UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File No. 333-149784

CAR CHARGING GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada		03-0608147
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1691 Michigan Avenue, Suite 601
Miami Beach, Florida		33139
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (305) 521-0200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[ ]	Accelerated filer	[ ]

Non-accelerated filer	[ ]	Smaller reporting company	[X]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

As of August 10, 2016, the registrant had 80,476,508 common shares issued and outstanding.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Condensed Consolidated Balance Sheets as of June 30, 2016 (Unaudited) and December 31, 2015	3

Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015	4

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Deficiency for the Six Months Ended June 30, 2016	5

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015	6

Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	23

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	29

Item 4. Controls and Procedures.	29

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.	30

Item 1A. Risk Factors.	30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	30

Item 3. Defaults Upon Senior Securities.	31

Item 4. Mine Safety Disclosures.	31

Item 5. Other Information.	31

Item 6. Exhibits.	31

SIGNATURES	32

CAR CHARGING GROUP, INC. & SUBSIDIARIES

Condensed Consolidated Balance Sheets

	June 30, 2016			December 31, 2015
	(unaudited)
Assets

Current Assets:
Cash and cash equivalents	$	183,767		$	189,231
Accounts receivable and other receivables, net		146,909			551,214
Inventory, net		489,773			744,150
Prepaid expenses and other current assets		248,118			429,798

Total Current Assets		1,068,567			1,914,393

Fixed assets, net		1,155,990			1,500,893
Intangible assets, net		121,639			126,797
Other assets		90,578			132,043

Total Assets	$	2,436,774		$	3,674,126

Liabilities and Stockholders’ Deficiency

Current Liabilities:
Accounts payable	$	2,326,099		$	2,160,433
Accounts payable [1]		3,908,009			3,908,009
Accrued expenses		6,745,643			5,146,724
Accrued expenses [1]		5,969			5,969
Accrued public information fee		2,910,447			2,433,734
Derivative liabilities		3,640,258			1,350,881
Convertible notes payable		50,000			50,000
Convertible notes payable - related party		127,403			-
Notes payable - related party		-			20,000
Current portion of notes payable		349,859			351,954
Current portion of deferred revenue		513,173			924,123

Total Current Liabilities		20,576,860			16,351,827
Deferred revenue, net of current portion		109,570			109,180
Notes payable, net of current portion		-			4,815

Total Liabilities		20,686,430			16,465,822

Series B Convertible Preferred Stock, 10,000 shares designated, 8,250 shares issued and outstanding as of June 30, 2016 and December 31, 2015		825,000			825,000

Commitments and contingencies

Stockholders’ Deficiency:
Preferred stock, $0.001 par value, 40,000,000 shares authorized; Series A Convertible Preferred Stock, 20,000,000 shares designated, 11,000,000 and 10,500,000 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively		11,000			10,500
Series C Convertible Preferred Stock, 250,000 shares designated, 150,426 and 120,330 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively		150			120
Common stock, $0.001 par value, 500,000,000 shares authorized, 80,476,508 and 79,620,730 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively		80,477			79,621
Additional paid-in capital		64,964,270			63,676,848
Accumulated deficit		(80,119,423	)		(73,372,655	)

Total Car Charging Group Inc. - Stockholders’ Deficiency		(15,063,526	)		(9,605,566	)
Non-controlling interest [1]		(4,011,130	)		(4,011,130	)

Total Stockholders’ Deficiency		(19,074,656	)		(13,616,696	)

Total Liabilities and Stockholders’ Deficiency	$	2,436,774		$	3,674,126

[1] - Related to 350 Green, which became a variable interest entity of the Company on April 17, 2014.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

	For The Three Months Ended						For The Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
				(revised)						(revised)
Revenues:
Charging service revenue	$	356,412		$	515,985		$	740,882		$	905,770
Grant and rebate revenue		57,385			159,794			157,165			805,979
Equipment sales		360,169			185,172			650,374			405,979
Other		119,246			82,160			208,331			116,684

Total Revenues		893,212			943,111			1,756,752			2,234,412

Cost of Revenues:
Cost of charging services		417,495			345,157		$	834,168			967,977
Depreciation and amortization		231,853			215,627			433,957			430,102
Cost of equipment sales		185,214			152,247			336,615			323,026

Total Cost of Revenues		834,562			713,031			1,604,740			1,721,105

Gross Profit		58,650			230,080			152,012			513,307

Operating Expenses:
Compensation		1,189,008			2,070,910			2,652,787			4,855,564
Other operating expenses		369,570			505,581			714,373			822,151
General and administrative expenses		368,813			813,412			637,717			1,525,492

Total Operating Expenses		1,927,391			3,389,903			4,004,877			7,203,207

Loss From Operations		(1,868,741	)		(3,159,823	)		(3,852,865	)		(6,689,900	)

Other (Expense) Income:
Interest expense		(35,314	)		(11,960	)		(70,552	)		(21,019	)
Amortization of discount on convertible debt		-			-			-			(41,998	)
Gain on settlement of accounts payable		-			-			-			40,500
Change in fair value of warrant liabilities		(179,849	)		290,898			(2,194,257	)		888,907
Loss on disposal of fixed assets		(5,766	)		(2,160	)		(8,597	)		(2,160	)
Investor warrant expense		(457	)		-			(6,284	)		(275,908	)
Non-compliance penalty for delinquent regular SEC filings		(255,849	)		(189,650	)		(476,713	)		(653,150	)
Non-compliance penalty for SEC registration requirement		-			-			(137,500	)		-
Release from liability from US Department of Energy		-			1,833,896			-			1,833,896

Total Other (Expense) Income		(477,235	)		1,921,024			(2,893,903	)		1,769,068

Net Loss		(2,345,976	)		(1,238,799	)		(6,746,768	)		(4,920,832	)
Less: Net income attributable to non-controlling interest		-			13,257			-			66,994
Net Loss Attributable to Car Charging Group, Inc.		(2,345,976	)		(1,252,056	)		(6,746,768	)		(4,987,826	)
Dividend attributable to Series C stockholders		(365,300	)		(212,400	)		(683,700	)		(414,400	)
Net Loss Attributable to Common Stockholders	$	(2,711,276	)	$	(1,464,456	)	$	(7,430,468	)	$	(5,402,226	)

Net Loss Per Share
- Basic and Diluted	$	(0.03	)	$	(0.02	)	$	(0.09	)	$	(0.07	)

Weighted Average Number of Common Shares Outstanding
- Basic and Diluted		80,330,460			79,139,995			79,986,345			78,489,861

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

Condensed Consolidated Statement of Changes in Stockholders’ Deficiency

For the Six Months Ended June 30, 2016

(unaudited)

																					Non
	Convertible														Additional						Controlling			Total
	Preferred-A				Preferred-C				Common Stock						Paid-In			Accumulated			Interest			Stockholders’
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Deficit			Deficiency

Balance - December 31, 2015		10,500,000	$	10,500		120,330	$	120		79,620,730		$	79,621		$	63,676,848		$	(73,372,655	)	$	(4,011,130	)	$	(13,616,696	)

Sale of Series C convertible preferred stock, net of issuance costs [1]		-		-		22,786		22		-			-			976,849			-			-			976,871

Stock-based compensation		-		-		-		-		194,158			194			382,595			-			-			382,789
																-
Common stock issued as compensation for services previously accrued		-		-		-		-		903,923			904			(904	)		-			-			-

Return and retirement of common stock in connection with settlement		-		-		-		-		(242,303	)		(242	)		(44,758	)		-			-			(45,000	)

Convertible preferred stock issued as compensation to the Chief Operating Officer		500,000		500		750		1		-			-			(501	)		-			-			-

Series C convertible preferred stock issued as compensation to the Executive Chairman		-		-		444		1		-			-			39,963			-			-			39,964

Series C convertible preferred stock dividends:
Accrual of dividends earned		-		-		-		-		-			-			(683,700	)		-			-			(683,700	)
Payment of dividends in kind		-		-		6,116		6		-			-			611,594			-			-			611,600

Warrant modification expense		-		-		-		-		-			-			6,284			-			-			6,284

Net loss		-		-		-		-		-			-			-			(6,746,768	)		-			(6,746,768	)

Balance - June 30, 2016		11,000,000	$	11,000		150,426	$	150		80,476,508		$	80,477		$	64,964,270		$	(80,119,423	)	$	(4,011,130	)	$	(19,074,656	)

[1] Includes gross proceeds of $1,367,120, less issuance costs of $211,835 ($150,383 of cash and $61,452 non-cash) and warrants with an issuance date fair value of $178,414 recorded as a derivative liability.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

	For The Six Months Ended
	June 30,
	2016			2015
				(revised)
Cash Flows From Operating Activities
Net loss	$	(6,746,768	)	$	(4,920,832	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		465,747			478,830
Amortization of discount on convertible debt		-			41,998
Change in fair value of warrant liabilities		2,194,257			(888,907	)
Provision for bad debt		(1,066	)		(1,347	)
Loss on disposal of fixed assets		8,597			2,160
Gain on settlement of accounts payable		-			(40,500	)
Release from U.S. Department of Energy accrued liability		-			(1,833,896	)
Non-compliance penalty for delinquent regular SEC filings		476,713			653,150
Non-compliance penalty for SEC registration requirement		137,500			-
Non-cash compensation:
Convertible preferred stock		131,967			728,962
Common stock		104,776			768,588
Options		599,011			1,076,428
Warrants		6,284			288,862
Changes in operating assets and liabilities:
Accounts receivable and other receivables		405,371			(256,801	)
Inventory		190,277			231,937
Prepaid expenses and other current assets		181,680			(162,599	)
Deposits		-			(4,511	)
Other assets		39,965			(20	)
Accounts payable and accrued expenses		781,744			37,660
Deferred rent		-			(6,564	)
Deferred revenue		(410,560	)		(115,042	)

