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
      1934For
      the quarterly period ended: March 31, 2010Oro
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





Commission File Number:
000-50983







ECOTALITY,
INC.


(Exact
name of registrant as specified in its charter)







Nevada
            68-0515422(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)80
      E. Rio Salado Parkway, Tempe, AZ
            85281(Address
      of principal executive offices)
            (Zip
      Code)







(480)
219-5005





(Registrant’s
telephone number, including area code)








Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes x    No o





Indicate
by check mark whether the registrant 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. (Check One):


Large
      accelerated filer o
            
            Accelerated
      filer o
            
            Non-accelerated
      filer þ
              (Do
      not check of a smaller reporting company)
            
            Smaller
      reporting company o




Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).


Yes o    No x







Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of May 12, 2010


8,994,017












ECOtality,
Inc.








Table
of Contents


PART I - FINANCIAL
      INFORMATION
            3Financial
      Statements:Condensed Consolidated
      Statements of Operations
            3Condensed Consolidated
      Balance Sheet
            4Condensed Consolidated
      Statements of Cash Flows
            5Notesto Condensed Consolidated Financial
      Statements
            6Management’s Discussion and
      Analysis of Financial Condition and Results  of
      Operation
            26Quantitative and Qualitative
      Disclosures about Market Risk
            35Controls and
      Procedures
            35PART II - OTHER
      INFORMATION
            36Legal
      Proceedings
            36Risk Factors
            36Unregistered Sales of
      Equity Securities
            36Defaults Upon Senior
      Securities
            37Submission of Matters to a
      Vote of Security Holders
            37Exhibits and Reports on Form
      8-K
            38SIGNATURES
            40




2


PART 1. FINANCIAL INFORMATION





ECOtality, Inc.Condensed
      Consolidated Statement of OperationsUnauditedFor
      the Three Months Ended March 31,2010
            
            
            2009Revenue
            
            $
            2,700,086
            
            
            $
            2,470,199Cost
      of goods sold
            
            
            2,391,524
            
            
            
            1,394,293Gross
      profit
            
            
            308,561
            
            
            
            1,075,906Expenses:Depreciation
            
            
            141,605
            
            
            
            138,970General
      and administrative expenses
            
            
            2,239,554
            
            
            
            1,342,509Research
      and development
            
            
            12,834
            
            
            
            11,467Total
      expenses
            
            
            2,393,991
            
            
            
            1,492,944Operating
      loss
            
            
            (2,085,429
            )
            
            
            (417,038
            )Other
      income:Interest
      income
            
            
            15,210
            
            
            
            -Gain
      on Disposal of Assets
            
            
            -
            
            
            
            9,760Total
      other income
            
            
            15,210
            
            
            
            9,760Other
      expenses:Interest
      expense
            
            
            328,794
            
            
            
            616,277Total
      other expenses
            
            
            328,794
            
            
            
            616,277Loss
      from operations before income taxes
            
            
            (2,399,015
            )
            
            
            (1,023,555
            )Provision
      for income taxes
            
            
            -
            
            
            
            -Net
      (loss)
            
            $
            (2,399,015
            )
            
            $
            (1,023,555
            )Weighted
      average number ofcommon
      shares outstanding - basic and fully diluted
            
            
            8,297,496
            
            
            
            2,522,375Net
      (loss) per share-basic and fully diluted
            
            $
            (0.29
            )
            
            $
            (0.41
            )The
      accompanying notes are an integral part of these financial
      statements





3


ECOtality, Inc.Condensed
      Consolidated Balance SheetsMarch
      31, 2010
            
            
            Decenber
      31, 2009Assets
            
            (Unaudited)
            
            
            (Audited)Current
      assets:Cash
            
            $
            14,885,506
            
            
            $
            11,824,605Receivables,
      net of allowance for bad debt of  $88,898 and $92,494 as of
      3/31/10 and  12/31/09 respectively
            
            
            1,474,495
            
            
            
            1,296,696Inventory,
      net of allowance for obsolescence of $292,896 and $335,864  as
      of 03/31/10 and 12/31/09 respectively
            
            
            994,949
            
            
            
            749,492Prepaid
      expenses and other current assets
            
            
            364,812
            
            
            
            387,327Total
      current assets
            
            
            17,719,762
            
            
            
            14,258,120Fixed
      assets, net accumulated depreciation of $4,284,328,
      and   $4,124,431 as of 3/31/10 and 12/31/09
      respectively
            
            
            1,933,149
            
            
            
            1,872,347Goodwill
            
            
            3,495,878
            
            
            
            3,495,878Total
      assets
            
            $
            23,148,788
            
            
            $
            19,626,344Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Accounts
      payable
            
            $
            882,933
            
            
            $
            372,982Accrued
      liabilities
            
            
            1,839,256
            
            
            
            1,438,177Total
      current liabilities
            
            
            2,722,188
            
            
            
            1,811,159Total
      LT Debt
            
            
            287,500
            
            
            
            287,500Stockholders’
      equity:Preferred
      stock, $0.001 par value, 200,000,000 sharesauthorized,
      8,537,299 and 8,597,299 shares issued and outstanding as
      of  3/31/10 and 12/31/09 respectively
            
            
            8,537
            
            
            
            8,597Common
      stock, $0.001 par value, 1,300,000,000 sharesauthorized,
      8,872,474  and 6,713,285 shares issuedand
      outstanding as of 3/31/10 and 12/31/09, respectively
            
            
            8,871
            
            
            
            6,712Common
      stock owed but not issued; 0 and 2,079,061 shares at3/31/10
      and 12/31/09 respectively
            
            
            -
            
            
            
            2,079Additional
      paid-in capital
            
            
            88,423,053
            
            
            
            88,411,074Subscription
      receivable
            
            
            -
            
            
            
            (5,000,000
            )Retained
      deficit
            
            
            (68,244,383
            )
            
            
            (65,845,368
            )Accumulated
      Foreign Currency Translation Adjustments
            
            
            (56,979
            )
            
            
            (55,409
            )Total
      stockholders' equity
            
            
            20,139,099
            
            
            
            17,527,685Total
      liabilities and stockholders' equity
            
            $
            23,148,788
            
            
            $
            19,626,344The
      accompanying notes are an integral part of these financial
      statements





4


ECOtality, Inc.Condensed
      Consolidated Statement of Cash FlowsUnauditedFor
      the three Months Ended March 31,2010
            
            
            2009Cash
      flows from operating activitiesNet
      Income (loss)
            
            $
            (2,399,015
            )
            
            $
            (1,023,555
            )Adjustments
      to reconcile:Stock
      and options issued for services and compensation
            
            
            -
            
            
            
            90,000Depreciation
            
            
            159,894
            
            
            
            138,970Amortization
      of stock issued for services
            
            
            -
            
            
            
            35,163Amortization
      of discount on notes payable
            
            
            -
            
            
            
            382,525Gain
      on disposal of assets
            
            
            -
            
            
            
            (9,760
            )Changes
      in operating assets and liabilities:Accounts
      Receivable
            
            
            (177,799
            )
            
            
            187,322Inventory
            
            
            (245,458
            )
            
            
            143,291Prepaid
      expenses and other
            
            
            22,531
            
            
            
            90,497Accounts
      Payable
            
            
            509,951
            
            
            
            (97,350
            )Accrued
      Liabilities
            
            
            401,064
            
            
            
            191,934Net
      cash provided (used) by operating activities
            
            
            (1,728,832
            )
            
            
            129,036Cash
      flows from investing activitiesPurchase
      of fixed assets
            
            
            (220,696
            )
            
            
            (4,157
            )Proceeds
      from sales of fixed assets
            
            
            -
            
            
            
            9,760Net
      cash (used) by investing activities
            
            
            (220,696
            )
            
            
            5,603Cash
      flows from financing activitiesProceeds
      from Warrant Exercise
            
            
            11,999
            
            
            
            -Proceeds
      from Subscription Receivable
            
            
            5,000,000
            
            
            
            -Net
      cash provided (used) by financing activities
            
            
            5,011,999
            
            
            
            -Effects
      of exchange rate changes
            
            
            (1,570
            )
            
            
            (5,319
            )Net
      increase (decrease) in cash
            
            
            3,060,901
            
            
            
            129,320Cash
      – beginning
            
            
            11,824,605
            
            
            
            327,332Cash
      – ending
            
            $
            14,885,506
            
            
            $
            456,652Supplemental
      disclosures:Interest
      paid
            
            $
            4,852
            
            
            $
            -Income
      Taxes paid
            
            $
            -
            
            
            $
            -Non-cash
      transactions:Stock
      and options issued for services
            
            $
            -
            
            
            $
            90,000Shares
      of stock issued
            
            
            -
            
            
            
            1,075,000Stock
      issued for acquisition
            
            $
            -
            
            
            $
            1,880,000Shares
      of stock issued
            
            
            -
            
            
            
            31,333,333Amortization
      of stock issued for services
            
            $
            -
            
            
            $
            35,163Amortization
      of discount on notes payable
            
            $
            -
            
            
            $
            382,525The
      accompanying notes are an integral part of these financial
      statements





5


ECOTALITY, INC.





NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





(UNAUDITED)


Note 1 – History and organization of
the company







The
Company was organized April 21, 1999 (Date of Inception) under the laws of
the State of Nevada, as Alchemy Enterprises, Ltd.  The Company was
initially authorized to issue 25,000 shares of its no par value common
stock.




On
October 29, 2002, the Company amended its articles of incorporation to
increase its authorized capital to 25,000,000 shares with a par value of $0.001.
 On January 26, 2005, the Company amended its articles of
incorporation again, increasing authorized capital to 100,000,000 shares of
common stock with a par value of $0.001.  On March 1, 2006, the
Company amended its articles of incorporation, increasing authorized capital to
300,000,000 shares of common stock, each with a par value of $0.001, and
200,000,000 shares of preferred stock, each with a par value of
$0.001.




On
November 26, 2006, the Company amended its articles of incorporation to
change its name from Alchemy Enterprises, Ltd. to ECOtality, Inc to better
reflect its renewable energy strategy.




The
former business of the Company was to market a private-label biodegradable
product line.  During the year ended December 31, 2006, the board of
directors changed the Company’s focus toward developing an electric power cell
technology.




On
June 11, 2007, the Company acquired the assets of the FuelCellStore.com, a
small web based seller of educational fuel cell products. The FuelCellStore.com
product line includes demonstration kits, educational materials, fuel cell
systems and component parts.  It also offers consulting services on
establishing educational programs for all levels of educational
institutions.  FuelCellStore.com now operates as a wholly owned subsidiary
call ECOtality Stores, Inc.  See note 4 for further
information.




On
October 1, 2007, the Company purchased certain assets of Innergy Power
Corporation and its wholly owned subsidiary, Portable Energy De Mexico, S.A. DE
C.V.  Innergy Power Corporation designs and manufactures standard and
custom solar-power and integrated solar-battery solutions for government,
industrial and consumer applications.  See note 4 for further
information.




On
November 6, 2007 the Company acquired all the outstanding capital stock of
Electric Transportation Engineering Corporation, as well as its affiliated
company The Clarity Group (collectively referred to as eTec).  eTec designs
fast-charge systems for material handling and airport ground support
applications.  eTec also tests and develops plug-in hybrids, advanced
battery systems and hydrogen ICE conversions.  See note 4 for further
information.




On
December 6, 2007 the Company acquired through eTec the Minit-Charger
business of Edison Enterprises. Minit-Charger makes products that enable fast
charging of lift trucks using revolutionary technologies.  See note 4 for
further information.





On
August 26, 2009, ECOtality Inc. management met with the shareholders at its
annual shareholders' meeting.  At this meeting the shareholders
approved an increase to the authorized number of common shares to 1,300,000,000
shares.




On
November 24, 2009 the Company effected a reverse split of 1:60 of its
$0.001 par value common stock and the ticker symbol was changed from "ETLY" to
"ETLE".  All shares in these financial statements have been
retroactively adjusted and presented for this reverse split.





On
January 7, 2010 the Company established a new, wholly owned subsidiary,
ECOtality Australia Pty Ltd., headquartered in Brisbane,
Queensland.  This subsidiary will market and distribute battery
charging equipment to support on-road vehicles (EV), industrial equipment , and
electric airport ground support equipment (GSE).





The
consolidated financial statements as of March 31, 2010 include the accounts of
ECOtality Stores, Innergy Power Corporation, eTec and ECOtality Australia Pty
Ltd.  .  All significant inter-company balances and transactions
have been eliminated.  ECOtality and its subsidiaries will collectively be
referred herein as the “Company”.








Note
2 -- Summary of Significant Accounting Policies





Use of
estimates


Preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Significant estimates have
been used by management in conjunction with the measurement of the valuation
allowance relating to deferred tax assets and future cash flows associated with
long-lived assets. Actual results could differ from those
estimates.





6


Cash and
cash equivalents


For
financial statement presentation purposes, the Company considers short-term,
highly liquid investments with original maturities of three months or less to be
cash and cash equivalents.





Interest
income is credited to cash balances as earned.  For the quarter ended
March 31, 2010 and 2009 interest income was $15,120 and $0
respectively.





Credit
risks


Financial
instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash deposits.  The Company maintains cash
and cash equivalent balances at financial institutions that are insured by the
Federal Deposit Insurance Corporation up to $250,000.  Deposits with these
banks may exceed the amount of insurance provided on such deposits.  At
March 31, 2010 and 2009, the Company had approximately $14,000,000 and $250,000
in excess of FDIC insured limits, respectively.





Accounts
receivable at March 31, 2010 was $1,474,495, and at March 31, 2009 was
$1,296,696. At March 31, 2010 we had one customer that represented in excess of
10% of our receivable balance.  United States Department of Energy had a
balance of $514,337. The Company has not experienced material losses in the past
from this or any other significant customer and continues to monitor its
exposures to minimize potential credit losses.





Impairment
of long-lived assets and intangible assets


Management
regularly reviews property, equipment, intangibles and other long-lived assets
for possible impairment. This review occurs quarterly, or more frequently if
events or changes in circumstances indicate the carrying amount of the asset may
not be recoverable. If there is indication of impairment, then management
prepares an estimate of future cash flows expected to result from the use of the
asset and its eventual disposition. If these cash flows are less than the
carrying amount of the asset, an impairment loss is recognized to write down the
asset to its estimated fair value. Management believes that the accounting
estimate related to impairment of its property and equipment, is a “critical
accounting estimate” because: (1) it is highly susceptible to change from
period to period because it requires management to estimate fair value, which is
based on assumptions about cash flows and discount rates; and (2) the
impact that recognizing an impairment would have on the assets reported on our
balance sheet, as well as net income, could be material. Management’s
assumptions about cash flows and discount rates require significant judgment
because actual revenues and expenses have fluctuated in the past and are
expected to continue to do so. During the three months ended March 31, 2010 and
2009,  the Company had no impairment expense.





Revenue
recognition


The
Company’s revenue recognition policies are in compliance with Staff Accounting
Bulletin (SAB) 104 and Accounting Research Bulletin (ARB) 45. Revenue is
recognized when a formal arrangement exists, the price is fixed or determinable,
all obligations have been performed pursuant to the terms of the formal
arrangement and collectability is reasonably assured.





Sales
related to long-term contracts for services (such as engineering, product
development and testing) extending over several years are accounted for under
the percentage-of-completion method of accounting .  Sales and
earnings under these contracts are recorded based on the ratio of actual costs
incurred to total estimated costs expected to be incurred related to the
contract under the cost-to-cost method based budgeted milestones or tasks as
designated per each contract. Anticipated losses on contracts are recognized in
full in the period in which losses become probable and estimable.





For all
other sales of product or services the Company recognizes revenues based on the
terms of the customer agreement.  The customer agreement takes the form of
either a contract or a customer purchase order and each provides information
with respect to the product or service being sold and the sales price.  If
the customer agreement does not have specific delivery or customer acceptance
terms, revenue is recognized at the time of shipment of the product to the
customer.





Management
periodically reviews all product returns and evaluates the need for establishing
either a reserve for product returns.  As of March 31, 2010 and 2009,
management has concluded that no reserve is required for product
returns.





The
Company warrants a limited number of eTec products against defects for periods
up to 120 months. The estimate of warranty liability is based on historical
product data and anticipated future costs. Should actual failure rates differ
significantly from our estimates, we record the impact of these unforeseen costs
or cost reductions in subsequent periods and update our assumptions and
forecasting models accordingly. At March 31, 2010 and 2009 the warranty reserve
was $243,489 and $144,613 respectively.  The increase to the reserve
was made in response to lengthening the warrantee period on several
items.





Accounts
receivable


Accounts
receivable are carried on a gross basis, with no discounting, less the allowance
for doubtful accounts. Management estimates the allowance for doubtful accounts
based on existing economic conditions, the financial conditions of the
customers, and the amount and the age of past due
accounts.  Receivables are considered past due if full payment is not
received by the contractual due date.  Past due accounts are generally
written off against the allowance for doubtful accounts only after all
collection attempts have been exhausted.  There is no collateral held
by the Company for accounts receivable.  The allowance for doubtful
accounts was $88,898 and $38,641 as of March 31, 2010 and 2009,
respectively.





7


ECOTALITY,
INC.




NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Inventory


Inventory
is valued at the lower of cost, determined on a first-in, first-out basis, or
market.  Inventory includes material, labor, and factory overhead
required in the production of our products.  Inventory obsolescence is
examined on a regular basis.  The allowance for obsolescence as of
March 31, 2010 and 2009 was $292,896 and $182,487 respectively.





Advertising
costs


The
Company expenses all costs of advertising as incurred.  There were
advertising costs of  $574 and $4,087 included in general and
administrative expenses for the quarter ended March 31, 2010 and 2009,
respectively.





Research
and development costs


Research
and development costs are charged to expense when incurred.  For the
quarter ended March 31, 2010 and 2009, research and development costs were
$12,834and
$11,467, respectively.





Contingencies


The
Company is not currently a party to any pending or threatened legal proceedings.
 Based on information currently available, management is not aware of any
matters that would have a material adverse effect on the Company’s financial
condition, results of operations or cash flows.





