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 our 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 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. Earnings per share for the period prior to the merger are restated to reflect the equivalent number of shares outstanding.
The consolidated financial statements consist of CCGI and its wholly-owned subsidiaries, 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.
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by ASC 915-10 “
Development Stage Entities
.” The Company is still devoting substantially all of its efforts on establishing the business and developing revenue generating opportunities through its planned principal operations. In the latter half of 2011, the Company’s principal sales operations began however the Company did not recognize significant revenues during the period. All losses accumulated since inception have been considered as part of the Company’s development stage activities.
LIQUIDITY
Historically, the Company has been dependent on debt and equity raised from individual investors to sustain its operations. The Company’s product has not been placed in enough locations nor have a sufficient number of plug-in electric vehicles been sold that utilize public charging stations to generate significant revenue. The Company has incurred losses and used cash for operating activities since inception. As of December 31, 2012, the Company had an accumulated deficit of $18,940,427. These conditions raise substantial doubt about its ability to continue as a going concern. Management plans include seeking additional equity investments, sale of energy tax credits, and institution of a cost reduction plan. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reporting period. Accordingly, actual results could differ from those estimates.
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.
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. Management has deemed this a normal business risk.
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. They are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over an estimated useful life of three years. 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.
All purchases of EV charging stations from inception to December 31, 2012 have been from a single vendor. The Company believes that there are other vendors in the marketplace that could supply the Company with comparable EV charging stations at comparable prices and terms.
The Company held approximately $218,000 and $185,000 in EV charging stations that were not placed in service as of December 31, 2012 and December 31, 2011, respectively. The Company will begin depreciating this equipment when installation is substantially complete. Depreciation expense for the years ended December 31, 2012 and 2011 was $234,364 and $123,934, respectively.
In December 2010, management determined that EV Charging Stations that were previously recorded as inventory would be used for future installations and reclassified $72,768 in inventory to EV Charging Stations. 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 occasion when the opportunity presents itself.
OFFICE AND COMPUTER EQUIPMENT
Office and computer equipment are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over an estimated useful life of five years. Upon sale or retirement of furniture and fixtures, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in Consolidated Statements of Operations. Depreciation for the years ended December 31, 2012 and 2011 was $11,794 and $9,437, respectively.
AUTOMOBILES
Automobiles are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over an estimated useful life of five years. Upon sale or retirement of automobiles, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the Condensed Consolidated Statements of Operations. The Company’s electrically-charged enabled automobile was placed in service in May 2012. Depreciation for the years ended December 31, 2012 and 2011 was $15,292 and $0, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include EV Charging Stations, office and computer equipment and security deposit, 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 there were no impairments of long-lived assets as of December 31, 2012 or December 31, 2011.
DISCOUNT ON DEBT
The Company allocated the proceeds received from convertible debt instruments between the underlying debt instruments and has recorded the conversion feature as a liability in accordance with paragraph 815-15-25-1 of the FASB Accounting Standards Codification. The conversion feature and certain other features that are considered embedded derivative instruments, such as a conversion reset provision have been recorded at their fair value within the terms of paragraph 815-15-25-1 of the FASB Accounting Standards Codification as its fair value can be separated from the convertible note and its conversion is independent of the underlying note value. The conversion liability is marked to market each reporting period with the resulting gains or losses shown on the Consolidated Statements of Operations for the year ended December 31, 2011. The conversion feature associated with the convertible debt outstanding as of December 31, 2012 does not contain a reset provision and is amortized over the term of the convertible debt.
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 paragraph 810-10-05-4 of the FASB Accounting Standards Codification and paragraph 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the Statement of Operations as 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. 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 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 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, 2012 and 2011.
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 paragraph 605-10-S99-1 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.
Governmental grants and rebates pertaining to revenues and expenses are recognized as income when the related revenue and/or 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. The Company received a grant and a rebate totaling $59,988 to defray the cost of equipment and installation of 13 charging stations during 2012 from two governmental entities. The rebate and grant are deferred and amortized in a manner consistent with the depreciation expense of the related assets over their useful lives. As a result the Company amortized $5,595 into revenue during the year ended December 31, 2012.
RECLASSIFICATION
During the year ended December 31, 2011, management revised the Company’s operating plan in response to customer requests to purchase charging stations that would be provided and serviced by the Company. Management believes that this type of sales activity will continue and will continue to function as a reseller of charging stations. Accordingly, a sale of equipment that was classified in other income (expense) in the second quarter was reclassified to sales revenue. Certain operating expenses incurred during 2011 have been reclassified to conform with the 2012 presentation.
STOCK-BASED COMPENSATION FOR OBTAINING EMPLOYEE SERVICES
The Company accounts for equity instruments issued to employees and directors pursuant to paragraphs 718-10-30-6 of the FASB Accounting Standards Codification, whereby all transactions in which 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 readily 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 probably that performance will occur.
The Company’s policy is to recognize compensation cost for awards with service conditions and when applicable a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.
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.
ADVERTISING
The Company expenses non-direct advertising as incurred. Total advertising expense for the years ending December 31, 2012 and 2011was $143 and $4,965, respectively.
INCOME TAXES
The Company follows Section 740-10-30 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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. 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 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25.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 740-10-25, 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 had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.
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, 2012 and 2011, as they were anti-dilutive.
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
|
55,899
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock issued
|
|
|
25,000,000
|
|
|
|
25,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
10,354,738
|
|
|
|
10,918,169
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
36,885
|
|
|
|
-
|
|
Total Potential Dilutive Shares
|
|
|
35,447,522
|
|
|
|
37,418,169
|
|
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.
CASH FLOWS REPORTING
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.
SUBSEQUENT EVENTS
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
There have been no accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2012 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, 2012 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.
3. PREPAID AND OTHER CURRENT ASSETS
Prepaid and other current assets consist of the following at:
|
|
|
December 31, 2012
|
|
|
December 31, 2011
|
|
|
Prepaid consulting fees
|
|
$
|
181,849
|
|
|
$
|
147,648
|
|
|
Prepaid compensation
|
|
|
311,090
|
|
|
|
-
|
|
|
Receivable from Target
|
|
|
34,475
|
|
|
|
-
|
|
|
Sundry prepaid expenses and other current assets
|
|
|
43,695
|
|
|
|
9,610
|
|
|
Subtotal
|
|
|
571,109
|
|
|
|
157,258
|
|
|
Less: non current portion
|
|
|
(213,797
|
)
|
|
|
( -
|
)
|
|
Prepaid and other current assets
|
|
$
|
357,312
|
|
|
$
|
157,258
|
|
On October 22, 2012, the Company entered into a one year agreement with a firm to provide consulting services which included business development and capital raising functions. As consideration for such services, the firm received 150,000 shares of the Company’s common stock valued at $225,000 on the date of issuance. As of December 31, 2012, the prepaid portion of those services was $181,849.
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 shares of the Company’s common stock valued at $316,000. As of December 31, 2012, the prepaid portion of the compensation was $311,090.
As part of its due diligence of a target acquisition company (“Target”), the Company requested that the Target retain the services of its independent registered accounting firm (“Auditor”) to perform an audit of the Target. The Company guaranteed the audit fee of the audit to the Auditor up to a maximum of $75,000. As of December 31, 2012, we had recorded a receivable from the Target of $34,475 and a corresponding payable to the Auditor in conjunction with the audit.
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following at:
|
|
|
December 31 ,2012
|
|
|
December 31, 2011
|
|
|
Accounts payable
|
|
$
|
370,675
|
|
|
$
|
294,083
|
|
|
Accrued wages
|
|
|
97,961
|
|
|
|
71,030
|
|
|
Accrued fees
|
|
|
72,038
|
|
|
|
-
|
|
|
Accrued interest expense
|
|
|
7,200
|
|
|
|
-
|
|
|
Total
|
|
$
|
547,874
|
|
|
$
|
365,113
|
|
5. CONVERTIBLE NOTES PAYABLE
Convertible notes payable issued prior to February 29, 2012 bear interest of 6% annually which were payable upon maturity on September 25, 2011. The notes have a conversion price of $.0025
.
During June, 2010, $5,000 of these notes was converted to 40,000 common shares.
During July, 2010, $10,000 of these notes was converted to 80,000 common shares.
During January, 2011, $4,000 of these notes was converted to 32,000 common shares.
During March, 2011, $50,000 of these notes together with $4,441 of accrued interest were converted to 21,776,544 common shares
During May and June of 2011, $4,000 of these notes were converted to 1,600,000 common shares.
During July, 2011, $12,500 of these notes were converted to 5,000,000 common shares.
During September, 2011, $10,750 of these notes were converted to 4,300,000 common shares.
On February 29, 2012, the final $3,750 of convertible notes and accrued interest were converted into 1,529,036 common shares.
Subsequent to this transaction, there were no outstanding convertible notes related to the notes above.
On September 14, 2012, the Company issued an unsecured $65,000 convertible note payable to a warrant holder which bears interest at 12% per anum and is due with accrued interest on March 14, 2013. The note is convertible, at the discretion of the holder into the Company’s common stock at the fixed rate of $1.00 per principal value for any unpaid principal and accrued interest thereon until the note is paid in full. In conjunction with the issuance of the note, the Company issued a warrant, to a stockholder to purchase 65,000 shares of the Company’s common stock at a $1.00 per share until September 14, 2014. The amount allocated to the warrants based on the relative fair value of the warrants on the date of the grant was estimated at $30,934 using a Black-Scholes valuation model under the following assumptions: (1) expected volatility of nearly 131% based on historical volatility, (2) a discount rate of 0.18%, (3) expected life of 1 year and (4) zero dividend yield. The amount allocated to the beneficial conversion feature based on the relative fair value of the beneficial conversion feature of the convertible note on the date of issuance was estimated at $32,884 resulting in an aggregate debt discount of $63,818 on September 14, 2012. As of December 31, 2012 the related unamortized debt discount was $18,523.
On October 10, 2012, the Company issued a convertible note in the amount of $100,000, to an investor, secured by all the assets of the Company, due April 10, 2013 with interest at 12% per anum. The note is convertible, at the discretion of the holder into the Company’s common stock at the fixed rate of $1.00 per principal value for any unpaid principal and accrued interest thereon until the note is paid in full. The noteholder is entitled to be repaid $25,000 for every $1,000,000 raised in equity by the Company which the Company has not met. In conjunction with the issuance of the note, the Company issued a warrant, to a stockholder to purchase 100,000 shares of the Company’s common stock at a $1.00 per share until October 10, 2015. The amount allocated to the warrants based on the relative fair value of the warrants on the date of the grant was estimated at $54,464 using a Black-Scholes valuation model under the following assumptions: (1) expected volatility of 182% based on historical volatility, (2) a discount rate of 0.23%, (3) expected life of 1.5 years and (4) zero dividend yield. The amount allocated to the beneficial conversion feature based on the relative fair value of the beneficial conversion feature of the convertible note on the date of issuance was estimated at $45,536 resulting in an aggregate debt discount of $100,000 on October 10, 2012. As of December 31, 2012 the related unamortized debt discount was $54,945.