Total Adjustments		5,312,263			998,388

Net Cash Used in Operating Activities		(1,434,505	)		(3,922,444	)

Cash Flows From Investing Activities
Purchase of fixed assets		(58,669	)		(42,487	)
Investment in estate of Ecotality net of amount owed to Ecotality Estate Creditor’s Committee		-			(210,965	)

Net Cash Used In Investing Activities		(58,669	)		(253,452	)

Cash Flows From Financing Activities
Proceeds from sale of shares of Series C Convertible
Preferred Stock and warrants		1,367,120			3,000,000
Payment of Series C Convertible Preferred Stock issuance costs		(52,500	)		-
Proceeds from issuance of convertible notes payable to a related party		200,000			-
Payment of notes and convertible notes payable		(26,910	)		(171,585	)

Net Cash Provided by Financing Activities		1,487,710			2,828,415

Net Decrease in Cash		(5,464	)		(1,347,481	)

Cash - Beginning of Period		189,231			1,627,062

Cash - Ending of Period	$	183,767		$	279,581

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows -- Continued

(unaudited)

	For The Six Months Ended
	June 30,
	2016			2015
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest expense	$	303		$	10,018

Non-cash investing and financing activities:
Return and retirement of common stock in connection with settlement	$	45,000		$	-
Issuance of common stock for services previously accrued	$	26,982		$	94,999
Issuance of Series C Convertible Preferred Stock in settlement of accrued registration rights penalty and related interest	$	-		$	2,069,700
Accrual of contractual dividends on Series C Convertible Preferred Stock	$	683,700		$	414,400
Issuance of Series C Convertible Preferred Stock in satisfaction of contractual dividends	$	(611,600	)	$	(435,200	)
Warrants issued in connection with extension of convertible note payable	$	-		$	23,641
Warrants reclassified to derivative liabilities	$	-		$	281,403
Accrual of issuance costs on Series C Convertible Preferred Stock	$	159,335		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BUSINESS ORGANIZATION AND NATURE OF OPERATIONS

Car Charging Group, Inc. (“CCGI”) was incorporated on October 3, 2006 under the laws of the State of Nevada as New Image Concepts, Inc. On December 7, 2009, New Image Concepts, Inc. changed its name to Car Charging Group, Inc.

CCGI, through its wholly-owned subsidiaries (collectively, the “Company” or “Car Charging”), acquires and installs electric vehicle (“EV”) charging stations and shares servicing fees received from customers that use the charging stations with the property owner(s), on a property by property basis. In addition, the Company sells hardware and enters into individual arrangements for this purpose with various property owners, which may include municipalities, garage operators, hospitals, multi-family properties, shopping malls and facility owner/operators.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of June 30, 2016 and for the three and six months ended June 30, 2016. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the operating results for the full year ending December 31, 2016 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures of the Company as of December 31, 2015 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on July 29, 2016.

2. GOING CONCERN AND MANAGEMENT’S PLANS

As of June 30, 2016, the Company had a cash balance, a working capital deficiency and an accumulated deficit of $183,767, $19,508,293 and $80,119,423, respectively. During the three and six months ended June 30, 2016, the Company incurred a net loss of $2,345,976 and $6,746,768, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Since inception, the Company’s operations have primarily been funded through proceeds received in equity and debt financings. Although management believes that the Company has access to capital resources, there are currently no commitments in place for new financing at this time, except as described below, and there is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its development initiatives or attain profitable operations. If the Company is unable to obtain additional financing on a timely basis, it may have to curtail its development, marketing and promotional activities, which would have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately the Company could be forced to discontinue its operations and liquidate.

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustment that might become necessary should the Company be unable to continue as a going concern.

In July 2016, the Company issued a sixty-day convertible note in the principal amount of $200,000 to a company wholly-owned by the Company’s Executive Chairman of the Board of Directors. In August 2016, the Company repaid a convertible note in the principal amount of $105,000 to a company wholly-owned by the Company’s Executive Chairman of the Board of Directors. The Company is currently funding its operations on a month-to-month basis. While there can be no assurance that it will be successful, the Company is in active negotiations to raise additional capital.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of CCGI and its wholly-owned subsidiaries, including Car Charging, Inc., Beam Charging LLC (“Beam”), EV Pass LLC, Blink Network LLC (“Blink”) and Car Charging China Corp. (“Car Charging China”). All intercompany transactions and balances have been eliminated in consolidation.

Through April 16, 2014, 350 Green LLC (“350 Green”) was a wholly-owned subsidiary of the Company in which the Company had full control and was consolidated. Beginning on April 17, 2014, when 350 Green’s assets and liabilities were transferred to a trust mortgage, 350 Green became a Variable Interest Entity (“VIE”). The consolidation guidance relating to accounting for VIEs requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity and perform ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. The Company determined that it is the primary beneficiary of 350 Green, and as such, 350 Green’s assets, liabilities and results of operations are included in the Company’s condensed consolidated financial statements.

USE OF ESTIMATES

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the financial statements. The Company’s significant estimates used in these financial statements include, but are not limited to, stock-based compensation, accounts receivable reserves, warranty reserves, inventory valuations, the valuation allowance related to the Company’s deferred tax assets, the carrying amount of intangible assets, estimates of future EV sales and the effects thereon, and the recoverability and useful lives of long-lived assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

ACCOUNTS RECEIVABLE

Accounts receivable are carried at their contractual amounts, less an estimate for uncollectible amounts. As of June 30, 2016 and December 31, 2015, there was an allowance for uncollectable amounts of $33,760 and $140,998, respectively. Management estimates the allowance for bad debts based on existing economic conditions, the financial conditions of the customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have been exhausted. There is no collateral held by the Company for accounts receivable nor does any accounts receivable serve as collateral for any of the Company’s borrowings with the exception of the Company’s convertible note payable further described in Note 7 – Notes Payable – Convertible Note.

INVENTORIES

Inventory is comprised of electric charging stations and related parts, which are available for sale or for warranty requirements. Inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. Inventory that is sold to third parties is included within cost of sales and inventory that is installed on the premises of participating owner/operator properties, where the Company retains ownership, is transferred to fixed assets at the carrying value of the inventory. The Company periodically reviews for slow-moving, excess or obsolete inventories. Products that are determined to be obsolete, if any, are written down to net realizable value. Based on the aforementioned periodic reviews, the Company recorded an inventory reserve for slow-moving, excess or obsolete inventories of $190,000 and $290,000 as of June 30, 2016 and December 31, 2015, respectively.

As of June 30, 2016 and December 31, 2015, the Company’s inventory was comprised solely of finished goods and parts that are available for sale.

FIXED ASSETS

Fixed assets are stated at cost, net of accumulated depreciation and amortization which is recorded commencing at the in-service date using the straight-line method over the estimated useful lives of the assets. Accumulated depreciation and amortization as of June 30, 2016 and December 31, 2015 was $4,347,020 and $4,100,163, respectively.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

INTANGIBLE ASSETS

Accumulated amortization related to intangible assets as of June 30, 2016 and December 31, 2015 was $28,602 and $23,445, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The accounting treatment of derivative financial instruments requires that the Company record the conversion options and warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. Conversion options are recorded as a discount to the host instrument and are amortized as interest expense over the life of the underlying instrument. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

The Binomial Lattice Model was used to estimate the fair value of the warrants that are classified as derivative liabilities on the condensed consolidated balance sheets. The model includes subjective input assumptions that can materially affect the fair value estimates. The expected volatility is estimated based on the most recent historical period of time equal to the weighted average life of the warrants.

SEQUENCING POLICY

Under ASC 815-40-35, the Company has adopted a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair values due to the short-term nature of these instruments. The carrying amount of the Company’s notes payable approximates fair value because the effective yields on these obligations, which include contractual interest rates, taken together with other features such as concurrent issuance of warrants, are comparable to rates of returns for instruments of similar credit risk.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

REVENUE RECOGNITION

The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. Accordingly, when a customer completes use of a charging station, the service can be deemed rendered and revenue may be recognized based on the time duration of the session or kilowatt hours drawn during the session. Sales of EV stations are recognized upon shipment to the customer, free on board shipping point, or the point of customer acceptance.

Governmental grants and rebates pertaining to revenues and periodic expenses are recognized as income when the related revenue and/or periodic expense are recorded. Government grants and rebates related to EV charging stations and their installation are deferred and amortized in a manner consistent with the related depreciation expense of the related asset over their useful lives.

For arrangements with multiple elements, which is comprised of (1) a charging unit, (2) installation of the charging unit, (3) maintenance and (4) network fees, revenue is recognized dependent upon whether vendor specific objective evidence (“VSOE”) of fair value exists for separating each of the elements. We determined that VSOE exists for both the delivered and undelivered elements of our multiple-element arrangements. We limit our assessment of fair value to either (a) the price charged when the same element is sold separately or (b) the price established by management having the relevant authority.