Fair
Value of Financial Instruments


The
carrying amounts of the Company’s financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses and notes
payable approximate their fair values based on their short-term nature. Fair
value estimates discussed herein are based upon certain market assumptions and
pertinent information available to management as of March 31, 2010 and 2009.
 The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values.





Loss per
Common Share


Net loss
per share is provided in accordance with ASC Subtopic 260-10. We present basic
loss per share (“EPS”) and diluted EPS on the face of statements of operations.
 Basic EPS is computed by dividing reported losses by the weighted average
shares outstanding.   Except where the result would be anti-dilutive to
income from continuing operations, diluted earnings per share has been computed
assuming the conversion of the convertible long-term debt and the elimination of
the related interest expense, and the exercise of stock warrants. Loss per
common share has been computed using the weighted average number of common
shares outstanding during the year. For the quarter ended March 31, 2010 and
2009, the assumed conversion of convertible long-term debt and the exercise of
stock warrants are anti-dilutive due to the Company’s net losses and are
excluded in determining diluted loss per share.





Foreign
Currency Translation


For the
quarter ended March 31, 2009 one Company subsidiary, Portable Energy De
Mexico, was operating outside the United States .  In the quarter
ended March 31, 2010 a second subsidiary, ECOtality Australia Pty was
established and the two entities were operating outside the United States
..  For both entities their local currency is their functional
currency. The functional currency is translated into U.S. dollars for balance
sheet accounts using the period end rates in effect as of the balance sheet date
and the average exchange rate is used for revenue and expense accounts for each
respective period. The resulting translation adjustments are deferred as a
separate component of stockholders' equity, within other comprehensive loss, net
of tax where applicable.





Stock-Based
Compensation


The
Company records stock-based compensation in accordance with SFAS No. 123R “Share
Based Payments”, using the fair value method. All transactions in which goods or
services are the consideration received for the issuance of equity instruments
are accounted for based on Emerging Issues Task Force Issue No. 96-18,
“Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services” using the fair
value of the consideration received or the fair value of the equity instrument
issued, whichever is more reliably measurable.





8


ECOTALITY,
INC.




NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)





Property
and Equipment


Property
and equipment are recorded at historical cost.  Minor additions and
renewals are expensed in the year incurred.  Major additions and renewals
are capitalized and depreciated over their estimated useful lives.  When
property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the accounts and any resulting gain or
loss is included in the results of operations for the respective period.
 The Company uses other depreciation methods (generally accelerated) for
tax purposes where appropriate.  The estimated useful lives for significant
property and equipment categories are as follows:





Equipment
            5-7
      yearsBuildings
            39
      years





Income
Taxes


The
Company has adopted the provisions of ASC subtopic 740-10 which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns.  Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax basis
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse. Deferred income tax expenses or
benefits are based on the changes in the asset or liability each period. If
available evidence suggests that it is more likely than not that some portion or
all of the deferred tax assets will not be realized, a valuation allowance is
required to reduce the deferred tax assets to the amount that is more likely
than not to be realized.  A valuation allowance is provided for those
deferred tax assets for which the related benefits will likely not be realized.
Future changes in such valuation allowance are included in the provision for
deferred income taxes in the period of change.





Deferred
income taxes may arise from temporary differences resulting from income and
expense items reported for financial accounting and tax purposes in different
periods. Deferred taxes are classified as current or non-current, depending on
the classification of assets and liabilities to which they relate. Deferred
taxes arising from temporary differences that are not related to an asset or
liability are classified as current or non-current depending on the periods in
which the temporary differences are expected to reverse.





The
Company does not anticipate any significant changes to its total unrecognized
tax benefits with the next twelve months. As of March 31, 2010 no income tax
expense has been incurred.




Dividends


The
Company has not yet adopted any policy regarding payment of dividends.  No
dividends have been paid or declared since inception.  For the foreseeable
future, the Company intends to retain any earnings to finance the development
and expansion of its business and it does not anticipate paying any cash
dividends on its common stock.  Any future determination to pay dividends
will be at the discretion of the Board of Directors and will be dependent upon
then existing conditions, including the Company’s financial condition and
results of operations, capital requirements, contractual restrictions, business
prospects and other factors that the board of directors considers
relevant.





Segment
reporting


Generally
accepted accounting procedures  require disclosures related to
components of a company for which separate financial information is available
that is evaluated regularly by a company’s chief operating decision maker in
deciding the allocation of resources and assessing performance.  In
this manner the Company has concluded it has three reportable segments;
ECOtality Stores,, Innergy Power segment and eTec segment (which includes
ECOtality Australia). The ECOtality Stores segment is the online marketplace for
fuel cell-related products and technologies with online distribution sites in
the U.S., Japan, Russia, Italy and Portugal. The Innergy Power segment is
comprised of the sale of solar batteries and other solar and battery powered
devices to end-users. The eTec segment includes our ECOtality Australia
operations and relates to sale of fast-charge systems for material handling and
airport ground support applications to the testing and development of plug-in
hybrids, advanced battery systems and hydrogen ICE conversions and consulting
revenues. This segment also includes the Minit-Charger business which relates to
the research, development and testing of advanced transportation and energy
systems with a focus on alternative-fuel, hybrid and electric vehicles and
infrastructures.  eTec holds exclusive patent rights to the eTec
SuperChargeTM and Minit-Charger systems - battery fast charge systems that allow
for faster charging with less heat generation and longer battery life than
conventional chargers. The Company has aggregated these subsidiaries into three
reportable segments: ECOtality/Fuel Cell Store, eTec and Innergy.





While
management is currently assessing how it evaluates segment performance, we
currently utilize income (loss) from operations, excluding depreciation of
corporate assets. We also exclude goodwill from segment assets. For the quarter
ended March 31, 2010 and 2009 inter-segment sales were $128,354 and $28,723
respectively.  All inter-segment sales have been eliminated during the
consolidation process.





9


Recent
Accounting Pronouncements





The FASB
issued ASC subtopic 855-10 (formerly SFAS 165 “Subsequent
Events”), incorporating guidance on subsequent events into
authoritative accounting literature and clarifying the time following the
balance sheet date which management reviewed for events and transactions that
may require disclosure in the financial statements.  The Company has
adopted this standard.  The standard increased our disclosure by requiring
disclosure reviewing subsequent events.  ASC 855-10 is included in the
“Subsequent Events” accounting guidance.




In April
2009, the FASB issued ASC subtopic 820-10 (formerly Staff Position
No. FAS 157-4,Determining Fair Value When Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly”) . ASC 820-10 provides guidance on how to determine the fair
value of assets and liabilities when the volume and level of activity for the
asset/liability has significantly decreased. FSP 157-4 also provides
guidance on identifying circumstances that indicate a transaction is not
orderly. In addition, FSP 157-4 requires disclosure in interim and annual
periods of the inputs and valuation techniques used to measure fair value and a
discussion of changes in valuation techniques. The Company determined that
adoption of FSP 157-4 did not have a material impact on its results of
operations and financial position.





In
July 2006, the FASB issued ASC subtopic 740-10 (formerly Interpretation No.
(“FIN”) 48, “Accounting
for Uncertainty in Income Taxes ”). ASC 740-10 sets forth a recognition
threshold and valuation method to recognize and measure an income tax position
taken, or expected to be taken, in a tax return. The evaluation is based on a
two-step approach. The first step requires an entity to evaluate whether the tax
position would “more likely than not,” based upon its technical merits, be
sustained upon examination by the appropriate taxing authority. The second step
requires the tax position to be measured at the largest amount of tax benefit
that is greater than 50 percent likely of being realized upon ultimate
settlement. In addition, previously recognized benefits from tax positions that
no longer meet the new criteria would no longer be recognized. The application
of this Interpretation will be considered a change in accounting principle with
the cumulative effect of the change recorded to the opening balance of retained
earnings in the period of adoption. Adoption of this new standard did not have a
material impact on our financial position, results of operations or cash
flows.





In April
2008, the FASB issued ASC 815-40 (formerly Emerging Issues Task Force (“EITF”)
07-05, "Determining whether an
Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock ").
ASC815-40 applies to any freestanding financial instruments or embedded features
that have the characteristics of a derivative, and to any freestanding financial
instruments that are potentially settled in an entity’s own common stock. ASC
815-40 is effective for financial statements issued for fiscal years beginning
after December 15, 2008.  The adoption of this pronouncement did not
have a material impact on its financial position, results of operations or cash
flows.





In June 2009, the
FASB issued ASC 105Accounting
Standards Codification TMand the Hierarchy of Generally
Accepted Accounting Principles . The FASB Accounting Standards
Codification TM (the “Codification”) has become the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in accordance with Generally
Accepted Accounting Principles (“GAAP”). All existing accounting standard
documents are superseded by the Codification and any accounting literature not
included in the Codification will not be authoritative. Rules and interpretive
releases of the SEC issued under the authority of federal securities laws,
however, will continue to be the source of authoritative generally accepted
accounting principles for SEC registrants. Effective September 30, 2009,
all references made to GAAP in our consolidated financial statements will
include references to the new Codification. The Codification does not change or
alter existing GAAP and, therefore, will not have an impact on our financial
position, results of operations or cash flows.





In June
2009, the FASB issued changes to the consolidation guidance applicable to a
variable interest entity (VIE). FASB ASC Topic 810, "Consolidation," amends the
guidance governing the determination of whether an enterprise is the primary
beneficiary of a VIE, and is, therefore, required to consolidate an entity, by
requiring a qualitative analysis rather than a quantitative analysis. The
qualitative analysis will include, among other things, consideration of who has
the power to direct the activities of the entity that most significantly impact
the entity's economic performance and who has the obligation to absorb losses or
the right to receive benefits of the VIE that could potentially be significant
to the VIE. This standard also requires continuous reassessments of whether an
enterprise is the primary beneficiary of a VIE. FASB ASC 810 also requires
enhanced disclosures about an enterprise's involvement with a VIE. Topic 810 is
effective as of the beginning of interim and annual reporting periods that begin
after November 15, 2009. This will not have an impact on the Company’s financial
position, results of operations or cash flows.





In June
2009, the FASB issued Financial Accounting Standards Codification No. 860 -
Transfers and Servicing. FASB ASC No. 860 improves the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor's continuing involvement, if any,
in transferred financial assets. FASB ASC No. 860 is effective as of the
beginning of each reporting entity's first annual reporting period that begins
after November 15, 2009, for interim periods within that first annual reporting
period and for interim and annual reporting periods thereafter. The adoption of
FASB ASC No. 860 will not have an impact on the Company’s financial
statements.





International
Financial Reporting Standards


In
November 2008, the Securities and Exchange Commission (“SEC”) issued for comment
a proposed roadmap regarding potential use of financial statements prepared in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board. Under the proposed roadmap, the
Company would be required to prepare financial statements in accordance with
IFRS in fiscal year 2014, including comparative information also prepared under
IFRS for fiscal 2013 and 2012. The Company is currently assessing the potential
impact of IFRS on its financial statements and will continue to follow the
proposed roadmap for future developments.





10


Reclassifications


Certain
reclassifications have been made to the prior years’ financial statements to
conform to the current year presentation.  These reclassifications had no
effect on previously reported results of operations or retained
earnings.





Year
end


The
Company has adopted December 31 as its fiscal year end.





Note
3 –  Fair Value Measurements





The
Company adopted ASC Topic 820-10 at the beginning of 2009 to measure the fair
value of certain of its financial assets required to be measured on a recurring
basis.  The adoption of ASC Topic 820-10 did not impact the Company’s
financial condition or results of operations.  ASC Topic 820-10
establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value.  The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements).  ASC Topic 820-10 defines
fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants on
the measurement date.  A fair value measurement assumes that the
transaction to sell the asset or transfer the liability occurs in the principal
market for the asset or liability.  The three levels of the fair value
hierarchy under ASC Topic 820-10 are described below:


Level
1 – Valuations based on quoted prices in active markets for identical
assets or liabilities that an entity has the ability to access.





Level
2 – Valuations based on quoted prices for similar assets and liabilities in
active markets, quoted prices for identical assets and liabilities in markets
that are not active, or other inputs that are observable or can be corroborated
by observable data for substantially the full term of the assets or
liabilities.





Level
3 – Valuations based on inputs that are supportable by little or no market
activity and that are significant to the fair value of the asset or
liability.





The
following table presents a reconciliation of all assets and liabilities measured
at fair value on a recurring basis as of March 31, 2010:







Level 1
            
            
            Level 2
            
            
            Level 3
            
            
            Fair ValueCash
      and CDs
            
            $
            14,885,506
            
            
            $
            -
            
            
            $
            -
            
            
            $
            14,885,506Accounts
      receivable
            
            
            -
            
            
            
            1,474,495
            
            
            
            -
            
            
            
            1,474,495Accounts
      payable
            
            
            -
            
            
            
            882,966
            
            
            
            -
            
            
            
            882,933Accrued
      liabilities
            
            
            -
            
            
            
            1,839,256
            
            
            
            -
            
            
            
            1,839,256Notes
      payable
            
            
            -
            
            
            
            287,500
            
            
            
            -
            
            
            
            287,500Total
            
            $
            14,885,506
            
            
            $
            4,484,217
            
            
            $
            -
            
            
            $
            19,369,690





The
following table presents a reconciliation of all assets and liabilities measured
at fair value on a recurring basis as of December 31, 2009:





Level 1
            
            
            Level 2
            
            
            Level 3
            
            
            Fair ValueCash
      and CDs
            
            $
            11,824,605
            
            
            $
            -
            
            
            $
            -
            
            
            $
            11,824,605Accounts
      receivable
            
            
            -
            
            
            
            1,296,696
            
            
            
            -
            
            
            
            1,296,696Accounts
      payable
            
            
            -
            
            
            
            372,982
            
            
            
            -
            
            
            
            372,982Accrued
      liabilities
            
            
            -
            
            
            
            1,438,177
            
            
            
            -
            
            
            
            1,438,177Notes
      payable
            
            
            -
            
            
            
            287,500
            
            
            
            -
            
            
            
            287,500Total
            
            $
            11,824,605
            
            
            $
            3,395,355
            
            
            $
            -
            
            
            $
            15,219,960








Note 4 - Acquisitions and
Goodwill




FuelCellStore.com
acquisition


On
June 11, 2007, the Company acquired the assets of the FuelCellStore.com, a
small web based seller of educational fuel cell products. The FuelCellStore.com
product line includes demonstration kits, educational materials, fuel cell
systems and component parts.  It also offers consulting services on
establishing educational programs for all levels of educational institutions.
FuelCellStore.com now operates as a wholly owned subsidiary called ECOtality
Stores, Inc. Our consolidated financial statements for the quarter ended March
31, 2010 and 2009 include the financial results of ECOtality Stores,
Inc.





Innergy
Power Corporation acquisition


On
October 1, 2007, the Company acquired certain assets of the Innergy Power
Corporation and its wholly owned subsidiary, Portable Energy De Mexico, S.A. DE
C.V. Innergy Power Corporation designs and manufactures standard and custom
solar-power and integrated solar-battery solutions for government, industrial
and consumer applications. Our consolidated financial statements for the the
quarter ended March 31, 2010 and 2009  include the financial results
of Innergy Power Corporation and its subsidiary.




11


eTec
acquisition


On
November 6, 2007, the Company acquired all the outstanding capital stock of
Electric Transportation Engineering Corporation, as well as its affiliated
company The Clarity Group (collectively referred to as eTec). eTec develops and
provides fast-charge systems designed for electric vehicle (EVs and PHEVs),
mobile material handling, airport ground support, and marine and transit
applications. eTec also tests and develops plug-in hybrids, advanced battery
systems and hydrogen ICE conversions. Our consolidated financial statements for
the quarter ended March 31, 2010 and 2009 include the financial results of
eTec.





The fair
market value of the transaction was $5,437,193. The Company paid $2,500,000 in
cash, issued a $500,000 note payable, and issued 108,333 shares of the company’s
common stock for the acquisition, which was valued at $1,820,000 based on the
closing market price on the date of the agreement.  The total value of the
transaction also included $217,193 in direct acquisition costs and the
subsequent Net Working Capital Adjustment discussed below.





The
$500,000 is payable was initially payable in monthly installments of $50,000
beginning December of 2007.  Payment of the balance of the note
payable remaining at December 31, 2008 was $235,253 and payment of this amount
was  made on December 11, 2009.





12


Included
in the purchase agreement was a Net Working Capital Adjustment which called for
an adjustment to the purchase price to be made via a post-Closing payment from
the Sellers to the Buyers or the Buyers to the Seller to the extent that the
actual Net Working Capital as of the Closing Date was more or less than the
agreed Net Working Capital Target. A reconciliation of actual vs. target net
working capital was presented by the Sellers in August 2008 and a True Up
Payment of $400,000 from the Buyers to the Sellers was agreed to in full
satisfaction of this purchase agreement requirement. The resulting note payable
represents an adjustment of the purchase price, and as such has been recorded as
an increase to Goodwill of $400,000.





The
balance of the note payable attributable to the Working Capital True up as of
December 31, 2008 was $400,000.  Payment of this amount was made on
December 11, 2009.  The balance due at March 31, 2010 was
$0.





The
aggregate purchase price was allocated to the assets acquired and liabilities
assumed on their preliminary estimated fair values at the date of the
acquisition.  The preliminary estimate of the excess of purchase price
over the fair value of net tangible assets acquired was allocated to
identifiable intangible assets and goodwill.  In accordance with U.S.
generally accepted accounting principles, we have up to twelve months from
closing of the acquisition to finalize the valuation.  The purchase
price allocation is preliminary, pending finalization of our valuation of
certain liabilities assumed.  The following table summarizes the
estimate of fair value of assets as part of the acquisition with
eTec:





Tangible
      assets acquired, net of liabilities assumed
            
            $
            1,941,315Goodwill
            
            
            3,495,878$
            5,437,193




The
Company reviewed the goodwill for impairment performing the necessary testing
for recoverability of the asset and measuring its fair value.   This
testing revealed current, historic, and future (projected) positive cash flows
supporting the full amount of goodwill.  As a result of this testing
in 2008 no impairment was taken in the year ended December 31,
2008.  In December 2009 and March 2010,  the Company
reviewed the goodwill for impairment performing the necessary testing for
recoverability of the asset and measuring its fair value.   This
testing again revealed current, historic, and future (projected) positive
cash flows supporting the full amount of goodwill.  As a result of
this testing no impairment was taken in the year ended December 31, 2009,
resulting in $0 impairment for those periods.