On October 12, 2012, the Company issued a convertible note in the amount of $50,000, secured by all the assets of the Company, due April 12, 2013 with interest at 12% per anum. The note is convertible, at the discretion of the holder into the Company’s common stock at the fixed rate of $1.00 per principal value for any unpaid principal and accrued interest thereon until the note is paid in full. The noteholder is entitled to be repaid $25,000 for every $1,000,000 raised in equity by the Company which the Company has not met. In conjunction with the issuance of the note, the Company issued a warrant, to a stockholder to purchase 50,000 shares of the Company’s common stock at a $1.00 per share until October 12, 2015. The amount allocated to the warrants based on the relative fair value of the warrants on the date of the grant was estimated at $27,938 using a Black-Scholes valuation model under the following assumptions: (1) expected volatility of 181% based on historical volatility, (2) a discount rate of 0.23%, (3) expected life of 1.5 years and (4) zero dividend yield. The amount allocated to the beneficial conversion feature based on the relative fair value of the beneficial conversion feature of the convertible note on the date of issuance was estimated at $22,062 resulting in an aggregate debt discount of $50,000 on October 12, 2012. As of December 31, 2012, the related unamortized debt discount was $28,022.
The noteholders pertaining to the October 10, 2012 and October 12, 2012 transactions have mutually agreed to enjoy equal rights as secured lenders under each of their respective notes and that neither shall have priority over the other.
On December 3, 2012, the Company issued an unsecured $20,000 convertible note payable to a warrant holder which bears interest at 12% per anum and is due with accrued interest on June 3, 2013. The note is convertible, at the discretion of the holder into the Company’s common stock at the fixed rate of $1.00 per principal value for any unpaid principal and accrued interest thereon until the note is paid in full. In conjunction with the issuance of the note, the Company issued a warrant, to a stockholder to purchase 20,000 shares of the Company’s common stock at a $1.00 per share until December 3, 2014. The amount allocated to the warrants based on the relative fair value of the warrants on the date of the grant was estimated at $10,049 using a Black-Scholes valuation model under the following assumptions: (1) expected volatility of nearly 124% based on historical volatility, (2) a discount rate of 0.18%, (3) expected life of 1 year and (4) zero dividend yield. The amount allocated to the beneficial conversion feature based on the relative fair value of the beneficial conversion feature of the convertible note on the date of issuance was estimated at $9,951 resulting in an aggregate debt discount of $20,000 on December 3, 2012. As of December 31, 2012, the related unamortized debt discount was $16,923.
On December 12, 2012, the Company issued an unsecured $56,000 convertible note payable to a warrant holder which bears interest at 12% per anum and is due with accrued interest on June 12, 2013. The note is convertible, at the discretion of the holder into the Company’s common stock at the fixed rate of $1.00 per principal value for any unpaid principal and accrued interest thereon until the note is paid in full. In conjunction with the issuance of the note, the Company issued a warrant, to a stockholder to purchase 56,000 shares of the Company’s common stock at a $1.00 per share until December 12, 2014. The amount allocated to the warrants based on the relative fair value of the warrants on the date of the grant was estimated at $26,925 using a Black-Scholes valuation model under the following assumptions: (1) expected volatility of nearly 109% based on historical volatility, (2) a discount rate of 0.14%, (3) expected life of 1 year and (4) zero dividend yield. The amount allocated to the beneficial conversion feature based on the relative fair value of the beneficial conversion feature of the convertible note on the date of issuance was estimated at $29,075 resulting in an aggregate debt discount of $56,000 on December 12, 2012. As of December 31, 2012, the related unamortized debt discount was $50,154.
On December 28, 2012, the Company issued an unsecured $5,000 convertible note payable to the Chief Executive Officer which bears interest at 12% per anum and is due with accrued interest on June 28, 2013. The note is convertible, at the discretion of the holder into the Company’s common stock at the fixed rate of $1.00 per principal value for any unpaid principal and accrued interest thereon until the note is paid in full. In conjunction with the issuance of the note, the Company issued a warrant, to the Chief Executive Officer to purchase 5,000 shares of the Company’s common stock at a $1.00 per share until December 28, 2014. The amount allocated to the warrants based on the relative fair value of the warrants on the date of the grant was estimated at $2,160 using a Black-Scholes valuation model under the following assumptions: (1) expected volatility of nearly 107% based on historical volatility, (2) a discount rate of 0.15%, (3) expected life of 1 year and (4) zero dividend yield. The amount allocated to the beneficial conversion feature based on the relative fair value of the beneficial conversion feature of the convertible note on the date of issuance was estimated at $2,840 resulting in an aggregate debt discount of $5,000 on December 28, 2012. As of December 31, 2012, the related unamortized debt discount was $4,918.
Amortization expense for the year ended December 31, 2012 was $103,442 and $36,385, respectively, related to convertible notes payable
.
Upon their origination, these notes had full reset adjustments based upon the issuance of equity securities by the Company in the future, they were subjected to derivative liability treatment under Section 815-40-15 of the FASB Accounting Standard Codification (“Section 815-40-15”) (formerly FASB Emerging Issues Task Force (“EITF”) 07-5). These notes have been measured at fair value using a lattice model at each reporting period with gains and losses from the change in fair value of derivative liabilities recognized on the consolidated statement of operations. The convertible notes gave rise to a derivative liability which was recorded as a discount to the notes upon origination.
In March, 2011, the Company issued 21,776,544 common shares pursuant to the conversion of $50,000 in notes payable together with $4,441 of accrued interest. This conversion was negotiated to mitigate the effect of the 1:50 Reverse-Split on the note conversion price which Management determined could have significantly dilutive effects due to its resets and toxic convertible features.
In March, 2011, agreements between the Company and the remaining note holders to fix the conversion rate stated in the convertible notes effectively removed the embedded derivative from the convertible notes. Accordingly, as future conversions were no longer subject to reset, the derivative liability related to the notes was adjusted to $0 and the Company recognized a gain on the change in value of the derivative liability of $2,701,894 upon execution
None of the convertible notes issued during 2012 gave rise to derivative liabilities.
NOTE PAYABLE
In connection with the purchase of an electrically charged enabled automobile by the Company in the first quarter, the Company entered into a financing agreement. The five-year note, secured by the related asset, bears interest at 4.75% and requires minimum monthly payments, inclusive of interest, of $1,216 commencing in May 2012. Future minimum monthly note payments, exclusive of interest, by year as of December 31, 2012 are as follows:
|
Year
|
|
Amount
|
|
|
2013
|
|
$
|
12,105
|
|
|
2014
|
|
|
12,703
|
|
|
2015
|
|
|
13,330
|
|
|
2016
|
|
|
13,988
|
|
|
2017
|
|
|
4,815
|
|
|
|
|
$
|
56,941
|
|
Total interest expense for the years ended December 31, 2012 and 2011 was $9,278 and $18,500, respectively
.
6. COMMON STOCK EQUIVALENTS
Subscription warrants
In connection with the closing of the Share Exchange Agreement, on December 7, 2009 the Company entered into a Subscription Agreement for the sale of 61,333 units of securities of the Company aggregating $920,000. Each unit consisted of one share of common stock and a warrant to purchase one share of Company’s common stock exercisable at $0.60 per share. The exercise price was subject to a full ratchet reset feature. 16,667 of these warrants were cancelled in 2010. The remaining warrants were adjusted due to a sale of common stock for cash at $3.00 per share, resulting in 446,665 warrants outstanding. The fair value of these warrants granted, were estimated on the date of grant, and recorded as a derivative liability. The derivative was re-measured at December 31, 2010 using their reset value yielding a gain on the change in fair value of $225,579 for the year ended December 31, 2010 and a loss in fair value of $1,182,375 during the period from September 3, 2009 through December 31, 2009, the outstanding liability for the related derivative liability was $636,220 at December 31, 2010. As further disclosed in Note 5, in October 2011, the warrant holders agreed to the cancellation of their outstanding warrants in exchange for 565,000 shares of common stock. This agreement effectively eliminated the remaining derivative liability associated with these warrants of approximately $80,000.
As of May 5, 2010, 3,834 additional units aggregating $57,500 were issued under a private placement. Each unit consisted of one share of common stock and a warrant to purchase one share of Company’s common stock exercisable at $30.00 per share. The related warrants issued in this place did not contain a full ratchet reset.
In connection with the closing of the Share Exchange Agreement, on December 7, 2009 the Company also issued warrants to purchase 500,000 shares of Company’s common stock exercisable at $.60 per share. The exercise price was subject to a full ratchet reset feature. These warrants were adjusted due to a sale of common stock for cash at $3.00 per share, resulting in 100,000 warrants. The derivative for these 100,000 warrants was re-measured at December 31, 2010 yielding a derivative liability of $129,749, resulting in a gain on change in fair value for the year ended December 31, 2010 of $15,589 and a loss in fair value of $1,182,375 during the period from September 3, 2009 through December 31, 2009. The outstanding liability for the related derivative liability was $129,749 at December 31, 2010. In October 2011, the Company executed an agreement with the warrant holder which eliminated the reset feature of these warrants. As a result of this agreement, the derivative liability associated with the reset is no longer present and the gain on the remaining fair value of approximately $17,500 was recognized.
In connection with a private offering initiated on October 24, 2012, the Company issued 525,000 shares of its common stock and issued warrants to purchase 525,000 shares of its common stock at price of $2.25 per share to two accredited investors during the period of October 24, 2012 through November 14, 2012. The warrants expire three years from the date of issuance. The amount allocated to the warrants based on the relative fair value of the warrants issued was estimated at approximately $308,000.
Compensation warrants and options
On April 1, 2010, the Company issued 55,000 warrants to purchase shares of the Company’s common stock, 5,000 at an exercise price of $15.00 and 50,000 warrants exercisable at $30.00 per share.
On April 12, 2010, the Company issued 5,000 warrants to purchase shares exercisable at $42.50 per share. The fair value of these warrants, estimated on the date of grant, was recorded as a expense for consulting services of $32,355.
On April 27, 2010, the Company issued warrants to purchase 440,000 shares of Company’s common stock exercisable at $15 per share. The exercise price of these 440,000 shares was subject to a full ratchet reset feature. These warrants were adjusted in June 2011 due to a sale of common stock for cash at $3.00 per share, resulting in 2,200,000 warrants. The fair value of all of these warrants, estimated on the date of grant, was recorded as compensation expense of $3,099,009.