CONCENTRATIONS

During the three and six months ended June 30, 2016, revenues generated from Entity C represented approximately 13% and 13%, respectively, of the Company’s total revenue. During the three and six months ended June 30, 2015, revenues generated from Entity C represented approximately 18% and 15%, respectively, of the Company’s total revenue. During the six months ended June 30, 2015, revenues generated from Entity A represented approximately 27% of the Company’s total revenue. The Company generated grant revenues from governmental agencies (Entity A) and charging service revenues from a customer (Entity C).

STOCK-BASED COMPENSATION

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is measured on the measurement date and re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Awards granted to non-employee directors for their service as a director are treated on the same basis as awards granted to employees. The Company computes the fair value of equity-classified warrants and options granted using the Black-Scholes option pricing model.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

NET LOSS PER COMMON SHARE

Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number vested of common shares, plus the net impact of common shares (computed using the treasury stock method), if dilutive, resulting from the exercise of outstanding stock options and warrants, plus the conversion of preferred stock.

The following common stock equivalents are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

	June 30,
	2016		2015
Preferred stock		50,674,188		41,242,027
Warrants		55,384,027		58,142,745
Options		7,765,000		7,666,333
Convertible notes		339,058		99,524
Total potentially dilutive shares		114,162,273		107,150,629

COMMITMENTS AND CONTINGENCIES

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. See Note 4 – Accrued Expenses, Note 10 – Commitments and Contingencies and Note 11 – Subsequent Events – Commitments and Contingencies.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

REVISION OF FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 2015

During the course of preparing the quarterly report on Form 10-Q for the quarter ended September 30, 2015, the Company identified an error which resulted in the overstatement of its accrued public information fee on the condensed consolidated balance sheet as of June 30, 2015 and its provision for non-compliance penalty for delinquent regular SEC filings on the condensed consolidated statements of operations during the three and six months ended June 30, 2015. The reason for the error related to the Company’s interpretation of a contractual provision. See Note 5 – Accrued Public Information Fee.

The following tables reconcile the prior period as reported balances to the revised balances:

	June 30,2015
	As Reported			Adjustment			As Revised
Condensed Consolidated Balance Sheet:

Total Current Assets	$	1,942,413		$	-		$	1,942,413
Total Assets	$	4,571,529		$	-		$	4,571,529
Total Current Liabilities	$	17,244,978		$	(1,100,000	)	$	16,144,978
Total Liabilities	$	17,501,491		$	(1,100,000	)	$	16,401,491
Total Stockholders’ Deficiency	$	(13,754,962	)	$	1,100,000		$	(12,654,962	)

	For the Three Months Ended June 30, 2015								For the Six Months Ended June 30, 2015
Condensed Consolidated Statements of Operations:	As Reported			Adjustment		As Revised			As Reported			Adjustment		As Revised

Loss From Operations	$	(3,159,823	)	$	-	$	(3,159,823	)	$	(6,689,900	)	$	-	$	(6,689,900	)
Total Other Income		821,024			1,100,000		1,921,024			669,068			1,100,000		1,769,068
Net Loss		(2,338,799	)		1,100,000		(1,238,799	)		(6,020,832	)		1,100,000		(4,920,832	)
Less: Net income attributable to noncontrolling interest		13,257			-		13,257			66,994			-		66,994
Net Loss Attributable to Car Charging Group, Inc.		(2,352,056	)		1,100,000		(1,252,056	)		(6,087,826	)		1,100,000		(4,987,826	)
Dividend attributable to Series C shareholders		(212,400	)		-		(212,400	)		(414,400	)		-		(414,400	)
Net Loss Attributable to Common Shareholders	$	(2,564,456	)	$	1,100,000	$	(1,464,456	)	$	(6,502,226	)	$	1,100,000	$	(5,402,226	)
Net Loss Per Share - Basic and Diluted	$	(0.03	)			$	(0.02	)	$	(0.08	)			$	(0.07	)
Weighted Average Number of
Common Shares Outstanding - Basic and Diluted		79,139,995					79,139,995			78,489,861					78,489,861

	For the Six Months Ended June 30, 2015
	As Reported			Adjustment			As Revised
Condensed Consolidated Statement of Cash Flows:

Cash Flows From Operating Activities:
Net Loss	$	(6,020,832	)	$	1,100,000		$	(4,920,832	)
Adjustments to reconcile net loss to net cash used in operating activities	$	2,374,328		$	(1,100,000	)	$	1,274,328
Net Cash Used In Operating Activities	$	(3,922,444	)	$	-		$	(3,922,444	)
Net Cash Used In Investing Activities	$	(253,452	)	$	-		$	(253,452	)
Net Cash Provided By Financing Activities	$	2,828,415		$	-		$	2,828,415

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

4. ACCRUED EXPENSES

SUMMARY

Accrued expenses consist of the following:

	June 30, 2016		December 31, 2015
	(unaudited)
Registration rights penalty	$	866,250	$	728,750
Accrued consulting fees		975,425		916,925
Accrued host fees		1,117,208		873,544
Accrued professional, board and other fees		1,265,881		1,069,341
Accrued wages		194,369		187,779
Warranty payable		290,131		223,988
Accrued taxes payable		413,722		355,950
Warrants payable		295,106		77,761
Accrued issuable equity		737,895		324,894
Accrued interest expense		154,092		83,842
Dividend payable		365,300		293,200
Other accrued expenses		70,264		10,750
	$	6,745,643	$	5,146,724

REGISTRATION RIGHTS PENALTY

In connection with the sale of the Company’s Series C Convertible Preferred Stock, the Company granted the purchasers certain registration rights. As of June 30, 2016 and December 31, 2015, the Company had not yet filed a registration statement under the Securities Act of 1933. The registration rights agreements entered into with the Series C Convertible Preferred Stock purchasers provide that the Company has to pay liquidated damages equal to 1% of all Series C subscription amounts received on the date the Series C resale registration statement was due to be filed pursuant to such registration rights agreements. The Company needs to pay such penalty each month thereafter until the resale registration statement is filed. The maximum liquidated damages amount is 10% of all Series C subscription amounts received. Failure to pay such liquidated damages results in interest on such damages at a rate of 18% per annum becoming due. As a result, the Company accrued $866,250 and $728,750 of Series C Convertible Preferred Stock registration rights damages at June 30, 2016 and December 31, 2015, respectively.

WARRANTS PAYABLE

As of June 30, 2016 and December 31, 2015, the Company accrued $294,111 and $77,735, respectively, related to investment banking fees which were payable in warrants. See Note 7 – Fair Value Measurement – Warrants Payable and Note 8 – Stockholders’ Deficiency – Preferred Stock - Series C Convertible Preferred Stock for additional details.

5. ACCRUED PUBLIC INFORMATION FEE

In accordance with certain securities purchase agreements, the Company is required to be compliant with Rule 144(c)(1) of the SEC, as defined, so as to enable investors to sell their holdings of Company shares in accordance with the securities purchase agreements. In the event of the Company’s noncompliance with Rule 144(c)(1) at any time after the six-month anniversary of the offering, the investors are entitled to receive a fee of 1% of the aggregate subscription amount of the purchaser’s securities, plus an additional 1% for every pro rata 30-day period that the Company is not in compliance (payable in cash or in kind). As of June 30, 2016 and December 31, 2015, the Company had accrued $2,910,447 and $2,433,734, respectively, as a result of periods of noncompliance with Rule 144(c)(1).

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

6. NOTES PAYABLE

CONVERTIBLE AND OTHER NOTES – RELATED PARTY

On June 24, 2016, the Company issued a sixty-day convertible note in the principal amount of $105,000 to a company wholly-owned by the Company’s Executive Chairman of the Board of Directors. The principal amount is to be repaid upon the date at which the Company has received payment under an existing grant with the Pennsylvania Turnpike. Interest on the note accrues at a rate of 18% annually and is payable at maturity. The unpaid principal and accrued interest are convertible at the election of the holder into shares of common stock at $0.70 per share. In connection with the note issuance, the Company issued a five-year immediately vested warrant to purchase 525,000 shares of common stock at an exercise price of $0.70 per share with an issuance date fair value of $38,113, which was recorded as a debt discount. In connection with the Company’s sequencing policy, the warrants were determined to be derivative liabilities. In connection with the Company’s sequencing policy, the conversion option was also determined to be a derivative liability, however its value was de minimis. Subsequent to June 30, 2016, the Company repaid the principal amount of $105,000 plus accrued interest.

On June 24, 2016, the Company issued a sixty-day convertible note in the principal amount of $95,000 to a company wholly-owned by the Company’s Executive Chairman of the Board of Directors. The principal amount is to be repaid upon the date at which the Company has received at least $1,000,000 in financing from third parties. Interest on the note accrues at a rate of 18% annually and is payable at maturity. The unpaid principal and accrued interest are convertible at the election of the holder into shares of common stock at $0.70 per share. In connection with the note issuance, the Company issued a five-year immediately vested warrant to purchase 475,000 shares of common stock at an exercise price of $0.70 per share with an issuance date fair value of $34,484, which was recorded as a debt discount. In connection with the Company’s sequencing policy, the warrants were determined to be derivative liabilities In connection with the Company’s sequencing policy, the conversion option was also determined to be a derivative liability, however, its value was de minimis.

During the six months ended June 30, 2016, the Company made aggregate principal repayments of $20,000 associated with a non-convertible note payable to the same related party.

CONVERTIBLE AND OTHER NOTES

As of June 30, 2016, the secured convertible note had an outstanding principal balance of $50,000 which was past due.