Minit-Charger
acquisition


On
December 6, 2007 the Company acquired through eTec the Minit-Charger business of
Edison Enterprises. Minit-Charger makes products that enable fast charging of
mobile material handling equipment using revolutionary proprietary
technologies.





The fair
market value of the transaction was $3,000,000. The company paid $1,000,000 in
cash and issued 33,333 shares of the company’s common stock for the
acquisition.  The company guaranteed to the sellers that the shares would
be worth $60 each ($2,000,000) by the tenth day following the first anniversary
date of the transaction. If the shares are not worth $2,000,000, the company
would be required to either issue additional shares such that the total shares
are worth $2,000,000 at that time or pay cash to the seller so that the
aggregate value of the 33,333 shares plus the cash given would equal
$2,000,000.





The fair
value of the common stock given, based on the closing price of the Company’s
common stock on December 31, 2007, was $370,000. A liability for the balance of
$1,630,000 based on the December 31 closing price was recorded as a current
liability for purchase price on the consolidated balance sheet as of December
31, 2007. This liability has been adjusted to reflect the actual obligation due
of $1,880,000 on the December 31, 2008 balance sheet.   This
obligation totals the $2,000,000 remaining purchase price obligation multiplied
by $56.40 (the difference between $60 and the VWAP of $3.60 for the thirty days
prior to the true up date of December 15, 2008).  The stock was issued
in full satisfaction of the agreement in the first quarter of 2009.








Note
5 – Fixed assets





Fixed
assets as of March 31, 2010 and 2009 consisted of the following:





At March 31,
      2010
              
              
              At March 31,
      2009Equipment
              
              $
              3,294,003
              
              
              $
              3,145,604Buildings
              
              
              575,615
              
              
              
              575,615Vehicles
              
              
              1,282,577
              
              
              
              1,575,010Furniture
      and fixtures
              
              
              167,847
              
              
              
              47,409Leasehold
      improvements
              
              
              727,203
              
              
              
              470,380Computer
      Software
              
              
              170,232
              
              
              
              80,5306,217,477
              
              
              
              5,894,548Less:
      accumulated depreciation
              
              
              (4,284,328
              )
              
              
              (4,397,046
              )1,933,149
              
              
              
              1,497,503





Depreciation
expense totaled $141,605 and $138,970, for the quarters ended March 31, 2010 and
2009 respectively.





13


Note
6 – Notes payable








On
January 16, 2007, the Company purchased an office building for an aggregate
price of $575,615.  $287,959 in cash was paid and the remaining
balance of $287,500 was structured as an interest-only loan.  The loan
bears an interest rate of 6.75% calculated annually, with monthly interest-only
payments due beginning on February 16, 2007.  The entire principal
balance is due on or before January 16, 2012 and is recorded as a long-term
note payable on the consolidated financial statements.





During
2007, the Company incurred a $500,000 note payable to the previous owners of
eTec through the acquisition of eTec. The loan is payable in ten monthly
installments of $50,000 each. See note 4 for details. As of December 31, 2008, $
235,253 was owed and recorded as an accrued liability for purchase price on the
consolidated financial statements.  This balance was paid in full on
December 11, 2009 and $0 was reflected in the financial statements on March 31,
2010.








NOVEMBER
AND DECEMBER 2007 DEBENTURES & SUBSEQUENT AMENDMENTS





In
November and December of 2007, the Company received gross proceeds of $5,000,000
in exchange for a note payable of $5,882,356 as part of a private offering of 8%
Secured Convertible Debentures (the “Debentures”).  The debentures were
convertible into common stock at $18 per share. Debenture principal payments
were due beginning in May and June of 2008 (1/24th of the outstanding amount is
due each month thereafter). In connection with these debentures, the Company
issued debenture holders warrants (“the Warrants”) to purchase up to 163,399
shares of the Company’s common stock with an exercise price of $19.20. The
warrants were exercisable immediately upon issue. The Warrants expire five years
from the date of issue.  The aggregate fair value of the Warrants equaled
$2,272,942 based on the Black-Scholes pricing model using the following
assumptions: 3.39%-3.99% risk free rate, 162.69% volatility, and strike price of
$19.20, market price of $13.20-$19.20, no yield, and an expected life of 912
days. The gross proceeds received were bifurcated between the note payable and
the warrants issued and a discount of $3,876,256 was recorded. The discount is
being amortized over the loan term of two and one half years.  As of
December 31, 2009 the total discount was fully amortized and recorded as
interest expense.  $0 was remaining at March 31, 2010.




AUGUST
2008 AMENDMENT TO THE DEBENTURES


On August
29, 2008 the Company signed an Amendment to the Debenture agreements deferring
the payments indicated above. The purpose of the agreement is to provide the
Company time to fund its working capital requirements internally through organic
growth as well as to obtain both short and long term funding through equity
financing and other sources of capital.





AUGUST
2008 WAIVER PROVISIONS:


The
waiver, deferment agreement aligns with the Company’s short term working capital
plan and provides time to achieve company objectives in this regard. In exchange
for the Amendment to the Debentures, the Company agreed to:





A.
            Waiver
      of interest payments due between May-December
  2008





B.
            Deferment
      of monthly redemptions for the period May-December
  2008.





C.
            Increase
      to the outstanding principal amount plus accrued interest though December
      31, 2008 for the debentures by 120% as of the effective date of the
      agreement.





D.
            Reset
      of the common stock conversion rate from $18.00 to
  $9.00.





E.
            Commencement
      of principal payments starting January 1, 2009 with no change to the
      redemption period (May 2010)





F.
            Commencement
      of interest payments @ 8% per year April 1, 2009 (first payment
      due).





G.
            Inclusion
      of make whole provisions to reset common stock warrant conversion prices
      to the value used to “true-up” both the Innergy Power Company and
      Minit-Charger (Edison) acquisitions when both “true-ups” are completed.
      For both of these acquisitions the Sellers were issued shares which the
      Company guaranteed would be worth $60.00 per share for the thirty days
      prior to the anniversary date of the purchase. This guarantee requires the
      issuance of additional shares or payment in cash for the difference in the
      share price on the respective anniversary dates. In the case of Innergy,
      the number of required “true up” shares is capped at
    66,666.





H.
            Inclusion
      of further make whole provisions to issue additional warrants adequate to
      maintain the pro rata debenture ownership % when fully diluted as per
      schedule 13 in the waiver
agreement.





I.
            Compliance
      with covenants per quarterly public reports issued for the periods ending
      June 30,
              September 30, and December 31, 2008 for the
      following:




1.
            Net
      cash used





2.
            Current
      ratio adjusted for non-cash
liabilities





3.
            Corporate
      Headquarters accounts payable
amount





14


IMPACT OF
THE AUGUST 2008 WAIVER PROVISIONS ON THE FINANCIAL STATEMENTS


During
the period ended September 30, 2008 the impact to the financial statements for
the provisions of the waiver noted above were estimated, the portion
attributable to the period ending September 30, 2008 was charged to interest
expense, and the remainder was capitalized as prepaid financing charges (see
details in #1 through #3 below).  During the last three months of the
waiver period, October to December 31, 2008, the remainder of the capitalized
prepaid financing charges of $2,378,672 were charged to interest
expense.  At December 31, 2008 all costs of the initial waiver had
been fully expensed.





1.
            The
      increase to principal of $1,559,859 (see letter “C” above) was added to
      the long term note, $1,157,315 was capitalized in prepaid financing
      charges and the portion of the increase attributable to the nine month
      period ending September 30, 2008 of $402,544, less previously accrued
      interest (now incorporated in the principal) of $191,438 was charged to
      interest expense. The capitalized remainder of $1,157,315 was charged to
      interest expense in the year ended December 31,
  2008.





2.
            The
      estimated change in value of the original 163,399 debenture warrants
      related to the pending reset of the exercise price (see letter “G” above)
      was calculated by using the Volume Weighted Average Price (VWAP) for the
      most recent 30 days prior to September 30, 2008 of $4.80 as the estimated
      new exercise price following the reset and the warrants were valued first
      at their current exercise price then at the estimated new price using the
      Black Scholes Model using the following assumptions: Strike Price $19.20
      (old) and $4.80 (new), Stock Price $6.00 (price on date of agreement),
      time 780 days for November Warrants and 795 for December Warrants,
      Volatility 146.39%, Risk Free Interest Rate 3.83%. The increase in value
      calculated totaled $207,941.  Of the total, $154,279 was
      capitalized as prepaid financing costs and was amortized over the waiver
      period ending December 31, 2008.




3.
            The
      estimated number of additional warrants required to be issued to true up
      to the original aggregate exercise price for the November and December
      Warrants (see letter “G” above) following the reset of the exercise price
      was calculated using the difference between the current aggregate exercise
      price of $3,137,256 (163,399 total warrants at original exercise price
      $19.20), and the new aggregate exercise price of $784,314 following the
      reset of the exercise price to $4.80. This difference totaled $2,352,942
      requiring the issuance of an estimated 490,196 warrants (at $4.80) to
      maintain the previous aggregate exercise price. The new warrants were
      valued at $1,438,235 using the Black Scholes Model with the following
      assumptions: Strike Price $4.80, Stock Price $4.20 (price at September 30,
      2008), time 753 days, Volatility 146.39%, Risk Free Rate 3.83%. Of the
      total, $1,067,077 was capitalized as prepaid financing costs and was
      amortized over the waiver period ending December 31,
  2008.








IMPACT OF
OCTOBER 2008 TRUE-UP (REQUIRED BY THE AUGUST 2008 WAIVER) TO THE FINANCIAL
STATEMENTS


On
October 17, 2008, a purchase price true up with Innergy was completed, whereby
we satisfied our purchase price obligation to Innergy in the form of a share
issuance (please see Note 4 for details).  This share issuance
triggered the make whole provision in the debenture waiver (letter “G” above)
which required us to immediately reset their warrant exercise price of $9.00 to
the VWAP in place at the time of the Innergy True up of $3.60, as well as to
change their debt conversion rate from the previous $9.00 to
$3.60.  This true up also required the issuance of new warrants to
allow the denture holders to maintain their previous aggregate exercise price
following the update.  The calculations for this change to our
debenture debt is outlined below.  All related charges were
immediately charged to interest expense.





1.
            The
      estimated change in value of the restated  debenture warrants
      related to the reset of the exercise price (see letter “G” above) was
      calculated by using the stock price employed for the Innergy true up
      calculation of $3.60 as the new exercise price following the reset and the
      warrants were valued first at their current exercise price then at the
      estimated new price using the Black Scholes Model using the following
      assumptions: Strike Price $4.80 (old) and $3.60  (new), Stock
      Price $6.00 (price on date of agreement), time 780 days for November
      Warrants and 795 for December Warrants, Volatility 146.39%, Risk Free
      Interest Rate 3.83%. The increase in value calculated totaled $35,001 and
      was charged to interest expense.2.
            The
      estimated number of additional warrants required to be issued to true up
      to the previous aggregate exercise price for the November and December
      Warrants (see letter “G” above) following the reset of the exercise price
      was calculated using the difference between the previous aggregate
      exercise price of $4.80 and the new aggregate exercise price following the
      reset to $3.60. This change  required the issuance of an
      additional 139,191 warrants (at $3.60) to maintain the previous aggregate
      exercise price. The change in value of the old vs. the  new
      increased number of warrants was ($445,061) using the Black Scholes Model
      with the following assumptions: Strike Price $3.60, Stock Price $2.40
      (price at December 31, 2008), time 753 days, Volatility 146.39%, Risk Free
      Rate 3.83%. The reduction in value (due to the lower stock price) was
      charged to interest expense.





15


On
January 30, 2009 a purchase price true up with Edison was completed, whereby we
satisfied our purchase price obligation to Edison in the form of a share
issuance (please see Note 4 for details).  This share issuance
triggered the make whole provision in the debenture waiver (letter “G” above)
which required the issuance of new warrants to allow the debenture holders to
maintain their previous aggregate exercise price following the
update.   This calculation resulted in the issuance of an additional
4,720,408 warrants (at $0.06) to maintain the previous aggregate exercise price.
The change in value of the old vs. the new increased number of warrants was
$124,147 using the Black Scholes Model consistent with the Innergy true
up.  The cost of the increased warrants of $124,147 was charged to
interest expense in the quarter ended March 31, 2009.





MARCH
2009 AMENDMENT TO THE DEBENTURES


On
March 5, 2009 we entered in to an Agreement entitled “Amendment to Debentures
and Warrants, Agreement and Waiver” (the “Agreement”) restructuring
our equity with the institutional debt holders of the our Original Issue
Discount 8% Senior Secured Convertible Debentures, dated November 6, 2007 (the
“November 2007 Debentures”)  (aggregate principal amount equal to
$4,117,649) and with our debt holder of our Original Issue Discount 8% Secured
Convertible Debentures, dated December 6, 2007 (the “December 2007
Debenture”)  (aggregate principle amount equal to
$1,764,707).  The November and December 2007 Debentures are held by
Enable Growth Partners LP (“EGP”), Enable Opportunity Partners LP (“EOP”),
Pierce Diversified Strategy Master Fund LLC, Ena (“Pierce”), and BridgePointe
Master Find Ltd  (“BridgePointe”)(individually referred to as “Holder”
and collectively as the “Holders”). The Agreement’s effective date is January 1,
2009.





MARCH
2009 WAIVER PROVISIONS:


In
exchange for signing an Amendment to Debentures and Warrants, Agreement and
Waiver which defers  interest payments due for the first quarter 2009 until
May 1, 2009 and payment of monthly principal redemptions until May 1, 2009, we
agreed to the following:





A.
            Adjust
      the conversion price of the November 2007 Debentures and December 2007
      Debenture s to $3.60.





B.
            The
      Holders collectively shall maintain an equity position in the Company, in
      fully diluted shares, of 50.4 %. Should the Holders’ equity position
      collectively become less than the 50.4%, the Company shall issue warrants
      to each Holder, pro-ratably to bring Holders’ equity position back to
      50.4%.C.
            Additional
      covenants related to not exceeding $2,000,000 accounts payable amount or
      payment of other liabilities while the debentures are
      outstanding.D.
            The
      right to recommend for placement on the Company 's Board of Directors, a
      nominee by either BridgePointe or BridgePointe’s investment manager
      Roswell Capital Partners LLC. Such a recommendation shall meet the
      Company’s requirements as set forth in the Company’s Bylaws and all
      applicable federal and state law. The nominee shall serve until such time
      as the Company has redeemed the debentures.E.
            All
      outstanding Warrants (defined in the Securities Purchase Agreements dated
      November 6, 2007 and December 6, 2007 ), and all Warrants issued to
      Holders as consideration for the current or prior Amendments to the
      November 2007 Debentures and the December 2007 Debentures shall be amended
      t o have an exercise price of $3.60 (to the extent that such exercise
      price was previously above $3.60), and the expiration dates shall be
      extended to May 1, 2014.





F.
            Use
      best efforts to obtain stockholder approval of an increase in the
      authorized number of shares of common stock of the Company. The proposal
      shall increase the number of authorized common shares from 300,000,000 to
      500,000,000.G.
            In
      addition, the Securities Agreement, dated November 6, 2007 and all UCC-1
      filings made as required thereof, shall be amended to include each of the
      Company’s current and future Patents and Trademarks. In addition the
      Company shall file notice of the Assignment for Security of the Company’s
      current and any future Patents and Trademarks with the United States
      Patent and Trademark Office and other foreign countries as
      appropriate.





IMPACT OF
THE MARCH 2009 WAIVER PROVISIONS ON THE FINANCIAL STATEMENTS:


There was
no financial impact of the March 2009 waiver as the warrants mentioned were
reset to $3.60 at the time of the October 2008 true up.








The
current portion of the debentures was recorded, net of a $1,530,101 discount, at
$4,448,837 at March 31, 2009.  The long-term portion of the debentures
was recorded, net of a $166,211 discount, at $1,029,577 as of March 31,
2009.





Included
in accrued liabilities was $104,753 of accrued interest relating to the
debentures at March 31, 2009.





Interest
expense totaled $616,277 for the quarter ended March 31, 2009.





16


For
the quarter ended March 31, 2010





MAY
2009 AMENDMENT TO THE DEBENTURES


Despite
the current tenuous economic situation, the financial opportunities specifically
in the Stimulus projects related to electric transportation, were
deemed  material to the Company’s future, thus  on  May
15, 2009, the Company and the Debenture Holders entered into an agreement
entitled “Amendment to Debentures and Warrants, Agreement and Waiver” (the
“Agreement”) restructuring the Company’s equity as well as establishing an
inducement for additional working capital for the Company.  The
Agreement’s effective date was May 1, 2009.





MAY 2009
WAIVER PROVISIONS:


The
Company agreed to the following:





1.
            Defer
      payment of interest until November 1, 2009. Interest to be paid monthly
      from that date.  Interest accrued though September 30, 2009 will
      be added to principal.





2.
            Commence
      redemption of principal on January 1, 2010 in 10 equal
      payments.





3.
            Consent
      to obtaining additional working capital for specified uses not to exceed
      $2,500,000 in the same form and rights of debentures pari pasu in
      seniority both as to security interest priority and right of payment with
      the debenture held by the existing
holders.





4.
            Segregation
      of payment of the Karner bridge note, reaffirmed Karner and Morrow
      employment agreements, identifies specific contract carve outs should the
      Company fail to achieve certain target objectives, and provide for a bonus
      should the target be achieved.





5.
            Maintain
      the conversion price of the November 2007 Debentures and December 2007
      Debentures at $.06.