On August 25, 2010, the Company issued 1,033,433 warrants to purchase shares of the Company’s common stock exercisable at $15 per share. The exercise price of these warrants was subject to a full ratchet reset feature. These warrants were adjusted in June 2011 due to a sale of common stock for cash at $3.00 per share, resulting in 5,167,565 warrants. The Company also issued 10,000 warrants to purchase shares of the Company’s common stock exercisable at $51.50 per share. The fair value of all of the warrants, estimated on the date of grant, was recorded as compensation expense of $3,896,075.
On February 17, 2011, the Company issued 50,000 warrants to purchase shares of the Company’s common stock exercisable at $20 per share. The fair value of all of the warrants, estimated on the date of grant, was recorded as compensation expense of $ 483,583.
On July 18, 2011, the Company issued 1,277,170 warrants to purchase shares of the Company’s common stock exercisable at $1.66 per share. The fair value of all of the warrants, estimated on the date of grant, was recorded as other operating incentive expense of $528,111.
On August 10, 2011, the Company issued 200,000 warrants to purchase shares of the Company’s common stock exercisable at $2.50 per share; 500,000 warrants to purchase shares of the Company’s common stock exercisable at $5.00 per share; 500,000 warrants to purchase shares of the Company’s common stock exercisable at $7.50 per share; and 500,000 warrants to purchase shares of the Company’s common stock exercisable at $10.00. The fair value of all of these warrants, estimated on the date of grant, was recorded as consulting compensation expense of $81,633.
On September 23, 2011, the Company issued 100,000 warrants to purchase shares of the Company’s common stock exercisable at $3.00 per share. The exercise price was subject to a full ratchet reset feature. As a result, the fair value of these warrants, estimated on the date of grant, was recorded as a derivative liability and related discount of short-term notes of $20,751. On October 24, 2011, the warrants were amended to remove the ratchet feature and the exercise price was reduced to a $1.00 per share. The note was paid in full in November 2011 and the remaining discount recorded as interest expense.
On November 15, 2011, the Company issued 250,000 warrants to purchase shares of the Company’s common stock exercisable at $1.50 per share. The fair value of all of the warrants, estimated on the date of grant, was recorded as consulting compensation expense of $77,993.
In October 2011, the Company executed agreements with certain employees and consultants which eliminated the reset feature of 7,467,165 warrants. As of December 31, 2011 all outstanding warrants have fixed exercise prices.
On January 16, 2012, the Company, in connection with the hire of a Chief Operating Officer, issued 1,000,000 warrants, at an exercise price of $1.75 per warrant that vest over a three year period, subject to continued employment. The warrants expire as follows: 300,000 on January 16, 2016, 300,000 warrants expire on January 16, 2017 and 400,000 warrants expire on January 16, 2018. The Chief Operating Officer resigned his position from the Company on October 3, 2012.
On March 19, 2012, the Company, in connection with the hire of an employee, issued 15,000 warrants, at an exercise price of $1.75 per warrant that vest over a three year period, subject to continued employment. The warrants expire as follows: 5,000 on March 19, 2016, 5,000 warrants expire on March 19, 2017 and 5,000 warrants expire on March 19, 2018.
On August 21, 2012, the Company issued 250,000 warrants at an exercise price of $1.00 per share of the Company’s common stock for the successful procurement of a $2,500,000 equity investment in the Company. The warrants expire on June 28, 2017.
On November 30, 2012, the Board of Directors 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. On December 28, 2012, we issued options to 13 employees and three consultants to purchase 4,500,000 shares of our common stock at an average price of $1.49 per share. All options vest ratably over three years and expire on December 27, 2017.
On December 7, 2012, the Company issued 100,000 warrants at an exercise price of $1.59 per share of the Company’s common stock for service rendered to a company owned by the Chief Executive Officer. The warrants expire on December 7, 2015
.
On December 14, 2013, the Company issued 10,000 warrants at an exercise price of $1.00 per share of the of the Company’s common stock to the Company’s newly appointed Chairman of the Board of Directors as part of his compensation package. The warrants vest ratably over two years from date of issuance and expire on December 13, 2015. In conjunction with this issuance, the Company issued 1,800 warrants to a firm which introduced the Chairman of the Board of Directors to the Company. The terms of the issuance to the firm were identical to the terms of the issuance to the Chairman of the Board of Directors.
The fair value of warrants and options pertaining to compensation on the date of the grant issued for the year ended December 31, 2012, was estimated at approximately $8,760,000, which will be recognized over the respective service periods. The fair value of the warrants on the grant date was estimated using a Black-Scholes valuation model and the following assumptions:
|
|
|
Strike Price
|
|
|
Historical
Volatility
|
|
|
Discount Rate
|
|
|
Expected
Life (Years)
|
|
|
Dividend
Yield
|
|
|
Compensation warrants
|
|
$
|
1.00 - $1.75
|
|
|
|
258% - 488
|
%
|
|
|
0.21% - 2.11
|
%
|
|
|
2.79 – 3.00
|
|
|
|
0
|
%
|
|
Compensation options
|
|
$
|
1.46 - $1.61
|
|
|
|
264
|
%
|
|
|
0.42
|
%
|
|
|
3.47
|
|
|
|
0
|
%
|
The fair value of the warrants was determined based on the closing price of the Company’s common stock on the date of grant. The Company recognized compensation cost related to the vesting of these options and warrants of $570,201 and $1,171,320 for the years ended December 31, 2012 and 2011, respectively.
The fair value of all warrant issuances was computed using the Black-Scholes Model, incorporating transaction details such as stock price, contractual terms, maturity and risk free rates, as well as assumptions about future financing, volatility and holder behavior.
The following table summarizes outstanding warrants by Expiration Date at December 31, 2012:
|
|
|
|
Exercise
|
|
Expiration
|
|
Quantity
|
|
|
Price
|
|
Date
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
$
|
15.00
|
|
April 1, 2013
|
|
|
50,000
|
|
|
$
|
3000
|
|
April 1, 2013
|
|
|
2,200,000
|
|
|
$
|
3.00
|
|
April 27, 2013
|
|
|
500,000
|
|
|
$
|
5.00
|
|
August 10, 2013
|
|
|
500,000
|
|
|
$
|
7.50
|
|
August 10, 2013
|
|
|
500,000
|
|
|
$
|
10.00
|
|
August 10, 2013
|
|
|
|
|
|
$
|
3.00
|
|
August 25, 2013
|
|
|
10,000
|
|
|
$
|
51.50
|
|
August 25, 2013
|
|
|
1,277,170
|
|
|
$
|
1.66
|
*
|
July 13, 2014
|
|
|
65,000
|
|
|
$
|
1.00
|
|
September 14, 2014
|
|
|
250,000
|
|
|
$
|
1.50
|
|
November 15, 2014
|
|
|
20,000
|
|
|
$
|
1.00
|
|
December 2, 2014
|
|
|
56,000
|
|
|
$
|
1.00
|
|
December 11, 2014
|
|
|
5,000
|
|
|
$
|
1.00
|
|
December 28, 2014
|
|
|
3,834
|
|
|
$
|
30.00
|
|
May 5, 2015
|
|
|
100,000
|
|
|
$
|
1.00
|
|
October 10, 2015
|
|
|
50,000
|
|
|
$
|
1.00
|
|
October 12, 2015
|
|
|
500,000
|
|
|
$
|
2.25
|
|
October 25, 2015
|
|
|
25,000
|
|
|
$
|
2.25
|
|
November 14, 2015
|
|
|
100,000
|
|
|
$
|
1.64
|
|
December 13, 2015
|
|
|
50,000
|
|
|
$
|
20.00
|
|
January 11, 2016
|
|
|
5,000
|
|
|
$
|
1.75
|
|
March 19, 2016
|
|
|
5,000
|
|
|
$
|
1.75
|
|
March 19, 2017
|
|
|
250,000
|
|
|
$
|
1.00
|
|
June 28, 2017
|
|
|
11,800
|
|
|
$
|
1.00
|
|
December 13, 2017
|
|
|
5,000
|
|
|
$
|
1.75
|
|
March 19, 2018
|
|
|
100,000
|
|
|
$
|
1.00
|
|
September 22, 2018
|
|
|
11,295,968
|
|
|
Total
|
|
|
*Price may be lower if market closes at lower price on exercise date.
|
|
|
Warrants Outstanding
|
|
|
Range of Exercise Price
|
|
Number Outstanding
December 31 ,2012
|
|
|
Weighted Average
Contractual Life (in years)
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.00-$51.50
|
|
|
11,295,968
|
|
|
|
2.14
|
|
|
$
|
3.50
|
|
|
|
|
Warrants Exercisable
|
|
|
Range of Exercise Price
|
|
Number Outstanding
December 31, 2012
|
|
|
Weighted Average
Contractual Life (in years)
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.00-$51.50
|
|
|
11,019,168
|
|
|
|
1.66
|
|
|
$
|
3.56
|
|
The Company is authorized to issue 500,000,000 shares of common stock and 40,000,000 shares of preferred stock.
PREFERRED STOCK
Series A Convertible Preferred Stock
In connection with the closing of the Share Exchange Agreement, on December 7, 2009 the Company issued 10,000,000 shares of Series A Convertible Preferred Stock with a par value of $0.001.
The Series A has five (5) times the number of votes on all matters to which common shareholders are entitled, bears no dividends, has a liquidation value eight times that sum available for distribution to common stock holders and is convertible at the option of the holder after the date of issuance at a rate of 2.5 shares of common stock for every preferred share issued.
