instruments
 
The Company follows Topic 825 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and Topic 820 of the FASB Accounting Standards Codification (“Topic 820”) to measure the fair value of its financial instruments. Topic 820 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Topic 820 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Topic 820 are described below:
 
Level 1
Quoted prices available in active markets for identical assets or liabilities as of the reporting date.
   
Level 2
Observable inputs other than quoted prices included in Level 1, such as quotable prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
   
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.
 
 
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The carrying amounts of the Company’s financial assets and liabilities, such as cash, 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 instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangement at December 31, 2013.  The warrant liability associated with the Beam acquisition and the warrants and warrant units issued during the fourth quarter of calendar year 2013 in conjunction with the sale of shares the Company’s common stock are measured at fair value on a recurring basis.
 
The Company has no other assets or liabilities measured at fair value on a recurring basis.
 
 d. 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 is recognized based on the time duration of the session or the kilowatt hours drawn during the session. Sales of EV stations are recognized upon shipment to the customer, F.O.B. shipping point.

Governmental grants and rebates pertaining to expense reimbursement are recognized as income when the related expense is incurred. 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.

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. 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.   The Company has recognized this revenue over the life of the charging station upon installation.

e.  Stock Based Compensation for Employee Services

Stock based awards granted to employees have been appropriately accounted for as required by ASC topic 718 “Compensation – Stock Compensation” (“ASC topic 718”). Under ASC topic 718 share 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.

f.  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 section 505-50-30 of the FASB ASC. Pursuant to FASB Topic 505, 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.
 
Recently Issued Accounting Pronouncements
 
There have been no accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2013 that are expected to have a material impact on the Company’s financial position, results of operations or cash flows. Accounting pronouncements that became effective during the year ended December 31, 2013 did not have a material impact on disclosures or on the Company’s financial position, results of operations or cash flows.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.
 
 
We are not required to provide the information required by this Item because we are a smaller reporting company.
 
 
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Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Car Charging Group, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Car Charging Group, Inc. and Subsidiaries (the “Company) as of December 31, 2013, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Car Charging Group, Inc. and Subsidiaries as of December 31, 2013, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
 
/s/ EisnerAmper LLP
EisnerAmper LLP
Iselin, NJ
May 2, 2014

 
F-1

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Shareholders of
Car Charging Group, Inc. and Subsidiaries
(A development stage company)
 
We have audited the accompanying consolidated balance sheets of Car Charging Group, Inc. and Subsidiaries, a development stage company, (the "Company") as of December 31, 2012 and 2011 and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the years in the two-year period ended December 31, 2012 and for the period from inception (September 3, 2009) to December 31, 2012. Car Charging Group, Inc. and Subsidiaries' management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The consolidated financial statements for the period from inception (September 3, 2009) to December 31, 2009, were audited by other auditors and our opinion, in so far as it relates to cumulative amounts included for such prior periods, is based solely on the report of other such auditors.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
 
In our opinion, based on our audits and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Car Charging Group, Inc. and Subsidiaries as of December 31, 2012 and 2011 and the results of its operations and its cash flows for each of the years in the two-year period then ended, and for the period from inception (September 3, 2009) to December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company had an accumulated deficit at December 31, 2012, and had a net loss and net cashed used in operations for the period from September 3, 2009 (inception) through December 31, 2012. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.
 
/s/ Goldstein Schechter Koch P.A.
Goldstein Schechter Koch P.A.
April 16, 2013
Coral Gables, Florida
 
 
F-2

 
 
CAR CHARGING GROUP, INC. & SUBSIDIARIES
Consolidated Balance Sheets
 
   
DECEMBER 31,
   
DECEMBER 31,
 
   
2013
   
2012
 
ASSETS
           
CURRENT ASSETS:
           
             
Cash and cash equivalents
 
$
7,837,339
   
$
13,416
 
Accounts receivable and other receivables net of allowance for doubtful accounts of $0 and $0, respectively
   
216,003
     
--
 
Inventory
   
1,441,792
     
--
 
Advanced commissions net of an allowance of $385,750 and $0, respectively
   
20,000
     
300,750
 
Prepaid expenses and other current assets
   
271,675
     
357,312
 
Total current assets
   
9,786,809
     
671,478
 
                 
OTHER ASSETS:
               
Property and Equipment
               
EV Charging stations, net of accumulated depreciation of $2,433,487 and $363,918,  respectively
   