6.
            Additional
      covenants related to not exceeding $2,500,000 accounts payable amount or
      payment of other liabilities while the debentures are outstanding. Other
      covenants include maintaining minimum cash flow amounts. Allowing for
      inspection of financial records, and achieving Stimulus contract target
      objectives.





7.
            The
      right to recommend for placement on the Company's Board of Directors, two
      (2)  nominees by either BridgePointe or BridgePointe’s
      investment manager Roswell Capital Partners LLC or other debenture
      holders. Such a recommendation will meet the Company’s requirements as set
      forth in the Company’s Bylaws and all applicable federal and state law.
      The nominees may serve until such time as the Company has redeemed the
      debentures.8.
            The
      existing Holders collectively will maintain an equity position in the
      Company, in fully diluted shares, of 80%. Should the existing holders
      Holders’ equity position collectively become less than the 80%, the
      Company will issue warrants to each existing Holder, pro-ratably to bring
      Holders’ equity position back to 80%. However, there are provisions (when
      additional capital is raised (not to exceed $2,500,000)) to bring the
      fully diluted position to 70% for the existing Holders as well as those
      Holders of new capital debentures.  There are provisions to
      further reduce the debenture holders to 65% should management achieve
      certain specified performance targets.9.
            All
      outstanding Warrants (defined in the Securities Purchase Agreements dated
      November 6, 2007 and December 6, 2007), and all Warrants issued to Holders
      as consideration for the current or prior Amendments to the November 2007
      Debentures and the December 2007 Debentures will be amended to have
      an exercise price of $0.60 (to the extent that such exercise price
      was previously above $3.60), and the termination dates for the makeup
      warrants will be five (5) years from date of
  issuance.




10.
            Use
      best efforts to obtain stockholder approval of an increase in the
      authorized number of shares of common stock of the Company.  The
      proposal shall increase the number of authorized common shares from
      300,000,000 to 1,300,000,000.11.
            Agreed
      to specific provisions relating to disclosure of material nonpublic
      information by debenture holder board members, or at other times when
      complying with the provisions of the debenture waive
      agreement..





IMPACT OF
THE MAY 2009 WAIVER PROVISIONS ON THE FINANCIAL STATEMENTS:


In the
quarter ended June 30, 2009, the financial impact of the May waiver was
calculated and fully amortized as noted below, over the waiver period of May 15,
2009 through December 31, 2009.





17




1.
            The
      change in value of the restated debenture warrants related to the
      reset of the exercise price (see #9 above) was calculated using the Black
      Scholes Model using the following assumptions: Strike Price $0.06 (old)
      and $0.01 (new), Stock Price $0.11 (price on date of agreement), time
      162.34 days Volatility 162.34%, Risk Free Interest Rate 3.10%. The
      increase in value calculated totaled $887,843.  This amount was
      added to additional paid in capital, and a contra-equity account
      for  “Unamortized Financing Charges” was established as the
      offset.  The portion of the Unamortized Financing Charges” that
      was charged to interest expense through September 30, 2009 was $532,706
       The remaining $355,137 was expensed over the remainder of the waiver
      period (October through December 2009).2.
            The
      number of additional warrants  to be issued to support the
      requirement of an 80% equity position as described in #8 above was
      calculated as follows:  Total Debenture warrants outstanding
      prior to the waiver = 871,460 + shares available on debenture conversion
      2,046,125 = 2,917,585 Total Fully Diluted Debenture Holder Ownership
      Pre-Waiver.  Total Company Fully Diluted Shares at May 15, 2009
      of 14,347,848 was used as the base on which to calculate the 80% ownership
      target  of  11,478,278 shares.  To determine
      the warrants to be issued the 80% target figure of 11,478,278 less total
      Debenture Holder Ownership of 2,917,585 resulted in 8,560,692 (additional
      warrants to be issued).  To value the new warrants we used the
      market cap at the date of the issuance calculated as shares outstanding at
      May 15, 2009 of 2,698,436 multiplied by the closing share price
      of  $6.60 = $17,809,681.  To get the portion of the
      market cap  attributable to the new warrants (vs. those already
      held by the debenture holders ) we divided the # of new warrants
      (8,560,692) by the total 80% ownership target number of shares for the
      debenture holders (11,478,278)  to get (75%).  The 75%
      was multiplied by  80% total ownership %, and the resulting 60%
      was then multiplied by the total market cap to get the portion of the
      market cap attributable to the new issuance of  $10,626,208.
      This amount was added to additional paid in capital, and a contra-equity
      account for “Unamortized Financing Charges” was used as the
      offset.




All
Unamortized Financing Charges were amortized and charged to charged to interest
expense over the waiver period in the year ending December 31,
2009.





JUNE
2009 Amendment to the MAY Amendment to the Debentures


The
debenture holders and the Company signed a First Amendment to Amendment to
Debentures and Warrants, Agreement and Waiver dated June 30,
2009.  This amendment modified the May 15, 2009 Amendment
by:





a.
            Increasing
      approval authority for specified transactions for the November and
      December 2007 and July 2009 Debenture Holders to 85% from 75% of
      outstanding principal amount.





b.
            Clarifying
      whom has Board of Director member
rights





c.
            Clarifying
      the June 30, 2009 warrant true-up calculation, per the May 15, 2009
      Amendment.





IMPACT OF
THE PROVISIONS OF THE JUNE AMENDMENT TO THE FINANCIAL STATEMENTS:


There was
no impact to the financial statements related to the June amendment to the May
15, 2009 amendment.







JULY
2009  NEW DEBENTURE ISSUANCE





To
support ECOtality’s expansion and current working capital needs, the Company
received a direct investment of $2,5000,000 in 8% Secured Convertible Debentures
due October 1, 2010, of which Shenzhen Goch Investment Ltd was issued $2,000,000
in debentures, Enable Growth Partners (current debenture holder) was issued
$250,000 in debentures, and BridgePointe Master Fund (current debenture holder)
was issued $250,000 in debentures. The debentures have an exercise price or
$3.60 per share of ECOtality common stock.  The July 2009
Debentures:





a.
            Are
      consistent with the initial debentures issued in November and December
      2007 except this series is secured, convertible rather than original issue
      discount debentures.





b.
            Update
      the original Security Purchase Agreements, Securities Agreements,
      Registration Rights Agreements, Subsidiary Guarantees, and related
      disclosure schedules.





c.
            Provide
      for issuance of warrants to Shenzhen Goch Investment Ltd for their capital
      investment and adjusting the warrants held by Enable and BridgePointe
      subject to the June 30, 2009 true up as defined in the May 15,
      2009 Amendment.





d.
            Restate
      the agreement  to increase the number of the Company’s
      authorized common shares from 300,000,000 to
  1,300,000,000.





18




e.
            Restate
      the covenants established in the May 15, 2009 Amendment and the Karner
      “carve-out” should certain “Stimulus” contract targets not be achieved. In
      accordance with the terms of the May 15 Amendment, the Company and Karner
      agreed that if Karner continues to remain a full-time employee, and The
      Company (with Karner’s assistance) fail to secure executed Stimulus
      Contracts (as defined in the May 15 Amendment) having an aggregate total
      contract value of $20,000,000 or more during the period from May 15, 2009
      through October 1, 2009, then The Company  must, on or prior to
      October 9, 2009, transfer ownership of all stock and assets of The Clarity
      Group, Inc. to Karner.





OCTOBER
2009 SECURITIES EXCHANGE AGREEMENT





On
October 31, 2009, ECOtality, Inc. (“ECOtality” or the “Company”) signed a
Securities Exchange Agreement with all holders of its convertible
debentures and holders of certain warrants to convert all outstanding
amounts ($9,111,170) under these debentures and all related warrants into an
aggregate of 8,597,299  shares of Series A Convertible Preferred Stock
(while not impacted by the current common stock split discussed herein, it could
be subject to adjustment for future forward and reverse stock splits, stock
dividends, recapitalizations and the like). The Series A Convertible
Preferred Stock has no redemption or preferential dividend rights, but may be
converted into shares of the Company’s common stock (the “Common Stock”) at a
1:1 ratio.





As of
March 31, 2010  a liability has been accrued of  $641,089 in
anticipation of  a potential penalty related to the registration
rights agreement as included in the October 31 Securities Purchase Agreement
(SPA).  This agreement’s provisions called for the filing of a
registration statement within 45 days of the SPA being signed.  For
reasons largely outside Management’s control, this filing has been
delayed.  A waiver agreement is currently being circulated amongst the
affected investors seeking relief for all or the majority of this penalty to be
waived in recognition of these circumstances.  As no waiver has yet
been signed, at the date of this filing the maximum penalty has been accrued and
expensed.





IMPACT OF
THE PROVISIONS OF THE SECURITIES EXCHANGE AGREEMENT ON THE FINANCIAL
STATEMENTS:


The
outstanding principal and unpaid interest on the date of the agreement was
$9,111,170.  The outstanding debenture liability was relieved in full
and a credit was recorded to additional paid in capital in the amount
of  9,102,573 and preferred stock was credited at par value of $0.001
multiplied by the 8,597,299 shares that were issued, for a credit of
$8,597.  The unamortized discount on the convertible debentures was
$676,244 immediately prior to the transaction.  This amount was
charged in full to interest expense in the year ended December 31,
2009.








The
balance of the debenture debt at March 31, 2010 was $0.


.




On August
29, 2008, Mr. Donald Karner, a director of the Company, and Kathryn Forbes
agreed to provide the Company a line of credit for up to $650,000. This Line was
secured by a second position on receivables (junior to previously issued
debentures). During the year ended December 31, 2008, $450,000 was advanced by
Mr. Karner and Ms. Forbes. Further advances above $450,000 were contingent on
the Company securing additional financing as agreed by October 26, 2008. This
line carries a loan fee of $45,000 payable when the line expires.  The
line was originally scheduled to expire December 15, 2008, but was extended to
April 20, 2009 by the Lenders.  In consideration of the extension, an
interest fee of $50,000 was paid to the Lenders in December 2008.  No
other interest payments or fees are required under the agreement. The fee of
$45,000 was expensed in full as of December 31, 2008.  All amounts
advanced under the Line are due and payable in full on April 20, 2009. The
balance of the note payable was $450,000 at December 31, 2008.  This
balance was paid in full on December 11, 2009 leaving a $0 balance in accrued
liabilities related to this item at March 31, 2010.




.


Note
7 – Stockholders’ equity





The
Company is authorized to issue 1,300,000,000 shares of its $0.001 par value
common stock and 200,000,000 shares of $0.001 par value preferred
stock.




Common
Stock





On August
8, 2008 the Company entered into a contract for services with vendor that called
for the issuance of 6,500 shares of the Company’s $0.001 common
stock.  These shares were valued at $54,900 and were expensed over the
life of the contract.  At December 31, 2008 $22,750 had been expensed
leaving a balance of $31,850 in prepaid services.  In the nine months
ended September 30, 2009 the remaining $31,850 was expensed leaving a balance of
$0  in prepaid services at September 30,2009.





There
were 2,157,048 shares of common stock issued and outstanding at December
31, 2008.





On
December 6, 2007 the Company acquired through eTec the Minit-Charger business of
Edison Enterprises. The fair market value of the transaction was $3,000,000. The
company paid $1,000,000 in cash and issued 33,333 shares of the company’s common
stock for the acquisition.  The company guaranteed to the sellers that the
shares would be worth $60 each ($2,000,000) by the tenth day following the first
anniversary date of the transaction. If the shares are not worth $2,000,000, the
company would be required to either issue additional shares such that the total
shares are worth $2,000,000 at that time or pay cash to the seller so that the
aggregate value of the 2,000,000 shares plus the cash given would equal
$2,000,000.  This purchase price obligation was settled in full on
January 30, 2009 with the issuance of 522,222 shares of ECOtality’s $0.001 par
value common stock.





19


In March
2009 the Company issued 17,917  shares of the Company’s $0.001 common
stock in satisfaction of $90,000 in accounts payable owed to two service
vendors.





On April
13, 2009 1,250 shares of common stock owed in 2008 were issued to an employee in
accordance with an employment agreement.





For the
year ended December 31, 2009, 16,667 shares of common stock valued at $260,000
and  were issued and 16,667 were owed in return for professional
services.





19,895
shares were issued to Corporate Headquarter employees as
compensation.  These awards were valued at $128,987 and approved by
the Board and were issued in recognition of performance during the year ended
December 31, 2009.





On
October 31, 2009, ECOtality signed a Securities Purchase Agreement and a
Registration Rights Agreement with certain accredited investors (the
“Investors”) pursuant to which the Investors agreed to purchase shares of the
Company's Common Stock at a purchase price of $7.20 per
share.  $20,500,000 was raised pursuant to the Purchase Agreement in
the year ended December 31, 2009.   Total fees to brokers
associated with the capital raise were $1,204,935 in cash as per their
contracted fee agreements.  $15,500,000 was received in the year ended
December 31, 2009.  1,458,330 Shares were issued in 2009 in
satisfaction of $10,500,000 of the investment received.  The the
remaining $5,000,000 received in 2009 and an additional $5,000,000 subscribed in
2009 were related to a single investor.  To capture the partial
receipt and outstanding commitment,  a subscription receivable of
$5,000,000 and 1,388,889shares owed but not issued were recorded at December 31,
2009 and were subsequently issued upon receipt of the second half of the
investor's total $10,000,000 investment in January of 2010.  At March
31, 2010 all related shares were issued and outstanding.  In addition
to the shares and fees described above, the purchase agreement called for the
issuance of  2,847,222 warrants to the new investors and 163,194
warrants to the brokers involved in the capital raise, as part of the
contractual fee agreements.  These are five year warrants with an
exercise price of $9.00 and were issued November 10, 2009.




On
September 30, 2009, triggering conditions were met under the management
incentive plan resulting in the grant of an equity award to Mr. Jonathan Read
valued at $8.1 million. This award, originally stated in terms of warrants was
never issued, was subsequently revised and reduced, with final grant and award
of 673,505 shares of the Company’s $0.001 par value common stock being granted
to Mr. Read on January 15, 2010, with final issuance of the shares on January
27, 2010. The value of the final award was calculated at the time of the
issuance of the shares on January 27, 2010. The share price on that date was
$5.50 for total compensation of $3,704,278. At December 31, 2009 the full amount
of the original award of $8.1 million was recorded in additional paid in capital
and the shares were shown as owed but not issued. At March 31, 2010 the 673,505
shares are issued and outstanding.  The award amount booked to
additional paid in capital was not reduced from the original $8.1 million
estimate to the $3.7 million final award value in compliance with
GAAP.




For the
year ended December 31, 2009, 2,118,723 shares were issued on the cashless
conversion of 2,256,656 debenture warrants with an exercise price of $0.60 as
follows. Enable Growth exercised 970,353 warrants in exchange for 913,805
shares,  Enable Opportunity exercised 114,159 warrants in exchange for
107,506 shares, Pierce Diversified Master Fund exercised 57,079 warrants in
exchange for 53,753 shares,  BridgePointe Master Fund exercised
1,080,210 warrants in exchange for 1,010,324 shares and Glenwood Capital, LLC
(recipient of assigned warrants) exercised 34,854 warrants in exchange for
33,333 shares





For the
year ended December 31, 2009, 98,610 shares were issued on the cashless
conversion of 105,306 Brookstreet Investor warrants at $0.60 exercise
price.





For the year ended
December 31, 2009, 302,778 shares on the Company's $0.001 par value common
stock  were issued for conversion of debenture debt in the amount
of  $1,090,000 at a rate of $3.60 as follows:  Pierce
Diversified Master Fund converted $42,000 in debt for 11,667 shares, Enable
Growth converted $714,000 in debt for 198,333 shares, Enable Opportunity
converted $84,000 in debt for 23,333 shares and BridgePointe Master Fund
converted $250,000 in debt for 69,444 shares.





There
were 6,713,285 shares of Common Stock outstanding and 2,079,061 shares owed but
not issued at December 31, 2009.





Shares
owed but not issued at December 31, 2009 (as described in detail above) were
subsequently issued in the quarter ended March 31, 2010 as
follows:  673,505 shares were issued to Jonathan Read, 16,666 shares
were issued to a consultant and 1,388,888 shares were issued to new
investors.





19,998
shares of Common Stock were issued in the quarter ended March 31, 2010 relating
to the exercise of  warrants with an exercise price of
$0.60.  The warrants were exercised in the following
increments:  9,999 on January 11, 2010, 3,333 on January 15, 2010,
3,333 on January 19, 2010 and 3,333 on March 22, 2010.  These warrants
were exercised for cash.





On March
3, 2010 60,000 shares were issued to BridgePointe Master fund on the conversion
of the same number of preferred shares.





130
previously outstanding fractional shares of Common Stock (resulting from the
November 2009 reverse stock split) were bought back and cancelled by the Company
reducing the total outstanding shares by that amount.





20


There
were 8,872,474 shares of Common Stock outstanding and 0 shares owed but not
issued at March 31, 2010.








Preferred
Shares





On
October 31, 2009, ECOtality, Inc. (“ECOtality” or the “Company”) signed a
Securities Exchange Agreement with all holders of its convertible
debentures and holders of certain warrants to convert all outstanding
amounts ($9,111,170) under these debentures and all 6,455,083 related warrants
into an aggregate of 8,597,299  shares of Series A Convertible
Preferred Stock (while not impacted by the current common stock split discussed
herein, it could be subject to adjustment for future forward and reverse stock
splits, stock dividends, recapitalizations and the like). The Series A
Convertible Preferred Stock has no redemption or preferential dividend rights,
but may be converted into shares of the Company’s common stock (the “Common
Stock”) at a 1:1 ratio





There
were 8,597,299 shares of Series A Convertible Preferred Stock outstanding at
December 31, 2009.





On March
3, 2010 BridgePointe Master Fund converted 60,000 shares of their preferred
stock into 60,000 shares of Common Stock.





There
were 8,537,299 shares of Series A Convertible Preferred Stock outstanding at
March 31, 2010.








