**UNITED
        STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**





**Washington,
      D.C. 20549**





**FORM
      10-Q**




**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the quarterly period ended: March 31, 2008****Or****o**
            **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.)**6821
                E Thomas Road, Scottsdale, Arizona**
            **85251**(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   o
              (Do
                not check of a smaller reporting company)
            
            Smaller
                reporting company   þ




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 15, 2008**


***124,732,861***










**ECOtality,
      Inc.**




**Table
      of Contents**


PART
                  I - FINANCIAL INFORMATION
              3Financial
                    Statements:Condensed
                    Consolidated Balance Sheet
              3Condensed
                  Consolidated Statements of Operations
              4Condensed
                    Consolidated Statements of Cash Flows
              5Notes
                  to Condensed Consolidated Financial Statements
              6Management’s
                    Discussion and Analysis of Financial Condition and Results of
                    Operation
              21Quantitative
                  and Qualitative Disclosures about Market Risk
              31Controls
                  and Procedures
              31PART
                  II - OTHER INFORMATION
              32Legal
                  Proceedings
              32Risk
                  Factors
              32Unregistered
                    Sales of Equity Securities
              32Defaults
                  Upon Senior Securities
              33Submission
                  of Matters to a Vote of Security Holders
              33Exhibits
                    and Reports on Form 8-K
              34SIGNATURES
              36




2




**PART 1.
      FINANCIAL INFORMATION**





**ECOTALITY,
      INC.**




CONDENSED
      CONSOLIDATED BALANCE
      SHEETS


**(unaudited)**




**March
                    31, 2008**
                
                **December
                    31, 2007****(Unaudited)****Assets**Current
                    assets:Cash
                
                $
                616,712
                
                $
                677,318Certificates
                    of deposit
                
                
                50,727
                
                
                1,197,784Receivables,
                    net of allowance for bad debt of $21,252 and $21,743
                  as
                    of 03/31/08 and 12/31/07 respectively
                
                
                2,624,554
                
                
                2,387,542Inventory,
                    net of allowance for obsolescence of $48,000 and $293,934
                  as
                    of 03/31/08 and 12/31/07 respectively
                
                
                1,075,647
                
                
                1,791,174Prepaid
                    expenses and other current assets
                
                
                587,417
                
                
                477,186Total
                    current assets
                
                
                4,955,057
                
                
                6,531,004Fixed
                    assets, net accumulated depreciation of $4,026,187 and $3,884,302
                  as
                    of 03/31/08 and 12/31/07 respectively
                
                
                2,028,535
                
                
                2,027,142Goodwill
                
                
                3,095,878
                
                
                3,095,878Total
                    assets
                
                $
                10,079,470
                
                $
                11,654,025**Liabilities
                    and Stockholders’ Equity**Current
                    liabilities:Accounts
                    payable
                
                $
                1,202,100
                
                $
                1,317,916Accrued
                    liabilities
                
                
                770,709
                
                
                670,746Liability
                    for purchase price
                
                
                4,245,600
                
                
                4,075,000Current
                    portion of LT Debt, net of discount of $1,291,272 and 1,174,075
                    as of
                    03/31/08 and 12/31/07 respectively
                
                
                1,334,757
                
                
                1,147,241Total
                    current liabilities
                
                
                7,553,168
                
                
                7,210,903Total
                    LT Liabilities, net of discount of $1,935,140 and $2,494,910
                    as of
                    03/31/08 and 12/31/07 respectively
                
                
                1,532,791
                
                
                1,808,314Stockholders’
                    equity:Preferred
                    stock, $0.001 par value, 200,000,000 sharesauthorized,
                    no shares issued and outstanding
                
                
                -
                
                
                -Common
                    stock, $0.001 par value, 300,000,000 sharesauthorized,
                    124,732,861 and 124,224,528 shares issuedand
                    outstanding as of 03/31/08 and 12/31/07, respectively
                
                
                124,733
                
                
                124,225Additional
                    paid-in capital
                
                
                31,139,184
                
                
                30,780,992Retained
                    deficit
                
                
                (30,262,626
                )
                
                (28,270,409
                )Accumulated
                    Foreign Currency Translation Adjustments
                
                
                (7,782
                )
                
                -Total
                    stockholders' equity
                
                
                993,510
                
                
                2,634,808Total
                    liabilities and stockholders' equity
                
                $
                10,079,470
                
                $
                11,654,025
  The
        accompanying notes are an integral part of these financial
        statements.




3




**ECOTALITY,
      INC.**




CONDENSED
      CONSOLIDATED STATEMENTS OF
      OPERATIONS


**(unaudited)**




**For
                  the Three Months Ended****March
                  31,****2008**
              
              **2007****(Unaudited)**Revenue
              
              $
              2,817,899
              
              $
              -Cost
                  of goods sold
              
              
              1,616,355
              
              
              -Gross
                  profit
              
              $
              1,201,544
              
              $
              -Expenses**:**Depreciation
              
              
              141,886
              
              
              48,087General
                  and administrative expenses
              
              
              2,357,009
              
              
              542,533Research
                  and development
              
              
              115,686
              
              
              373,530Settlement
                  Expense
              
              
              0
              
              
              1,800,000Total
                  expenses
              
              
              2,614,581
              
              
              2,764,150Operating
                  loss
              
              
              (1,413,037
              )
              
              (2,764,150
              )Other
                  income:Interest
                  income
              
              
              8,150
              
              
              21,743Total
                  other income
              
              
              8,150
              
              
              21,743Other
                  expenses:Interest
                  expense
              
              
              562,304
              
              
              3,234Loss
                  on Disposal of Assets
              
              
              25,020
              
              
              -Accrued
                  expense - Potential Registration Rights Penalty
              
              
              
              
              
              3,001,493Total
                  other expenses
              
              
              587,324
              
              
              3,004,727Loss
                  from operations before income taxes
              
              
              ($1,992,211
              )
              
              ($5,747,134
              )Provision
                  for income taxes
              
              
              -
              
              
              -Net
                  (loss)
              
              
              ($1,992,211
              )
              
              ($5,747,134
              )Weighted
                  average number ofcommon
                  shares outstanding - basic and fully diluted
              
              
              124,469,621
              
              
              110,066,566Net
                  (loss) per share-basic and fully diluted
              
              
              ($0.02
              )
              
              ($0.05
              )




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





4


**ECOTALITY,
      INC.**





**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(unaudited)**




**For
                      the Three Months Ended****March
                      31,****2008**
                  
                  **2007****Cash
                      flows from operating activities**
                  
                  **(unaudited)**Net
                      Income (loss)
                  
                  
                  ($1,992,211
                  )
                  
                  ($5,747,134
                  )Adjustments
                      to reconcile:Stock
                      and options issued for services and compensation
                  