During the six months ended June 30, 2016, the Company made aggregate principal repayments of $6,910 associated with a non-convertible note payable.

INTEREST EXPENSE

Interest expense for the three and six months ended June 30, 2016 was $35,314 and $70,552, respectively, and $11,960 and $21,019 during the three and six months ended June 30, 2015, respectively.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

7. FAIR VALUE MEASUREMENT

See Note 4 – Accrued Expenses – Warrants Payable and Note 8 – Stockholders’ Deficiency – Preferred Stock - Series C Convertible Preferred Stock for additional details associated with issuance costs which included an obligation to issue investment banker warrants.

Assumptions utilized in the valuation of Level 3 liabilities are described as follows:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015

Risk-free interest rate		0.58% - 1.08%		0.22% - 1.01%		0.58% - 1.16%		0.02% - 1.30%
Expected term (years)		2.28 - 5.00		1.00 - 4.66		2.28 - 5.00		1.00 - 5.05
Expected volatility		123% - 139%		89% - 95%		114% - 139%		84% - 95%
Expected dividend yield		0.00%		0.00%		0.00%		0.00%

The following table sets forth a summary of the changes in the fair value of Level 3 derivative liabilities and warrants payable that are measured at fair value on a recurring basis:

Derivative Liabilities
Beginning balance as of January 1, 2016	$	1,350,881
Issuance of warrants		251,011
Change in fair value of derivative liability		2,038,366
Ending balance as of June 30, 2016	$	3,640,258

Warrants Payable
Beginning balance as of January 1, 2016	$	77,761
Provision for new warrant issuances		969
Accrual of other warrant obligations		61,454
Change in fair value of warrants payable		154,922
Issuance of warrants		-
Ending balance as of June 30, 2016	$	295,106

Assets and liabilities measured at fair value on a recurring or nonrecurring basis are as follows:

	June 30, 2016
	Level 1		Level 2		Level 3		Total
Liabilities:
Derivative liabilities	$	-	$	-	$	3,640,258	$	3,640,258
Warrants Payable		-		-		295,106		295,106
Total liabilities	$	-	$	-	$	3,935,364	$	3,935,364

	December 31, 2015
	Level 1		Level 2		Level 3		Total
Liabilities:
Derivative liabilities	$	-	$	-	$	1,350,881	$	1,350,881
Warrants payable		-		-		77,761		77,761
Total liabilities	$	-	$	-	$	1,428,642	$	1,428,642

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

8. STOCKHOLDERS’ DEFICIENCY

PREFERRED STOCK

SERIES A CONVERTIBLE PREFERRED STOCK

On March 24, 2016, the Company issued 500,000 shares of Series A Convertible Preferred Stock to the Company’s Chief Operating Officer in connection with his March 24, 2015 employment agreement. The $500,000 of aggregate fair value of the shares was recognized over the one year service period. The Company recognized $0 and $114,754 of stock-based compensation expense during the three and six months ended June 30, 2016, respectively, related to the award which is included within stock-based compensation on the condensed consolidated statement of changes in stockholders’ deficiency.

The Series A Convertible Preferred Stock shall have no liquidation preference so long as the Series C Convertible Preferred Stock shall be outstanding.

SERIES B CONVERTIBLE PREFERRED STOCK

As of June 30, 2016, the liquidation preference for the Series B Convertible Preferred Stock amounted to $825,000.

SERIES C CONVERTIBLE PREFERRED STOCK

On March 11, 2016, the Company entered into a securities purchase agreement with a purchaser for gross proceeds of an aggregate of $2,900,040 (“Subscription Amount”), of which, $650,040 was paid to the Company at closing and the remaining $2,250,000 (“Milestone Amounts”) was payable to the Company upon the completion of certain milestones (“Milestones”), as specified in the agreement. Through June 30, 2016, based on the Company’s achievement of certain of the milestones prior to the June 24, 2016 deadline, net proceeds of an aggregate of $1,147,950 (gross proceeds of $1,267,160 less issuance costs of $197,160, of which, as of June 30, 2016, $149,658 had not been paid and was included within accrued expenses) of the Subscription Amount had been paid to the Company. See Note 4 – Accrued Expenses – Warrants Payable and Note 7 – Fair Value Measurement for additional details. As a result, the Company issued the following to the purchaser during the six months ended June 30, 2016: (i) 21,120 shares of Series C Convertible Preferred Stock and (ii) five-year warrants to purchase an aggregate of 3,017,047 shares of common stock at an exercise price of $1.00 per share with an issuance date fair value of $167,956 which was recorded as a derivative liability.

On March 11, 2016, the Company entered into a securities purchase agreement with a purchaser for net proceeds of an aggregate of $85,285 (gross proceeds of $99,960 less issuance costs of $14,675, of which, as of June 30, 2016, $9,677 had not been paid and was included within accrued expenses). See Note 4 – Accrued Expenses – Warrants Payable and Note 7 – Fair Value Measurement for additional details. Pursuant to the securities purchase agreement, the Company issued the following to the purchaser: (i) 1,666 shares of Series C Convertible Preferred Stock, and (ii) a five-year warrant to purchase 238,000 shares of common stock for an exercise price of $1.00 per share with an issuance date fair value of $10,458 which was recorded as a derivative liability.

On March 24, 2016, the Company issued 750 shares of Series C Convertible Preferred Stock to the Company’s Chief Operating Officer in connection with his March 24, 2015 employment agreement. The $75,000 of aggregate fair value of the shares was recognized over the one year service period. The Company recognized $0 and $17,213 of stock-based compensation expense during the three and six months ended June 30, 2016, respectively, related to the award which is included within stock-based compensation on the condensed consolidated statement of changes in stockholders’ deficiency.

During the six months ended June 30, 2016, the Company issued 444 shares of Series C Convertible Preferred Stock with a fair value of $39,964 to the Company’s Executive Chairman of the Board in satisfaction of amounts previously owed which was accrued for as of December 31, 2015, which is included within Series C convertible preferred stock issued as compensation to the Executive Chairman on the condensed consolidated statement of changes in stockholders’ deficiency.

During the six months ended June 30, 2016, the Company issued 2,932 shares of Series C Convertible Preferred Stock in satisfaction of the $293,200 dividend for the three months ended December 31, 2015 and 3,184 shares of Series C Convertible Preferred Stock in satisfaction of the $318,400 dividend for the three months ended March 31, 2016. As of June 30, 2016 the Company accrued $365,300 in connection with the dividend payable for the three months ended June 30, 2016. See Note 4 – Accrued Expenses.

In the event of a liquidation, the Series C Convertible Preferred Stock is also entitled to a liquidation preference equal to the stated value plus any accrued and unpaid dividends, which, as of June 30, 2016, was equal to $15,407,900.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

8. STOCKHOLDERS’ DEFICIENCY – CONTINUED

NON-CONTROLLING INTERESTS

350 Green is not owned by the Company but is deemed to be a VIE where the entirety of its results of operations are consolidated in the Company’s financial statements.

STOCK-BASED COMPENSATION

The Company recognized stock-based compensation expense related to preferred stock, common stock, stock options and warrants for the three and six months ended June 30, 2016 in the amounts of $280,792 and $842,038, respectively, and for the three and six months ended June 30, 2015 in the amounts of $1,102,606 and $2,862,840, respectively. As of June 30, 2016, there was $196,537 of unrecognized stock-based compensation expense related to stock options that will be recognized over the weighted average remaining vesting period of 0.9 years.

STOCK OPTIONS

The weighted average estimated fair value of the options granted during the three and six months ended June 30, 2016 was $0.51 and $0.38 per share, respectively. The weighted average estimated fair value of the options granted during the three and six months ended June 30, 2015 was $0.37 and $0.37 per share, respectively.

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following assumptions:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2014

Risk free interest rate		0.73% - 0.90%		0.63% - 1.00%		0.73% - 0.90%		0.63% - 1.21%
Expected term (years)		2.50		2.50 - 3.00		2.50		2.50 - 3.50
Expected volatility		112% - 118%		87% - 91%		102% - 118%		87% - 101%
Expected dividends		0.00%		0.00%		0.00%		0.00%

A summary of the option activity during the six months ended June 30, 2016 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Life		Intrinsic
	Shares			Price		In Years		Value

Outstanding, December 31, 2015		7,781,667		$	1.15
Granted		130,000			0.38
Exercised		-			-
Cancelled/forfeited/expired		(146,667	)		0.75
Outstanding, June 30, 2016		7,765,000		$	1.14		2.3	$	21,600

Exercisable, June 30, 2016		6,871,000		$	1.19		2.2	$	21,600

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

8. STOCKHOLDERS’ DEFICIENCY – CONTINUED

STOCK WARRANTS

See Note 8 – Stockholders’ Deficiency – Preferred Stock – Series C Convertible Preferred Stock for details associated with the issuances of warrants in connection with the security purchase agreements.

In January 2016, the Company agreed to extend the maturity date of warrants to purchase an aggregate of 1,290,000 shares of common stock with an exercise price of $2.25 per share by eighteen (18) months in exchange for the warrant holders’ consent to rescind a fundamental transactions provision. As a result, the Company recorded warrant modification expense of $5,827 during the six months ended June 30, 2016.

During the six months ended June 30, 2016, the Company recorded warrant modification expense of $457 related to the extension of expiration date of warrants to purchase 25,000 shares of common stock.