7,015,237
     
960,234
 
Software, net of accumulated amortization of $65,515 and $0, respectively
   
260,820
     
--
 
Automobiles, net of accumulated depreciation of $39,662 and $15,292, respectively
   
93,089
     
99,400
 
Office and computer equipment, net of accumulated depreciation of $43,383 and $26,604, respectively
   
55,022
     
36,717
 
Machinery and equipment, net of accumulated depreciation of $10,465 and $0
   
61,044
     
--
 
Total property and equipment, net
   
7,485,212
     
1,096,351
 
                 
DEPOSITS
   
42,275
     
42,265
 
                 
INTANGIBLE ASSETS, net of accumulated amortization of $109,854 and $0, respectively
   
963,648
     
--
 
                 
GOODWILL
   
4,901,261
     
--
 
                 
OTHER ASSETS
   
290,887
     
232,727
 
TOTAL ASSETS
 
$
23,470,092
   
$
2,042,821
 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
CURRENT LIABILITIES:
               
                 
Current portion of notes payable
 
439,739
   
 $
12,105
 
Convertible notes-related party, net of discount of $0 and $4,918, respectively
   
--
     
82
 
Convertible notes payable-net of discount of $0 and $168,567, respectively
   
--
     
122,433
 
Accounts payable
   
5,328,419
     
370,265
 
Accrued interest-related party
   
-- 
     
5
 
Accrued expenses
   
6,357,684
     
177,609
 
Warrants payable
   
1,216,000 
     
--
 
Derivative warrant liability
   
9,511,364
     
--
 
Deferred revenue
   
212,094
     
19,996
 
Deferred rent
   
13,881
     
9,731
 
                 
TOTAL CURRENT LIABILITIES
   
23,079,181
     
712,226
 
                 
DEFERRED REVENUE, net of current portion
   
678,392
     
34,747
 
                 
DEFERRED RENT, net of current portion
   
6,564
     
20,445
 
                 
NOTES PAYABLE, net of current portion
   
129,202
     
44,836
 
                 
TOTAL LIABILITIES
   
23,893,339
     
812,254
 
                 
Commitments and contingencies
               
                 
STOCKHOLDERS' DEFICIT:
               
Series A Convertible Preferred stock, par value $.001 per share; 10,000,000 shares issued and outstanding at December 31, 2013  and 2012, respectively
   
10,000
     
10,000
 
Series B Convertible Preferred stock, par value $0.001 per share; 0 and 1,000,000 shares issued and outstanding at December 31, 2013 and 2012, respectively
   
--
     
1,000
 
Common stock, par value $.001 per share; 500,000,000 shares authorized; 77,124,833 and 42,434,705 shares issued and outstanding at December 31, 2013 and 2012, respectively
   
77,125
     
42,435
 
Additional paid-in capital
   
45,399,170
     
20,117,559
 
Accumulated deficit
   
(45,909,542
)
   
(18,940,427
)
TOTAL STOCKHOLDERS' DEFICIT  
   
(423,247
   
1,230,567
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
23,470,092
   
$
2,042,821
 
 
The accompanying notes are an integral part of these financial statements.
 
 
F-3

 
 
CAR CHARGING GROUP, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
   
For the Year Ended
 
   
DECEMBER 31,
   
DECEMBER 31,
 
   
2013
   
2012
 
             
Revenue:
           
     Service fees
 
$
327,971
   
$
16,743
 
     Grant and rebate revenue
   
90,796
     
5,595
 
     Sales
   
47,636
     
235,726
 
TOTAL REVENUE
   
466,403
     
258,064
 
                 
Costs:
               
     Cost of services
   
744,696
     
5,036
 
     Depreciation and amortization
   
2,505,780
     
-- 
 
     Cost of sales
   
36,196
     
194,056
 
TOTAL COSTS
   
3,286,672
     
199,092
 
                 
GROSS PROFIT (LOSS)
   
(2,820,269
)
   
58,972
 
                 
Operating expenses:
               
     Compensation
   
11,025,966
     
2,367,313
 
     Other operating expenses
   
1,062,067
     
547,353
 
     General and administrative
   
4,477,074
     
2,321,197
 
TOTAL OPERATING EXPENSES
   
16,565,107
     
5,235,863
 
                 
LOSS FROM OPERATIONS
   
(19,385,376
)
   
(5,176,891
)
                 
Other income (expense):
               
Interest expense, net
   
(73,958
)
   
(9,278
)
Amortization of discount on convertible debt
   
(173,484
)
   
(103,441
)
Loss on settlement of accounts payable for common stock
   
(47,856
)
   