Note
8 – Options and Warrants





At
December 31, 2008, there were 963,979 options and warrants
outstanding.





A third
reset of the November and December debenture warrants occurred in January 2009
due to the Edison True up outlined in Note 6.  This reset led to the
issuance of an additional 78,673 warrants attributable to the November and
December Warrants with an exercise price of $3.60.





On May
15, 2009 the November and December debentures were amended as outlined in Note
6.  As a result, the existing warrants were reset from $3.60 to $0.60
exercise price and an additional 8,560,692 true up warrants were also issued to
provide for an 80% equity position agreed to as part of this
amendment.





In
conjunction with the new July 2 debentures discussed more fully in Note 6, the
November and December 2007 debenture holders surrendered 720,703warrants in
compliance with the June 30th True Up requirement contained in the May 15, 2009
debenture waiver.





For the
year ended December 31, 2009, 2,118,723 shares were issued on the cashless
conversion of 2,256,656 debenture warrants with an exercise price of $0.60 as
follows. Enable Growth exercised 970,353 warrants in exchange for 913,805
shares,  Enable Opportunity exercised 114,159 warrants in exchange
for 107,506 shares, Pierce Diversified Master Fund exercised 57,079
warrants in exchange for 53,753 shares,  BridgePointe Master Fund
exercised 1,080,210 warrants in exchange for 1,010,324 shares and Glenwood
Capital, LLC (recipient of assigned warrants) exercised 34,854 warrants in
exchange for 33,333 shares





In
accordance with our October 2009 Securities Purchase Agreement, new investors
would secure 1 share of common stock per $7.20 invested plus one warrant to
purchase one share of common stock for a price of $9.00.  In return
for total equity investments received of $15.5 million in addition to a
subscription receivable of an additional $5 million, 2,847,222 five year
warrants were issued on November 10, 2009 with an exercise price of $9.00 to 13
new investors.  In addition, 163,194 five year warrants with an
exercise price of $9.00 were issued to brokers involved in the capital raise
activities in accordance with their contractual agreements.





During
the year ended December 31, 2009:18,332 five year warrants
with an exercise price of $0.60 were issued to two consultants in accordance
with their contractual agreements, 17,615 five year warrants with an exercise
price of $0.60 were issued to Brookstreet Investors in satisfaction of
anti-dilution provisions as outlined in their Securities Purchase Agreements,
and 105,693 warrants with an exercise price of $0.60 were cashless exercised by
Brookstreet Investors in return for 98,610 shares of common stock.





On
October 31, 2009, ECOtality, Inc. (“ECOtality” or the “Company”) signed a
Securities Exchange Agreement with all holders of its convertible
debentures and holders of certain warrants to convert all outstanding
amounts ($9,111,170) under these debentures and all 6,455,083 related warrants
into an aggregate of 8,597,299 shares of Series A Convertible Preferred
Stock.





21


The
following is a summary of the status of the Company’s stock
warrants:




Number Of
      Shares
                
                
                Weighted-Average
      Exercise PriceOutsatnding at December 31,
      2008
                
                
                963,979
                
                
                $
                8.40Granted
                
                
                11,685,721
                
                
                $
                2.78Exercised
                
                
                (8,817,143
                )
                
                $
                0.60Cancelled
                
                
                (720,703
                )
                
                $
                0.60Outsatnding at December 31,
      2009
                
                
                3,111,854
                
                
                $
                9.71Granted
                
                
                9,999
                
                
                $
                0.60Exercised
                
                
                (9,999
                )
                
                $
                0.60Cancelled
                
                
                -
                
                
                $
                0.60Outsatnding at March 31,
      2010
                
                
                3,111,854
                
                
                $
                9.71






STOCK WARRANTS
      OUTSTANDINGRange
      of Exercise Price
              
              Number
      of Shares Outstanding
              
              
              Weighted-Average
      Remaining Contractual Life in
Years
              
              
              Weighted-Average
      Exercise Price$74.40-$85.20
              
              
              31,665
              
              
              
              1.30
              
              
              $
              81.66$21.00
              
              
              2,281
              
              
              
              1.58
              
              
              $
              21.00$16.80
              
              
              16,666
              
              
              
              7.58
              
              
              $
              16.80$11.10
              
              
              15,832
              
              
              
              7.75
              
              
              $
              11.10$9.00
              
              
              3,010,412
              
              
              
              4.61
              
              
              $
              9.00$2.40
              
              
              16,666
              
              
              
              8.58
              
              
              $
              2.40$0.60
              
              
              18,332
              
              
              
              4.81
              
              
              $
              0.603,111,854
              
              
              
              4.61
              
              
              $
              9.71







STOCK WARRANTS
      EXERCISABLERange
      of Exercise Price
              
              Number
      of
                Shares
                Exercisable
              
              
              Weighted-Average
                Exercise
      Price$74.40-$85.20
              
              
              31,665
              
              
              $
              81.66$21.00
              
              
              2,281
              
              
              $
              21.00$16.80
              
              
              16,666
              
              
              $
              16.80$11.10
              
              
              15,832
              
              
              $
              11.10$9.00
              
              
              3,010,412
              
              
              $
              9.00$2.40
              
              
              16,666
              
              
              $
              2.40$0.60
              
              
              18,332
              
              
              $
              0.603,111,854
              
              
              $
              9.71




22


NOTE
9 – Income taxes





The
Company follows ASC subtopic 740-10 (formerly Statement of Financial Accounting
Standard No. 109, “Accounting for Income Taxes”) for recording the provision for
income taxes.  ASC 740-10 requires the use of the asset and liability
method of accounting for income taxes.  Under the asset and liability
method, deferred tax assets and liabilities are computed based upon the
difference between the financial statement and income tax basis of assets and
liabilities using the enacted marginal tax rate applicable when the related
asset or liability is expected to be realized or settled.  Deferred
income tax expenses or benefits are based on the changes in the asset or
liability each period.  If available evidence suggests that it is more
likely than not that some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the deferred tax assets to
the amount that is more likely than not to be realized.  Future
changes in such valuation allowance are included in the provision for deferred
income taxes in the period of change.





Deferred
income taxes may arise from temporary differences resulting from income and
expense items reported for financial accounting and tax purposes in different
periods.  Deferred taxes are classified as current or non-current,
depending on the classification of assets and liabilities to which they
relate.  Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or non-current
depending on the periods in which the temporary differences are expected to
reverse.





The
Company’s effective income tax rate is higher than would be expected if the
federal statutory rate were applied to income before tax, primarily because of
expenses deductible for financial reporting purposes that are not deductible for
tax purposes during the year ended December 31, 2009 and 2008.





The
Company’s operations for the year ended December 31, 2009 and 2008 resulted in
losses, thus no income taxes have been reflected in the accompanying statements
of operations.





As of
December 31, 2009 and 2008, the Company has net operating loss carry-forwards
which may or may not be used to reduce future income taxes payable. Current
Federal Tax Law limits the amount of loss available to offset against future
taxable income when a substantial change in ownership occurs. Therefore, the
amount available to offset future taxable income may be limited.  A
valuation allowance has been recorded to reduce the net benefit recorded in the
financial statements related to this deferred asset. The valuation allowance is
deemed necessary as a result of the uncertainty associated with the ultimate
realization of these deferred tax assets.





The
provision for income taxes consist of the following:




As of December 31,2009
            
            
            2008Current
      tax
            
            $
            -
            
            
            $
            -Benefits
      of operating loss carryforward
            
            
            3,295,000
            
            
            
            3,780,000Change
      in valuation allowance
            
            
            (3,295,000
            )
            
            
            (3,780,000
            )Provision
      for income tax
            
            $
            -
            
            
            $
            -





Below is
a summary of deferred tax asset calculations as of December 31, 2009 based on a
34% income tax rate. Currently there is no reasonable assurance that the Company
will be able to take advantage of a deferred tax asset. Thus, an offsetting
allowance has been established for the deferred asset.




Deferred tax
              asset
            
            
            34% tax rateNet
      operating loss
            
            $
            27,730,124
            
            
            $
            9,425,000Reserves
      and allowances
            
            
            8,859,582
            
            
            
            1,025,000Goodwill,
      net of amort.
            
            
            3,027,045
            
            
            
            3,010,00013,460,000Valuation
      allowance
            
            
            
            
            
            
            (13,460,000
            )Deferred
      tax asset
            
            
            
            
            
            $
            -





For
financial reporting purposes, the Company has incurred a loss since inception to
December 31, 2009.  Based on the available objective evidence,
including the Company’s history of its loss, management believes it is more
likely than not that the net deferred tax assets will not be fully realizable.
Accordingly, the Company provided for a full valuation allowance against its net
deferred tax assets at December 31, 2009. Further, management does not believe
it has taken the position in the deductibility of its expenses that creates a
more likely than not potential for future liability under the guidance of FIN
48.





A
reconciliation between the amount of income tax benefit determined by applying
the applicable U.S. and State statutory income tax rate to pre-tax loss is as
follows:





Year ended December 31,2009
            
            
            2008Federal
      and state statutory rate
            
            
            34
            %
            
            
            34
            %Non-deductible
      items in net loss
            
            
            (23
            )%
            
            
            13
            %Change
      in valuation allowance
            
            
            (11
            )%
            
            
            (47
            )%-
            
            
            
            -





23


For
financial reporting purposes, the Company has incurred a loss since inception to
March 31, 2010.  Based on the available objective evidence, including
the Company’s history of losses, management believes it is more likely than not
that the deferred tax asset will not be fully realized and has therefore
provided a valuation allowance for the full amount of the deferred tax
assets.





The
federal and state statutory income tax rate of 34% has been fully offset by the
change in the valuation allowance during the quarters ended March 31, 2010 and
2009.  The effective income tax rate of the Company over these years
is 0%.





Note
10– Commitments and contingencies








As of
March 31, 2010, the Company has eleven leases in effect for operating
space.  Future obligations under these commitments are $306,398 for 2010,
$396,238 for 2011, $404,240 for 2012, $19,589 for 2013, $129,159 for 2014,
$109,175 for 2015.





In June
of 2006, the Company entered into a License Agreement with California Institute
of Technology, whereby the Company obtained certain exclusive and non-exclusive
intellectual property licenses pertaining to the development of an electronic
fuel cell technology.  The License Agreement carries an annual
maintenance fee of $50,000, with the first payment due on or about June 12, 2009
which has been accrued (net $25,000 allowable reductions) through the quarter
ended March 31, 2010.   The License Agreement carries a perpetual
term, subject to default, infringement, expiration, revocation or
unenforceability of the License Agreement and the licenses granted
thereby.








Note
11 – Segment Reporting





Generally
accepted accounting procedures  require disclosures related to
components of a company for which separate financial information is available
that is evaluated regularly by a company’s chief operating decision maker in
deciding the allocation of resources and assessing performance.  In
this manner the Company has concluded it has three reportable segments;
ECOtality Stores,, Innergy Power segment and eTec segment (which includes
ECOtality Australia). The ECOtality Stores segment is the online marketplace for
fuel cell-related products and technologies with online distribution sites in
the U.S., Japan, Russia, Italy and Portugal. The Innergy Power segment is
comprised of the sale of solar batteries and other solar and battery powered
devices to end-users. The eTec segment includes our ECOtality Australia
operations and relates to sale of fast-charge systems for material handling and
airport ground support applications to the testing and development of plug-in
hybrids, advanced battery systems and hydrogen ICE conversions and consulting
revenues. This segment also includes the Minit-Charger business which relates to
the research, development and testing of advanced transportation and energy
systems with a focus on alternative-fuel, hybrid and electric vehicles and
infrastructures.  eTec holds exclusive patent rights to the eTec
SuperChargeTM and Minit-Charger systems - battery fast charge systems that allow
for faster charging with less heat generation and longer battery life than
conventional chargers. The Company has aggregated these subsidiaries into three
reportable segments: ECOtality/Fuel Cell Store, eTec and Innergy.





While
management is currently assessing how it evaluates segment performance, we
currently utilize income (loss) from operations, excluding depreciation of
corporate assets. We also exclude goodwill from segment assets. For the quarter
ended March 31, 2010 and 2009 inter-segment sales were $128,354 and $28,723
respectively.  All inter-segment sales have been eliminated during the
consolidation process.





Summarized
financial information concerning the Company’s reportable segments for the
quarter ended March 31, 2010  is as follows:





24




THREE MONTHS ENDED MARCH 31,
      2010ETEC
              
              
              INNERGY
              
              
              FUEL CELL
                STORE
              
              
              TOTALTotal net operating
      revenues
              
              $
              2,148,750
              
              
              $
              347,456
              
              
              $
              203,879
              
              
              $
              2,700,086Depreciation and
      amortization
              
              $
              105,101
              
              
              $
              969
              
              
              $
              891
              
              
              $
              106,961Operating income
      (loss)
              
              $
              (988,796
              )
              
              $
              50,432
              
              
              $
              46,934
              
              
              $
              (891,431
              )Interest Income
      (expense)
              
              $
              (31
              )
              
              $
              -
              
              
              $
              -
              
              
              $
              (31
              )Gain / (Loss) on disposal of
      assets
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Other Income
      (expense)
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Segment Income before Corporate
      Overhead Allocation
              
              $
              (988,826
              )
              
              $
              50,432
              
              
              $
              46,934
              
              
              $
              (891,461
              )Corporate Overhead
      Allocation
              
              $
              (1,172,152
              )
              
              $
              (189,539
              )
              
              $
              (111,217
              )
              
              $
              (1,472,907
              )Segment Income /
      (Loss)
              
              $
              (2,160,978
              )
              
              $
              (139,107
              )
              
              $
              (64,283
              )
              
              $
              (2,364,370
              )Not Included in segment
      income:Depreciation on Corporate
      Assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              34,645Reported Net income after
      tax
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (2,399,015
              )Capital
      Expenditures
              
              $
              220,696
              
              
              $
              -
              
              
              $
              -
              
              
              $
              220,696Total segment assets - excluding
      intercompany receivables
              
              $
              3,318,011
              
              
              $
              566,923
              
              
              $
              255,321
              
              
              $
              4,140,255Other item Not included in Segment
      Assets:Goodwill
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              3,495,878Other Corporate
      Assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              15,512,655Total Reported
      Assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              23,148,788




3 MONTHS ENDED MARCH 31,
      2009ETEC
              
              
              INNERGY
              
              
              FUEL CELL
                STORE
              
              
              TOTALTotal net operating
      revenues
              
              $
              1,775,086
              
              
              $
              478,814
              
              
              $
              216,299
              
              
              $
              2,470,199Depreciation and
      amortization
              
              $
              103,510
              
              
              $
              1,455
              
              
              $
              891
              
              
              $
              105,856Operating income
      (loss)
              
              $
              (50,980
              )
              
              $
              136,360
              
              
              $
              47,648
              
              
              $
              133,028Interest Income
      (expense)
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Gain / (Loss) on disposal of
      assets
              
              $
              9,760
              
              
              $
              -
              
              
              $
              -
              
              
              $
              9,760Other Income
      (expense)
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Segment Income before Corporate
      Overhead Allocation
              
              $
              (41,220
              )
              
              $
              136,360
              
              
              $
              47,648
              
              
              $
              142,788Corporate Overhead
      Allocation
              
              $
              814,340
              
              
              $
              219,661
              
              
              $
              99,230
              
              
              $
              1,133,231Segment Income /
      (Loss)
              
              $
              (855,560
              )
              
              $
              (83,301
              )
              
              $
              (51,582
              )
              
              $
              (990,443
              )Not Included in segment
      income:Depreciation on Corporate
      Assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              33,114Reported Net income after
      tax
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (1,023,555
              )Capital
      Expenditures
              
              $
              4,157
              
              
              $
              -
              
              
              $
              -
              
              
              $
              4,157Total segment assets - excluding
      intercompany receivables
              
              $
              3,194,463
              
              
              $
              526,609
              
              
              $
              208,800
              
              
              $
              3,929,872Other item Not included in Segment
      Assets:Goodwill
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              3,495,878Other Corporate
      Assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              974,102Total Reported
      Assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              8,399,852





NOTE
12 – Related Party Transactions





On August
29, 2008, Mr. Donald Karner, a director of the Company, and Kathryn Forbes
agreed to provide the Company a line of credit for up to $650,000. This Line is
secured by a second position on receivables (junior to previously issued
debentures). During the nine months ended September 30, 2008, $300,000 was
advanced by Mr. Karner and Ms. Forbes. This line carried a loan fee of $45,000
payable when the line expired on December 15, 2008. No other interest payments
or fees were required under the agreement. The fee of $45,000 was expensed over
the life of the Line. Imputed interest of $1,425 and financing charges of $6,962
were expensed in the nine month period ending September 30, 2008.  The
balance of the note payable of $450,000 was paid July 9, 2009.




Please
refer to Note 7 for information on equity awards to employees.





25


Note
13 – Subsequent Events





The
Company has evaluated all subsequent events through May 14, 2010, the date the
financial statements were issued, and determined that there are no subsequent
events to record, and the following subsequent events to disclose:








On April
7, 2010 we issued 83 shares of Common Stock to an employee for
compensation.





On April
8, 2010 we issued 1,100 shares of Common Stock to a consultant in accordance
with an approved contract.





On April
21, 2010 we issued 20,418 shares of Common Stock to Glenwood Capital based on
their conversion of an equal number of convertible preferred
shares.





On April
27, 2010 we issued 100,000 shares of Common Stock to BridgePointe Master Fund
based on their conversion of an equal number of convertible preferred
shares.







Management’s Discussion and Analysis of Financial Condition and
Results of Operations





The
following discussion and analysis provides information which management believes
is relevant to an assessment and understanding of the Company’s results of
operations and financial condition. The discussion should be read in conjunction
with the Condensed Consolidated Financial Statements and the related notes
thereto.





Forward-Looking
Statements





This
Quarterly Report contains forward-looking statements about our business,
financial condition and prospects that reflect management’s assumptions and
beliefs based on information currently available.  We can give no assurance
that the expectations indicated by such forward-looking statements will be
realized.  If any of our management’s assumptions should prove incorrect,
or if any of the risks and uncertainties underlying such expectations should
materialize, Alchemy’s actual results may differ materially from those indicated
by the forward-looking statements.