                  
                  52,288
                  
                  
                  -Shares
                      issued for settlement
                  
                  
                  -
                  
                  
                  1,200,000Shares
                      Accrued for registration penalty
                  
                  
                  
                  
                  
                  3,001,493Depreciation
                  
                  
                  141,886
                  
                  
                  48,087Amortization
                      of stock issued for services
                  
                  
                  91,413
                  
                  
                  -Amortization
                      of discount on notes payable
                  
                  
                  442,573
                  
                  
                  -Loss
                      on disposal of assets
                  
                  
                  25,020
                  
                  
                  -Changes
                      in operating assets and liabilities:Certificate
                      of deposit
                  
                  
                  1,147,057
                  
                  
                  (21,743
                  )Accounts
                      Receivable
                  
                  
                  (230,248
                  )
                  
                  -Inventory
                  
                  
                  690,503
                  
                  
                  -Prepaid
                      expenses and other
                  
                  
                  (116,995
                  )
                  
                  5,543Accounts
                      Payable
                  
                  
                  (115,816
                  )
                  
                  (87,107
                  )Accrued
                      Liabilities
                  
                  
                  (42,836
                  )
                  
                  1,183Net
                      cash provided (used) by operating activities
                  
                  
                  92,634
                  
                  
                  (1,599,678
                  )**Cash
                      flows from investing activities**Purchase
                      of fixed assets
                  
                  
                  (143,277
                  )
                  
                  (611,019
                  )Net
                      cash (used) by investing activities
                  
                  
                  (143,277
                  )
                  
                  (611,019
                  )**Cash
                      flows from financing activities**Mortgage
                      Payable
                  
                  
                  
                  
                  
                  287,500Payments
                      on notes payable
                  
                  
                  (2,180
                  )
                  
                  -Net
                      cash provided (used) by financing activities
                  
                  
                  (2,180
                  )
                  
                  287,500Effects
                      of exchange rate changes
                  
                  
                  (7,782
                  )Net
                      increase (decrease) in cash
                  
                  
                  (60,605
                  )
                  
                  (1,923,197
                  )Cash
                      - beginning
                  
                  
                  677,318
                  
                  
                  5,047,968Cash
                      - ending
                  
                  
                  616,712
                  
                  
                  3,124,771Supplemental
                      disclosures:Interest
                      paid
                  
                  
                  4,758
                  
                  
                  3,234Non-cash
                      transactions:Stock
                      and options issued for services
                  
                  $
                  52,288
                  
                  $
                  -Shares
                      of stock issued
                  
                  
                  125,000
                  
                  
                  -Number
                      of options issued
                  
                  
                  175,000
                  
                  
                  -Stock
                      issued for settlement
                  
                  $
                  0
                  
                  $
                  1,200,000Shares
                      of stock issued
                  
                  
                  -
                  
                  
                  1,500,000Amortization
                      of stock issued for services
                  
                  $
                  91,413
                  
                  $
                  0Amortization
                      of discount on notes payable
                  
                  $
                  442,573
                  
                  $
                  0Note
                      Payable conversted for common stock
                  
                  $
                  100,000
                  
                  $
                  0Shares
                      of stock issued
                  
                  
                  333,333
                  
                  
                  -


The
      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 3 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 3 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 3 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 3 for further
      information.





The
      consolidated financial statements as of March 31, 2008 include the accounts
      of
      ECOtality, Innergy Power Corporation, eTec, and Minit-Charger. 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




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**





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,
      2008 and 2007 interest income was $ **8,150** and
      $21,743, 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 $100,000.  Deposits with these banks
      may exceed the amount of insurance provided on such deposits.  At March 31,
      2008 and 2007, the Company had approximately $226,500 and $5,061,281 in excess
      of FDIC insured limits, respectively.





Impairment
      of long-lived assets and intangible assets


The
      Company follows the provisions of SFAS No. 144, “Accounting for the Impairment
      or Disposal of Long-Lived Assets” and SFAS No. 142, “Goodwill and other
      intangible assets”, which addresses financial accounting and reporting for
      acquired goodwill and other 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 quarter ended March 31, 2008 and 2007, the Company had
      impairment expense of $0 and $0, respectively




Revenue
      recognition


The
      Company’s revenue recognition policies are in compliance with Staff Accounting
      Bulletin (SAB) 104. 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 collectibility is reasonably assured.
       The Company recognizes revenues on product sales, 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 provide 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 or a product warranty liability. As of
      March 31, 2008 and 2007, management has concluded that no reserve is required
      for product returns.





We
      warrant to our customers that our product and services are in good working
      order
      at the time of delivery. In our acquisition of Minit-Charger, we assumed a
      warranty reserve in relation to warranties of products. At the time of
      acquisition, the warranty reserve was $231,303 and as of March 31, 2008 the
      warranty reserve was $217,729. Management has concluded this warranty reserve
      to
      be adequate for future expenses relating to the warranty.





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 $21,252 and $21,743 as of March 31, 2008 and 2007,
      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, 2008 was
      $48,000. ****





Advertising
      costs


The
      Company expenses all costs of advertising as incurred.  There were
      advertising costs of $15,454 and $0 included in general and administrative
      expenses for the quarter ended March 31, 2008 and 2007,
      respectively.





Research
      and development costs


Research
      and development costs are charged to expense when incurred. For the quarter
      ended March 31, 2008 and 2007, research and development costs were
      $115,686 **** and
      $373,530, 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, 2008 and 2007.
       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 Statement of Financial Accounting
      Standards No. 128 (SFAS #128), “Earnings Per Share”. 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, 2008 and
      2007, the assumed conversion of convertible long-term debt and the exercise
      of
      stock warrants are anti-dilutive due to the Company’s net loss and were excluded
      in determining diluted loss per share.





Foreign
      Currency Translation


In
      2008,
      a Company subsidiary, Protable Energy De Mexico operated outside the United
      States and 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 for revenue and expense accounts for each respective period. The
      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 SFAS No. 109, “Accounting for Income
      Taxes" 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 adopted FASB Interpretation Number. 48, Accounting for Uncertainty
      in
      Income Taxes, as of January 1, 2007. FIN 48 clarifies the accounting for
      uncertainty in income taxes recognized in the companies’ financial statements in
      accordance with FASB Statement No. 109, Accounting for Income Taxes. As a
      result, the Company applies a more-likely-than-not recognition threshold for
      all
      tax uncertainties. FIN 48 only allows the recognition of those tax benefits
      that
      have a greater than fifty percent likelihood of being sustained upon examination
      by the taxing authorities. As a result of implementing FIN 48, the Company
      reviewed its tax positions and determined there were no outstanding, or
      retroactive tax positions with less than a fifty percent likelihood of being
      sustained upon examination, therefore the implementation of this standard has
      not had a material affect on the Company.