--
 
Induced debt conversion expense
   
(687,286
)
   
--
 
Loss on retirement and transfer of charging station
   
(57,333
)
   
--
 
Provision for warrant liability
   
(1,480,000
)
   
--
 
Impairment of intangible assets
   
(606,685
)
   
--
 
Financing agreement settlement expense
   
(3,420,000
)
   
--
 
    Gain on change in fair value of derivative warrant liability and warrants payable
   
1,794,693
     
--
 
TOTAL OTHER INCOME (EXPENSE)
   
(4,751,909)
     
(112,719
)
                 
Loss before income taxes
   
(24,137,285
)
   
(5,289,610
)
                 
Income tax provision
   
-
     
-
 
                 
NET LOSS
 
$
(24,137,285
)
 
$
(5,289,610
)
                 
Deemed dividend to Series B shareholder upon conversion to common stock and warrants
   
(2,831,830
)
   
--
 
Net loss attributable to common shareholders
 
$
(26,969,115
)
 
$
(5,289,610
)
Net loss per common share – basic and diluted
 
$
(0.49
)
 
$
(0.13
)
                 
Weighted average number of common shares outstanding – basic and diluted
   
54,945,088
     
40,332,688
 
 
The accompanying notes are an integral part of these financial statements.
 
 
F-4

 
 
CAR CHARGING GROUP, INC. & SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
 
                                                           
   
Preferred - A
   
Preferred - A
 
Preferred - B
    Preferred - B  
Common
   
Common
   
Additional
Paid-in
   
Accumulated
   
Stock
Subscriptions
   
Total
Stockholders
 
   
Shares
   
Amount
 
Shares
    Amount  
Shares
   
Amount
   
Capital
   
Deficit
   
Receivable
    Deficit  
Balance at December 31, 2011
   
10,000,000
   
$
10,000
 
-
     
-
 
$
37,384,414
   
$
37,384
   
$
15,557,096
   
$
(13,650,817
)
 
$
(999,000
)
 
$
954,663
 
                                                                           
Sale of common stock
                             
2,075,000
     
2,075
     
481,228
             
999,000
     
1,482,303
 
                                                                           
Issuance of Preferred Shares
               
1,000,000
     
1,000
                   
899,000
                     
900,000
 
                                                                           
Common stock issued for conversion of convertible notes and accrued interest
                             
1,529,036
     
1,529
     
2,294
                     
3,823
 
                                                                           
Common stock issued for compensation and services
                             
1,171,255
     
1,172
     
1,595,141
                     
1,596,313
 
                                                                           
Common stock issued for director compensation
                             
275,000
     
275
     
461,975
                     
462,250
 
                                                                           
Warrants issued for compensation and services
                                             
843,899
                     
843,899
 
                                                                           
Warrants issued with convertible debt
                                             
276,926
                     
276,926
 
                                                                           
Net loss
                                                     
(5,289,610
)
           
(5,289,610
)
                                                                           
Balance at December 31, 2012
   
10,000,000
   
$
10,000
 
1,000,000
    $
1,000
   
42,434,705
   
$
42,435
   
$
20,117,559
   
$
(18,940,427
)
 
$
-
   
$
1,230,567
 
                                                                           
Sale of common stock
                             
25,325,714
     
25,325
     
15,079,242
                     
15,104,567
 
                                                                           
Issuance of warrants in conjunction with sale of common stock
                                             
2,160,942
                     
2,160,942
 
                                                                           
Issuance of common stock for compensation and services
                             
1,967,984
     
1,968
     
2,417,402
                     
2,419,370
 
                                                                           
Common stock issued for director compensation
                             
100,000
     
100
     
145,400
                     
145,500
 
                                                                           
Common stock issued in settlement of agreement
                             
2,000,000
     
2,000
     
3,418,000
                     
3,420,000
 
                                                                           
Common stock issued for software development
                             
113,636
     
114
     
149,886
                     
150,000
 
                                                                           
Warrants and options issued for compensation and services
                                             
8,022,996
                     
8,022,996
 
                                                                           
Conversion of Series B Preferred Stock into common stock and warrants
               
(1,000,000
)    
(1,000
)  
2,500,000
     
2,500
     
(1,500)
                     
--
 
                                                                           
Deemed dividend on Series B Preferred shares converted into common stock and warrants
                                             