Series B Convertible Preferred Stock
On February 6, 2012, the Company entered into a stock purchase agreement to sell 1,000,000 shares of a new class of preferred stock at per share price of $1.00. The Series B has one vote per share in CarCharging Limited, a subsidiary formed in June 2012, as if the shares were converted into common stock as of the date immediately prior to the record date for determining the stockholders eligible to vote on any such matter, bears no dividends and is junior to Series A Preferred stock with respect to dividends and distribution of assets. The preferred stock, has been authorized and issued as Series B Convertible Preferred Stock as of June 28, 2012. At the discretion of the Purchaser, the shares are convertible into (i) one percent (1%) of the issued and outstanding common stock of CarCharging, Limited for every 500,000 shares of Series B Preferred Stock until February 6, 2017 or (ii) the Purchaser may convert each share of Series B Preferred Stock into Common Stock of the Company on a one for one basis during the period of July 1, 2015 through December 31, 2015. The agreement included an option to purchase an additional 1,500,000 shares of the Series B Preferred stock at an exercise price of $1.00 per share within 60 days of the issuance of the original 1,000,000 shares which was not exercised. Simultaneously with the issuance of the original 1,000,000 Series B Preferred shares, the Purchaser was entitled to receive two percent (2%) of the issued and outstanding common stock of CarCharging Limited in exchange for consulting services for developing business relationships and obtaining charging station locations in Romania. Additionally, if the Purchaser exercises its options in the initial stock purchase agreement, it will receive additional payment for its consulting services for developing business relationships and obtaining charging station locations in Greece in the form of three percent (3%) of the total outstanding common stock of CarCharging Limited. The Company received the $900,000, net of issuance costs, in February 2012 and issued 1,000,000 shares of the Series B Convertible Preferred Stock in June 2012. The fair value of the option to purchase additional shares on the date the Series B Preferred shares were issued was estimated at approximately $226,000, which has been credited to Additional Paid In Capital. The fair value of the option on the stock issuance date was estimated using a Black-Scholes valuation model and the following assumptions: (1) expected volatility of nearly 54% based on historical volatility (2) a discount rate of 0.65%, (3) expected life of 60 days and (4) zero dividend yield. The fair value of the option was determined based on the closing price of the Company’s common stock on the date of the stock issuance.
On December 7, 2009 the Company entered into a Subscription Agreement for the sale of 61,333 units of securities of the Company aggregating $920,000. Each unit consisted of one share of common stock and a warrant to purchase one share of Company’s common stock exercisable at $30.00 per share.
On February 19, 2010, the Company issued 4,600 shares of its common stock, to extinguish a debt to its founders of $4,600 included in accounts payable. The stock was treated as founders’ shares and issued at its par value of $0.001.
On February 19, 2010, the Company issued 8,500 shares of its common stock at $15 per share, for services performed with a fair value of $127,500.
On May 5, 2010, the Company issued 3,834 shares of common stock at $15.00 per share with warrants attached exercisable at $30.00 per share. See the description of warrants with embedded derivatives in Note 5 above for a more complete description of this transaction.
During June 2010, the Company issued 40,000 shares of common stock at $0.125 each, in exchange for $5,000 of convertible notes payable
During July 2010 the Company issued 80,000 shares of common stock at $0.125 each, in exchange for $10,000 of convertible notes payable. See the derivative analysis of this transaction in Note 4 above for a complete description of this transaction
.
On July 30, 2010, the Company issued 36,667 shares of common stock at $15.00 per share.
On August 19, 2010, the Company issued 6,000 shares of its common stock at $ 51.50 per share, for services performed with a fair value of $ 309,000.
On September 7, 2010, the Company issued 66,667 shares of common stock at $15.00 per share, together with 6,667 shares of common stock for services performed in connection with the sale of these share. The Company received $885,000, net of costs of $115,000.
On January 3, 2011, the Company issued 250 shares of common stock in payment of services. In addition, the Company entered into a continuing services agreement that provides for issuance of $1,500 of common stock per month in connection with this agreement. In connection with this agreement, the Company issued 1,451 shares during the year.
On February 4, 2011, the Company issued 3,000 shares of common stock in payment of $81,000 in services.
During June, 2011, the Company issued 1,005 shares of common stock in payment of $3,000 in services and issued 333,333 shares for cash at $3.00 per share.
During July, 2011, the Company issued 50,000 shares of common stock at $1.80 per share for services performed.
During August, 2011, the Company issued 400,000 shares of common stock at $1.25 per share for services performed.
During September, 2011, the Company issued 17,482 shares of common stock in exchange for forgiveness of a $25,000 account payable.
During October, 2011, the Company issued 3,527 shares of stock in exchange for $6,000 worth of services.
In October 2011, the Company entered into an agreement with three warrant holders, whereby the Company issued 565,000 shares of common stock in exchange for warrants to purchase 446,665 shares. The exchange agreement terminates all rights associated with the warrants.
Due to the reset feature of these warrants, they represented a derivative liability of approximately $80,000 at the time of the exchange. The Company elected to treat this transaction in accordance with ASC 470-50-40 “Extinguishment of Debt”. Per the codification, the Company recognized a loss for the excess of consideration in the form of common stock given over the fair value of the extinguished instrument. On the measurement date, the fair value of the common stock issued was $1.00 per share and the warrants had a combined fair market value of $80,000. The exchange resulted in the Company recording a loss on the conversion of $485,000, which was recorded as a Loss on Exchange in the Other Income (Expense) section of the Consolidated Statement of Operations.
In November, 2011, the Company entered into a stock purchase agreement for 2.5 million shares of common stock in exchange for $2.5 million in cash. In accordance with this agreement, the Company issued 1,500,000 shares of common stock at $1.00 per share. The agreement calls for the issuance of 500,000 additional shares to be issued in March of 2012, funding of which was received on April 3, 2012 and 500,000 shares to be issued in June of 2012, each at $1.00 per share. The stock subscription, net of common share amount to be issued, resulted in stock subscription receivable of $999,000 at December 31, 2011.
During December, 2011, the Company issued 5,000 shares in connection with the receipt of a loan resulting in a discount on the loan of approximately $21,000. The loan was paid in full prior to year end and the discount was recognized as interest.
During 2011, the Company issued 32,708,544 shares of common stock pursuant to the conversion of $81,250 in convertible notes payable, as further described in Footnote 4. On February 29, 2012, the final $3,750 of convertible notes and related interest were converted into 1,529,036 of common stock.
On January 6, 2012, the Company issued 50,000 shares of common stock, at $1.00 per share, related to a stock purchase agreement executed in 2011.
On February 27, 2012, the Company, in connection with the hire of a Chief Financial Officer and Director, issued 75,000 shares of restricted common stock at $1.95 per share.
On February 27, 2012, the Company entered into a stock purchase agreement for 500,000 shares of restricted common stock in exchange for $500,000 cash.
On February 29, 2012, the Company issued 250,000 shares of common stock in connection with a consulting agreement at $1.80 per share.
On April 23, 2012 and May 21, 2012, the Company issued 4,930 shares of common stock at $1.72 per share and 12,400 shares of common stock at $1.25 per share, respectively, in exchange for services valued at $23,980.
On May 21, 2012 the Company granted an employee the right to receive 15,000 shares of its common stock valued $1.25 per share upon the anniversary date of the grant and the continued employment of the employee with the Company.
On August 15, 2012, the Company entered into a consulting agreement for business development services for a monthly fee of $15,000 in cash and $5,000 in common stock of the Company. For the year ended December 31, 2012, the Company issued 16,270 shares of its common stock at an average value of $1.38 per share in connection with this consulting agreement. The agreement is for a term of one year and will automatically renew for an additional year unless written notification is provided by either party at least 60 days prior to the expiration of the initial term. Thereafter, the parties may renew the agreement on mutually agreeable terms
.
On August 21, 2012, the Company issued 5,835 shares of its common stock valued at $1.08 per share in connection with consulting services rendered.
On August 28, 2012, the Company issued 100,000 shares of its common stock in connection with a consulting agreement valued at $1.03 per share.
On September 10, 2012, the Company entered into an advisory services agreement with a consultant which may be terminated by either party with 30 days advance notice. Under terms of the agreement, the Company issued 262,500 shares of its common stock, valued at $1.00 per share for services to be rendered during the first three months of the agreement and will issue an additional 87,500 shares of the Company’s common stock monthly for the succeeding nine months.
On September 13, 2012, the Company entered into an advisory services agreement with a consultant which may be terminated by either party with 30 days advance notice. Under terms of the agreement, the Company issued 137,503 shares of its common stock, valued at $1.03 per share for services to be rendered during the first three months of the agreement and will issue an additional 45,833 shares of the Company’s common stock monthly for the succeeding nine months.
On October 22, 2012, we entered into a one year consulting agreement for investment advisory and business development services with a firm and issued 150,000 shares of our common stock at a $1.50 per share as a fee for such services. Additionally, we retained the firm to introduce us to a chairman-quality board of directors candidate and upon hiring of such candidate on December 14, 2012 issued the firm 47,392 shares of our common stock at $1.58 per share and issued a warrant to purchase 1,800 shares of our common stock at a $1.00 per share. The warrant vests in full on December 14, 2014 and expires on December 14, 2017.
On October 24, 2012, we initiated a private offering of our common stock at $1.00 per share to “accredited investors”, as defined, (“Investors”) for which the minimum investment for all Investors shall be $500,000. In addition, each Investor shall receive a warrant to purchase a like number of shares of our common stock at $2.25 per share for a period of three years from the purchase date of the shares under the offering.
On October 25, 2012 in conjunction with this offering, we received $500,000 and issued 500,000 shares of our common stock and a warrant to purchase 500,000 shares of our common stock at $2.25 per share which expires on October 25, 2015. In conjunction with this transaction we issued 50,000 shares of our common stock on December 14, 2012 at a $1.58 per share to a consultant as an investment advisory fee
On November 14, 2012 in conjunction with this offering, we received $25,000 and issued 25,000 shares of our common stock and a warrant to purchase 25,000 shares of our common stock at $2.25 per share which expires on November 14, 2015.
On December 14, 2012 we entered into an employment agreement with an individual to serve as the Chairman of our Board of Directors for a period of three years. As part of his compensation, we issued 200,000 shares of our common stock at a $1.58 per share and issued a warrant to purchase 10,000 shares of our common stock at a price of a $1.00 per share. The warrant vests in full as of December 14, 2014 and expires on December 14, 2017.
On December 19, 2012, entered into social media marketing agreement with a firm for a six month period. In conjunction with this agreement, we issued 3,226 shares of our common stock at $1.55 per share as a fee for the month of December 2012.
On December 31, 2012, we issued 50,000 shares of our common stock each to two employees for compensation under the Plan at a price of $1.60 per share.
In accordance with a consulting agreement which we entered into on December 10, 2012 with a firm, we issued 31,199 shares of our common stock to the firm for consulting services at an average price of $1.36 per share for services rendered during the calendar quarter ended December 31, 2012.
Compensation expense related to common stock and warrants issued for the years ended December 31, 2012 and 2011 were $2,409,524 and $1,872,820 respectively
.