The
      Company does not anticipate any significant changes to its total unrecognized
      tax benefits with the next twelve months. As of March 31, 2008 and 2007, 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.





9




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**





Segment
      reporting


SFAS No. 131,
      “Disclosures about Segments of an Enterprise and Related Information,” requires
      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. Upon completion of FuelCellStores.com, Innergy Power Corporation,
      Electric Transportation Engineering Corporation (eTec) and eTec’s Minit-Charger
      business acquisitions from June through December 2007, the Company identified
      its segments based on the way management expects to organize the Company to
      assess performance and make operating decisions regarding the allocation of
      resources. In accordance with the criteria in SFAS No. 131, “Disclosure
      about Segments of an Enterprise and Related Information,” the Company has
      concluded it has three reportable segments for the quarter ended March 31,
      2008;
      ECOtality/ECOtality Stores segment, Innergy Power segment and eTec segment.
      The
      ECOtality/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 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.





Management
      is currently assessing how it evaluates segment performance, and currently
      utilize income (loss) from operations, excluding share-based compensation
      (benefits), depreciation and intangibles amortization and income taxes. There
      were no inter-segment sales during the quarter ended March 31, 2008.





Recent
      Accounting pronouncements


In
      December 2004, the FASB issued Financial Accounting Standards No. 123 (revised
      2004) (“FAS 123R”), Share-Based Payments, FAS 123R replaces FAS No. 123,
      Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25,
      Accounting for Stock Issued to Employees. FAS 123R requires compensation
      expense, measured as the fair value at the grant date, related to share-based
      payment transactions to be recognized in the financial statements over the
      period that an employee provides service in exchange for the award. FAS 123R
      is
      effective January 1, 2006. The company has adopted this accounting standard,
      however the implementation of this standard did not have a material impact
      on
      the Company’s financial position, results of operations or cash flows.





In
      November 2004, FASB issued Financial Accounting Standards No. 151, Inventory
      Costing, an amendment amends the guidance in ARB No. 43, Chapter 4, "Inventory
      Pricing," to clarify the accounting for abnormal amounts such as wasted
      material. This Statement requires that those items be recognized as
      current-period charges regardless of whether they meet the criterion of
      "abnormal." The implementation of this standard did not have a material impact
      on the Company’s financial position, results of operations or cash flows for the
      quarters ended March 31, 2008 and 2007.





In
      September of 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”
(SFAS No. 157). SFAS No. 157 establishes a framework for measuring
      fair value under generally accepted accounting procedures and expands
      disclosures on fair value measurements. This statement applies under previously
      established valuation pronouncements and does not require the changing of any
      fair value measurements, though it may cause some valuation procedures to
      change. Under SFAS No. 157, fair value is established by the price that
      would be received to sell the item or the amount to be paid to transfer the
      liability of the asset as opposed to the price to be paid for the asset or
      received to transfer the liability. Further, it defines fair value as a market
      specific valuation as opposed to an entity specific valuation, though the
      statement does recognize that there may be instances when the low amount of
      market activity for a particular item or liability may challenge an entity’s
      ability to establish a market amount. In the instances that the item is
      restricted, this pronouncement states that the owner of the asset or liability
      should take into consideration what affects the restriction would have if viewed
      from the perspective of the buyer or assumer of the liability. This statement
      is
      effective for all assets valued in financial statements for fiscal years
      beginning after November 15, 2007. Although SFAS No. 157 applies to and
      amends the provisions of existing FASB and AICPA pronouncements, it does not,
      of
      itself, require any new fair value measurements, nor does it establish valuation
      standards.  SFAS No. 157 applies to all other accounting pronouncements
      requiring or permitting fair value measurements, except for: SFAS No. 123(R),
      share-based payment and related pronouncements, the practicability exceptions
      to
      fair value determinations allowed by various other authoritative pronouncements,
      and AICPA Statements of Position 97-2 and 98-9 that deal with software revenue
      recognition. The Company is currently evaluating the impact of SFAS No. 157
      to its financial position and result of operations.





10




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**





In
      July
      2006, the FASB issued FASB Interpretation No. 48 “Accounting for Uncertain
      Tax Positions” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty
      in income taxes recognized in an enterprise’s financial statements in accordance
      with FASB Statement No. 109 “Accounting for Income Taxes”. It prescribes a
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken,
      in
      a tax return. FIN 48 also provides guidance on de-recognition, classification,
      interest and penalties, accounting in interim periods, disclosure, and
      transition. FIN 48 is effective for fiscal years beginning after
      December 15, 2006. The implementation of this standard did not have a
      material impact on the Company’s financial position, results of operations or
      cash flows for the quarter ended March 31, 2008.





In
      December 2007, FASB issued Statement of Financial Accounting Standards No.
      141
      (revised 2007) on Business Combinations. This guidance retains the fundamental
      requirements in Statement 141 that the acquisition method of accounting (which
      Statement 141 called the purchase method) be used for all business combinations
      and for an acquirer to be identified for each business combination. This
      Statement defines the acquirer as the entity that obtains control of one or
      more
      businesses in the business combination and establishes the acquisition date
      as
      the date that the acquirer achieves control. This guidance requires an acquirer
      to recognize the assets acquired, the liabilities assumed, and any
      non-controlling interest in the acquired at the acquisition date, measured
      at
      their fair values as of that date, with limited exceptions specified in the
      Statement. It replaces Statement 141’s cost-allocation process, which required
      the cost of an acquisition to be allocated to the individual assets acquired
      and
      liabilities assumed based on their estimated fair values. For example, Statement
      141 required the acquirer to include the costs incurred to effect the
      acquisition (acquisition- related costs) in the cost of the acquisition that
      was
      allocated to the assets acquired and the liabilities assumed. This guidance
      requires those costs to be recognized separately from the acquisition. In
      addition, in accordance with Statement 141, restructuring costs that the
      acquirer expected but was not obligated to incur were recognized as if they
      were
      a liability assumed at the acquisition date. This guidance requires the acquirer
      to recognize those costs separately from the business combination. The Company
      has followed the above guidance in accounting for all acquisitions that happened
      in 2007.





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 -
        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 call ECOtality
      Stores, Inc. The acquisition has been accounted for under the purchase
      accounting method pursuant to SFAS 141. Our consolidated financial statements
      for the year ended December 31, 2007 and the quarter ended March 31, 2008
      include the financial results of ECOtality Stores, Inc. subsequent to the date
      of the acquisition.





The
      fair
      value of the transaction was $539,000. The company paid $350,000 in cash and
      issued 300,000 shares of common stock, which was valued at $189,000 based on
      the
      closing market price on the date of the agreement.