A summary of the warrant activity during the six months ended June 30, 2016 is presented below:

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Life		Intrinsic
		Shares			Price		In Years		Value

Outstanding, December 31, 2015		61,043,591		$	1.08
Issued		3,857,143			0.92
Exercised		-			-
Cancelled/forfeited/expired		(9,516,707	)		2.08
Outstanding, June 30, 2016		55,384,027		$	0.89		2.6	$	56

Exercisable, June 30, 2016		55,384,027		$	0.89		2.6	$	56

COMMON STOCK

In March 2016, one of the former members of Beam returned 242,303 shares of the Company’s common stock to the Company in exchange for cash of $45,000. The shares of common stock were cancelled by the Company in March 2016.

During the six months ended June 30, 2016, the Company issued 750,000 shares of common to the Company’s Chief Operating Officer in connection with his March 24, 2015 employment agreement. The $300,000 of aggregate fair value of the shares was recognized over the one year service period. The Company recognized $0 and $68,852 of stock-based compensation expense during the three and six months ended June 30, 2016, respectively, related to the award which is included within stock-based compensation on the condensed consolidated statement of changes in stockholders’ deficiency.

During the six months ended June 30, 2016, the Company issued an aggregate of 348,081 shares of common stock to the Company’s Board of Directors as compensation for their attendance at various Board and OPFIN Committee meetings, of which, 194,158 shares were issued for 2016 meetings and 153,923 shares were issued for 2015 meetings. The shares had an aggregate grant date fair value of $65,982, of which, $35,924 was recognized during the six months ended June 30, 2016 and is included within stock-based compensation on the condensed consolidated statement of changes in stockholders’ deficiency and $30,058 was recognized during the year ended December 31, 2015 and was included within stock-based compensation on the consolidated statement of changes in stockholders’ deficiency as of December 31, 2015.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9. RELATED PARTIES

The Company paid commissions to a company owned by its former CEO totaling $0 during the three and six months ended June 30, 2016 and $8,500 and $26,250 during the three and six months ended June 30, 2015, respectively, for business development services relating to the installations of EV charging stations by the Company in accordance with the support services contract. These amounts are recorded as compensation in the condensed consolidated statements of operations.

The Company incurred accounting and tax service fees totaling $0 for the three and six months ended June 30, 2016 provided by a company that is partially owned by the Company’s former Chief Financial Officer. The Company incurred accounting and tax service fees totaling $17,736 and $24,918 for the three and six months ended June 30, 2015, respectively, provided by a company that is partially owned by the Company’s former Chief Financial Officer. This expense was recorded as general and administrative expense.

The Company is licensing certain technology under terms of a patent licensing agreement with an entity (licensor) that is majority owned by the former CEO. The Company has agreed to pay royalties to the licensor equal to 10% of the gross profits received by the Company from bona fide commercial sales and/or uses of the licensed products and processes. As of June 30, 2016, the Company has not paid nor incurred any royalty fees related to this agreement. See Note 10 – Commitments and Contingencies – Patent License Agreement.

10. COMMITMENTS AND CONTINGENCIES

OPERATING LEASE

Total rent expense for the three and six months ended June 30, 2016 was $91,120 and $170,991, respectively, and $113,297 and $229,244 for the three and six months ended June 30, 2015, respectively.

PATENT LICENSE AGREEMENT

On March 11, 2016, the Company (the “Licensee”), the Executive Chairman of the Board and Balance Holdings, LLC (an entity controlled by the Executive Chairman) (collectively, the “Licensor”) entered into an agreement related to a patent license agreement, dated March 29, 2012. The parties acknowledge that the Licensee has paid a total of $8,525 in registration and legal fees for the U.S. Provisional Patent Application No. 61529016 (the “Patent Application”) to date. Effective March 11, 2016, the patent license agreement, solely with respect to the Patent Application and the parties’ rights and obligations thereto, was terminated. The Executive Chairman of the Board agreed to be solely responsible for all future costs and fees associated with the prosecution of the patent application. In the event the Patent Application is successful, the Executive Chairman of the Board shall grant a credit to the Licensee in the amount of $8,525 to be applied against any outstanding amount(s) owed to him. If the Licensee does not have any outstanding payment obligations to the Executive Chairman of the Board at the time the Patent Application is approved, the Executive Chairman of the Board shall remit the $8,525 to the Licensee within twenty (20) days of the approval. The parties agreed to a mutual release of any claims associated with the patent license agreement.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

10. COMMITMENTS AND CONTINGENCIES – CONTINUED

LITIGATION AND DISPUTES

On July 28, 2015, a Notice of Arbitration was received stating ITT Cannon has a dispute with Blink for the manufacturing and purchase of 6,500 charging cables by Blink, who has not taken delivery or made payment on the contract price of $737,425. ITT Cannon also seeks to be paid the cost of attorney’s fees as well as punitive damages. The parties have agreed on a single arbitrator and are working to schedule the arbitration. The Company contends that the product was not in accordance with the specifications in the purchase order and, as such, believes the claim is without merit. The parties have agreed on a single arbitrator and are working to schedule the arbitration while simultaneously pursuing settlement options.

On April 8, 2016, Douglas Stein filed a Petition for Fee Arbitration with the State Bar of Georgia against the Company for breach of contract for failure to pay invoices in the amount of $178,893 for legal work provided. The invoices have been accrued for in the periods in which the services were provided. The Company has responded to the claim and is simultaneously pursuing settlement options.

On May 18, 2016, the Company was served with a complaint from Solomon Edwards Group, LLC for breach of written agreement and unjust enrichment for failure to pay invoices in the amount of $172,645 for services provided, plus interest and costs. The invoices have been accrued for in the periods in which the services were provided.

From time to time, the Company is a defendant or plaintiff in various legal actions that arise in the normal course of business.

350 GREEN, LLC

There have been five lawsuits filed against 350 Green by creditors of 350 Green regarding unpaid claims. These lawsuits relate solely to alleged pre-acquisition unpaid debts of 350 Green. Also, there are other unpaid creditors, aside from those noted above, that claim to be owed certain amounts for pre-acquisition work done on behalf of 350 Green solely, that potentially could file lawsuits at some point in the future.

On August 7, 2014, 350 Green received a copy of a complaint filed by Sheetz, a former vendor of 350 Green alleging breach of contract and unjust enrichment of $112,500. The complaint names 350 Green, 350 Holdings LLC and CCGI in separate breach of contract counts and names all three entities together in an unjust enrichment claim. CCGI and 350 Holdings will seek to be dismissed from the litigation, because, as the complaint is currently plead, there is no legal basis to hold CCGI or 350 Green liable for a contract to which they are not parties. The parties held a mediation conference on May 15, 2015, but no settlement was reached. The parties continue to negotiate a settlement.

On September 9, 2015, the United States Court of Appeals for the Seventh Circuit of Chicago, Illinois affirmed the ruling of the United States District Court for the Northern District of Illinois in the matter of JNS Power & Control Systems, Inc. v. 350 Green, LLC in favor of JNS, which affirmed the sale of certain assets by 350 Green to JNS and the assumption of certain 350 Green liabilities by JNS. On April 7, 2016, JNS amended the complaint to add CCGI alleging an unspecified amount of lost revenues from the chargers, among other matters, caused by the defendants. Plaintiff also seeks indemnity for its unspecified costs in connection with enforcing the Asset Purchase Agreement in courts in New York and Chicago. CCGI has filed a motion to dismiss and the parties have concurrently agreed to attend a settlement conference on August 18, 2016.

OTHER MATTER

On May 12, 2016, the Securities and Exchange Commission (“SEC”) filed a complaint with the United States District Court in the Central District of California wherein the SEC alleges that an attorney who previously served as securities counsel to the Company was involved in a fraudulent scheme to create and sell seven (7) public “shell” companies. The SEC’s complaint indicates that one of the shell companies, New Image Concepts, Inc. (“NIC”) was the subject of the Company’s December 7, 2009 reverse merger, wherein following the merger, NIC was renamed Car Charging Group, Inc. The Company is not named as a defendant in the SEC’s complaint and, based on internal review and discussions, there were and are no continuing affiliations between any employees, directors, or investors of the pre-merger shell company and the Company. The Company has determined that no current or past employees of the Company were involved with the former shell company and it does not expect any additional actions to be necessary with respect to this matter.

CAR CHARGING GROUP, INC. & SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11. SUBSEQUENT EVENTS

NOTE PAYABLE

On July 27, 2016, the Company issued a sixty-day convertible note in the principal amount of $200,000 to a company wholly-owned by the Company’s Executive Chairman of the Board of Directors. The principal amount is to be repaid upon the date at which the Company has received at least $1,000,000 in financing from third parties. Interest on the note accrues at a rate of 18% annually and is payable at maturity. The unpaid principal and accrued interest are convertible at the election of the holder into shares of common stock at $0.70 per share. In connection with the note issuance, the Company issued a five-year immediately vested warrant to purchase 1,000,000 shares of common stock at an exercise price of $0.70 per share.