8. INCOME TAXES
Deferred tax assets
Income Taxes
No provision has been recorded for the years ended December 31, 2012 and 2011 since the company had net losses and the increase in the deferred tax asset was offset by the valuation allowance.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes are as follows:
Deferred Tax Asset (Liability):
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tax loss carry forwards
|
|
$
|
2,358,000
|
|
|
$
|
1,160,000
|
|
|
Stock based compensation
|
|
|
1,549,000
|
|
|
|
1,630,000
|
|
|
Amortization of debt discount
|
|
|
21,000
|
|
|
|
|
|
|
Depreciation
|
|
|
(98,000
|
)
|
|
|
(40,000
|
)
|
|
Tax credit carry forward
|
|
|
255,000
|
|
|
|
36,000
|
|
|
|
|
|
|
|
|
|
2,786,000
|
|
|
Valuation allowance
|
|
|
(
4,085,000
|
)
|
|
|
(2,786,000
|
)
|
|
Non current deferred income tax assets
|
|
$
|
0
|
|
|
$
|
0
|
|
At December 31, 2012 and 2011, the Company had a net operating loss carry forwards for both federal and state purposes of approximately $11.8 million and $6.6 million, respectively, which may be offset against future taxable income through 2032
.
The Company has determined that a valuation for the entire income tax provision is required. A valuation allowance is required if, based on the weight of evidence, it is more likely than not that some or the entire portion of the deferred tax asset will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a full valuation allowance is necessary to reduce the deferred tax asset to zero, the amount that will more likely not be realized. The change in the valuation allowance for the current year is $1,299,000.
Income taxes in the statements of operations
A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
|
|
|
For the Years Ended
December 31,
2012 and 2011
|
|
|
|
|
|
|
|
|
Federal statutory income tax rate
|
|
|
15.0
|
%
|
|
State taxes net of federal benefit
|
|
|
5.0
|
%
|
|
|
|
|
20.0
|
%
|
|
Change in valuation allowance on deferred tax asset
|
|
|
(20.0
|
)%
|
|
Effective income tax rate
|
|
|
0.0
|
%
|
9.
RELATED PARTY
The Company paid consulting fees to a company that is owned by its Chief Executive Officer amounting to $0 and $100,000 for the years ended December 31, 2012 and 2011, respectively. These fees were paid pursuant to the terms of a two-year support services contract that was in place prior to the CEO’s employment. Additionally, the Company paid commissions totaling $77,500 during the year ended December 31, 2012 to this company for business development related to installations of EV charging stations by the Company in accordance with the support services contract. No commissions were paid to this Company during 2011.
The Company incurred accounting and tax service fees totaling $68,913 for the year ended December 31, 2012 provided by a company that is partially owned by the Company’s Chief Financial Officer
.
On March 29, 2012, the Company entered into a patent license agreement with a stockholder of the Company and a related party under common ownership. Under terms of the agreement, the Company has agreed to pay royalties to the licensors equal to 10% of the gross profits received by the Company from bona fide commercial sales and/or use of the licensed products and licensed processes. As of December 31, 2012, the Company has not paid any royalty fees related to this agreement.
10. COMMITMENTS AND CONTINGENCIES
The Company has entered into several contracts that obligate it to office space lease payments, equipment acquisition and other matters. The following is a summary of these commitments:
|
a.
|
On March 31, 2011, the Company entered into a three (3) year lease for office space at approximately $132,480 per year, with an option to renew for an additional three years at approximately $137,655 per year. In the fourth quarter of 2011, the office owner space declared bankruptcy and the Company has not been required to pay any rent payments. However, the Company had continued to accrue monthly rent based on the contracted amount through December 31, 2011 and $55,200 has been accrued for in accounts payable and accrued expenses as of June 30, 2012 and December 31, 2011, respectively. During the quarter ended September 30, 2012, the Company had received, from the landlord of the property, a release from liability of any rents that may be due by the Company to the landlord. As a result, the Company reversed the $55,200 accrued rent liability. In addition, the Company wrote off the related $34,000 security deposit, as it is not expected to be recovered.
On May 4, 2012, the Company entered into a 39 month lease for 4,244 square feet of office space in Miami Beach, Florida commencing as of March 1, 2012. The lease requires a security deposit of $33,952 and initial annual minimum rental payment of $135,808 with annual increase of approximately 3% over the life of the lease and a rent holiday for the first three months of the lease. The lease contains one-three year option to renew based upon notice as defined by the lease at prevailing rates at such time. The deferred rent on the Consolidated Balance Sheet at December 31, 2012 represents the excess of the minimum monthly straight line payments over the life of the lease over the actual lease payments made as of December 31, 2012.
On March 22, 2012, the Company entered into a three year lease for 1,543 square feet of office space in San Jose, California commencing on April 1, 2012. The lease requires a security deposit of $7,869 and initial annual minimum rental payment of $29,626 with annual increase of approximately 3% over the life of the lease. The lease contains one-three year option to renew based upon notice as defined by the lease at prevailing rates at such time.
Total rent expense for the year ended December 31, 2012 and 2011 was $82,584, as a result of the aforementioned reversal of the accrued rent liability and $143,461, respectively.
Future minimum monthly rental commitments as of December 31, 2012 relating to the Miami Beach and San Jose leases are as follows:
|
|
Year
|
|
Amount
|
|
|
2013
|
|
$
|
178,466
|
|
|
2014
|
|
|
183,542
|
|
|
2015
|
|
|
72,107
|
|
|
Total
|
|
$
|
434,115
|
|
|
b.
|
Pursuant to the terms of the amendment of March 30, 2012 master agreement, the Company has committed to purchase 500 charging stations over the year, at prices ranging from $2,500 to $2,700 per unit. If the Company fails to take delivery of the total specified number units, it will be responsible for reimbursement of certain price discounts on units previously received. As of December 31, 2012, the Company has purchased 90 units under this master agreement. In the opinion of the Company’s management, the vendor has not performed in accordance with the terms of the master agreement. As of December 31, 2012, the ultimate resolution of this matter is unknown.
|
|
c.
|
In March and April 2012, a former officer and director of the Company filed declaratory actions against the Company relating to compensatory matters, certain warrant exercise rights and the termination of his employment. The parties are currently in negotiations to resolve the matters, however, the outcome of the negotiations can not be determined at this time.
|
|
d.
|
In October 2012, a former officer and director of the Company resigned his position from the Company and filed a claim with the California Labor Board (“Labor Board”) relating to certain compensatory matters. As of December 31, 2012, the matter was being heard before the Labor Board however no decision had been rendered. The parties are currently in negotiations, however, the outcome of the negotiations can not be determined at this time.
|
11. SUBSEQUENT EVENTS
The Company has evaluated all events that occurred after the balance sheet date through the date these financial statements were issued.
Equity Matters
During the period of January 23, 2013 through March 25, 2013,
we received $2,320,500, net of issuance costs, from 14 accredited investors and issued to them 4,990,000 shares of our common stock and a warrant to purchase 4,990,000 shares of our common stock at $2.25 per share which expires two years from the date of issuance of the shares of our common stock. The shares and related warrants are being offered in reliance on the exemption under Section 4(2) of the Securities Act of 1934, Rule 506 of Regulation D as amended (the “Securities Act”). These shares of the Company’s common stock qualified for exemption under Section 4(2) since the issuance shares by the Company 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.
On January 11, 2013, the Board of Directors 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.
In conjunction with an advisory services agreement entered into on September 13, 2012, the Company issued 137,499 shares of its common stock under 2013 Plan to a consultant on January 1, 2013 at a value of $1.35 per share covering the service period of January 1, 2013 through March 31, 2013.
In conjunction with an advisory services agreement entered into on September 10, 2012, the Company issued 112,500 shares of its common stock under 2013 Plan to a consultant on January 1, 2013 at a value of $1.23 per share covering the service period of January 1, 2013 through March 31, 2013.
On January 11, 2013, the Board of Directors of the Company appointed an individual as a member of the Board of Directors of the Company. In conjunction with the appointment, and as part of his director agreement he received 50,000 shares of the Company’s common stock at a value of $1.49 per share. Additionally, he received warrants to purchase 12,000 shares of the Company’s common stock at $1.50 per share which vest ratably through January 11, 2015 and expire on January 11, 2018. The shares of stock and warrants issued were under the 2013 Plan.
On March 8, 2013, the Company entered into an agreement with a firm to provide investor relations services for a term of six months, with termination at an earlier date by written notice by either party. In accordance with terms of the agreement, the Company issued to the firm 150,000 shares of its common stock at a value of $1.28 per share under the 2013 Plan and may issue an additional 150,000 shares of its common stock on the six month anniversary date of the agreement pending adequate and completed the services specified in the agreement.
On January 4, 2013, the Company entered into a one year agreement with a firm to assist the Company with business development matters. As part of its consideration, the Company issued 250,000 shares of its common stock to the firm at a value of $1.49 per share.
On February 5, 2013, the Company entered into an agreement with a firm to develop a mobile application by users of electric vehicle car charging stations. As part of the firm’s consideration for this project, the Company issued 113,636 shares of its common stock at a value of $1.32 per share for the development of the deliverables.
In conjunction with a consulting agreement for business development services entered into on August 15, 2012, we issued 10,696 shares of the Company’s common stock at an average price of $1.40 per share during the calendar quarter ended March 31, 2013. Additionally, on February 1, 2013, the Company issued the consultant 60,933 shares of the Company’s common stock at a price of $1.40 per share as payment for services rendered as of December 31, 2012.
On December 3, 2012, the Company entered into a business and financing advisory services agreement with a consultant whereby as part of the consideration paid to the consultant, the Company would pay a monthly fee of $10,000 in shares of the Company’s common stock for such services. During the calendar quarter ended March 31, 2013, the Company issued to the consultant 21,393 shares of its common stock at an average price of $1.40 in accordance with the terms of the agreement.
In accordance with a consulting agreement which the Company entered into on December 10, 2012 with a firm, the Company issued 11,384 shares of its common stock to the firm for consulting services at an average price of $1.49 per share for services rendered during the calendar quarter ended March 31, 2013.
In conjunction with a social media marketing agreement entered into on December 19, 2012 with a firm for a six month period, the Company issued 10,796 shares of its common stock at an average price of $1.39 per share as a fee for the calendar quarter ended March 31, 2013.
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.
Acquisitions
In conjunction with the Company’s guarantee of the audit fee of the Target, the Target issued a note to the Company, on January 3, 2013 in the amount of $75,000 collateralized by a first lien on all the assets of the Target.