The key
factors that are not within our control and that may have a direct bearing on
operating results include, but are not limited to, acceptance of our services,
our ability to expand our customer base, managements’ ability to raise capital
in the future, the retention of key employees and changes in the regulation of
our industry.





There
may be other risks and circumstances that management may be unable to predict.
 When used in this Quarterly Report, words such as,  “believes,”
   “expects,”
“intends,”    “plans,”  
 ”anticipates,”
   “estimates”
  and similar expressions are intended to identify forward-looking
statements, although there may be certain forward-looking statements not
accompanied by such expressions.







GENERAL





The
following discussion and analysis provides information that management believes
is relevant to an assessment and understanding of the Company’s results of
operations and financial condition. The discussion should be read in conjunction
with the Condensed Consolidated Financial Statements and the related notes
thereto, contained elsewhere in this Form 10-Q.





Business
Development and Summary





We were
incorporated in Nevada in 1999.  We are a leader in clean electric
transportation and storage technologies. Through innovation, acquisitions, and
strategic partnerships, we accelerate  the market applicability of advanced
electric technologies to replace carbon-based fuels. We are a leader in
providing electric vehicle infrastructure products and solutions that are
used in on-road grid-connected vehicles (including plug-in hybrid electric
vehicles (PHEV) and battery electric vehicles (BEV)), material handling and
airport electric ground support applications. Through our main operating
subsidiary, Electric Transportation Engineering Corporation (eTec),
our  primary product offering is the Minit-Charger line of advanced
battery fast-charge systems that are designed for various motive applications.
In addition to our  electric transportation focus, we are also
involved in the development, manufacture, assembly and sale of specialty solar
products, advanced battery systems, and hydrogen and fuel cell systems. Our
subsidiaries and primary operating segments consist of Electric Transportation
Engineering Corporation (eTec), Innergy Power Corporation (Innergy), and
ECOtality Stores (dba Fuel Cell Store). In addition we have a wholly-owned
subsidiary in Mexico providing manufacturing services for us and a wholly-owned
subsidiary in Australia, ECOtality Australia Pty Ltd, to market and distribute
battery charging equipment to support on-road electric vehicles, industrial
equipment, and electric airport ground support equipment.





26


We
operate with a commercial “electro-centric” strategy, targeting only products
and companies involved in the creation, storage, and/or delivery of clean or
renewable electric power. This strategy has resulted in the development and
acquisition of various operating companies.. While focused on electric
transportation infrastructure, we have developed a diversified technology
portfolio that is linked through the ability to deliver comprehensive
electro-centric energy alternatives and solutions. By establishing a
technologically diverse multi-product base we are able to mitigate the
uncertainty of clean technology demands and regulatory changes. Our current
primary focus is to facilitate and execute the development and implementation of
electric vehicle charging infrastructure in anticipation of mass
commercialization of plug-in hybrid electric vehicles (PHEV) and battery
electric vehicles (BEV) in the 2010 to 2012 timeframe.





On August
5, 2009 our wholly owned subsidiary, eTec, was selected by the U.S.
Department of Energy for a grant of approximately $99.8 million to undertake the
largest deployment of electric vehicles (EVs) and charging infrastructure in
U.S. history.  On September 30, 2009 eTec accepted the grant of
$99.8 million, of which $13 million was sub-funded to federal research and
development centers, which will net eTec $86 million in
revenue.   eTec, as the lead applicant for the proposal,
partnered with Nissan North America to deploy EVs and the charging
infrastructure to support them. The project takes advantage of the early
availability of the Nissan LEAF, a zero-emission electric vehicle, to develop,
implement and study techniques for optimizing the effectiveness of charging
infrastructure that will support widespread EV deployment. The project will
install electric vehicle charging infrastructure and deploy up to a total of
4,700 Nissan battery electric vehicles in strategic markets in five states:
Arizona, California, Oregon, Tennessee, and Washington.





Electric
Transportation Engineering Corporation (eTec)





Electric
Transportation Engineering Corporation (eTec) was incorporated in Arizona in
1996 to support the development and installation of battery charging
infrastructures for electric vehicles. As our  primary operating
subsidiary, eTec is a recognized leader in the research, development and testing
of advanced transportation and energy systems, and is the exclusive provider of
the Minit-Charger line of battery fast-charge systems and technologies.
Specializing in alternative-fuel, hybrid and electric vehicles and
infrastructures, eTec offers consulting, technical support and field services
and is committed to developing and commercially advancing clean electric
technologies with clear market advantages.







eTec’s
primary product line consists of the Minit-Charger line of battery fast-charge
systems. The Minit-Charger brand is the result of a consolidation of the two
leading fast-charging technologies:eTec SuperChargeTM
  andEdison
Minit-Charger . Prior to rebranding all eTec fast-charge systems under
the Minit-Charger brand, eTec held exclusive patent rights to the flagship
product line,eTec
SuperChargeTM   - battery fast-charge systems that allow for
rapid charging while generating less heat and promoting longer battery life than
conventional chargers. TheeTec
SuperCharge  technology was licensed to eTec from Norvic
Traction in 1999. TheeTec
SuperChargeTM system was specifically designed for airport ground
support equipment, neighborhood and on-road electric vehicle, and marine and
transit system operations. Since the acquisition of the technology, eTec has
made considerable engineering and product advancements and is currently a leader
in providing these clean electric fast-charging technologies to airports
throughout North America.





In 2007,
we acquired the Minit-Charger business of Edison Source, a division of Edison
International . The coreMinit-Charger technology allows for material handling equipment to
convert to electric power systems that can be charged quickly, conveniently and
efficiently, thereby eliminating the need for propane or diesel-powered
equipment or for backup batteries and costly change-out operations required with
traditional straight-line charging..eTec’s
Minit-Charger  line of battery fast charge systems has a large
customer base that consists of Fortune 500 companies and other corporate
entities throughout North America.





In March
of 2008, all eTec fast-charging products, including theeTec SuperChargeTM product
line, were consolidated under theeTec
Minit-Charger  brand. By unifying the underlying fast-charging
technologies under a single engineering, manufacturing and sales entity (eTec Minit-Charger ), we are
better able to streamline our operations and sales and marketing efforts. The
complete portfolio ofeTec
Minit-Charger  products provides eTec with a leadership
position in current fast charging markets and positions us well to capitalize on
the rapidly growing clean technology sector for electric vehicle infrastructure
technologies. We believe Minit-Charger is the most superior fast-charge
technology on the market as it is a smart charging system that can charge
batteries (of almost all chemistries) as fast as possible, while best
controlling the battery temperature and avoiding the devastating effects of
overcharging.





eTec has
a comparatively long history in clean and renewable technologies and has various
standing contractual relationships as a test contractor and/or primary and
consulting engineer for projects with the United States Department of Energy
(DoE), several national research laboratories, national energy storage
consortiums, and large electric utilities where they provide services in energy
storage, monitoring, systems design and fabrication, product and vehicle
testing, and product development. Their work has been in the areas of electric
vehicle systems, recharging stations, energy demand management systems, utility
communication systems, advanced battery technologies, fast charging
technologies, hydrogen creation, storage and dispensing systems, and coal
gasification programs. Currently, eTec is holds the exclusive contract for the
DoE’s Advanced Vehicle Testing Activity (AVTA) program and has conducted more
than 6 million miles of vehicle testing on more than 200 advanced fuel
vehicles.





We
acquired eTec as an expansion platform for its core expertise in battery
technologies, fast charging systems, energy distribution infrastructure, and
advanced vehicle technologies and testing, which includes electric vehicle (EV),
hybrid electric vehicle (HEV), plug-in hybrid electric vehicle (PHEV) and
hydrogen vehicle technologies. We believe that eTec will expand its core
technologies through new product development, joint ventures, acquisitions and
organic growth.  Because eTec has unparalleled experience with
electric vehicle infrastructure, we believe our experience with electric
vehicles infrastructure, our knowledge of the vehicle and battery systems, as
well as our industry leading fast-charging technology provides us with a
distinct competitive advantage to be leading provider of electric vehicle
infrastructure services and installation.





27


eTec has
been involved in every North American EV initiative to date and is a leading
provider of solutions for electric vehicles and its supporting infrastructure.
Currently, eTec has installed more than 5,100 charging stations for motive
applications, and has installed more chargers for on-road applications than any
other company in North America.





On August
5, 2009 eTec was selected as the lead grantee by the U.S. Department of Energy
for a grant of approximately $99.8 million to undertake the largest
deployment of electric vehicles (EVs) and charging infrastructure in
U.S. history. On September 30, eTec accepted the $99.8 million
grant, of which approximately $13 million was sub-funded to federal
research and development centers, which will net eTec $86.4 million in
revenues. eTec, as the lead applicant for the proposal, partnered with
Nissan North America to deploy EVs and the charging infrastructure to support
them. The Project takes advantage of the early availability of the Nissan LEAF,
a zero-emission electric vehicle, to develop, implement and study techniques for
optimizing the effectiveness of charging infrastructure including more than
11,000 residential and publicly available charges that will support
widespread EV deployment. The Project will install a robust electric vehicle
charging infrastructure and will deploy 4,700 Nissan battery electric
vehicles in strategic markets in five states: Arizona, California, Oregon,
Tennessee, and Washington.





The
Project will collect and analyze data to characterize vehicle use in diverse
topographic and climatic conditions, evaluate the effectiveness of charge
infrastructure, and conduct trials of various revenue systems for commercial and
public charge infrastructure.





Innergy
Power Systems





Founded
in 1989, Innergy Power Systems is based in San Diego, California with a
manufacturing facility in Tijuana, Mexico. Innergy is the only North American
manufacturer of both renewable energy solar modules and thin-sealed rechargeable
batteries, as its solar photovoltaic (PV) product line addresses the burgeoning
worldwide demand for solar energy products and off-grid power. Innergy’s
fiberglass reinforced panel (FRP) solar modules are designed to meet a broad
range of applications for emergency preparedness and recreation, where quality,
durability, rugged construction and light weight are important in the outdoor
environment. Applications include logistics tracking, asset management systems,
off-grid lighting, mobile communications, mobile computing, recreational
vehicles, signaling devices and surveillance cameras.





Innergy
and our wholly owned subsidiary providing manufacturing services, Portable
Energy De Mexico, S.A. DE C.V., provides us the ability to further expand our
production, manufacturing and assembly capabilities for Innergy’s solar products
and energy storage devices, as well as products of our other subsidiaries,
including eTec’s Minit-Charger products. Innergy provides us the ability to
expand our offering of solar products and solutions into current and developing
commercial markets, as well as providing strong manufacturing and assembly
operations to assist other aspects of our business. While we expect solar to
become a major future energy source, Innergy’s battery systems that support the
electric vehicle market that is quickly expanding is vital as well, and we
expect the combination of solar solutions and new battery sales to contribute to
our long and short-term earnings and revenue growth. Innergy is actively
pursuing growth opportunities through product line expansion, joint ventures,
acquisitions, and manufacturing contracts.





ECOtality
Stores (dba Fuel Cell Store)





ECOtality
Stores (dba Fuel Cell Store) is our wholly-owned subsidiary and operates as our
online retail division. Fuel Cell Store (www.fuelcellstore.com) is an e-commerce
marketplace that offers consumers a wide array of fuel cell products from around
the globe. Based in San Diego, California and with active international
operations in Japan, Russia, Italy, and Portugal, Fuel Cell Store develops,
manufactures, and sells a diverse and comprehensive range of fuel cell products
that includes fuel cell stacks, systems, component parts and educational
materials. In addition to primary retail operations, Fuel Cell Store also offers
consulting services for high schools, colleges, and leading research institutes
and is available to host workshops, conferences and corporate events. Fuel Cell
Store is the leading market place for fuel cell stack, component, and hydrogen
storage manufacturers to unite with consumers and is an attractive source for
hydrogen and fuel cell industry activity and direction.




HydralityTM





HydralityTM
is a complex reactor system that stores and delivers hydrogen on-demand
using magnesium compounds and water. The EPC/Hydrality technology, which was
initially developed in conjunction with NASA’s Jet Propulsion Laboratory (JPL)
and subsequently advanced by Arizona State University, Green Mountain
Engineering and Airboss Aerospace, Inc. continues to have strong promise for a
variety of commercial applications. While we initially sought to design and
license a cost efficient Hydrality system for use in motorized vehicles and
industrial equipment, we have identified several additional and promising
applications for Hydrality that include stationary applications for remote
power, back-up power systems, and large scale industrial and utility
use.







Organizational
History




We were
incorporated in Nevada in 1999 under the name Alchemy Enterprises, Ltd. to
market biodegradable products.  On November 14, 2006, we changed our
name to “ECOtality, Inc.” to better reflect our renewable energy
strategy.




28


On
June 12, 2006, we entered into a License Agreement with California
Institute of Technology (CalTech), which operates Jet Propulsion Laboratory
(JPL), whereby we acquired certain exclusive licensed patent and/or patent
applications rights and improvement patent rights related to research performed
under the JPL Task Plan No. 82-10777, entitled “Mechanically-Fed Metal-Air
Fuel Cell As A High Energy Power Source” (“Task Plan”), as well as a
nonexclusive licensed technology rights developed as a result of the Task Plan.
 As partial consideration paid in connection with the License Agreement, we
issued 5,869,565 shares of our common stock to CalTech with a fair market value
of $1.40 per share, based upon the closing price of our common stock on
June 12, 2006, for a total aggregate value of $8,217,391.
 Furthermore, we are obligated to pay an annual maintenance fee of $50,000
to CalTech, beginning on June 12, 2009, continuing until the expiration,
revocation, invalidation or unenforceability of the last exclusively licensed
patent rights or improvement patent rights.  The License Agreement carries
a perpetual term, subject to default, infringement, expiration, revocation or
unenforceability of the License Agreement and the licenses granted
thereby.





On
June 11, 2007, we bought the assets of the Fuel Cell Store
(www.FuelCellStore.com), a small web-based seller of educational fuel cell
products. The Fuel Cell Store product line includes demonstration kits,
educational materials, fuel cell systems and component parts.  It also
offers consulting services for establishing educational programs for all levels
of educational institutions.  Since Fuel Cell Store was significantly
smaller than we are, we were not required to provide audited financial
statements for it.  We operate the Fuel Cell Store through our
wholly-owned subsidiary, ECOtality Stores, Inc.  While revenue
producing activities, facilities and employees has initially remained the same,
we have changed the distribution system through inventory control procedures,
and expanded the customer base through increased emphasis on marketing.  We
sell Fuel Cell Store products through our own ECOtality Store’s website (www.fuelcellstore.com).





On
October 1, 2007 we closed on the purchase of certain assets of Innergy
Power Corporation and its wholly owned subsidiary, Portable Energy De Mexico,
S.A. DE C.V., pursuant to an agreement that we entered into on September, 18,
2007.  Innergy designs and manufactures standard and custom solar-power and
integrated solar-battery solutions for government, industrial and consumer
applications.  The purchase price for the assets was 3,000,000 shares of
our common stock.  We guaranteed to the sellers that the shares of our
common stock issued in the transaction would be worth $3,000,000 during the 30
day period commencing 11 months from the closing date or we would be required to
either issue additional shares such that the total shares are worth $3,000,000
at that time or pay the seller the difference in cash. On October 17, 2008,
4,000,000 shares were issued to Innergy Power Corporation in full satisfaction
of our purchase obligation to them.





On
November 6, 2007 we signed an agreement to acquire all of the outstanding
stock of the Clarity Group, Inc. and its affiliate, Electric Transportation
Engineering Corporation (eTec), through a stock purchase agreement.  eTec
provides technical support and field services for all aspects of electric
vehicle infrastructure.  eTec operates as our wholly owned subsidiary and
there have been no changes to the eTec’s management team.





In
December 2007, we entered into and completed various stock and asset
purchase agreements with Electric Transportation Engineering Corporation
(“eTec”), Edison Source (“Vendor”), Edison Enterprises (“Edison”) and 0810009
B.C. Unlimited Liability Company (“0810009”) to purchase certain technology and
assets related to the manufacture and selling of a “fast charge” battery
charging system to be used in commercial and industrial market
places.





Electric
Transportation Engineering Corporation (eTec)




On
November 6, 2007, we signed a stock purchase agreement with two
non-affiliated individuals whereby we purchased all of the issued and
outstanding capital stock of Electric Transportation Engineering Corporation, as
well as its affiliated company Clarity Group, Inc. (both of which are
collectively referred to as “eTec”).  eTec provides technical support and
field services for all aspects of electric vehicle infrastructure.  eTec
will operate as our subsidiary and there will be no changes to the company’s
management team.




The
aggregate purchase price for the outstanding capital stock of eTec is $3,000,000
in cash and 6,500,000 shares of our common stock of the $3,000,000 in cash to be
paid to eTec, $2,500,000 was paid upon closing of the stock purchase agreement
and $500,000 will be paid in 10 equal monthly installments, beginning
December 1, 2007.  The 6,500,000 shares were issued in the following
manner: 6,500,000 were issued upon the close of the stock purchase agreement,
3,250,000 were released on date of signing, and 3,250,000 were released on the
first anniversary of the closing of the stock purchase agreement from the
Company corporate secretary The shares bear a restrictive legend and are not
subject to piggy-back registration rights.




Edison
Minit-Charger




In
December 2007, we entered into and completed various stock and asset
purchase agreements with Electric Transportation Engineering Corporation
(“eTec”), Edison Source (“Vendor”), Edison Enterprises (“Edison”) and 0810009
B.C. Unlimited Liability Company (“0810009”) to purchase certain technology and
assets related to the manufacture and selling of a “fast charge” battery
charging system to be used in commercial and industrial market
places.