SUBLEASE AGREEMENT

On July 28, 2016, the Company (“Sublandlord”) entered into a sublease agreement with Balance Labs, Inc. (“Subtenant”) (an entity controlled by the Company’s Executive Chairman of the Board of Directors) pursuant to which the Company agreed to sublease a portion of its Miami, Florida corporate headquarters to Subtenant. The term of the sublease agreement is from August 1, 2016 to September 29, 2018, subject to earlier termination upon written notice of termination by the landlord or Sublandlord. Throughout the term of the agreement, Subtenant shall pay to Sublandlord fixed base rent and operating expenses equal to 50% of Sublandlord’s obligation under its primary lease agreement, resulting in monthly base rent payments ranging from approximately $7,500 to $8,000 per month, for a total of approximately $200,000 for the total term of the sublease agreement.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition of Car Charging Group, Inc. (and, including its subsidiaries, “CarCharging”, “CCGI”, “the Company”) as of June 30, 2016 and for the three and six months ended June 30, 2016 and 2015 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to CarCharging. This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risks and uncertainties discussed in Item IA. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (“SEC”) on July 29, 2016.

Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

Overview

CarCharging is a leading owner, operator, and provider of electric vehicle (“EV”) charging equipment and networked EV charging services. CarCharging offers both residential and commercial EV charging equipment, enabling EV drivers to easily recharge at various location types.

Our principal line of products and services is our Blink EV charging network (the “Blink Network”) and EV charging equipment (also known as electric vehicle supply equipment - EVSE) and EV related services. Our Blink Network is proprietary cloud-based software that operates, maintains, and tracks all of the Blink EV charging stations and the associated charging data. The Blink Network provides property owners, managers, and parking companies, who we refer to as our Property Partners, with cloud-based services that enable the remote monitoring and management of EV charging stations, payment processing, and provides EV drivers with vital station information including station location, availability, and applicable fees.

We offer our Property Partners a flexible range of business models for EV charging equipment and services. In our comprehensive and turnkey business model, we own and operate the EV charging equipment, manage the installation, maintenance, and related services; and share a portion of the EV charging revenue with the property owner. Alternatively, Property Partners may share in the equipment and installation expenses, with CarCharging operating and managing the EV charging stations and providing connectivity to the Blink Network. For Property Partners interested in purchasing and owning EV charging stations, that they manage, we can also provide EV charging hardware, site recommendations, connectivity to the Blink Network, and service and maintenance services.

We have strategic relationships with hundreds of property partners that include well-recognized companies, large municipalities, and local businesses. The types of properties include airports, auto dealers, healthcare/medical, hotel, mixed-use, municipal locations, multifamily residential and condo, parks and recreation areas, parking lots, religious institution, restaurants, retailers, schools and universities, stadiums, supermarkets, transportation hubs, and workplace locations. Some examples are Caltrans, City of Azusa, City of Chula Vista, City of Springfield, City of Tucson, Cracker Barrel, Federal Realty, Fred Meyer Stores, Inc., Fry’s Food & Drug, Inc., IKEA, JBG Associates, LLC, Kroger Company and Ralphs Grocery Company. CarCharging continues to establish contracts with property partners that previously had contracts with ECOtality, the former owner of the Blink related assets.

We currently have approximately 11,600 charging stations deployed of which 4,880 are Level 2 public charging units, 130 DC Fast Charging EV chargers and 2,800 residential charging units in service on the Blink Network. Additionally, we currently have approximately 370 Level 2 charging units on other networks and there are also approximately an additional 3,400 non-networked, residential Blink EV charging stations.

Sales

We currently maintain an in-house field sales force that maintains business relationships with our property partners and develops new sales opportunities through lead generation and marketing. We also sell our products and services through reseller partners, which then sell to property representatives and/or hosts.

We continue to invest in the improvement of the service and maintenance of our Company-owned stations, as well as those stations with a service and maintenance plans, and expanding our cloud-based network capabilities. We anticipate continuing to expand our revenues by selling our next generation of EV charging equipment to current as well as new Property Partners, which includes airports, auto dealers, healthcare/medical, hotel, mixed-use, municipal locations, multifamily residential and condo, parks and recreation areas, parking lots, religious institution, restaurants, retailers, schools and universities, stadiums, supermarkets, transportation hubs, and workplace locations, expanding our sales channels to wholesale distributors, utilities, auto OEMs, solar integrators, and dealers, and implementing EV charging station occupancy fees (after charging is completed, fees for remaining connected to the charging station beyond an allotted grace period), and subscription plans for EV drivers on our Blink-owned public charging locations.

During the three months ended June 30, 2016, one electric car sharing services customer accounted for 13% of our total revenues.

Our revenues are primarily derived from fees charged to EV drivers for EV charging in public locations, EV charging hardware sales, and government grants. EV charging fees to EV drivers are based either on an hourly rate, a per kilowatt-hour (“kWh”) rate, or by session, and are calculated based on a variety of factors, including associated station costs and local electricity tariffs. EV charging hardware is sold to our property partners such as Green Commuter, IKEA, Nashville Music Center, and Wendy’s. In addition, other sources of fees from EV charging services are network fees and payment processing fees paid by our property partners.

Recent Developments

Private Placements

On March 11, 2016, we entered into securities purchase agreements with two purchasers for proceeds of an aggregate of $3,000,000, of which, $750,000 was paid to us at closing and the remaining $2,250,000 was payable to us upon the completion of certain milestones, as specified in the agreement. Based on the Company’s achievement of certain of the milestones prior to the June 24, 2016 deadline, the Company received a final aggregate of $1,367,120 and issued a total of (i) 22,786 shares of Series C Convertible Preferred Stock, and (ii) five-year warrants to purchase an aggregate of 3,255,047 shares of common stock for an exercise price of $1.00 per share.

Notes Payable

On June 24, 2016, we issued a sixty-day convertible note in the principal amount of $105,000 to a company wholly-owned by our Executive Chairman. The principal amount is to be repaid upon the date at which we have received payment under an existing grant with the Pennsylvania Turnpike. Interest on the note accrues at a rate of 18% annually and is payable at maturity. The unpaid principal and accrued interest are convertible at the election of the holder into shares of common stock at $0.70 per share. In connection with the note issuance, we issued a five-year immediately vested warrant to purchase 525,000 shares of common stock at an exercise price of $0.70 per share. Subsequent to June 30, 2016, we repaid the principal amount of $105,000 plus accrued interest.

On June 24, 2016, we issued a sixty-day convertible note in the principal amount of $95,000 to a company wholly-owned by our Executive Chairman. The principal amount is to be repaid upon the date at which we have received at least $1,000,000 in financing from third parties. Interest on the note accrues at a rate of 18% annually and is payable at maturity. The unpaid principal and accrued interest are convertible at the election of the holder into shares of common stock at $0.70 per share. In connection with the note issuance, we issued a five-year immediately vested warrant to purchase 475,000 shares of common stock at an exercise price of $0.70 per share.

On July 27, 2016, we issued a sixty-day convertible note in the principal amount of $200,000 to a company wholly-owned by our Executive Chairman. The principal amount is to be repaid upon the date at which we have received at least $1,000,000 in financing from third parties. Interest on the note accrues at a rate of 18% annually and is payable at maturity. The unpaid principal and accrued interest are convertible at the election of the holder into shares of common stock at $0.70 per share. In connection with the note issuance, we issued a five-year immediately vested warrant to purchase 1,000,000 shares of common stock at an exercise price of $0.70 per share.

Patent License Agreement

On March 11, 2016, the Company (the “Licensee”), the Executive Chairman of the Board and Balance Holdings, LLC (an entity controlled by Michael D. Farkas, our Executive Chairman) (collectively, the “Licensor”) entered into an agreement related to a patent license agreement, dated March 29, 2012. The parties acknowledge that the Licensee has paid a total of $8,525 in registration and legal fees for the U.S. Provisional Patent Application No. 61529016 (the “Patent Application”) to date. Effective March 11, 2016, the patent license agreement, solely with respect to the Patent Application and the parties’ rights and obligations thereto, was terminated. The Executive Chairman of the Board agreed to be solely responsible for all future costs and fees associated with the prosecution of the patent application. In the event the Patent Application is successful, the Executive Chairman of the Board shall grant a credit to the Licensee in the amount of $8,525 to be applied against any outstanding amount(s) owed to him. If the Licensee does not have any outstanding payment obligations to the Executive Chairman of the Board at the time the Patent Application is approved, the Executive Chairman of the Board shall remit the $8,525 to the Licensee within twenty (20) days of the approval. The parties agreed to a mutual release of any claims associated with the patent license agreement. We have not paid nor incurred any royalties to date under the patent license agreement.

Consolidated Results of Operations

Three Months Ended June 30, 2016 Compared With Three Months Ended June 30, 2015

Revenues

We have generated charging service revenue of $356,412 related to installed EV charging stations for the three months ended June 30, 2016 as compared to $515,985 for the three months ended June 30, 2015, a decrease of $159,573, or 31%, which was primarily a result of a reduction in revenue from a program sponsored by Nissan North America that the Company has participated in since July 2014. As part of the program, drivers that purchase a Nissan Leaf in certain markets within the United States receive two years of free charging. Since July 2015, other participating companies have added charging stations to the program reducing our share of revenue generated in connection with this program. We expect revenues derived from this program during the balance of 2016 to continue to be lower than the revenues we derived from this program in the same periods in 2015.