11




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**





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. The acquisition has been accounted for under the
      purchase accounting method pursuant to SFAS 141. Our consolidated financial
      statements for the year ended December 31, 2007 and the quarter ended March
      31,
      2008 include the financial results of Innergy Power Corporation and its
      subsidiary subsequent to the date of the acquisition.





The
      fair
      market value of the transaction was $3,000,000. The Company issued 3,000,000
      shares of the Company’s common stock for the acquisition.  The Company
      guaranteed to the sellers that the shares would be worth $1 each ($3,000,000)
      during the 30-day period commencing 11 months from the closing date. If the
      shares are not worth $3,000,000, the company would be required to either issue
      additional shares such that the total shares are worth $3,000,000 at that time
      or pay cash to the seller so that the aggregate value of the 3,000,000 shares
      plus the cash given would equal $3,000,000.





The
      fair
      value of the 3,000,000 shares of common stock given, based on the closing price
      of the Company’s common stock on December 31, 2007, was $555,000. A liability
      for the balance of $2,445,000 has been recorded as a current liability for
      purchase price on the consolidated balance sheet as of December 31, 2007. This
      liability has been reduced to reflect the value of the closing price of the
      Company’s common stock of March 31, 2008 and the amount of the current liability
      for purchase price has been updated to $2,376,000 on the consolidated balance
      sheet at March 31, 2008.




**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 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. The acquisition has been accounted for
      under the purchase accounting method pursuant to SFAS 141. Our consolidated
      financial statements for the year ended December 31, 2007 and the quarter ended
      March 31, 2008 include the financial results of eTec subsequent to the date
      of
      the acquisition.





The
      fair
      market value of the transaction was $5,037,193. The Company paid $2,500,000
      in
      cash, issued a $500,000 note payable, and issued 6,500,000 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 includes $217,193 in direct acquisition
      costs.





The
      $500,000 is payable in monthly installments of $50,000 beginning December of
      2007. The note payable balance as of March 31, 2008 was $300,000.


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 preliminary estimate of fair
        value
        of assets as part of the acquisition with eTec:
 
 2007Tangible
                  assets acquired, net of liabilities assumed
              
              $
              1,941,315Goodwill
              
              
              3,095,878$
              5,037,193
 
 In
        accordance with SFAS No. 144, “Accounting for the impairment or disposal of long
        lived assets”, the Company reviewed the goodwill for impairment. Due to a proven
        track record of cash flows generated by the assets acquired, no impairment
        was
        taken during the year ended December 31, 2007. Impairment expense relating
        to
        this acquisition was $0 for the quarter ended March 31, 2008.


12




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**





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
      lift trucks using revolutionary technologies. The acquisition has been accounted
      for under the purchase accounting method pursuant to SFAS 141. Our consolidated
      financial statements for the year ended December 31, 2007 and the quarter ended
      March 31, 2008 include the financial results of Minit-Charger subsequent to
      the
      date of the acquisition.





The
      fair
      market value of the transaction was $3,000,000. The company paid $1,000,000
      in
      cash and issued 2,000,000 shares of the company’s common stock for the
      acquisition.  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.





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 reduced to reflect the value of the closing
      price of the Company’s common stock of March 31, 2008 and the amount of the
      current liability for purchase price has been updated to $1,584,000 on the
      consolidated balance sheet at March 31, 2008.




Pro
      forma
      financial statements





The
      unaudited pro forma consolidated statement of operations for the quarters ended
      March 31, 2008 and 2007 combines the historical results of ECOtality, Inc and
      the unaudited pro forma results of the four companies acquired during 2007
      and
      gives effect to the acquisitions as if they occurred on January 1,
      2007 **.** Pro
      forma adjustments have been made related to impairment of goodwill. The pro
      forma consolidated results do not purport to be indicative of results that
      would
      have occurred had the acquisition been in effect for the periods presented,
      nor
      do they claim to be indicative of the results that will be obtained in the
      future, and do not include any adjustments for cost savings or other synergies
      achieved in the consolidations of the companies.





The
      following table contains unaudited pro forma results for the quarters ended
      March 31, 2008 and 2007 as if the acquisitions had occurred on January 1,
      2007:





13




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**


Quarter
                  Ended March 31,2008
              
              
              
              
              
              2007Reported
              
              
              Pro
                  Forma
              
              
              Reported
              
              
              Pro
                  FormaNet
                  Revenues
              
              $
              2,817,899
              
              $
              2,817,899
              
              $
              -
              
              $
              3,268,073Net
                  Income (loss)
              
              
              ($1,992,211
              )
              
              ($1,992,211
              )
              
              ($5,747,134
              )
              
              ($6,332,549
              )Net
                  (loss) per share-basic and fully diluted
              
              
              ($0.02
              )
              
              ($0.02
              )
              
              ($0.05
              )
              
              ($0.06
              )





**Note
      4 - Fixed assets**





Fixed
      assets as of March 31, 2008 and 2007 consisted of the following:











Depreciation
      expense totaled $141,886 and $48,087, for the quarters ended March 31, 2008
      and
      2007 respectively.





**Note
      5 - Notes payable**





For
      the
      quarter ended March 31, 2007





14




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**





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.





Interest
      expense totaled $3,234 for the quarter ended March 31, 2007.





As
      of
      March 31, 2007, there were no other outstanding notes payable.





For
      the
      quarter ended March 31, 2008


During
      2007, the Company acquired a note payable in the acquisition of eTec. The note
      relates to a vehicle that was also acquired in the acquisition. As of March
      31,
      2008, $24,105 was owed on the note; $3,480 of which is due during 2008 with
      the
      remainder, $20,625 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 3 for details. As of March 31, 2008,
      $300,000 was owed and recorded as long-term note payable on the consolidated
      financial statements.





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 are
      convertible into common stock at $0.30 per share. The debentures are 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 9,803,925 shares
      of the Company’s common stock with an exercise price of $0.32. The warrants are
      exercisable immediately upon issue. The Warrants expire five years from the
      date
      of issue.  The aggregate fair value of the Warrants equals $2,272,942 based
      on the Black-Scholes pricing model using the following assumptions: 3.39%-3.99%
      risk free rate, 162.69% volatility, strike price of $0.32, market price of
      $0.22-$0.32, 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 March 31, 2008, a total of
      $649,844 had been amortized and recorded as interest expense and $3,226,412
      remains as the unamortized discount.  See note 7 for additional discussion
      regarding the issuance of warrants.





15




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**





The
      current portion of the debentures is recorded, net of a $1,291,272 discount,
      is
      $1,331,277 at March 31, 2008. The long-term portion of the debentures is
      recorded, net of a $1,935,140 discount, is $1,224,666 as of March 31,
      2008.





Included
      in accrued liabilities is $114,051 of accrued interest relating to the
      debentures at March 31, 2008.