2,831,830
     
(2,831,830
)            
--
 
                                                                           
Conversion of notes payable into common stock and warrants
                             
330,000
     
330
     
852,161
                     
852,491
 
                                                                           
Issuance of common stock in settlement of accounts payable
                             
60,993
     
61
     
85,329
                     
85,390
 
                                                                           
Common stock issued for acquisitions
                             
2,541,801
     
2,542
     
3,154,730
                     
3,157,272
 
                                                                           
Retirement of reacquired stock
                             
(250,000
)    
(250
)    
(449,750
)                    
(450,000
)
                                                                           
Fair value of warrants issued in conjunction with sale of common stock deemed to be derivative liabilities
                                             
(11,042,057
)                    
(11,042,057
)
                                                                           
Registration rights fee
                                             
(1,543,000
)                    
(1,543,000
)
                                                                           
Net loss for the year ended December 31, 2013
                                                     
(24,137,285
)            
(24,137,285
)
                                                                           
Balance at
December 31, 2013
   
10,000,000
   
$
10,000
 
--
     
--
   
77,124,833
   
$
77,125
   
$
45,399,170
   
$
(45,909,542
)  
$
--
   
$
(423,247
)
 
The accompanying notes are an integral part of these financial statements.
 
 
F-5

 
 
 
CAR CHARGING GROUP, INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows
 
   
For the Year Ended
 
   
December 31,
   
December 31,
 
   
2013
   
2012
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
 
$
(24,137,285
)
 
$
(5,289,610
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
   
2,687,012
  
   
268,499
 
Amortization of discount on convertible notes payable
   
173,484
     
103,441
 
Gain on change in fair value of derivative liability
   
(1,794,693
   
--
 
Non cash compensation
               
Warrants and options issued for compensation and services
   
8,022,996
     
843,899
 
Common stock and warrants issued for services and incentive fees
   
2,778,144
     
1,565,625
 
Provision for loss on advanced commissions
   
385,750
     
--
 
Loss on settlement of accounts payable for common stock
   
47,856
     
--
 
Provision for warrant liability
   
1,480,000
     
--
 
Impairment of intangible assets
   
606,685
     
--
 
Debt conversion expense
   
687,286
     
--
 
Return of common stock due to arbitration
   
(450,000
   
--
 
Financing agreement settlement expense
   
3,420,000
     
--
 
Loss on retirement and transfer of charging station
   
57,333
     
--
 
                 
Changes in operating assets and liabilities:
               
Accounts receivable
   
(195,076
)
   
--
 
Inventory
   
279,841
     
--
 
Advanced commissions
   
(105,000
)
   
(128,500
)
Deposits
   
(10
)
   
(35,821
)
Prepaid expenses and other current assets
   
(127,637
)
   
92,403
 
Other assets
   
88,811
     
(39,295
Accounts payable and accrued expenses
   
1,478,954
     
182,834
 
Deferred rent
   
(9,731
   
30,176
 
Deferred revenue
   
835,743
     
54,743
 
Accrued interest-related party
   
(5
   
(35
Net Cash Used in Operating Activities
   
(3,789,542
)
   
(2,351,641
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of accounts receivable
   
(163,292
   
--
 
Purchase of office and computer equipment
   
(2,867
)
   
(12,653
)
Purchase of automobile
   
--
     
(50,000
Purchase of electric charging stations
   
(1,138,222
)
   
(649,700
)
Cash paid for acquisitions, net of $34,393 of cash acquired
   
(3,325,607
   
--
 
Net Cash Used in Investing Activities
   
(4,629,988
)
   
(712,353
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from notes payable
   
442,000
     
296,000
 
Proceeds from sale of preferred stock
   
--
     
900,000
 
Sale of common stock, net of issuance costs
   
17,265,509
     
1,482,303
 
Payment of notes and convertible notes payable
   
(1,464,056
)
   
(7,752
Net Cash Provided by Financing Activities
   
16,243,453
     
2,670,551
 
                 
NET INCREASE (DECREASE) IN CASH
   
7,823,923
     
(393,443
                 
CASH AT THE BEGINNING OF PERIOD
   
13,416
     
406,859
 
CASH AT END OF PERIOD
 
$
7,837,339
   
$
13,416
 
                 
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES
               
Cash Paid For:
               