Grant revenue decreased from $159,794 to $57,385 during the three months ended June 30, 2016, a decrease of $102,409, or 64%. Grants, rebate and incentives, collectively “grant revenue” relating to equipment and the related installation are deferred and amortized in a manner consistent with the depreciation expense of the related assets over their useful lives. Our grant revenue during the 2014 and 2015 fiscal years was primarily derived from our agreement with the Bay Area Air Quality Management District (the “BAAQMD”). Our agreement with the BAAQMD ended on December 31, 2015. Our current source of grant revenue is from Pennsylvania Turnpike Commission. The ability to secure grant revenues is typically unpredictable and, therefore, uncertain. However, historically, the Company has secured and depended on incentives and intends to continue to pursue incentives from various governmental jurisdictions. As an example, the Company recently endorsed the Obama Administration’s announcement of, among other things, programs to release up to $4.5 billion in loan guarantees and invite applications to support the deployment of commercial EV charging facilities, and launch the Fixing America’s Surface Transportation (“FAST”) Act process to identify and develop corridors for zero emission and alternative fuel vehicles, which will include a network of EV fast charging stations.

Equipment sales increased from $185,172 to $360,169 during the three months ended June 30, 2016, an increase of $174,997, or 95%. The increase was primarily due to a higher volume of residential and commercial units sold during the three months ended June 30, 2016.

Other revenue increased from $82,160 to $119,246 during the three months ended June 30, 2016, an increase of $37,086, or 45%. Other revenues are comprised of network and transaction fees earned from our hosts which we initiated during the fourth quarter of 2014, which resulted in an increase in the number of fee generating units on our network during the three months ended June 30, 2016 as compared to the three months ended June 30, 2015.

Cost of Revenues

Cost of revenues primarily consists of depreciation of installed charging stations, amortization of the Blink Network infrastructure, the cost of charging station parts and related services sold, repairs and maintenance, electricity reimbursements to hosts and revenue share payments made to hosts when we are the primary obligor in the revenue share arrangement. Cost of revenues for the three months ended June 30, 2016 were $834,562 as compared to $713,031 for the three months ended June 30, 2015, an increase of $121,531, or 17%. There is a degree of variability in our gross margins related to charging services revenues from period to period primarily due to (i) the mix of revenue share payment arrangements, (ii) electricity reimbursements, and (iii) the estimated repair and maintenance costs associated with those charging stations not currently in operation. Any variability in our gross margins related to equipment sales depends on the mix of products sold.

Operating Expenses

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

Compensation expense decreased by $881,902, or 43%, from $2,070,910 for the three months ended June 30, 2015 to $1,189,008 for the three months ended June 30, 2016. The decrease was primarily attributable to a reduction of approximately $434,000 in non-cash stock-based compensation expense as compared to the 2015 period (which includes a $218,000 reduction of stock-based compensation expense related to share-based payments made to our Chief Operating Officer during the three months ended June 30, 2015 under the terms of his employment agreement) as well as a reduction in payroll and other related expenses of approximately $381,000 due to the departure of certain management and other personnel during the second half of 2015.

Other operating expenses consist primarily of rent, travel and IT expenses. Other operating expenses decreased by $136,011, or 27%, from $505,581 for the three months ended June 30, 2015 to $369,570 for the three months ended June 30, 2016. The decrease was primarily attributable to decreased IT expenses and call center expenses as the Company inaugurated its own internal call center in Phoenix, Arizona during 2016 as compared to the prior period.

General and administrative expenses decreased by $444,599, or 55%, from $813,412 for the three months ended June 30, 2015 to $368,813 for the three months ended June 30, 2016. The decrease was primarily due to reduced legal and consulting fees as compared to the three months ended June 30, 2015, which was primarily attributable to cash constraints and reduced litigation activity during the three months ended June 30, 2016.

Other (Expense) Income

Other income was $1,921,024 for the three months ended June 30, 2015 as compared to other expense of $477,235 for the three months ended June 30, 2016, a decrease of $2,398,259, or 125%. The decrease was primarily attributable to $1,833,896 of income during the three months ended June 30, 2015 which relate to a notification from the U.S Department of Energy (“DOE”) that it had no further property interest in certain direct current fast chargers, which resulted in the release of our liability to the DOE. In addition, we recorded a loss from the change in the fair value of warrant liabilities of $179,849 during the three months ended June 30, 2016, as compared to a gain of $290,898 during the three months ended June 30, 2015, an decrease of $470,747, primarily as a result of the Company’s share price, which increased the value of its warrant liabilities.

Net Loss

Our net loss for the three months ended June 30, 2016 increased by $1,107,177, or 89%, to $2,345,976 as compared to $1,238,799 for the three months ended June 30, 2015. The increase was primarily attributable to an increase in other expense of $2,398,259, partially offset by a decrease in operating expenses of $1,462,512. Our net loss attributable to common shareholders for the three months ended June 30, 2016 increased by $1,246,820, or 85%, from $1,464,456 to $2,711,276 for the aforementioned reasons and due to an increase in the dividend attributable to Series C Convertible Preferred shareholders of $152,900.

Six Months Ended June 30, 2016 Compared With Six Months Ended June 30, 2015

Revenues

We have generated charging service revenue of $740,882 related to installed EV charging stations for the six months ended June 30, 2016 as compared to $905,770 for the six months ended June 30, 2015, a decrease of $164,888, or 18%, which is primarily a result of a reduction in revenue from a program sponsored by Nissan North America that the Company has participated in since July 2014. As part of the program, drivers that purchase a Nissan Leaf in certain markets within the United States receive two years of free charging. Since July 2015, other participating companies have added charging stations to the program reducing our share of revenue generated in connection with this program. We expect revenues derived from this program during the balance of 2016 to continue to be lower than the revenues we derived from this program in the same periods in 2015.

Grant revenue decreased from $805,979 to $157,165 during the six months ended June 30, 2016, a decrease of $648,814, or 81%. Grants, rebate and incentives, collectively “grant revenue” relating to equipment and the related installation are deferred and amortized in a manner consistent with the depreciation expense of the related assets over their useful lives. Our grant revenue during the 2014 and 2015 fiscal years was primarily derived from our agreement with the BAAQMD. Our agreement with the BAAQMD ended on December 31, 2015. Our current source of grant revenue is from Pennsylvania Turnpike Commission. The ability to secure grant revenues is typically unpredictable and, therefore, uncertain. However, historically, the Company has secured and depended on incentives and intends to continue to pursue incentives from various governmental jurisdictions. As an example, the Company recently endorsed the Obama Administration’s announcement of, among other things, programs to release up to $4.5 billion in loan guarantees and invite applications to support the deployment of commercial EV charging facilities, and launch the FAST Act process to identify and develop corridors for zero emission and alternative fuel vehicles, which will include a network of EV fast charging stations.

Equipment sales increased from $405,979 to $650,374 during the six months ended June 30, 2016, an increase of $244,395, or 60%. The increase was primarily due to a higher volume of residential and commercial units sold during the six months ended June 30, 2016.

Other revenue increased from $116,684 to $208,331 during the six months ended June 30, 2016, an increase of $91,647, or 79%. Other revenues are comprised of network and transaction fees earned from our hosts which we initiated during the fourth quarter of 2014, which resulted in an increase in the number of fee generating units on our network during the six months ended June 30, 2016 as compared to the six months ended June 30, 2015.

Cost of Revenues

Operating Expenses

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

Compensation expense decreased by $2,202,777, or 45%, from $4,855,564 for the six months ended June 30, 2015 to $2,652,787 for the six months ended June 30, 2016. The decrease was primarily attributable to share-based payments with a fair value of approximately $1,100,000 made to our Chief Operating Officer during the six months ended June 30, 2015 under the terms of an employment agreement, as well as reduced payroll expenses of approximately $704,000 due to the departure of certain management and other personnel during the second half of 2015.

Other operating expenses consist primarily of rent, travel and IT expenses. Other operating expenses decreased by $107,778, or 13%, from $822,151 for the six months ended June 30, 2015 to $714,373 for the six months ended June 30, 2016. The decrease was primarily attributable to decreased call center expenses as the Company inaugurated their own internal call center in Phoenix, Arizona during 2016 and reduced travel expenses as compared to the prior period.

General and administrative expenses decreased by $887,775, or 58%, from $1,525,492 for the six months ended June 30, 2015 to $637,717 for the six months ended June 30, 2016. The decrease was primarily due to reduced legal and consulting fees as compared to the six months ended June 30, 2015, which was primarily attributable to cash constraints and reduced litigation activity during the six months ended June 30, 2016.

Other (Expense) Income

Other income was $1,769,068 for the six months ended June 30, 2015 as compared to other expense of $2,893,903 for the six months ended June 30, 2016, a decrease of $4,662,971, or 264%. The decrease was primarily attributable to a loss from the change in the fair value of warrant liabilities of $2,194,257 during the six months ended June 30, 2016, as compared to a gain of $888,907 during the six months ended June 30, 2015, a decrease of $3,083,164, primarily as a result of the increase in the Company’s share price, which increased the value of its warrant liabilities. In addition, there was $1,833,896 of income during the six months ended June 30, 2015 which relate to a notification from the DOE that it had no further property interest in certain direct current fast chargers, which resulted in the release of our liability to the DOE.

Net Loss

Our net loss for the six months ended June 30, 2016 increased by $1,825,936, or 35%, to $6,746,768 as compared to $4,920,832 for the six months ended June 30, 2015. The increase was primarily attributable to an increase in other expense of $4,662,971, partially offset by a decrease in operating expenses of $3,198,330. Our net loss attributable to common shareholders for the three months ended June 30, 2016 increased by $2,028,242, or 38%, from $5,402,226 to $7,430,468 for the aforementioned reasons and due to an increase in the dividend attributable to Series C Convertible Preferred shareholders of $269,300.