Interest
      expense totaled $562,304 for the quarter ended March 31, 2008.





**Note
      6 - Stockholders’ equity**





There
      were 124,224,528 shares of common stock issued and outstanding at December
      31,
      2007.




During
      the year ended December 31, 2007, the Company issued 11,800,000 shares in four
      different acquisitions. See Note 3 for further information.





During
      the year ended December 31, 2007, the Company issued a total of 750,000 shares
      of common stock to employees as an incentive. The stock was valued at the
      current market price at the date of issue for a total of $316,000. Of this
      amount $91,000 was expensed and $225,000 was recorded as unamortized cost of
      stock issued for services to be amortized over the periods of the related
      agreements. During the quarter ended March 31, 2008, $56,250 has been amortized
      and $56,250 remains in unamortized cost of stock issued for
      services.


In
        January 2008, 175,000 shares of $0.001 common stock were issued to employees
        of
        eTec. The cost of issuance for these shares was recorded at $0.155, the close
        price of the stock on the date of grant and was charged to compensation
        expense.
 
 In
        February 2008, BridgePointe Capital, one of the holders of the convertible
        debentures described in Note 5, converted $100,000 of debentures into 333,332
        shares of $0.001 common stock at a conversion price of $0.30. This conversion
        was made in two equal installments, the first on February 1 st ,
        2008
        and the second on February 29 th ,
        2008.
        As a result of these conversions, a reduction to the outstanding debenture
        balance in the amount of $100,000 and a corresponding reduction to the remaining
        discount on the debenture of $55,797 were recorded.




16




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**


During
        the year ended December 31, 2007, the Company signed an employment agreement
        with the CEO of the Company. The Company agreed to issue a total of 1,000,000
        options for shares of common stock currently and issue another 1,000,000
        options
        to him one year from the date of the agreement. The options issued in 2007
        have
        a term of ten years and a strike price of $0.30. The aggregate fair value
        of the
        Warrants equals $281,300 based on the Black-Scholes pricing model using the
        following assumptions: 3.95% risk free rate, 162.69% volatility, strike price
        of
        $0.30, market price of $0.32, no yield, and an expected life of 5 years.
        This
        amount was recorded as unamortized cost of stock issued for services to be
        amortized over the two-year period of the agreement. During the quarter ended
        March 31, 2008, $35,163 has been amortized into expense and $222,696 remains
        in
        unamortized cost of stock issued for services. The options to be issued in
        2008
        were treated as earned equally over the two-year term of the agreement so
        that
        208,334 of these options were earned as of March 31, 2008. Those options
        were
        valued using the Black-Scholes pricing model assuming 3.45% risk free rate,
        179.04% volatility, strike and market price of $0.21 and were valued at $25,163.
        This amount was expensed during the quarter ended March 31,
        2008.**** The remainder of the options will be expensed over
        the two-year term of the agreement as they are earned.




During
      the year ended December 31, 2007, the Company issued a total of 790,000 shares
      of common stock to consultants forservices. The stock was valued at the current
      market price at the date of issue for a total of $400,400. This amount was
      recorded as a prepaid expense for services to be amortized over the periods
      of
      the related agreements. During the quarter ended March 31, 2008, $47,275 has
      been amortized and $66,300 remains in prepaid expenses.





There
      were 124,732,861 shares of common stock issued and outstanding at March 31,
      2008.





There
      is
      no preferred stock issued or outstanding as of March 31, 2008, or March
      2007.




17




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**




Note
      7 - Options and Warrants




As
      of
      December, 2007, there were 8,799,982 options and warrants
      outstanding.




During
        the year ended December 31, 2007, the Company signed an employment agreement
        with the CEO of the Company. The Company agreed to issue a total of 1,000,000
        options for shares of common stock currently and issue another 1,000,000
        options
        to him one year from the date of the agreement. The options issued in 2007
        have
        a term of ten years and a strike price of $0.30. The aggregate fair value
        of the
        Warrants equals $281,300 based on the Black-Scholes pricing model using the
        following assumptions: 3.95% risk free rate, 162.69% volatility, strike price
        of
        $0.30, market price of $0.32, no yield, and an expected life of 5 years.
        This
        amount was recorded as unamortized cost of stock issued for services to be
        amortized over the two-year period of the agreement. During the quarter ended
        March 31, 2008, $35,163 has been amortized into expense and $222,696 remains
        in
        unamortized cost of stock issued for services. The options to be issued in
        2008
        were treated as earned equally over the two-year term of the agreement so
        that
        208,334 of these options were earned as of March 31, 2008. Those options
        were
        valued using the Black-Scholes pricing model assuming 3.45% risk free rate,
        179.04% volatility, strike and market price of $0.21 and were valued at $25,163.
        This amount was expensed during the quarter ended March 31, 2008**.**The remainder of the options will be expensed over the
        two-year term of
        the agreement as they are earned.
  As
          of
          March 31, 2008, there were 19,075,462 options and warrants
          outstanding.





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




***Number***
              
              
              ***Weighted-Average******Of
                  Shares***
              
              
              ***Exercise
                  Price***Outstanding
                  at December 31, 2006
              
              
              **8,799,982**
              
              **$**
              **0.57**Granted
              
              
              **11,753,925**
              
              **$**
              **0.31**Exercised
              
              
              **(1,478,445**
              **)**
              **$**
              **0.35**Cancelled
              
              
              **0**
              
              **$**
              **0.00**Outstanding
                  at December 31,2007
              
              
              **19,075,462**
              
              **$**
              **0.42**Granted
              
              
              **0**
              
              **$**
              **0.00**Exercised
              
              
              **0**
              
              **$**
              **0.00**Cancelled
              
              
              **0**
              
              **$**
              **0.00**Outstanding
                  at March 31, 2008
              
              
              **19,075,462**
              
              **$**
              **0.42**
  **STOCK
                  WARRANTS OUTSTANDING*****Range
                      of***Exercise Prices
              
              
              ***Number
                      of***SharesOutstanding
              
              
              ***Weighted-Average***RemainingContractualLife
                    in Years
              
              
              ***Weighted-***AverageExercise
                  Price**$0.35**
              
              
              **5,421,537**
              
              
              **3.56**
              
              **$**
              **0.35****$1.24
                  - $1.42**
              
              
              **1,900,000**
              
              
              **3.32**
              
              **$**
              **1.36****$0.32**
              
              
              **6,862,748**
              
              
              **4.59**
              
              **$**
              **0.32****$0.32**
              
              
              **2,941,177**
              
              
              **4.67**
              
              **$**
              **0.32****$0.30**
              
              
              **1,000,000**
              
              
              **9.57**
              
              **$**
              **0.30****$0.18**
              
              
              **950,000**
              
              
              **9.75**
              
              **$**
              **0.18****(2**
              **)****19,075,462**
              
              
              **4.7**
              
              **$**
              **0.42**
 **STOCK
                    WARRANTS EXERCISABLE*****Range
                        of***Exercise Prices
                