Interest expenses
 
$
42,776
   
$
2,035
 
Income taxes
 
$
--
   
$
-
 
                 
NONCASH INVESTING AND FINANCING ACTIVITIES
               
Common stock issued for debt and accrued interest
 
$
--
   
$
3,823
 
Beneficial conversion feature of notes payable and related warrants issued
 
$
--
   
$
276,926
 
Common stock issued for settlement of accounts payable
 
$
37,534
   
$
--
 
Conversion of preferred shares into common shares and warrants
  $
1,000
     
--
 
Issuance of warrants to placement agents
 
$
2,535,172
   
273,697 
 
Conversion of notes payable into common stock and warrants
 
$
165,205
   
$
--
 
Note payable for purchase of automobile
 
$
--
   
$
64,693
 
Purchase of software development for common stock
 
$
150,000
   
$
--
 
Registration rights penalty     1,543,000       --  
Purchase of accounts receivable for common stock
 
$
127,941
   
$
--
 
Retirement of reacquired stock
 
$
450,000
   
$
--
 
Deemed dividend on Series B Preferred shares
 
$
2,831,830
     
--
 
Issuance of common stock for acquisitions
 
$
3,157,272
   
$
--
 
Issuance of notes payable for acquisitions
 
$
980,918
   
$
--
 
Issuance of warrants in conjunction with sale of common stock considered to be derivative liabilities
 
$
11,042,057
   
--
 
 
The accompanying notes are an integral part of these financial statements.
 
 
F-6

 
 
CAR CHARGING GROUP, INC. & SUBSIDIARIES
 
December 31, 2013 and 2012
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 
1.          ORGANIZATION
 
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 November 20, 2009, New Image Concepts, Inc. changed its name to Car Charging Group, Inc.
 
Car Charging, Inc., was incorporated as a Delaware corporation on September 3, 2009.   Car Charging Inc. was created to develop electric charging service facilities for the electric vehicle (EV) automobile market.  Pursuant to its business plan, Car Charging Inc. (or its affiliates) acquires and installs 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.    Additionally, the Company sells hardware to others.   Car Charging, Inc., therefore, enters into individual arrangements for this purpose with various property owners, which may include cities, counties, garage operators, hospitals, multi- family properties, shopping-malls and facility owner/operators.
 
During February 2011, the Shareholders and Board of Directors authorized a decrease of issued and outstanding common stock, in the form of a reverse stock-split, on a one-for-fifty (1:50) basis (the “Reverse Stock-Split”).  There was no change to the authorized amount of shares or to the par value. All share and per share amounts included in the consolidated financial statements have been retroactively adjusted to reflect the effects of the Reverse Stock-Split
 
Merger
 
On December 7, 2009, CCGI entered into a Share Exchange Agreement (the “Agreement”) among CCGI and Car Charging, Inc. (“CCI”) Pursuant to the terms of the Agreement, CCGI agreed to issue an aggregate of 10,000,000 restricted shares of CCGI's common stock and 10,000,000 shares of its Series A Convertible Preferred Stock to the CCI Shareholders in exchange for all of the issued and outstanding shares of CCI.
 
The merger was accounted for as a reverse acquisition and recapitalization. CCI is the acquirer for accounting purposes and CCGI is the issuer. Accordingly, CCGI’s historical financial statements for periods prior to the acquisition become those of the acquirer retroactively restated for the equivalent number of shares issued in the merger. Operations prior to the merger are those of CCI.  From inception on September 3, 2009 until the merger date, December 7, 2009, CCI had minimal operations with no revenues.
 
LIQUIDITY

At December 31, 2013, the Company had $7,837,339 in cash resources to meet current obligations. In addition, as of December 31, 2013, the Company had a net working capital deficit of $13,292,372. Historically, the Company has been dependent on debt and equity raised from individual investors and government grants to sustain its operations. The Company has obtained financing commitments totaling $6,000,000 through December 31, 2014 from three existing shareholders, in the event additional financing is necessary. The Company’s management believes that the Company has sufficient resources to fund its operations through at least December 31, 2014.
 
ACQUISITIONS
 
The consolidated financial statements consist of CCGI and its wholly-owned subsidiaries, including those recently acquired Beam Charging LLC, EV Pass LLC, 350Green LLC and Blink Network LLC. Beam Charging LLC was acquired on February 26, 2013, EV Pass LLC was acquired on April 3, 2013, 350Green LLC was acquired on April 22, 2013 and Blink Network LLC was acquired on October 16, 2013.  Accordingly the operating results of these businesses are included from their respective acquisition dates.  They are collectively referred to herein as the “Company” or “Car Charging”.  All intercompany transactions and balances have been eliminated in consolidation.
 
2.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
BASIS OF PRESENTATION
 
The accompanying 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 financial statements and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for Form 10-K.
 