Liquidity and Capital Resources

During the six months ended June 30, 2016, we primarily financed our activities from proceeds derived from sales of our capital stock. A significant portion of the funds raised from the sale of capital stock have been used to cover working capital needs and personnel, office expenses and various consulting and professional fees.

For the six months ended June 30, 2016 and 2015, we used cash of $1,434,505 and $3,922,444 in operating activities, respectively. Our cash used in operating activities for the six months ended June 30, 2016 was primarily attributable to our net loss of $6,746,768, adjusted for non-cash expenses in the aggregate amount of $4,123,786, partially offset by $1,188,477 of net cash provided by changes in the levels of operating assets and liabilities. Our cash used in operating activities for the six months ended June 30, 2015 was primarily attributable to our net loss of $4,920,832, adjusted for net non-cash expenses in the aggregate amount of $1,274,328, plus $275,940 of net cash used to fund changes in the levels of operating assets and liabilities.

For the six months ended June 30, 2016, cash used in investing activities was $58,669 which was used to purchase charging stations and other fixed assets. During the six months ended June 30, 2015, cash used in investing activities was $253,452, of which $42,487 was used for the purchase of office and computer equipment and $210,965 was paid to the ECOtality Estate Creditor’s Committee.

Cash provided by financing activities for the six months ended June 30, 2016 was $1,487,710, of which, $1,314,620 of net proceeds (gross proceeds of $1,367,120 less issuance costs of $52,500) were from the sale of Series C Convertible Preferred Stock and warrants, $200,000 was provided in connection with proceeds from the issuance of convertible notes to a related party, partially offset by the repayment of notes payable of $26,910. Cash provided by financing activities for the six months ended June 30, 2015 was $2,828,415, of which $3,000,000 was due to the release of funds from escrow in connection with a prior sale of Series C Convertible Preferred Stock, partially offset by the repayment of notes payable of $171,585.

We expect that through the next 12 months from the date of this filing, we will require external funding to sustain operations and to follow through on the execution of our business plan. There can be no assurance that our plans will materialize and/or that we will be successful in our efforts to obtain the funding to cover working capital shortfalls. Given these conditions, there is substantial doubt about our ability to continue as a going concern and our future is contingent upon our ability to secure the levels of debt or equity capital we need to meet our cash requirements. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered by entrants into established markets, the competitive environment in which we operate and the current capital raising environment.

Since inception, our operations have primarily been funded through proceeds from equity and debt financings. Although management believes that we have access to capital resources, there are currently no commitments in place for new financing at this time, except as described above under the heading Recent Developments, and there is no assurance that we will be able to obtain funds on commercially acceptable terms, if at all.

We intend to raise additional funds during the next twelve months. The additional capital raised would be used to fund our operations. The current level of cash and operating margins is insufficient to cover our existing fixed and variable obligations, so increased revenue performance and the addition of capital through issuances of securities are critical to our success. Should we not be able to raise additional debt or equity capital through a private placement or some other financing source, we would take one or more of the following actions to conserve cash: further reductions in employee headcount, reduction in base salaries to senior executives and employees, and other cost reduction measures. Assuming that we are successful in our growth plans and development efforts, we believe that we will be able to raise additional debt or equity capital. There is no guarantee that we will be able to raise such additional funds on acceptable terms, if at all.

Through June 30, 2016, we incurred an accumulated deficit since inception of $80,119,423. As of June 30, 2016, we had a cash balance and working capital deficit of $183,767 and $19,508,293, respectively. During the six months ended June 30, 2016 and 2015, we incurred net losses of $6,746,768 and $4,920,832, respectively. These conditions raise substantial doubt about our ability to continue as a going concern.

These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should it be unable to continue as a going concern.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

Critical Accounting Policies and Estimates

There are no material changes from the critical accounting policies set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on July 29, 2016. Please refer to that document for disclosures regarding the critical accounting policies related to our business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not required to provide the information required by this Item because we are a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2016. The term “disclosure controls and procedures,” as defined in Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it 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. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2016, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

	1.	We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the year ended December 31, 2015. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

	2.	We do not have sufficient resources in our accounting function, which restricts the Company’s ability to gather, analyze and properly review information related to financial reporting in a timely manner. In addition, due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

	3.	We do not have personnel with sufficient experience with United States generally accepted accounting principles to address complex transactions.

	4.	We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non–financial personnel and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness.

	5.	We have determined that oversight over our external financial reporting and internal control over our financial reporting by our Board of Directors is ineffective. The Board of Directors has not provided adequate review of the Company’s SEC’s filings and condensed consolidated financial statements and has not provided adequate supervision and review of the Company’s accounting personnel or oversight of the independent registered accounting firm’s audit of the Company’s condensed consolidated financial statement.

To help address these material weaknesses, management engaged financial consultants and performed additional analyses and other procedures.

Notwithstanding the assessment that our ICFR was not effective and that there are material weaknesses as identified herein, we believe that our condensed consolidated financial statements contained in this Quarterly Report fairly present our financial position, results of operations and cash flows for the periods covered thereby in all material respects.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

General Litigation

From time to time, we are a defendant or plaintiff in various legal actions that arise in the normal course of business. The Company records legal costs associated with loss contingencies as incurred and has accrued for all probable and estimable settlements.

ITEM 1A. RISK FACTORS.

There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K which was filed with the SEC on July 29, 2016.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The disclosure under the heading “Convertible Notes” in Note 7 to our unaudited condensed consolidated financial statements is incorporated herein by reference.

During the three months ended June 30, 2016, the Company issued five-year options to purchase 70,000 shares of the Company’s common stock at exercise prices ranging from $0.31 to $0.72 per share to members of the Board as compensation for attending Board meetings during this time. The options are fully vested and had an aggregate grant date fair value of $32,250.

During the three months ended June 30, 2016, the Company issued five-year options to purchase 60,000 shares of the Company’s common stock at exercise prices ranging from $0.15 to $0.49 per share to members of the Board as compensation for attending meetings of the OPFIN Committee. The options vest immediately and had an aggregate grant date fair value of $17,550.

During the three months ended June 30, 2016, the Company issued 66,667 shares of the Company’s common stock to members of the Board as compensation for attending Board meetings. The shares had a grant date fair value of $18,000 based on the trading price of the Company’s common stock on the dates of the Board meetings.

During the three months ended June 30, 2016, the Company issued an aggregate of 179,452 of the Company’s common stock as compensation for attending OPFIN Committee meetings. The shares had a grant date fair value of $30,923 based on the trading price of the Company’s common stock on the dates of the OPFIN Committee meetings.

As previously reported in our Quarterly Report on Form 10-Q for the period ended March 31, 2016, on March 11, 2016, the Company entered into a securities purchase agreement with a purchaser for gross proceeds of an aggregate of $2,900,040, of which $650,040 was paid to the Company at closing and the remaining $2,250,000 was payable to the Company upon the completion of certain milestones, as specified in the agreement. As previously reported, at closing, 10,834 shares of Series C Convertible Preferred Stock were issued to the purchaser.

During the three months ended March 31, 2016, upon the completion of certain milestones, the Company issued 2,500 shares of Series C Convertible Preferred Stock to the purchaser for a purchase price, as part of the aggregate $2,900,040 to be paid, of $150,000.

During the three months ended June 30, 2016, upon the completion of certain milestones, the Company issued 5,000 shares of Series C Convertible Preferred Stock to the purchaser for a purchase price, as part of the aggregate $2,900,040 to be paid, of $300,000.The above securities were issued in reliance on the exemption under Section 4(2) of the Securities Act. These securities qualified for exemption under Section 4(2) since the issuance by us did not involve a public offering. The offerings were not “public offerings” as defined in Section 4(2) due to the insubstantial number of persons involved in the transactions, manner of the issuance and number of securities issued. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, the investors had the necessary investment intent as required by Section 4(2) since they agreed to and received securities bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Act. This restriction ensures that these securities 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 these transactions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

Exhibit		Incorporated by Reference			Filed or Furnished
Number	Exhibit Description	Form	Exhibit	Filing Date	Herewith
4.1	Secured Convertible Promissory Note in the Principal Amount of $105,000 related to a Pennsylvania Turnpike grant, issued June 24, 2016.				X
4.2	Class A Common Stock Purchase Warrant to Purchase 525,000 shares, issued June 24, 2016.				X
4.3	Secured Convertible Promissory Note in the Principal Amount of $95,000 related to third party financing, issued June 24, 2016.				X
4.4	Class A Common Stock Purchase Warrant to Purchase 475,000 shares, issued June 24, 2016.				X
4.5	Amendment to class A Common Stock Purchase warrant to Purchase 525,000 shares, dated July 27, 2016.				X
4.6	Amendment to class A Common Stock Purchase warrant to Purchase 475,000 shares, dated July 27, 2016.				X
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.				X
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.				X
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.				X
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.				X
101.INS	XBRL Instance.				X
101.XSD	XBRL Schema.				X
101.PRE	XBRL Presentation.				X
101.CAL	XBRL Calculation.				X
101.DEF	XBRL Definition.				X
101.LAB	XBRL Label.				X

* In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

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.

Date: August 15, 2016	CAR CHARGING GROUP, INC.

	By:	/s/ Michael J. Calise
		Michael J. Calise
		Chief Executive Officer (Principal Executive Officer and Interim Principal Financial Officer)