                
                ***Number
                        of***SharesExercisable
                
                
                ***Weighted-***AverageExercise
                    Price**$0.35**
                
                
                **5,421,537**
                
                **$**
                **0.35****$1.24
                    - $1.42**
                
                
                **1,900,000**
                
                **$**
                **1.36****$0.32**
                
                
                **6,862,748**
                
                **$**
                **0.32****$0.32**
                
                
                **2,941,177**
                
                **$**
                **0.32****$0.30**
                
                
                **1,000,000**
                
                **$**
                **0.30****$0.18**
                
                
                **950,000**
                
                **$**
                **0.18****19,075,462**
                
                **$**
                **0.42**


18




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**




**Note 8
        - Commitments and contingencies**





As
      of
      March 31, 2008, the Company has seven leases in effect for operating space.
      Future obligations under these commitments are $161,631 for 2008, $119,400
      for
      2009, $109,450 for 2010, and $0 for 2011 and thereafter.





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. 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 9
      - Segment Reporting**





SFAS No. 131,
      “Disclosures about Segments of an Enterprise and Related Information,” requires
      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. Upon completion of FuelCellStores.com, Innergy Power Corporation,
      Electric Transportation Engineering Corporation (eTec) and eTec’s Minit-Charger
      business acquisitions from June through December 2007, the Company identified
      its segments based on the way management expects to organize the Company to
      assess performance and make operating decisions regarding the allocation of
      resources. In accordance with the criteria in SFAS No. 131, “Disclosure
      about Segments of an Enterprise and Related Information,” the Company has
      concluded it has three reportable segments for the quarter ended March 31,
      2008;
      ECOtality/ECOtality Stores segment, Innergy Power segment and eTec segment.
      The
      ECOtality/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 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.





Management
      is currently assessing how it evaluates segment performance, and currently
      utilize income (loss) from operations, excluding share-based compensation
      (benefits), depreciation and intangibles amortization and income taxes. There
      were no inter-segment sales during the quarter ended March 31, 2008. ****





The
      Company did not have separate segments for the quarter ended March 31,
      2007.





19




**ECOTALITY,
      INC.**




**NOTES TO
      CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS — (Continued)**





Summarized
      financial information concerning the Company’s reportable segments for the
      quarter ended March 31, 2008 is as follows:


**Quarter
                  Ended**
              
              
              **ECOtality/**
              
              
              
              
              
              **eTec/****March
                  31, 2008**
              
              
              **Fuel
                  Cell Store**
              
              
              **Innergy**
              
              
              **Minit-Charger**
              
              
              **Total**Total
                  net operating revenues
              
              
              180,023
              
              
              674,975
              
              
              1,962,901
              
              $
              2,817,899Depreciation
                  and amortization
              
              
              35,494
              
              
              10,284
              
              
              96,108
              
              
              141,886Operating
                  income (loss)
              
              
              (1,352,057
              )
              
              37,207
              
              
              (98,187
              )
              
              (1,413,038
              )Interest
                  expense
              
              
              (562,098
              )
              
              -
              
              
              (206
              )
              
              (562,304
              )Interest
                  income
              
              
              4,672
              
              
              435
              
              
              3,043
              
              
              8,150Loss
                  on disposal of assets
              
              
              -
              
              
              -
              
              
              (25,020
              )
              
              (25,020
              )Income
                  (loss) before income tax
              
              
              (1,909,483
              )
              
              37,642
              
              
              (120,370
              )
              
              (1,992,211
              )Income
                  tax provision (benefit)
              
              
              -
              
              
              -
              
              
              -
              
              
              -Total
                  assets
              
              
              4,802,388
              
              
              649,958
              
              
              4,627,123
              
              
              10,079,469Capital
                  expenditures (including non-cash)
              
              
              (694
              )
              
              (7,396
              )
              
              (135,187
              )
              
              (143,277
              )




20




**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, Ecotality’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.




21


**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**





ECOtality,
      Inc. is a Nevada corporation that was incorporated in 1999. We are a renewable
      energy company that develops, acquires and operates companies in the clean
      technology sector that provide commercial solutions for today’s global energy
      challenges. Through strategic acquisitions, partnerships and technology
      innovations, we strive to advance the market applicability of clean electric
      technologies to become accepted alternatives to carbon-based fuel technologies.
      In 2007, through a number of platform acquisitions we transitioned from a
      development-stage company into a revenue producing company focused on providing
      renewable energy products and solutions.





We
      operate with a commercial “electro-centric” strategy, targeting only products
      and companies that are 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 and the establishment of solar,
      hydrogen, and energy storage divisions. We are developing a diverse technology
      product base that is linked through the ability to deliver comprehensive
      electro-centric energy alternatives and solutions for commercial customers
      seeking to implement greenhouse gas reduction programs (GRPs) and to prepare
      for
      the anticipated consumer and governmental moves to carbon caps and taxes. We
      also believe that by building a technologically diverse multi-product base
      we
      can mitigate the uncertainty of renewable energy demand and regulatory changes.
      With our primary focus on commercially advancing clean electro-centric
      technologies, we are focused on improving the world’s prevailing and most
      dominant energy system - electricity.





Our
      gross
      sales grew from $0 in 2006 to $2,588,658 for the year ended December 31, 2007
      and $2,817,899 for the first quarter of 2008. The trailing twelve month
      performance of the companies acquired in 2007, coupled with the strong and
      quickly growing demand for clean and renewable energy technologies and products
      positions us to greatly expand our sales and market share in 2008 as indicated
      by our first quarter sales revenue amount. As most of our acquisitions occurred
      between October and December of 2007, our revenue amounts for 2007 reflect
      only
      the portion of sales while under our control.





The
      current operations of the Company consist of:





****** ***HydralityTM***





HydralityTM
      is our initial
      technology and is  a
      complex
      reactor 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. An
      electric power cell or fuel cell is an electrochemical device that combines
      hydrogen and oxygen to produce electric power without combustion.




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.




We
      expect
      to derive revenue from technology license fees, technology transfer fees, fuel
      licensing fees and
      fees for the design, installation and technical support of Hydrality systems
      and
      by third parties.




***Innergy
      Power Systems***





Founded
      in 1989, Innergy Power Systems is a division of ECOtality, Inc. and 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, Portable Energy De Mexico, S.A. DE C.V., were
      acquired as platform acquisitions that provide us the ability to further expand
      our production and manufacturing of solar products and energy storage devices.
      We viewed this acquisition as the starting point of a major move to provide
      solar products and solutions for current and developing commercial markets.
      We
      expect that solar will become one of our four core technology groups and will
      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.