 
F-7

 
 
DEVELOPMENT STAGE COMPANY

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 defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915-10 “Development Stage Entities.” The Company has established the business and corresponding revenue generating opportunities through its principal operations.
  
PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All significant intercompany accounts and transactions 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, allowance for bad debts, and estimates of future cash flows from and 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.
 
CASH AND CASH EQUIVALENTS
 
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents in both the Consolidated Balance Sheets and Consolidated Statement of Cash Flows. 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. 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.  If future demand or market conditions are less favorable than the Company’s projections, future inventory write-downs could be required and 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 December 31, 2013, inventory was comprised solely of finished goods and parts that are available for sale.

PROPERTY AND EQUIPMENT

Property and equipment are carried at historical cost less accumulated depreciation.  Depreciation is 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 electric vehicle charging stations
 
5 years
 
When property and equipment 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 Consolidated Statements of Operations. The Company held approximately $1,135,000 and $218,000 in EV charging stations that were not placed in service as of December 31, 2013 and December 31, 2012, respectively. The Company will begin depreciating this equipment when installation is substantially complete.  In conjunction with the acquisition of Blink Network LLC 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 and for the year ended December 31, 2013.  EV charging station depreciation, formerly classified as general and administrative expenses and Blink Network software amortization, are now classified as Cost of Sales. Depreciation expense pertaining to EV charging stations for the year ended December 31, 2013 was $2,457,000. EV charging station depreciation of $234,364 for the year ended December 31, 2012 was recorded in general and administrative expenses.
 
 
F-8

 
 
SOFTWARE

Amortization expense for the years ended December 31, 2013 and 2012 pertaining to network software was $38,316 and $0. The 2013 amortization expense is recorded as Cost of Revenue. Non network software amortization for the years ended December 31, 2013 and 2012 was $27,199 and $0.
 
OFFICE AND COMPUTER EQUIPMENT
 
Depreciation expense for the years ended December 31, 2013 and 2012 was $16,779 and $11,794, respectively.

AUTOMOBILES
 
The Company operates six electrically-charged enabled automobiles.  Depreciation expense for the years ended December 31, 2013 and 2012 was $24,370 and $15,292, respectively.

MACHINERY AND EQUIPMENT
 
Depreciation expense classified as Cost of Sales for the years ended December 31, 2013 and 2012 was $10,465 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.
 
The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts.  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 future discounted cash flows or 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.  
 
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. There have been no goodwill impairments through December 31, 2013.
 
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 810 of the FASB Accounting Standards Codification and Topic 815 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative if required to be bifurcated is marked-to-market each balance sheet date 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.
 
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. 
 
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 (unadjusted) 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.
 
 
F-9

 
 
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 and convertible 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 December 31, 2013 and 2012.
 
The Company revalues its derivative liability at every reporting period and recognizes gains or losses in the consolidated statement of operations that are attributable to the change in the fair value of the derivative liability.  The Company has no other assets or liabilities measured at fair value on a recurring basis.
 
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 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 was 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. The Company is required to install the network by June 30, 2014. Two of the fast chargers have been installed as of December 31, 2013 and $1,359 of revenue has been recognized. Nissan reserves the right of 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 Statement of Operations for the year ended December 31, 2013. Prior year amounts  are recorded as general and administrative expenses as the Company was still in the developmental stage.  Certain amounts in the prior period have been reclassified to conform with the 2013 financial statement presentation.
 
STOCK-BASED COMPENSATION FOR OBTAINING EMPLOYEE SERVICES
 
Stock based awards granted to employees have been appropriately accounted for as required by ASC topic 718 “Compensation – Stock Compensation” (“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 section 505-50-30 of the FASB Accounting Standards Codification (“FASB ASC Section 505-50-30”).  Pursuant to FASB ASC Section 505-50-30, 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.
 
 
F-10

 
 
INCOME TAXES
 
The Company follows Section 740 of the FASB Accounting Standards Codification, 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.
 
The Company adopted section 740 of the FASB Accounting Standards Codification (“Section 740”). Section 740 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 Section 740, the Company may recognize the tax benefit from an uncertain 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  Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The Company has open tax years going back to 2010 until 2012 which may be subject to audit. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions in interest expense in Company’s Consolidated Statement of Operations
 
NET LOSS PER COMMON SHARE
 
Net loss per common share is computed pursuant to section 260-10-45 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 year ended December 31, 2013 and 2012, as they were anti-dilutive.
 