Beam Acquisition
On February 26, 2013, Car Charging Group, Inc. (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”). In the Exchange Agreement, 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 made a payment of $500,000 to Manhattan Charging, of which an aggregate amount of $461,150 was issued in the form of promissory notes(the “Promissory Notes”). The Promissory Notes accrue interest at a rate of 6% per annum on the aggregate principal amount, payable and was paid on April 15, 2013 (the “Maturity Date”). As a security for the Promissory Notes, the Company entered into a security agreement granting the Beam Members a first priority security interest in all the assets of Beam (the “Security Agreement”) and a pledge and security agreement granting the Beam Members a first priority security interest in all of the equity interest in Beam (the “Pledge and Security Agreement”). In connection with the event of default under the Promissory Notes, the Company entered into an escrow agreement (the “Escrow Agreement”) by and among the Company, Beam Acquisition, Beam, the Beam Members, the Law Office of Samuel A. Tversky P.C. (“Tversky”), and the Bernstein Law Firm (“Bernstein” each of Tversky and Bernstein an “Escrow Agent”). Pursuant to the terms of the Escrow Agreement, each of the Beam Members delivered to Bernstein an executed cancellation letter in connection with the transactions contemplated by the Exchange Agreement (the “Cancellation Letters”); Beam Acquisition delivered to Tversky a fully executed assignment of all ownership interest in Beam (the “Assignment of Beam Membership Interest”); and the Company, Beam Acquisition, and Beam delivered to Tversky an executed confession of judgment, to be held in escrow pursuant to the terms of the Escrow Agreement.
In conjunction with the Equity Exchange, the Company entered into an Assignment of Promissory Note (the “Note Assignment”) with certain assignors (the “Assignors”), pursuant to which the Assignors sold to the Company two certain secured promissory notes (the “Notes”) totaling an aggregate principal amount of $130,000. In connection with the Note Assignment, the Company entered into an Amendment to 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.
Synapse Acquisition
On April 3, 2013 (the “Closing Date”), the Company, entered into an equity exchange agreement (the “Exchange Agreement”) by and among the Company, EV Pass, LLC, a New York limited liability company (“EV Pass”) and Synapse Sustainability Trust, Inc., a New York non-profit corporation (“Synapse”) pursuant to which the Company acquired from Synapse (i) all of the outstanding membership interests in EV Pass; (ii) the right to operate, maintain and receive revenue from 68 charging stations located throughout Central New York State (“CNY”) in exchange for 671,141 shares (the “Exchange Shares”) of the Company’s common stock, par value $0.001 (the “Common Stock”); and (iii) title to the registered trademark “EV Pass” (the “Equity Exchange”).
As part of the Equity Exchange, the Company made a payment of $100,000 to Synapse, of which $25,000 was paid on the Closing Date and $75,000 was issued in the form of a promissory note (the “Promissory Note”). The Promissory Note does not bear interest and is payable in three installment payments of $25,000 on each subsequent three month anniversary of the Closing Date.
On the Closing Date, the parties also executed (i) a Revenue Sharing Agreement wherein the Company agreed to pay Synapse 3.6% of the net revenues earned from all current and future charging units installed at any of the 68 CNY locations and (ii) a Bleed-Out Agreement pursuant to which Synapse agreed to limit its total daily trading of the Common Stock to no more than 5% of the total daily trading volume of the Company’s shares.
Notes Payable
On January 31, 2013, the Company repaid the note payable and accrued interest thereon to the Chief Executive Officer of the Company in the amount of $5,056.
On March 5, 2013, the Company repaid the three notes payables and accrued interest thereon to the unsecured warrant holder in the amount of $146,762.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012. The framework used by management in making that assessment was the criteria set forth in the document entitled “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that, during the period covered by this report, such internal controls and procedures were not effective as of December 31, 2012 and that a material weakness in ICFR existed as more fully described below.
As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements and Related Independence Rule and Conforming Amendments,” established by the Public Company Accounting Oversight Board ("PCAOB"), a material weakness is a deficiency or combination of deficiencies that result in a more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of December 31, 2012:
(1)
Lack of an independent audit committee or audit committee financial expert; our board of directors serves as the audit committee. These factors are counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management
.
Our management determined that this deficiency constituted material weaknesses.
Due to our small size, we are not able to immediately take any action to remediate this material weakness. However, an audit committee will be formed
when circumstances permit
.
Notwithstanding the assessment that our ICFR was not effective and that there was a material weakness as identified herein, we believe that our consolidated financial statements contained in this Annual Report fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm as we are a smaller reporting company and not required to provide the report.
Changes in Internal Control over Financial Reporting
There have been no changes in our system of internal control over financial reporting occurred during the fourth quarter of the fiscal year ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our directors, executive officers and key employees are listed below. The number of directors is determined by our board of directors. All directors hold office until the next annual meeting of the board or until their successors have been duly elected and qualified. Officers are elected by the board of directors and their terms of office are, except to the extent governed by employment contract, at the discretion of the board of directors.
|
Name
|
|
Age
|
|
Principal Positions With Us
|
|
Bill Richardson
|
|
65
|
|
Chairman of Board of Directors
|
|
Andy Kinard
|
|
48
|
|
President, Director
|
|
Michael D. Farkas
|
|
41
|
|
Chief Executive Officer, Director
|
|
Jack Zwick
|
|
77
|
|
Chief Financial Officer, Director
|
|
William Fields*
|
|
63
|
|
Director
|
|
|
|
69
|
|
Director
|
*William Fields was appointed to the Board as of January 11, 2013.
** Eckardt Beck was appointed to the Board as of
April 3
, 2013.
Set forth below is a brief description of the background and business experience of our directors and executive officers for the past five years.
Bill Richardson, Chairman of the Board of Directors
Governor Richardson has served as Chairman of our Board of Directors since December 14, 2012. Governor Richardson currently serves as Senior Fellow for Latin America at Rice University’s James A. Baker III Institute for Public Policy, and participates on several non-profit and for-profit boards including Abengoa’s International Advisory Board, the fifth largest biofuels producer in the United States, WRI World Resources Institute, and the National Council for Science and the Environment. From January 2003 through January 2011, he was the Governor of New Mexico. Prior to his governorship, Governor Richardson was the U.S. Secretary of Energy (1998-2001), U.S. Ambassador to the United Nations (1997-1998) and a member of the U.S House of Representatives for New Mexico (1983-1997). Governor Richardson has a BA from Tufts University and an MA from Tufts University Fletcher School of Law and Diplomacy.
Based on his experience in the energy sector, work experience and education, the Company has deemed Governor Richardson fit to serve on the Board.
Andy Kinard, President, Director
Mr. Kinard has served as our President and as a member of our board of directors since 2009. Prior to his joining our Company Mr. Kinard sold electric vehicles in Florida for Foreign Affairs Auto from 2007 to 2009. From 2004 through 2005, he marketed renewable energy in Florida and was a Guest Speaker at the World Energy Congress. His first employer was Florida Power & Light (“FPL”) where he worked for 15 years. In his early years, his focus was on engineering. During his tenure, he performed energy analysis for large commercial accounts, and ultimately became a Certified Energy Manager. Simultaneously, Mr. Kinard was assigned to FPL’s electric vehicle program. FPL had their own fleet of electric vehicles that they used to promote the technology. He also served on the Board of Directors of the South Florida Manufacturing Association for 4 years. He has City, County, and State contacts throughout Florida, and has attended every car show, and green fair in the State. Mr. Kinard graduated from the Auburn University in 1987 with a degree in Engineering.
Based on his work experience and education, the Company has deemed Mr. Kinard fit to serve on the Board.
Jack Zwick, Chief Financial Officer, Director
Mr. Zwick has served as our Chief Financial Officer and as a member of our board of directors since 2012. Mr. Zwick is a certified public accountant, and he is a founding member of Zwick & Banyai, PLLC, certified public accountants, where he has worked since its inception in 1994. He began his career in public accounting in 1958 in Detroit; he worked with local firms in New York and Detroit until 1969 when he joined Laventhol & Horwath. He was promoted to partner at Laventhol & Horwath in 1973 and became the managing partner of the Detroit office in 1982. He was also an executive director with Grant Thornton (an International CPA firm).
Mr. Zwick holds a Bachelor of Arts degree in Accountancy and a Masters of Science in Taxation from Wayne State University. He is a member of the American Institute of Certified Public Accountants; the Michigan Association of Certified Public Accountants; and past Chair of the City of Southfield Zoning Board of Appeal. He was a member of Wayne State University's Accounting Department Advisory Board. He was a member of the Board of Directors of Health-Chem Corporation, (a public company). He has served on the Executive Committee of senior citizens housing projects and their food committees and served on the board of a private school.
Mr. Zwick currently serves as, and has served in the past five years as a life member of the Board of Trustees of the senior citizens housing projects, the Senior Vice President of finance of Sunrise Sports & Entertainment, LLC the Florida Panthers of the National Hockey League and was the CFO of American Bio Care, Inc. (a public company). He currently serves as a member of the board of directors and chairman of the audit committee for First China Pharmaceutical Group, Inc., a public company.
Based on his work experience, previous directorships and education, the Company has deemed Mr. Zwick fit to serve on the Board.
Michael D. Farkas, Chief Executive Officer, Director
Mr. Farkas has served as our Chief Executive Officer and as a member of our board of directors since 2009. Mr. Farkas is the founder and manager of The Farkas Group, a privately held investment firm. Mr. Farkas also currently holds the position of Chairman and Chief Executive Officer of the Atlas Group, where its subsidiary, Atlas Capital Services, a broker-dealer, has successfully raised more than $200 million for a number of public clients until it withdrew its FINRA registration in 2007. Over the last 20 years, Mr. Farkas has established a successful track record as a principal investor across a variety of industries, including telecommunications, technology, aerospace and defense, and automotive retail.
Based on his work experience and education, the Company has deemed Mr. Farkas fit to serve on the Board.
William Fields, Director
Mr. Fields has served as a director since January 11, 2013. Mr. Fields is Chairman of Intersource Co. Ltd., Chairman of Four Corners International, and General Partner of Origentics. Previously, Mr. Fields served as Chairman and Chief Executive Officer of Factory 2-U Stores, Inc. from 2002 to 2003, President and Chief Executive Officer of Hudson’s Bay Company from 1997 to 1999 and as Chairman and Chief Executive Officer of Blockbuster Entertainment Group, a division of Viacom, Inc., from 1996 to 1997. Mr. Fields has also held numerous positions with Wal-Mart Stores, Inc., which he joined in 1971. He left Wal-Mart in March 1996 as President and Chief Executive Officer of Wal-Mart Stores Division, and Executive Vice President of Wal-Mart Stores, Inc. Mr. Fields has also served as a director of the following companies during the past five years: Lexmark International as Director since 1996, Biosara Corporation, as Chairman, since 2009, Graphic Packaging Corporation from 2005 to 2008, Sharper Image Corporation from 2006 to 2008, and VitaminSpice LLC from 2009 to 2010. Mr. Fields received his bachelor’s degree in Economics and Business from the University of Arkansas.
Based on Mr. Fields experience, qualifications, skills, significant executive management experience gained as a chief executive officer of four companies, financial expertise acquired as a chief executive officer; and significant experience gained as a director of multiple publicly-held companies the Company has deemed Mr. Fields fit to serve as a Director on the Board.