22


***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, and conducts research, development and
      testing of advanced transportation and energy systems. 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 also holds exclusive patent rights for their flagship products,
      the *eTec
      SuperChargeTM* -
      battery fast-charge systems that allow for rapid charging while generating
      less
      heat and promoting longer battery life than conventional chargers. This
      technology was licensed to eTec from Norvic Traction in 1999. The eTec
      SuperCharge system is specifically designed for airport ground support
      equipment, neighborhood electric vehicle operations, and marine and transit
      systems. Since the acquisition of the technology, eTec has made considerable
      engineering and product advancements and is currently a leader in providing
      this
      clean electric fast charging technology to airports throughout North America.





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 Department of Energy, 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 advanced battery technologies, fast charging
      technologies, hydrogen creation, storage and dispensing systems, electric
      vehicle systems, recharging stations, and coal gasification
      programs.





eTec
      was
      acquired 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 and its subsidiaries will
      expand its core technologies through new product development, joint ventures,
      acquisitions and organic growth.





***Edison
      MinitCharger***





Edison
      MinitCharger was a subsidiary of Edison Source, a division of Edison
      International (the Southern California energy conglomerate). Edison originally
      acquired Norvic Traction Technology, which became Edison MinitCharger, for
      its
      unique fast charge and complex battery maintenance technologies that are
      primarily used in mobile material handling applications (forklifts, pallet
      jacks, etc.). Edison MinitCharger has been, and continues to be, one of the
      leaders in the mobile material handling industry. The core MinitCharger
      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. Following the initial acquisition of Norvic, Edison
      engineers completed many advancements of the technology and received numerous
      patents all of which were transferred to us in our acquisition. MinitCharger
      has
      a large customer base that consists of Fortune 500 companies and other corporate
      entities throughout North America.





Our
      acquisition of Edison MinitCharger greatly increased the size of our company
      and
      reunited the technologies and advancements that sprung from the original Norvic
      Traction technology: Edison’s MinitCharger and eTec’s SuperCharge products. It
      allows the unification of the underlying fast charging technology under a single
      engineering, manufacturing and sales entity and puts us in a leadership position
      in the rapidly growing clean technology sector of electric vehicle
      infrastructure technologies.




***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 the widest 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, manufacturers,
      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.




23


**Products**





We
      currently offer the following products:


·
            Hydrality
                technology


·
            Energy
                engineering services (hydrogen, solar, battery, coal gasification,
                energy
                delivery infrastructure, etc...)


·
            eTec
                SuperCharge fast charge systems


·
            Minit-Charger
                fast charge systems


·
            Industrial
                battery systems


·
            Solar
                panel production


·
            Specialty
                solar solutions


·
            Specialty
                thin-sealed lead battery products


·
            Proprietary
                solar products for consumer, emergency response programs and remote
                power
                systems.


·
            Third-party
                hydrogen and education related
                products





**Customers**





We
      have a
      strong base of commercial, industrial, institutional, governmental, and utility
      customers. As the move to renewable clean energy continues to advance, we
      believe that our positioning within the commercial sector gives us an advantage
      over companies who focus on consumer products or distribution. Our customer
      base
      includes many Fortune 500 companies, hundreds of colleges and universities,
      international research institutes, major electric utilities, the Department
      of
      Energy, the Department of Transportation, major industry research consortiums,
      vehicle manufacturers and original equipment manufacturers (OEM). By providing
      testing and engineering services, as well as being a product provider, we are
      on
      the cutting edge of technology and product development for the production,
      storage and delivery of renewable energy sources, which allows us to develop
      innovative product solutions for industry and government needs. Our customers
      use our products in industrial applications and for OEM
      applications.





We
      believe that commercial/industrial entities will be the early adopters of
      renewable energy technologies and products, precipitated by regulatory,
      financial, employee, and customer pressure. We also believe this sector will
      provide the most stable demand and will be less prone to overall economy or
      “fad” pressures. For the immediate future, we plan to focus our efforts and
      products on this high value added business sector.





**Manufacturing**





We
      have
      manufacturing facilities in Mexico operated under a Maquiladora program for
      the
      production of solar and battery products. The facility is highly
      labor-intensive. We have a high-value assembly operation in Phoenix, Arizona.
      Additionally, we have manufacturing agreements with third parties in Canada,
      Germany, and China.





We
      expect
      to expand our Mexican operations significantly in 2008, as well as the
      high-value manufacturing capability in Arizona. We are currently planning for
      new leased facilities in Mexico to handle our anticipated growth. Part of our
      anticipated growth plan would include more mechanized production systems,
      inclusive of International Organization for Standardization (ISO) quality and
      environmental certifications. We believe that our existing plant in Arizona
      has
      sufficient room for anticipated growth.





24




**Research
      and Development**




We
      devoted a large percentage of our 2007 research and development expenditures to
      the
      Hydrality project. This expenditure was with third-party technology and
      engineering partners such as NASA’s Jet Propulsion Laboratories (JPL) and
      others. We
      have
      determined that we will rationalize and capacitate our technology research
      and
      development expenditures at levels in-line with traditional operating technology
      companies based upon a reasonable percentage of revenues. Given the proven
      and
      commercially viable clean technology companies we acquired in 2007 and
      anticipate adding in 2008, we have determined we are well positioned with our
      strategy to grow through a combination of organic growth of existing operations
      and potential acquisitions of other mid-stage companies that are congruous
      with
      our clean electro-centric strategy.





We
      have
      determined that the vagaries of the hydrogen industry, the advancement of other
      renewable technologies to the commercial forefront, and the potentially long
      and
      expensive road to commercialization and profitability for hydrogen technologies
      necessitate that we prudently and significantly scale back our hydrogen research
      and development expenditures, and proceed only on the basis of joint development
      projects with third-parties or significantly subsidized development with
      potential licensees or federal grants.




**Sales
      and Marketing**





We
      are
      actively marketing all of our companies and products under the ECOtality brand
      as well as under their historic brand names. We are striving to build a strong
      corporate identity as a purveyor of “renewable energy” products and solutions.
      This corporate branding of group products is an important part of our strategy
      to provide individual and integrated electro-centric products and solutions.
      All
      marketing programs are or will be dually targeted towards “green products and
      green returns.” Product marketing is handled on a divisional and subsidiary
      level, with cross-marketing efforts to be a key element of the corporate
      marketing program. Corporate marketing and overall brand management, investor
      relations and group representation is handled out of corporate headquarters
      in
      Scottsdale, Arizona.