     
2013
     
2012
 
                 
Convertible notes
   
--
     
55,899
 
                 
Preferred stock issued
   
25,000,000
     
25,000,000
 
                 
Warrants
   
37,895,137
     
10,354,738
 
                 
Options
   
4,943,665
     
36,885
 
Total Potential Dilutive Shares
   
67,838,802
     
35,447,522
 
 
COMMITMENTS AND CONTINGENCIES
 
The Company follows subtopic 450-20 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.
 
 
F-11

 
 
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-K.
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
There have been no accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2013 that are expected to have a material impact on the Company’s financial position, results of operations or cash flows. Accounting pronouncements that became effective during the year ended December 31, 2013 did not have a material impact on disclosures or on the Company’s financial position, results of operations or cash flows.

A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to our consolidated financial statements.
 
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
 
 
F-12

 
 
3.           ACCOUNTS RECEIVABLE
 
Accounts and other receivables consist of the following as of December 31, 2013:
 
Unbilled receivables:
     
  California Energy Commission
  $ 529,990  
  Bay Area Air Quality Management District
    269,423  
      799,413  
U.S. Department of Energy
    1,040,854  
Other accounts receivable
    188,995  
Total  receivables acquired from Ecotality
    2,029,262  
Less: Fair value adjustment to receivables acquired from Ecotality
    (2,000,189 )
Fair value of accounts receivable acquired from Ecotality – See Note 5
    29,073  
Due from the estate of Electric Transportation Engineering Corporation of America
    143,282  
Other accounts receivable
    43,648  
   Balance
  $ 216,003  
 
California Energy Commission
 
In conjunction with the Asset Purchase Agreement (“Blink APA”) of the Blink Network assets pursuant to an auction approved by the United States Bankruptcy Court of the District of Arizona from Electric Transportation Engineering Corporation of America (“Ecotality”), the Company was assigned a grant with the California Energy Commission (“CEC”), subject to novation with the CEC, for the installation of electric charging stations in designated areas in California.  Ecotality had completed some of the work, prior to its filing for bankruptcy, in accordance with the terms of the grant. Pursuant to the terms of the grant, all project billings to the CEC were subject to a 10% retainage to be released upon completion of all deliverables under the agreement.  As of December 31, 2013, the Company was in negotiations with the CEC to assume the remainder of the Ecotality agreement, under which satisfaction of all remaining deliverables would result in payment of all retainage.  The Company assumed the grant in February 2014, however due to the uncertainty of CEC’s satisfaction of all remaining deliverables, the Company  recorded the fair value of this amount at $0.
 
Bay Area Air Quality Management District
 
As part of the Blink APA, the Company acquired a grant from the Bay Area Air Quality Management District (“BAAQMD”) for the furnishing of charging station usage data of approximately 1,400 participants in the Bay Area of San Francisco, California.  The Company’s assumption of the grant is subject to the approval of BAAQMD.  The Company has aggregated the data for the period of July through December 2013 but has not forwarded the data pending BAAQMD’s approval of the Company’s assumption of the grant.  Due to the uncertainty of BAAQMD’s approval, the Company recorded the fair value of the receivable acquired at $0.
 
U.S. Department of Energy
 
In conjunction with the Blink APA, the Company assumed a grant with the United States Department of Energy (“DOE”) subject to a novation of the grant between the parties. Ecotality had a receivable from DOE for charging stations installed in accordance with the terms of the grant prior to filing for bankruptcy. DOE had filed a creditor’s claim in the Ecotality bankruptcy for an amount in excess of the amount receivable from DOE. Although the Company and DOE are currently in negotiations regarding the novation, the outcome of those negotiations are uncertain. Furthermore, DOE could assert its right to offset the amount it owes Ecotality against the amount it asserts Ecotality owes the DOE. Accordingly, the Company has recorded the fair value of the receivable acquired at $0.
 
Ecotality
 
The amount due from the estate of Electric Transportation Engineering Corporation of America of $143,282 consists of Blink Network LLC revenue received by the estate for charging services rendered after the execution of the APA offset by expenses paid by the estate on behalf of the Company.
 