Eckardt Beck, Director
Mr. Beck has served as a director since April 3, 2013. Mr.
Beck
currently serves
on the Executive Committee of 3GI Terminals, LLC, an intermodal infrastructure company committed to advancing global opportunities for importing and exporting goods. For the period of 2002 – 2012, Mr. Beck served as managing partner of Synapse Partners, LLC, a company founded by Mr. Beck. Synapse Partners LLC includes two operating businesses: Synapse Sevices LLC, and Synpase Risk Management LLC. Synapse a wholesale excess line brokerage firm doing business in 43 states. In 2003, Mr. Beck founded the Synapse Sustainability Trust, of which he is currently its Executive Director, a community based not-for-profit community based organization whose stated mission includes the lessening of burdens on government/education institutions, foster public awareness and participation in sustainable environmental initiatives and to provide technical assistance to local government, educational, and community stakeholders. Mr. Beck holds a bachelor’s degree in Business and Industrial Communications from Emerson College and a master’s degree in Public Administration from New York University.
Based on Mr. Beck’s experience, qualifications, skills and managerial experience gained as an executive of diverse businesses in various sectors of the economy, the Company has deemed Mr. Beck fit to serve as a Director on the Board.
Family Relationships
There are no relationships between any of the officers or directors of the Company.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
|
|
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
|
|
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
|
|
|
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
|
|
|
been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
|
|
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
|
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our Board of Directors and hold office until removed by the Board.
Board Committees
Our Board of Directors has no separate committees and our Board of Directors acts as the audit committee and the compensation committee. Mr. Fields serves as a financial expert serving on our Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company does not have a class of securities registered under the Exchange Act and therefore its directors, executive officers, and any persons holding more than ten percent of the Company’s common stock are not required to comply with Section 16 of the Exchange Act.
Code of Ethics
Our code of ethic creates an affirmative obligation on the part of the CEO, CFO and any members of the finance department to, among other things, generally act with honesty and integrity and to promptly report any violations of law or business ethics.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officer during the years ended December 31, 2011, and 2012 in all capacities for the accounts of our executive, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO).
SUMMARY COMPENSATION TABLE
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity Incentive Plan Compensation
($)
|
|
|
Non-Qualified Deferred Compensation Earnings
($)
|
|
|
All Other Compensation
($)
|
|
|
Totals
($)
|
|
|
Andy Kinard, President
|
|
2011
|
|
$
|
67,089
|
|
|
$
|
4,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
71,089
|
|
|
|
|
2012
|
|
$
|
80,740
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
431,846
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
512,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael D. Farkas, Chief
|
|
|
|
$
|
155,127
|
|
|
$
|
25,000
|
|
|
$
|
0
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
180,127
|
|
|
Executive Officer
|
|
|
|
$
|
335,190
|
|
|
$
|
30,000
|
|
|
$
|
0
|
|
|
$
|
1,078,847
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
24,800
|
|
|
$
|
1,468,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack Zwick, Chief
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Financial Officer
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
146,250
|
|
|
$
|
431,846
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
8,000
|
|
|
$
|
586,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ted Fagenson, Chief
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Operating Officer**
|
|
|
|
$
|
107,500
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,688,130
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,795,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard Adeline,
|
|
|
|
$
|
71,156
|
|
|
$
|
10,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
81,156
|
|
|
|
|
|
|
$
|
7,599
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
7,599
|
|
|
Treasurer*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Mr. Adeline is no longer an employee of the Company as of February 27, 2012.
**
Mr. Fagenson is no longer an employee of the Company as of October 3, 2012.
Stock Grants
Mr. Zwick was issued 75,000 shares of the Company’s common stock valued at $146,250 on the date of issuance, in connection with his hiring as the Company’s interim Chief Financial Officer and Director.
Option Grants
Messrs. Kinard, Zwick and Farkas were awarded 300,000, 300,000 and 750,000 options respectively under the Company’s 2012 Omnibus Plan and valued on the date of grant at $431,486, $431,846 and $1,078,847 in accordance with FASB ASC Topic 718.
No options were exercised during the year ended December 31, 2011 or 2012.
Warrant Grants
Mr. Fagenson was awarded warrants to purchase 1,000,000 shares of the Company’s common stock, which vested ratably over three years and valued on the date of grant at $1,688,130 in accordance with FASB ASC Topic 718. No warrants were exercised during 2012 and 2011. Mr. Fagensons’s warrants were forfeited upon his departure from the Company.
Long-Term Incentive Plan (“LTIP”) Awards Table
.
No awards made during the years ended December 2011 or 2012 under any LTIP.
Other Compensation
Mr. Farkas received an auto allowance of $1,500 per month and health insurance reimbursement of $6,800 for the year ended December 31, 2012.
Mr. Zwick received a monthly stipend of $1,000 per month for the year ended December 31, 2012.
Employment Agreements
The Company entered into an employment agreement with Michael Farkas, its CEO, on October 15, 2010. The agreement is for three years and stipulates a base salary of $120,000 in year one, $240,000 in year two and $360,000 in year three. The agreement also included a signing bonus of $60,000 upon commencement of the agreement.
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board has the authority to fix the compensation of directors. Jack Zwick has received 75,000 shares as compensation for his services as a director and interim Chief Financial Officer.
The Company entered into a director agreement (the “Richardson Agreement) with Governor Richardson. Pursuant to the Richardson Agreement, Governor Richardson will fulfill general duties associated with being Chairman of the Board. For every board meeting he attends, Governor Richardson will receive five-year options to purchase 5,000 shares at an exercise price equal to the then-current market price, which will vest two years following the grant date, and $1,500, which can be paid in shares at a value of $3,000 at the Company’s discretion. Additionally, Governor Richardson will receive $100,000 annually for being Chairman of the Board. Upon the execution of the Richardson Agreement, Governor Richardson received 200,000 shares and five-year options to purchase 10,000 shares at an exercise price of $1.00, which will vest two years following the grant date.
The Company entered into a director agreement (the “Fields Agreement) with Mr. Fields. Every year that he is a member of the Board, Mr. Fields will receive five-year options to purchase 12,000 shares at an exercise price equal to $0.01 above the closing price on the date of grant, which will vest two years following the grant date. For every board meeting he attends, Mr. Fields will receive five-year options to purchase 5,000 shares at an exercise price equal to $0.01 above the closing price on the date of grant, which will vest two years following the grant date, and $1,500, which can be paid in shares at a value of $3,000 at the Company’s discretion. Additionally, should Mr. Fields become chairman of any Board committee, he will receive $1,500 for every committee meeting attended, which can be paid in shares at a value of $3,000 at the Company’s discretion. Upon the execution of the Fields Agreement, Mr. Fields received 50,000 shares.
The following table provides information for 2012 regarding all compensation awarded to, earned by or paid to each person who served as a non-employee director for some portion or all of 2012. Other than as set forth in the table, to date we have not paid any fees to or, except for reasonable expenses for attending Board and committee meetings, reimbursed any expenses of our directors, made any equity or non-equity awards to directors, or paid any other compensation to directors.
|
Name
|
|
Fees
Earned
or Paid
in Cash
($)
|
|
|
Stock
Awards
($)
|
|
|
Warrant
Awards
($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
|
(1)
Governor Richardson
|
|
$
|
6,849
|
|
|
$
|
316,000
|
|
|
$
|
15,800
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
338,649
|
|
|
(1)
|
Governor Richardson was appointed as Director on December 14, 2012
|
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information regarding our shares of common stock beneficially owned as of April 15, 2013, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within 60 days through an exercise of stock options or warrants. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.
For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of April 15, 2013. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of April 15, 2013 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership
.
|
Name and Address of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
of Common Stock
|
|
|
Percent
Common Stock (1)
|
|
|
Amount and Nature of
Beneficial Ownership
of
Series A Preferred Stock
|
|
|
Percent of Series A Preferred Stock (2)
|
|
|
5% Shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ze’evi Group, Inc.
6538 Collins Avenue, Suite 57
Miami Beach, FL 33141
|
|
|
17,807,694
|
|
|
|
35.30
|
%
|
|
|
-
|
|
|
|
-
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platinum Partners Liquid Opportunity Master Fund, LP
152 West 57th Street, 4th Floor
New York, NY 10019
|
|
|
7,075,219
|
|
|
|
13.49
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nathan Low
600 Lexington Avenue, 23 rd Floor
New York, NY 10022
|
|
|
5,905,000
|
(3)
|
|
|
11.67
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael D. Farkas
1691 Michigan Avenue, Suite 601
Miami Beach, FL 33139
|
|
|
34,440,335
|
(4)
|
|
|
42.42
|
%
|
|
|
10,000,000
|
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill Richardson
1691 Michigan Avenue
Suite 601
Miami Beach, FL 33139
|
|
|
200,000
|
|
|
|
|
*
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack Zwick
20950 Civic Center Drive, Suite 418
Southfield, MI 48076
|
|
|
75,000
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Fields
1691 Michigan Avenue
Suite 601
Miami Beach, FL 33139
|
|
|
50,000
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eckardt Beck
1691 Michigan Avenue
Suite 601
Miami Beach, Florida 33139
|
|
|
50,000
|
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andy Kinard
1691 Michigan Avenue, Suite 601
Miami Beach, FL 33139
|
|
|
10,000
|
(5)
|
|
|
*
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and officers as a group (5 people)
|
|
|
34,825,335
|
|
|
|
42.89
|
%
|
|
|
10,000,000
|
|
|
|
100%
|
|
|
(1)
|
Based on
50,442,455
shares of common stock issued and outstanding as of April 12, 2013. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.
|
|
|
|
|
(2)
|
Based on 10,000,000 shares of Series A Preferred Stock issued and outstanding as of April 12, 2013. Each share of Series A Preferred Stock has voting rights five times the number of shares of common stock into which the Series A Preferred Stock are convertible, as designated in the Certificate of Designation for the Series A Convertible Preferred Stock. The total aggregate number of votes for the Series A Preferred Stock is 125 million.
|
|
|
|
|
(3)
|
Includes 2,800,000 shares held by Sunrise Securities Corp., which is 100% owned by Nathan Low; 1,750,000 shares held by NLBDIT Portfolio LLC, a trust held in the name of Nathan Low’s children, of which he is a guardian; 1,200,000 shares held by the Sunrise Charitable Foundation of which Mr. Low has voting authority, 50,000 warrants, which are currently exercisable, held by Sunrise Financial Group, which is 100% owned by Nathan Low; and 100,000 warrants, which are currently exercisable, held by Nathan Low.
|
|
|
|
|
(4)
|
Includes 10,000,000 Series A Convertible Preferred shares as if converted into 25,000,000 shares of common stock; 2,698,000 shares of common stock and 5,000 warrants all owned by Mr. Farkas. Additionally included are 250,000 common shares owned by each of Mr. Farkas’ three minor children of which Mr. Farkas has voting authority and serves as custodian; 4,000 shares owned by the Farkas Family Irrevocable Trust of which Mr. Farkas is a trustee and 250,000 common shares owned by The Farkas Family Foundation of which Mr. Farkas has voting authority as trustee and 5,733,335 warrants, which are currently exercisable, held by The Farkas Group, Inc. which is wholly-owned by Michael D. Farkas.
|
|
|
|
|
(5)
|
Includes 10,000 warrants, which are currently exercisable, held by Andy Kinard.