The
aggregate purchase price is $1,000,000 in cash and 2,000,000 shares of our
common stock.  The company guaranteed to the sellers that the shares would
be worth $1 each ($2,000,000) by the tenth day following the first anniversary
date of the transaction. If the shares are not worth $2,000,000, the company
would be required to either issue additional shares such that the total shares
are worth $2,000,000 at that time or pay cash to the seller so that the
aggregate value of the 2,000,000 shares plus the cash given would equal
$2,000,000.  This purchase price obligation was settled in full on
January 30, 2009 with the issuance of $31,333,333 shares of ECOtality’s $0.001
par value common stock.  .





29


.







Our
Hydrality System




We have
been developing HydralityTM, a system that stores and delivers hydrogen on-demand
using magnesium compounds and water. When used in conjunction with existing fuel
cell technology, Hydrality emits only pure water and produces no harmful
emissions.




While we
initially sought to design and license a cost efficient Hydrality system for use
in motorized vehicles and industrial equipment, we have identified several
additional promising applications for Hydrality that include stationary
application for remote power, back-up power systems, and large-scale industrial
and utility use as we have described above in our description of our
business.




On
May 7, 2007, a non-provisional patent application was filed by Stinson
Morrison Hecker LLP in the name of California Institute of Technology as
assignee and us as exclusive licensee of the technology, for a Method and System
for Storing and Generating Hydrogen, claiming priority from a provisional
application filed by CalTech on May 8, 2006.  The details of the
patent application and invention are confidential until publication or issue.
 The patent application is generally directed towards the hydrogen reactor
design currently under development.





The
current technology, which is the subject of the pending patent application, is a
method for generating hydrogen in an on-board vehicle reaction chamber to fuel a
fuel cell or modified engine on demand.  The information and diagrams in
the Technology Contribution Agreement and JPL Task Plan involve a metal-air
battery design.  Based on the research of JPL into the metal-air battery
design, the technology has migrated from a basic metal-air battery concept to a
hydrogen reactor.





While we
are now are in the process of investigating and analyzing third-generation
reactor models, we anticipate this to be a long term project given the minimal
amount of funds we are expending on this research and development effort.
 Laboratory-scale test reactors are being used to gather data for the
purpose of characterizing the reactor and constructing analytical design models.
 It is anticipated that patent protection will be sought on one or more
aspects or features of the third-generation reactor.  However, it is not
our stated intent to manufacture reactors. Rather, it is our intent to use the
third-generation reactors to demonstrate the technology, and then license the
technology and/or the reactor design to others for commercialization. The
specifications of the commercial reactors have not yet been determined, and the
designs will vary based on different customer application
requirements.




Status
of any announced new product or service





On
January 8, 2009 ECOtality announced its EV Microclimate Program. It is an
integrated turnkey program that provides a blueprint for a comprehensive
Electric Vehicle infrastructure system.  As part of this program
ECOtality works with all relevant stakeholders to ensure an area is prepared for
consumer adoption of electric transportation.  The implementation of
an EV Micro-Climate includes physical charge infrastructure installations at
residential, commercial and public locations, as well as comprehensive
regulatory, public awareness and marketing programs to support the various value
chains associated with a n EV Micro-Climate.  As part of the process,
ECOtality will assist the automotive manufactures with
the  installation of home charging systems in car owners’ homes (or in
public areas) in advance of vehicle delivery, as well as install fast charging
systems in strategic locations (ie fuel stations, grocery stores, shopping
areas)




30




.





Stage
of Commercialization of the Hydrality Technology


We
believe the Hydrality technology has a promising future, but this future was not
as eminent as it was two years ago. There have been dramatic changes in the
hydrogen industry and an absence of expected interrelated product advancements
(i.e. fuel cells). Thus we have determined that the extreme vagaries of the
hydrogen technology industry, the immediate advancement of other renewable
technologies to the commercial forefront, and the potentially long and expensive
road to commerciality and profitability for any hydrogen technology necessitates
us to prudently and significantly scale back all hydrogen expenditures, and
proceed only on the basis of joint development projects or significantly
subsidized development with potential licensees or federal grants.





This
shift to joint development projects and the scaling back on our hydrogen
research and development expenditures  is clearly reflected in
our  2009 and 2010  operating results.





Segment
Information




Generally
accepted accounting procedures  require disclosures related to
components of a company for which separate financial information is available
that is evaluated regularly by a company’s chief operating decision maker in
deciding the allocation of resources and assessing performance.  In
this manner the Company has concluded it has three reportable segments;
ECOtality Stores,, Innergy Power segment and eTec segment (which includes
ECOtality Australia). The ECOtality Stores segment is the online marketplace for
fuel cell-related products and technologies with online distribution sites in
the U.S., Japan, Russia, Italy and Portugal. The Innergy Power segment is
comprised of the sale of solar batteries and other solar and battery powered
devices to end-users. The eTec segment includes our ECOtality Australia
operations and relates to sale of fast-charge systems for material handling and
airport ground support applications to the testing and development of plug-in
hybrids, advanced battery systems and hydrogen ICE conversions and consulting
revenues. This segment also includes the Minit-Charger business which relates to
the research, development and testing of advanced transportation and energy
systems with a focus on alternative-fuel, hybrid and electric vehicles and
infrastructures.  eTec holds exclusive patent rights to the eTec
SuperChargeTM and Minit-Charger systems - battery fast charge systems that allow
for faster charging with less heat generation and longer battery life than
conventional chargers. The Company has aggregated these subsidiaries into three
reportable segments: ECOtality/Fuel Cell Store, eTec and Innergy.





While
management is currently assessing how it evaluates segment performance, we
currently utilize income (loss) from operations, excluding depreciation of
corporate assets. We also exclude goodwill from segment assets. For the quarter
ended March 31, 2010 and 2009 inter-segment sales were $128,354 and $28,723
respectively.  All inter-segment sales have been eliminated during the
consolidation process.





Summarized
financial information concerning the Company’s reportable segments for the
quarter ended March 31,2010  is as follows:




THREE MONTHS ENDED MARCH 31,
      2010ETEC
                
                
                INNERGY
                
                
                FUEL CELL
                  STORE
                
                
                TOTALTotal net operating
      revenues
                
                $
                2,148,750
                
                
                $
                347,456
                
                
                $
                203,879
                
                
                $
                2,700,086Depreciation and
      amortization
                
                $
                105,101
                
                
                $
                969
                
                
                $
                891
                
                
                $
                106,961Operating income
      (loss)
                
                $
                (988,796
                )
                
                $
                50,432
                
                
                $
                46,934
                
                
                $
                (891,431
                )Interest Income
      (expense)
                
                $
                (31
                )
                
                $
                -
                
                
                $
                -
                
                
                $
                (31
                )Gain / (Loss) on disposal of
      assets
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Other Income
      (expense)
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Segment Income before Corporate
      Overhead Allocation
                
                $
                (988,826
                )
                
                $
                50,432
                
                
                $
                46,934
                
                
                $
                (891,461
                )Corporate Overhead
      Allocation
                
                $
                (1,172,152
                )
                
                $
                (189,539
                )
                
                $
                (111,217
                )
                
                $
                (1,472,907
                )Segment Income /
      (Loss)
                
                $
                (2,160,978
                )
                
                $
                (139,107
                )
                
                $
                (64,283
                )
                
                $
                (2,364,370
                )Not Included in segment
      income:Depreciation on Corporate
      Assets
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                34,645Reported Net income after
      tax
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                (2,399,015
                )Capital
      Expenditures
                
                $
                220,696
                
                
                $
                -
                
                
                $
                -
                
                
                $
                220,696Total segment assets - excluding
      intercompany receivables
                
                $
                3,318,011
                
                
                $
                566,923
                
                
                $
                255,321
                
                
                $
                4,140,255Other item Not included in Segment
      Assets:Goodwill
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                3,495,878Other Corporate
      Assets
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                15,512,655Total Reported
      Assets
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                23,148,788





31




3 MONTHS ENDED MARCH 31,
      2009ETEC
                
                
                INNERGY
                
                
                FUEL CELL
                  STORE
                
                
                TOTALTotal net operating
      revenues
                
                $
                1,775,086
                
                
                $
                478,814
                
                
                $
                216,299
                
                
                $
                2,470,199Depreciation and
      amortization
                
                $
                103,510
                
                
                $
                1,455
                
                
                $
                891
                
                
                $
                105,856Operating income
      (loss)
                
                $
                (50,980
                )
                
                $
                136,360
                
                
                $
                47,648
                
                
                $
                133,028Interest Income
      (expense)
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Gain / (Loss) on disposal of
      assets
                
                $
                9,760
                
                
                $
                -
                
                
                $
                -
                
                
                $
                9,760Other Income
      (expense)
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Segment Income before Corporate
      Overhead Allocation
                
                $
                (41,220
                )
                
                $
                136,360
                
                
                $
                47,648
                
                
                $
                142,788Corporate Overhead
      Allocation
                
                $
                814,340
                
                
                $
                219,661
                
                
                $
                99,230
                
                
                $
                1,133,231Segment Income /
      (Loss)
                
                $
                (855,560
                )
                
                $
                (83,301
                )
                
                $
                (51,582
                )
                
                $
                (990,443
                )Not Included in segment
      income:Depreciation on Corporate
      Assets
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                33,114Reported Net income after
      tax
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                (1,023,555
                )Capital
      Expenditures
                
                $
                4,157
                
                
                $
                -
                
                
                $
                -
                
                
                $
                4,157Total segment assets - excluding
      intercompany receivables
                
                $
                3,194,463
                
                
                $
                526,609
                
                
                $
                208,800
                
                
                $
                3,929,872Other item Not included in Segment
      Assets:Goodwill
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                3,495,878Other Corporate
      Assets
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                974,102Total Reported
      Assets
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                8,399,852


Employees




As of
March 31, 2009, we had 91 employees, including 13 in manufacturing and the
rest in research and development, sales and marketing, and general and
administration positions. None of our employees is represented by a labor union
or is covered by a collective bargaining agreement other than our employees in
our wholly owned subsidiary in Mexico. As we expand domestically and
internationally, however, we may encounter employees who desire union
representation. We believe that relations with our employees are
good.








Results
of Operations





QUARTER
ENDED MARCH 31, 2010, COMPARED WITH QUARTER ENDED MARCH 31, 2009





CONSOLIDATED
RESULTS





Since
January 1, 2008 we have been transitioning ourselves from being a development
stage company to a growth oriented renewable energy company with a focus toward
electric vehicle infrastructure. Beginning January 2009 we initiated additional
efforts to strengthen our financial viability including steps to reduce or
eliminate our debt structure, obtain adequate working capital, establish strong
partnerships and secure federal stimulus contracts. Thus, the variations
reflected in our results of operations when comparing the
quarter  ended  March 31, 2010 to the quarter ended March
31, 2009 and described below reflect these steps as well as this transformation
and the impact of the global economic slowdown.





In the
quarter ended March 31, 2010, we had revenues of $2,700,086 compared to the
quarter ended March 31, 2009 of $2,470,199.  The increase in revenue
is largely related to the effect of our ramp up of work on our recently awarded
contract with the US Department of Energy.  The cost of goods sold
percentage for the quarter ending March 31, 2010 was 89% leaving us with a gross
profit of $308,561. Our gross margin was down 11% from the same period prior
year of 44%.  This reduction is directly related to the nature of our
cost reimbursement contract with the US Department of Energy
(DOE).  This contract provides for a cost match of 50%, which is
expected to continue to reduce our gross margin in the early stages of the
contract pending the launch of electric vehicles in 4thquarter
2010.





Total
operating expenses during the three months ended March 31, 2010 were $2,393,991
compared to $1,492,944 for the three months ended March 31, 2009, a 60% increase
over prior year.  This increase reflects staffing and other start up
expenses to service the contract with the DOE including but not limited to
expanding office space, recruiting and hiring new employees, and implementing a
new Enterprise Resource Planning (ERP) System at our eTec
subsidiary.  General and administrative expenses were $2,239,554 or
94% of total operating expenses for the three months ended March 31, 2010
compared with $1,342,509 or 77% for the three months ended March 31, 2009. The
increase of 67% is consistent with our ramp up in resource deployment for the
DOE contract as discussed above.  Details around the changes in these
expenses are described below:





32


Professional
fees were $131,488 for the three months ended March 31, 2009 compared with
$13,579 for the three months ended March 31, 2009.  This increase is
attributable to recruiting and other outsourced human resource activities as we
manage the increase in our employee base as well as the opening of new field
offices to support the DOE contract.  New media, marketing,
advertising and investor and public relations expenses were $109,658 for the
three months ended March 31, 2009 compared with $4,087 for the three months
ended March 31, 2009.  The spend in 2010 is related to outsourced
branding identification efforts to establish our base brand from which all our
on-road (electric vehicle related) products will extend.  Legal fees
were $225,925 for the quarter ended March 31, 2010 compared with $229,778 for
the quarter ended March 31, 2009.  While legal spend in both years has
been substantial, each of these figures were driven by different business
issues.  In 2009 much of our legal fees were attributable to managing
our debt.  In contrast, for the quarter ending March 31, 2010 our
legal fees are related to efforts around establishing and protecting our
Intellectual Property (IP) including the expansion of these IP protections into
targeted international markets.  Also included in the firstquarter 2010 legal
fees are the costs around establishing our new subsidiary in
Australia.  Accounting fees were $65,250 for the quarter ended March
31, 2010, compared with $0 for the quarter ended March 31,
2009.  Accounting fees in 2010 are attributable to our 2009 financial
statement audit.  Executive compensation was $275,042 for the three
months ended March 31, 2010 compared with $193,677 for the three months ended
March 31, 2009. Depreciation expense was $141,605 for the quarter ended March
31, 2010 compared to $138,970 for the quarter ended March 31,
2009.  All other general and administrative (G&A) spending totaled
$1,419,273 for the three months ended March 31, 2010 compared to $1,074,329 for
the three months ended March 31, 2009.  The increase in all other
G&A is attributable to the costs of larger employee base to service larger
contracts and the systems to support them.





Expenses
for research and development totaled $12,834 for the three months ended March
31, 2010compared
to$11,467 for the
three months ended March 31, 2009.   Expenses for R&D is
anticipated to remain low.  Since one of our primary objectives
continues to be the commercial advancement of clean electric technologies that
reduce our dependence upon carbon based fuels, we have retained a focus on
research and development activities, and expect to continue to incur additional
research and development costs, although at a significantly reduced rate, for
the foreseeable future as reflected in the minimal amount expensed during the
first quarter 2010.





Our
operating loss was $2,085,429 for the quarter ended March 31, 2010 compared with
a loss of $417,038 for the quarter ended March 31, 2009.  The
overall loss was greater in firstquarter 2010 due to the
lower margins for the DOE contract and the higher expenses as we ramp up in the
early stages of the contract.




For the
quarter ended March 31, 2010, we earned interest income in the amount of $15,210
compared with $0 for the quarter ended March 31, 2009.





Interest
expense was $328,794 for the three months ended March 31, 2010 compared to
$616,277 for the three months ended March 31, 2009.  The amount in
first quarter 2009 was driven by the interest on the convertible debentures
we issued in November and December of 2007.  For first
quarter 2010 the amount is attributable to the potential penalty associated
with our obligation to file an S-1 within a short time frame following our
capital raise in October. Due to circumstances largely outside our control we
were unable to meet the filing deadline.  We are currently circulating
a waiver agreement due to these extenuating circumstances and
anticipate  having all or most of this penalty waived prior to our
next filing. We had a gain on disposal of assets in the three months ended March
31, 2009, there were no assets disposed of in the quarter ended March 31,
2010.





Our net
loss after other income and expenses was $2,399,015 for the quarter ended March
31, 2010 compared to a loss of $1,023,555 for the quarter ended March 31,
2009.








Liquidity
and Capital Resources





As of
March 31, 2010, we had $14,885,806 of cash on hand compared to a March
31, 2009 balance of $456,652 of cash on hand and $28,044 in
certificates of deposit.





We had a
use of cash for operating activities in the first quarter of 2010 in the amount
of $(1,728,832) compared to a generation of cash in firstquarter 2009
of $129,036.   In addition, cash utilized in investing
activities was $220,696 for the three months ended March 31, 2010 compared to a
generation of cash of 5,603 for 2009.





Cash
generated by financing activities was $5,011,999 in the first quarter of 2010
compared cash generated of $0 in 2009.  The cash in 2010 represented
the collection of a subscription receivable in January 2010 related to our
October 2009 capital raise.





It is
important to understand our complex financing transactions from January 1,
2009 through March 31, 2010 as we have endeavored to become a leader in the
renewable energy sector during a period characterized by a lack of capital
markets in a down economy. These activities are described in detail
below:





During
the quarter ended March 31, 2009 we continued to seek additional
capital while working with our debt holders for additional time to begin paying
interest and principal redemption.  As a result:





On March
5, 2009 we entered in to an Agreement entitled “Amendment to Debentures and
Warrants, Agreement and Waiver” (the “Agreement”) restructuring our equity
with the institutional debt holders of the our Original Issue Discount 8% Senior
Secured Convertible Debentures, dated November 6, 2007 (the “November 2007
Debentures”) (aggregate principal amount equal to $4,117,649) and with our
debt holder of our Original Issue Discount 8% Secured Convertible Debentures,
dated December 6, 2007 (the “December 2007 Debenture”) (aggregate principle
amount equal to $1,764,707).  The November and December 2007
Debentures are held by Enable Growth Partners LP (“EGP”), Enable Opportunity
Partners LP (“EOP”), Pierce Diversified Strategy Master Fund LLC, Ena
(“Pierce”), and BridgePointe Master Find
Ltd  (“BridgePointe”)(individually referred to as “Holder” and
collectively as the “Holders”). The Agreement’s effective date was January 1,
2009.