 
F-13

 

4.           PREPAID AND OTHER CURRENT ASSETS

Prepaid and other current assets consist of the following at:
 
   
December 31,
2013
   
December 31,
2012
 
Prepaid consulting fees
 
$
23,493
   
$
181,849
 
Prepaid compensation
   
256,171
     
311,090
 
Receivable from Target
   
--
     
34,475
 
Short term storage and utility deposits
   
42,187
     
--
 
Sundry prepaid expenses and other current assets
   
75,829
     
43,695
 
  Subtotal
   
397,680
     
571,109
 
Less: non current portion
   
(126,005
)     
   
(213,797
)
Prepaid and other current assets
 
$
271,675
   
$
357,312
 
 
On December 6, 2012, the Company retained an individual to serve as chairman of the Company’s Board of Directors for three years.  As part of the chairman’s compensation, the Company issued to him 200,000 fully vested shares of the Company’s common stock valued at $316,000 which is based on the market value on the date of issuance.  As of December 31, 2013, the prepaid portion of the compensation was $205,756.  The expense will be recognized ratably over the term of the agreement.

On January 11, 2013, the Company retained an individual to serve on the Company’s Board of Directors for three years. As part of the individual’s compensation, the Company issued to him 50,000 fully vested shares of the Company’s common stock valued at $74,500 which is based on the market value on the date of issuance under the 2013 Omnibus Plan. The expense will be recognized ratably over the term of the agreement. As of December 31, 2013, the prepaid portion of the compensation was $50,415.

On January 14, 2013, the Company entered into a contract with a firm to provide strategic planning consulting services over a year. The Company issued 250,000 fully vested shares of its common stock at $1.49 per share, for a total value of $372,500 which is based on the market value on the date of issuance, covering the year ended January 14, 2014. The expense will be recognized ratably over the term of the agreement. As of December 31, 2013, the prepaid portion of those services was $14,288.
 
On August 12, 2013 the Company retained a firm to provide the Company with management advisory services over a year. As part of the agreement the Company issued 3,000 shares of its common stock to the firm and 7,000 shares of its common stock to a principal of the firm; each at $1.50 per share and valued at $15,000 in aggregate which is based on the market value on the date of issuance. The expense will be recognized ratably over the term of the agreement. As of December 31, 2013, the prepaid portion of those services was $9,205.
 
 
F-14

 

5.           ACQUSITIONS
 
BEAM LLC ACQUISITION
 
On February 26, 2013, the Company, entered into an equity exchange agreement (the “Exchange Agreement”) by and among the Company, Beam Acquisition LLC, a Nevada limited liability company and wholly-owned subsidiary of the Company (“Beam Acquisition”), Beam Charging LLC, a New York limited liability company (“Beam”), and Manhattan Charging LLC, a New York limited liability company (“Manhattan Charging”), Eric L’Esperance (“L’Esperance”), and Andrew Shapiro (“Shapiro” and together with Manhattan Charging, L’Esperance and the individual members of Manhattan Charging LLC, the “Beam Members”). The Company had previously entered into an agreement, dated December 31, 2012, (the “Initial Agreement”) with Beam Acquisition and Manhattan Charging, pursuant to which Beam Acquisition acquired all of the outstanding membership interests in Beam in exchange for 1,265,822 restricted shares (the “Exchange Shares”) of the Company’s common stock, par value $0.001 (the “Common Stock”) valued at $1,645,569,  based on the market price of the Company’s common stock on the date of issuance, subject to certain conditions to be met. In the Exchange Agreement and after the conditions had been met, the Company, through Beam Acquisition, further identified the specific terms under which it acquired all of the outstanding membership interests of Beam and Beam became a wholly owned subsidiary of Beam Acquisition (the “Equity Exchange”).
 
As part of the Equity Exchange, the Company issued an aggregate amount of $461,150 of promissory notes (the “Promissory Notes”) to Manhattan Charging and paid $38,850 in transaction costs. The Promissory Notes accrue interest at a rate of 6% per annum on the aggregate principal amount, and was paid on April 15, 2013 (the “Maturity Date”).
 
Prior to the Equity Exchange, the Company entered into an Assignment of Promissory Note (the “Note Assignment”) with certain creditors of Beam (the “Creditors”), pursuant to which the Creditors sold to the Company two certain secured promissory notes (the “Notes”) totaling an aggregate principal amount of $130,000 and accrued interest of $33,292. In connection with the Note Assignment, the Company entered into an Amendment to the Promissory Note (the “Note Amendment”). Pursuant to the Note Amendment, the Notes held by the Company accrue interest at a rate of 8% per annum on the aggregate principal amount, payable on February 26, 2016. The Notes are secured by a lien on and continuing security interest in all of the Beam assets as described in the Note Amendment and are still outstanding as of December 31, 2013.
 
The Company acquired Beam in order to expand its presence in the New York City market and has accounted for the transaction as a business combination. The following table summarizes the fair value of assets acquired and liabilities assumed at the closing date:
 
   
February 26,
2013
 
Cash
  $ 69