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Related Party Transactions
During 2012 and 2011, the Company paid consulting fees to a company that is owned by our Chief Executive Officer totaling $0 and $100,000, respectively. Additionally, the Company paid commissions totaling $77,500 during the year ended December 31, 2012 to this company for business development related to installations of EV charging stations by the Company in accordance with the support services contract. No commissions were paid to this Company during 2011.These fees were paid pursuant to the terms of a two-year support services contract that was in place prior to the CEO’s employment.
On March 29, 2012, the Company entered into a patent license agreement with its Chief Executive Officer and a company which is managed by a group of which our Chief Executive Officer is the principal.
Under terms of the agreement, the Company has agreed to pay royalties to the licensors equal to 10% of the gross profits received by the Company from bona fide commercial sales and/or use of the licensed products and licensed processes. As of December 31, 2012, the Company has not paid any royalty fees related to this agreement.
The Company incurred accounting and tax service fees totaling $68,913 for the year ended December 31, 2012 provided by a company that is partially owned by the Company’s Chief Financial Officer
.
On December 13, 2012, we issued a warrant to purchase 100,000 shares of our common stock at an exercise of $1.64 per share as a fee for services to a company that is owned by our Chief Executive Officer. The warrant expires on December 13, 2015.
On December 28, 2012, we issued our Chief Executive Officer an unsecured convertible note in the amount of $5,000, due June 28, 2013, with interest at 12% per anum. The note is convertible, at the discretion of the holder into our common stock at the fixed rate of $1.00 per principal value for any unpaid principal and accrued interest thereon until the note is paid in full. In conjunction with the issuance of the note, we issued a warrant, to our Chief Executive Officer to purchase 5,000 shares of our common stock at an exercise price of $1.00 per share. The warrant expires on December 28, 2014.
Michael D. Farkas has long-standing relationships with the principals of Ze’evi Group Inc. and has had numerous financial dealings with them over the years, including personal and business loans and investments
.
Director Independence
Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
|
|
the director is, or at any time during the past three years was, an employee of the company;
|
|
|
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
|
|
|
a family member of the director is, or at any time during the past three years was, an executive officer of the company;
|
|
|
the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
|
|
|
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
|
We have determined that Governor Richardson and Mr. Fields are independent directors.
We do not have an audit committee, compensation committee or nominating committee.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
For the Company’s fiscal years ended December 31, 2012 and 2011, we were billed approximately $35,172 and $75,500 for professional services rendered for the audit and review of our financial statements.
Audit Related Fees
There were no fees for audit related services for the years ended December 31, 2012 and 2011.
Tax Fees
For the Company’s fiscal years ended December 31, 2012 and 2011, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2012 and 2011.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
-approved by our audit committee; or
-entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors.
The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees were pre-approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as part of this report:
|
(1)
|
Financial Statements:
|
The audited consolidated balance sheets of the Company as of December 31, 2012 and, 2011, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended and the period from inception (September 3, 2009) to December 31, 2012, the footnotes thereto, and the report of Goldstein Schechter Koch P.A., independent auditors, are filed herewith
.
None
Financial statement schedules have been omitted because they are either not applicable or the required information is included in the consolidated financial statements or notes hereto.
The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Report.
(b) The following are exhibits to this Report and, if incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included.
Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties:
|
●
|
may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements;
|
|
●
|
may apply standards of materiality that differ from those of a reasonable investor; and
|
|
●
|
were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.
|
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.
|
Exhibit
Number
|
|
Description
|
|
3.1(a)
|
|
Articles of Incorporation (1)
|
|
3.1(b)
|
|
Amendment to Articles of Incorporation changing name and increasing the number of preferred shares authorized filed with the State of Nevada on December 7, 2009 (2)
|
|
3.1(c)
|
|
Amendment to Articles of Incorporation increasing the number of preferred shares authorized filed with the State of Nevada on June 29, 2012 (3)
|
|
3.1(d)
|
|
Certificate of Designation for Series A Preferred Stock (2)
|
|
3.1(e)
|
|
Amendment No. 1 to Certificate of Designation for Series A Preferred Stock (4)
|
|
3.1(f)
|
|
Certificate of Designation for Series B Preferred Stock (3)
|
|
3.2
|
|
Bylaws (1)
|
|
4.1
|
|
Form of Warrant(2)
|
|
4.2
|
|
Form of Warrant – October 2012 Offering (5)
|
|
4.3
|
|
Form of Warrant – March 2012 Offering (6)
|
|
4.4
|
|
Form of Convertible Promissory Note dated October 2012
|
|
10.1
|
|
Stock Purchase Agreement dated May 27, 2011. (7)
|
|
10.2
|
|
Subscription Agreement dated November 4, 2011. (8)
|
|
10.3
|
|
Stock Purchase Agreement dated January 31, 2012. (9)
|
|
10.4
|
|
Stock Purchase Agreement dated February 6, 2012. (10)
|
|
10.5
|
|
Form of Subscription Agreement – October 2012 Offering (5)
|
|
10.6
|
|
Form of Promissory Note, dated February 26, 2013.(6)
|
|
10.7
|
|
Security Agreement, dated February 26, 2013. (6)
|
|
10.8
|
|
Pledge and Security Agreement, dated February 26, 2013. (6)
|
|
10.9
|
|
Escrow Agreement, dated February 26, 2013. (6)
|
|
10.10
|
|
Form of Cancellation Letter, dated February 26, 2013. (6)
|
|
10.11
|
|
Form of Assignment of Beam Membership Interest, dated February 26, 2013, by and among Beam Acquisition LLC and Manhattan Charging LLC. (6)
|
|
10.12
|
|
Form of Assignment of Promissory Note, dated February 26, 2013, by and among Car Charging Group, Inc. and Beam charging LLC. (6)
|
|
10.13
|
|
Amendment to Promissory Notes, dated February 26, 2013, by and among Car Charging Group, Inc. and Beam Charging LLC. (6)
|
|
10.14
|
|
Form of Subscription Agreement – March 2013 Offering (6)
|
|
10.15**
|
|
2012 Omnibus Incentive Plan (11)
|
|
10.16**
|
|
2013 Omnibus Incentive Plan (12)
|
|
10.17**
|
|
Employment Agreement with Michael Farkas
|
|
10.18**
|
|
Director Agreement with Jack Zwick (13)
|
|
10.19**
|
|
Director Agreement with Bill Richardson (14)
|
|
10.20**
|
|
Director Agreement with William Fields (15)
|
|
10.21
|
|
Patent License Agreement, dated March 29, 2012, by and among Car Charging Group, Inc., Balance Holdings, LLC and Michael Farkas.
|
|
14.1
|
|
Code of Ethics (16)
|
|
21.1
|
|
List of Subsidiaries
|
|
31.1
|
|
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
|
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
|
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
|
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS *
|
|
XBRL Instance Document
|
|
|
|
|
|
101.SCH *
|
|
XBRL Taxonomy Schema
|
|
|
|
|
|
101.CAL *
|
|
XBRL Taxonomy Calculation Linkbase
|
|
|
|
|
|
101.DEF *
|
|
XBRL Taxonomy Definition Linkbase
|
|
|
|
|
|
101.LAB *
|
|
XBRL Taxonomy Label Linkbase
|
|
|
|
|
|
101.PRE *
|
|
XBRL Taxonomy Presentation Linkbase
|
In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
* Furnished herewith. XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
(1) Filed as an Exhibit on Form S-1 with the SEC on March 18, 2008.
(2) Filed as an Exhibit on Current Report to Form 8-K with the SEC on December 11, 2009.
(3) Filed as an Exhibit on Form 10-Q with the SEC on November 21, 2011.
(4) Filed as an Exhibit on Current Report to Form 8-K with the SEC on June 1, 2011.
(5) Filed as an Exhibit on Current Report to Form 8-K with the SEC on November 10, 2011.
(6) Filed as an Exhibit on Current Report to Form 8-K with the SEC on January 24, 2012.
(7) Filed as an Exhibit on Current Report to Form 8-K with the SEC on February 16, 2012.
(8) Filed as an Exhibit on Current Report to Form 8-K with the SEC on March 13, 2012.
(9) Filed as an Exhibit on Current Report to Form 8-K with the SEC on April 11, 2012.
(10) Filed as an Exhibit on Form 10-K/A with the SEC on September 30, 2009.
(11) Filed as an Exhibit on Current Report to Form 8-K with the SEC on January 19, 2011.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Dated:
April 16, 2013
|
CAR CHARGING GROUP, INC.
|
|
|
|
|
|
|
|
|
By:
|
/s/ Michael D. Farkas
|
|
|
|
|
Michael D. Farkas
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/Bill Richardson
|
|
Chairman of the Board
|
|
April 16, 2013
|
|
Bill Richardson
|
|
|
|
|
|
|
|
|
|
|
|
/s/Michael D. Farkas
|
|
Chief Executive Officer and Director
|
|
April 16, 2013
|
|
Michael D. Farkas
|
|
(principal executive officer)
|
|
|
|
|
|
|
|
|
|
/s/ Jack Zwick
|
|
Chief Financial Officer and Director
|
|
April 16, 2013
|
|
Jack Zwick
|
|
(principal financial and accounting officer)
|
|
|
|
|
|
|
|
|
|
/s/Andy Kinard
|
|
President and Director
|
|
April 16, 2013
|
|
Andy Kinard
|
|
|
|
|
|
|
|
|
|
|
|
/s/
William Fields
|
|
Director
|
|
April 16, 2013
|
|
William Fields
|
|
|
|
|
|
|
|
|
|
|
|
/s/Eckhard Beck
|
|
Director
|
|
April 16, 2013
|
|
Eckhard Beck
|
|
|
|
|
Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act
The registrant has not sent to its sole stockholder an annual report to security holders covering the registrant’s last fiscal year or any proxy statement, form of proxy or other proxy soliciting material with respect to any annual or other meeting of security holders.
33