33




To allow
the additional time necessary for us to achieve our working capital targets in
the current economic environment, we requested our debenture holders to further
extend a waiver of debt service requirements.  In exchange for signing
an Amendment to Debentures and Warrants, Agreement and Waiver which
defers interest payments due for the first quarter 2009 until May 1, 2009
and payment of monthly principal redemptions until May 1, 2009, we agreed
to a number of conditions that were subsequently amended on May 15,
2009




On
May 15, 2009, despite the current tenuous economic environment, the financial
opportunities offered specifically in the Stimulus projects related to electric
transportation, were deemed material to the Company’s  future, thus the
Company  and the November and December 2007 Debenture Holders entered into
an agreement entitled “Amendment to Debentures and Warrants, Agreement and
Waiver” (the “Agreement”) restructuring the Company’s  equity as well as
establishing an inducement for additional working capital. The Agreement’s
effective date was May 1, 2009.   The Agreement signed on May 15, 2009
provided for $2,000,000 in new capital as well as additional capital (up to
$500,000) to be invested by the November and December 2007 Debenture
Holders.





On July
2, 2009 the Company completed two amendments to the May 15, 2009 Amendment to
Debentures and Warrants, Agreement and Waiver, and issued $2,500,000 in 8%
Secured Convertible Debentures  that are important to the Company’s future
and tie together the series of November and December 2007 Debenture documents
that have been amended three times since the initial issuing of the
debentures  in November and December 2007.  The
transactions/agreements have been consummated included:





On
October 31, 2009, ECOtality, Inc. (“ECOtality” or the “Company”) signed a
Securities Exchange Agreement with all holders of its convertible
debentures and holders of certain warrants to convert all outstanding
amounts ($9,111,170) under these debentures and all related warrants into an
aggregate of 8,597,299  shares of Series A Convertible Preferred Stock
(while not impacted by the current common stock split discussed herein, it could
be subject to adjustment for future forward and reverse stock splits, stock
dividends, recapitalizations and the like). The Series A Convertible
Preferred Stock has no redemption or preferential dividend rights, but may be
converted into shares of the Company’s common stock (the “Common
Stock”).





Concurrent
with the signing of the Securities Exchange Agreement, the ECOtality Board of
Directors approved a 1:60 reverse stock split (the “Reverse Split”) of its
common stock and authorized Company management to affect the Reverse Split after
providing the required notice to the Financial Industry Regulatory Authority
(FINRA).  The Reverse Stock split was effective November 24,
2009.





On
October 31, 2009, ECOtality signed a Securities Purchase Agreement and a
Registration Rights Agreement with accredited investors (the “Investors”) in the
amount of $20.5 million pursuant to which the Investors agreed to purchase
shares of the Common Stock at a purchase price of $7.20 per share.  The
funds from the private placement will be utilized as working capital to support
the initial requirements of the contract signed with the Department of Energy on
September 30, 2009.





On
January 7, 2010 we received the final commitment of $5 million from the
Securities Purchase Agreements signed on October 31, 2009.




The
culmination of all the activities noted above have resulted in a strong working
capital position, the elimination of debt and related interest obligations and
have positioned us favorably to meet our obligations in the early stages of the
DOE contract.




Management’s
Plan of Operation





Our long
term plan of operation calls for sustained organic growth. We believed that the
acquisitions we completed during 2007 would provide us with a base to support
this objective and this growth had been  reflected in our budget and
business plans for 2009. However, growth consistent with our plans did not occur
during 2009, nor in the first half of 2009.  Sales, consulting
services and manufacturing levels have remained at lower levels..








However,
with the signing of the DOE contract on September 30, 2009 and the Securities
Exchange Agreements with our debenture holders and Securities Purchase
Agreements with current and new investors on October 31,2009 ,we  have
taken the following actions to significantly strengthen our financial viability
which has continued through the first quarter of 2010:




1.
            Raised
      $20.5 million for working capital in equity financing from original
      investors/debt holders ($15 million) and new investors ($5.5
      million).a.
            This
      has resulted in positive shareholder equity on our balance
      sheet.b.
            This private offering has provided an adequate level of
      working capital to support initial requirements of the DOE contract
      awarded to our subsidiary eTec.2.
            Convert
      $9.08 million of debt on balance sheet to equity (preferred
      shares).3.
            Convert
      $9.08 million of debt on balance sheet to equity (preferred
      shares).




34


Working
Capital





Net
working capital is an important measure of our ability to finance our
operations.  Our net working capital at March 31, 2010 was positive by
$14,997,573.





We do not
have any off-balance sheet arrangements.





We
anticipate the need to add significant numbers of full- or part- time employees
over the next 12 months per the award of the Stimulus Department of Energy
related contracts.  We plan to outsource the research and development and
production of our products when cost effective to do so.





Commitments
and Long Term Liabilities





On June
12, 2006, the Company entered into a License Agreement with California Institute
of Technology, whereby the Company obtained certain exclusive and non-exclusive
intellectual property licenses pertaining to the development of an electronic
fuel cell technology.  The License Agreement carries an annual maintenance
fee of $50,000, with the first payment due on or about June 12, 2009.  The
License Agreement carries a perpetual term, subject to default, infringement,
expiration, revocation or unenforceability of the License Agreement and the
licenses granted thereby.





On
January 19, 2007 we purchased a small (1,750 square feet) stand alone office
building at a cost of $575,615.  A total of $287,959 has been paid and a
tax credit has been recorded in the amount of $156.  The remaining balance
of $287,500 is structured as an interest-only loan from a non affiliated
third-party, bears an interest rate of 6.75% calculated annually, with monthly
payments in the amount of $1,617 due beginning on February 16, 2007. The
entire principal balance is due on or before January 16, 2012.





As of
March 31, 2010, the Company has eleven leases in effect for operating
space.  Future obligations under these commitments are $306,398 for 2010,
$396,238 for 2011, $404,240 for 2012, $19,589 for 2013, $129,159 for 2014,
$109,175 for 2015.





Quantitative and Qualitative Disclosures about Market
Risk





Controls and Procedures





Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures




We
maintain a set of disclosure controls and procedures designed to ensure that
information required to be disclosed by us in the reports filed under the
Securities Exchange Act, is recorded, processed, summarized and reported within
the time periods specified by the Commission’s rules and forms.
 Disclosure controls are also designed with the objective of ensuring that
this information is accumulated and communicated to our management, including
our chief executive officer and chief financial officer, as appropriate, to
allow timely decisions regarding required disclosure.  We evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end
of the period covered by this report. As a result of this evaluation, we
concluded that our disclosure controls and procedures were effective for the
period ended March 31, 2010.





Changes
in Internal Control





There
were no changes in our internal control over financial reporting that occurred
during our most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





Management’s
Report on Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934, as amended). These internal controls are
designed to provide reasonable assurance that the reported financial information
is presented fairly, that disclosures are adequate and that the judgment
inherent in the preparation of financial statements is reasonable.





Our
management does not expect that our disclosure controls or internal controls
over financial reporting will prevent all errors or all instances of fraud.
 A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system’s objectives
will be met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within our company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Because of the inherent limitation of a cost-effective control
system, misstatements due to error or fraud may occur and not be
detected.





Management
conducted its evaluation of the effectiveness of our internal controls over
financial reporting based on the framework and criteria established in Internal
Control-Integrated Framework, issued by the Committee of Sponsoring
Organization’s of the Treadway Commission (COSO). Based on this evaluation, we
concluded that our internal controls over financial reporting (as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) were
effective for the quarter ended March 31, 2010.





35


PART
II - OTHER INFORMATION







Legal Proceedings







None of
our directors, officers, significant employees, or affiliates has been convicted
in a criminal proceeding, exclusive of traffic violations.





None of
our directors, officers, significant employees, or affiliates has been
permanently or temporarily enjoined, barred, suspended, or otherwise limited
from involvement in any type of business, securities or banking
activities.





None of
our directors, officers, significant employees, or affiliates of has been
convicted of violating a federal or state securities or commodities
law.





We are
not a party to any pending legal proceedings.






Risk
Factors




In
addition to the other information set forth in this report, you should carefully
consider the risk factors discussed in “Risk Factors” in our Annual Report on
Form 10-K for the year ended December 31, 2009, which could materially
affect our business, financial condition or future results. We caution the
reader that these risk factors may not be exhaustive. We operate in a
continually changing business environment and new risks emerge from time to
time. Management cannot predict such new risk factors, nor can we assess the
impact, if any, of such new risk factors on our business or to the extent to
which any factor or combination of factors may impact our business. There have
not been any material changes during the quarter ended March  31, 2010 from
the risk factors disclosed in the above-mentioned Form 10-K for the year
ended December 31, 2009.





Unregistered Sales of Equity Securities





Recent
Sales of Unregistered Securities





On
November 6, 2007, we entered into a financing arrangement with a group of
accredited investors pursuant to which we sold our Original Issue Discount 8%
Secured Convertible Debentures and warrants to purchase our common stock in
consideration of an aggregate of $4,117,649.  We received gross proceeds of
approximately $3,500,000 from this offering.  In connection with the
November 2007 financing, we issued the following securities to the
investors:





·
            $4,117,649
      in Secured Original Issue Discount Convertible Debentures;
    and





·
            Common
      Stock Purchase Warrants to purchase 114,379 shares of common stock at
      $19.20  per share for a period of five
  years.


The
warrants were originally exercisable to purchase one share of common stock at
$19.20 per share, and had a term of exercise equal to 5 years.  The warrant
holders could  not exercise the warrants for a number of shares of common
stock in excess of that number of shares which upon giving effect to such
exercise would cause the aggregate number of shares beneficially owned by the
holder to exceed 9.99% of the outstanding shares of the common stock following
such exercise.  On October 31, 2009, the remaining unpaid principal and
related interest and penalties of $4,194,393 as well as the outstanding warrants
(including warrants issued subsequently related to debt payment waivers) to
purchase 4,597,145 shares at $0.60, were converted to preferred
shares.





36


On
December 6, 2007, we entered into a financing arrangement with a group of
accredited investors pursuant to which we sold our Original Issue Discount 8%
Secured Convertible Debentures and warrants to purchase our common stock in
consideration of an aggregate of $1,764,706.We received gross proceeds of
approximately $1,500,000 from this offering.  In connection with the
December 2007 financing, we issued the following securities to the
investors:








·
            $1,764,706.50
      in Secured Original Issue Discount Convertible Debentures;
    and





·
            Common
      Stock Purchase Warrants to purchase 49,019 shares of common  stock at
      $19.20 per share for a period of five
years.





The
warrants were originally exercisable to purchase one share of common stock at
$19.20 per share, and had a term of exercise equal to 5 years.  The Warrant
holders could not exercise the Warrants for a number of shares of common stock
in excess of that number of shares which upon giving effect to such exercise
would cause the aggregate number of shares beneficially owned by the holder to
exceed 9.99% of the outstanding shares of the Common stock following such
exercise.  On October 30, 2009, the remaining unpaid principal and related
interest and penalties of $2,350,895 was converted to preferred
shares.





July 2,
2009 issuance of $2,500,000 in 8% Secured Convertible Debentures (July 2009
Debentures) due October 1, 2010. The debentures had an exercise price or $3.60
per share of ECOtality common stock. Shenzhen Goch Investment Ltd was issued
$2,000,000 of July 2009 Debentures, Enable Growth Partners (November and
December 2007 Debenture holder) was issued $250,000 in July 2009 Debentures, and
BridgePointe Master Fund (November and December 2007 Debenture holder) was
issued $250,000 in July 2009 Debentures.  New investor Shenzhen Goch was
issued 29,149 Common Stock Purchase Warrants to purchase shares of common stock
at  $0.60.  The Nov/Dec debenture holders cancelled an equivalent
number of previously issued Common Stock purchase warrants of equal value to
offset this issuance.  On October 31, 2009, the remaining unpaid principal
and related interest of $2,565,881 and the related outstanding warrants to
purchase 29,149 shares of common stock at $0.60 were converted to preferred
shares.





On
October 31, 2009, ECOtality, Inc. (“ECOtality” or the “Company”) signed a
Securities Exchange Agreement with all holders of its convertible
debentures and holders of certain warrants to convert all outstanding
amounts ($9,111,170) under these debentures and all related warrants into an
aggregate of 8,597,299  shares of Series A Convertible Preferred Stock
(while not impacted by the current common stock split discussed herein, it could
be subject to adjustment for future forward and reverse stock splits, stock
dividends, recapitalizations and the like). The Series A Convertible
Preferred Stock has no redemption or preferential dividend rights, but may be
converted into shares of the Company’s common stock (the “Common Stock”). 
At the date of this filing the Series A Convertible Preferred Stock is
convertible at a1:60 ratio.  Following the reverse split of common shares
(see below) the Company expects that the preferred shares will be convertible at
a 1:1 ratio





On
October 31, 2009, ECOtality signed a Securities Purchase Agreement and a
Registration Rights Agreement with certain accredited investors (the
“Investors”) pursuant to which the Investors agreed to purchase shares of the
Common Stock at a  purchase price of $7.20 per share.  The funds from
the private placement will be utilized as working capital to support the initial
requirements of the contract signed with the Department of Energy on September
30, 2009.





Terms of
the private placement include:





1.
            A
      minimum aggregate purchase of $15,500,000 of Common Stock by the
      Investors.





2.
            Each
      Investor will receive a Warrant to purchase the equivalent number of
      shares of Common Stock that it purchases under to the Securities Purchase
      Agreement.  The exercise price of the Warrants will be equal to $9.00
      per share.  The Company may call the Warrants if the closing price of
      shares of the Common Stock is at least $27 per share for 20 consecutive
      trading days, subject to certain conditions, including the existence of an
      effective registration statement for the shares of Common Stock issuable
      upon exercise of the Warrants (the “Warrant Shares”) and minimum volume
      provisions.  The Company may not effect any exercise of the Warrants
      in an amount that would result in any Investor or  its affiliates
      beneficially owning more than 9.99% of the outstanding Common Stock upon
      such an exercise.  The Warrants will have a five-year term during
      which they can be exercised and shall contain a cashless exercise
      provision which shall apply if there is not an effective registration
      statement covering the resale of the shares issuable upon
      exercise.3.
            The
      Company shall file a shelf registration statement for the resale of the
      shares of Common Stock purchased under the Securities Purchase Agreement
      and the Warrant Shares on Form S-3 or another appropriate form (the
      “Registration Statement”).  Such Registration Statement shall be
      filed as soon as practicable, but in any event within 45 days of the
      closing date of the Securities Purchase
  Agreement.





4.
            The
      Investors have agreed not to exercise “short sales” for a period of
      9-months after the date of the Securities Purchase
    Agreement.





37


5.
            The
      Company will initiate the process to effect the Reverse Split prior to the
      closing, and the Company will submit its application to be listed on The
      NASDAQ Stock Market as soon as possible thereafter. The Company is
      obligated to consummate the Reverse Split within 30 days of the date of
      the Securities Purchase Agreement which was accomplished on November 24,
      2009.







Defaults upon Senior Securities





There
were no defaults upon senior securities in the quarter ended March 31,
2010.





Submission of Matters to a Vote of Security
Holders







None




38




Exhibit Number
            
            Name
      and/or Identification of Exhibit31
            
            Rule 13a-14(a)/15d-14(a) Certification32
            
            Certification
      under Section 906 of the Sarbanes-Oxley Act (18 U.S.C.
      Section 1350)







Notes:





(1)
            Incorporated
      by reference herein to the Form SB-2, previously filed with the SEC
      on January 8, 2008.





(2)
            Incorporated
      by reference herein to the Form SB-2, previously filed with the SEC
      on January 31, 2008.





(3)
            Incorporated
      by reference herein to the Form SB-2, previously filed with the SEC
      on January 31, 2008.





(4)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      January 31, 2008.





(5)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      April 11, 2008.





(6)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      September 4, 2008.





(7)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      September 25, 2008.





(8)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      December 30, 2008.





(9)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      January 07, 2009.





(10)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      February 03, 2009.





(11)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      February 11, 2009.





(12)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      March 10, 2009.




(13)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      May 18, 2009.





(14)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      July 06, 2009.





(15)
            Incorporated
      by reference herein to the Form 8-K/A previously filed with the SEC
      on July 09, 2009





(16)
            Incorporated
      by reference herein to the Form 8-K, previously filed with the SEC on
      August 27, 2009.





(17)
            Incorporated
      by reference herein to the Form 8-K previously filed with the SEC on
      September 2, 2009





(18)
            Incorporated
      by reference herein to the Form 8-K (1 of 2), previously filed with
      the SEC November 4, 2009.





(19)
            Incorporated
      by reference herein to the Form 8-K  (2 of 2) previously filed
      with the SEC on November 4, 2009





(20)
            Incorporated
      by reference herein to the Form 8-K  (2 of 2) previously filed
      with the SEC on November 18, 2009(21)
            Incorporated
      by reference herein to the Form 8-K previously filed with the
      SEC on November 23, 2009(22)
            Incorporated
      by reference herein to the Form 8-K  previously filed with
      the SEC on December 16, 2009(23)
            Incorporated
      by reference herein to the Form 8-K  (1 of 2) previously filed
      with the SEC on January 13, 2010(24)
            Incorporated
      by reference herein to the Form 8-K  (2 of 2) previously filed
      with the SEC on January 13, 2010





39


SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.





ECOTALITY,
INC.




Signature
            
            Title
            
            Date/s/
      Jonathan R. Read
            
            Chief
      Executive Officer
            
            May
      14, 2010Jonathan
      R. Read





In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





ECOTALITY,
INC.




Signature
            
            Title
            
            Date/s/
      Jonathan R. Read
            
            Chief
      Executive Officer,
            
            May
      14, 2010Jonathan
      R. Read
            
            President
      and Director/s/
      Barry S. Baer
            
            Chief
      Financial Officer
            
            May
      14, 2010Barry
      S. Baer
            
            Principal
      Accounting Officer and Director/s/
      Dave Kuzma
            
            Director
            
            May
      14, 2010Dave
      Kuzma/s/
      E. Slade Mead
            
            Director
            
            May
      14, 2010E.
      Slade Mead/s/
      Jack Smith
            
            Director
            
            May
      14, 2010Jack
      Smith/s/Daryl
      Magana
            
            Director
            
            May
      14, 2010Daryl
      Magana/s/Carlton
      Johnson
            
            Director
            
            May
      14, 2010Carlton
      Johnson





40