The
      majority of our products are sold directly on a business-to-business basis.
      ECOtality Stores operates internet sales operations of hydrogen fuel cell
      products and educational kits and systems. We intend to commercialize our
      Hydrality product through technology license fees, technology transfer fees,
      fuel licensing fees and fees for the design, installation and technical support
      of Hydrality systems by ECOtality and/or third parties.




**Government**





The
      energy industry is highly regulated. Several states in the U.S. along with
      Canada and various countries in Europe and Asia have adopted a variety of
      government subsidies to allow new renewable sources of energy and technologies
      to compete with conventional fossil fuel based sources. Government grants for
      research and development are often the precursors to the acceptance of and
      government incentives for new clean technologies. We closely track government
      policy and strategy as it relates to renewable and clean tech energy. eTec
      has a
      large portfolio of DOE contracts and is in regular contact with leaders of
      U.S
      energy and technology policies.





Solar
      power is increasingly becoming more attractive to consumers due to government
      subsidies and incentives that generally focus on grid-connected systems and
      take
      several forms, including feed-in tariffs, net metering programs, renewable
      portfolio standards, rebates, tax incentives and low-interest loans. Some
      programs further specify that a portion of the renewable energy quota must
      be
      from solar electricity.





25


Tax
      incentive programs exist in the United States at both the federal and state
      level and can take the form of investment tax credits, accelerated depreciation
      and property tax exemptions. Several governments also facilitate low interest
      loans for photovoltaic systems, either through direct lending, credit
      enhancement, or other programs.








Gradual
      government increases to Corporate Average Fuel Economy (CAFE) standards on
      vehicle mileage minimums, along with high gas prices and consumer ecology
      preferences, are forcing vehicle OEMs to actively seek alternatives to
      petroleum-powered internal combustion engines (ICE). There is considerable
      jockeying for a leadership role between two factions - biofuels vs. electric
      vehicles (HEVs, PHEVs and pure EVs). We are well positioned to play a
      substantial role in the electric vehicle sector and the associated establishment
      of an electric infrastructure for PHEVs and EVs.





Our
      Hydrality system may be subject to regulation under the 2002 National Electric
      Code (“NEC”), which is a model code adopted by the National Fire Protection
      Association that governs, among other things, the installation of fuel cell
      systems.  Accordingly, any of our systems installed in a jurisdiction that
      has adopted the 2002 NEC must be installed in accordance with Article 692.
       In addition, product safety standards have been established covering the
      overall fuel cell system and the power conversion electronics. There may be
      new
      regulations with respect to fuel cells, but we do not currently know the extent
      to which any new regulations may impact our ability to distribute, sell or
      install and service Hydrality. If Hydrality reaches the commercialization
      stage and we begin distributing our systems to our early target markets,
      federal, state or local government entities may seek to impose
      regulations.




The
      Federal Bayh-Dole Act requires the California Institute of Technology (CalTech-
      operators of NASA’s JPL) to grant to the Federal government a worldwide,
      non-exclusive, non-transferable, irrevocable, paid-up license in connection
      with
      any invention developed under the license agreement.  Therefore,
      under this provision, the Federal government would have a license to use
      each subject invention for NASA-related applications and for other applications
      of the Federal government.





The
      Federal government also retains “March-in Rights, ” which would allow the
      Federal government to grant licenses to others if:  (1) we do not “achieve
      practical application” of a subject invention (i.e. commercialize the
      technology); (2) such action is necessary to alleviate health or safety needs
      that are not reasonably satisfied by us; (3) such action is necessary to meet
      requirements for public use specified by federal regulations and such
      requirements are not reasonably satisfied by us; or (4) such action is necessary
      because we and/or our sub licensees are manufacturing patented products
      outside of the United States.  We believe that the Federal government is
      not likely to exercise its March-in Rights with regard to any of our patented
      technology because March-in Rights have rarely, if ever, been invoked by the
      Federal government since the Bayh-Dole Act was enacted in 1980. However, we
      cannot assure you that the Federal government will not invoke its March-in
      Rights against us in the future.




**General
      Competition**




Currently,
      we believe that we have no direct competitors and that our consolidated and
      diverse offering of products and technologies in multiple renewable energies
      sectors differentiates us from others in the industry and gives us a competitive
      advantage. While many of our individual technologies and products do have direct
      market competition, we are aware of no other entity that has consolidated its
      products and technology offerings to extend to such diverse renewable energy
      market segments.




As
      competition in the renewable energy sectors is intense, the potential
      competition for each of the individual products and technologies that we offer
      ranges from development stage companies to major domestic and international
      companies, many of which have financial, technical, marketing, sales,
      manufacturing, distribution and other resources that are significantly greater
      than ours.




**Hydrality
      Competition**




Hydrality
      is a complex reactor system that is currently in developmental stages and stores
      and delivers hydrogen on-demand using magnesium compounds and water. As
      Hydrality provides an alternative method of storage and delivery of hydrogen,
      it
      competes with current suppliers of delivered hydrogen and with other
      manufacturers of on-site hydrogen generators. Competitors in the delivered
      hydrogen market include Airgas, Inc., Air Liquide, Air Products and
      Chemicals, Inc., Linde AG, Praxair Technology, Inc., and Distributed Energy
      Systems Corporation. Hydrality will also compete with older generations of
      electrolysis-based hydrogen generation equipment sold by Hydrogenics
      Corporation, Statoil Hydro, Teledyne Energy Systems, Inc., and other companies.
      We believe that many of these current
      hydrogen creation, storage and delivery methods are bulky, unreliable,
      expensive, energy inefficient, contain hazardous materials, or require
      the assistance of mechanical compressors to produce hydrogen at high pressures.




There
      are
      a number of companies located in the United States, Canada and abroad that
      are
      developing Proton Exchange Membrane (PEM) fuel cell technology. These companies
      include Ballard Power Systems Inc., General Motors Corporation,
      Giner, Inc., Honda Motor Company, Toyota Motor Corporation, SANYO Electric
      Co., Ltd., IdaTech LLC, Hydrogenics Corporation, Nuvera Fuel Cells, Plug Power
      Inc. and United Technologies Corporation. Although we believe these companies
      are currently primarily targeting vehicular and residential applications, they
      could decide to enter the hydrogen generation and backup power markets we
      address. We may also encounter competition from companies that have developed
      or
      are developing fuel cells based on non-PEM technology, as well as other
      distributed hydrogen generation technologies.




26


**Fast-Charge
      Competition**




The
      eTec
      SuperCharge and Minit-Charger are fast battery charging systems designed for
      material handling applications, airport ground support equipment and electric
      vehicles. We believe that the principal competitive factors in the markets
      for
      our battery fast charging products and services include product performance,
      features, acquisition cost, lifetime operating cost, including maintenance
      and
      support, ease of use, integration with existing equipment, quality, reliability,
      customer support, brand and reputation.




The
      primary direct competitors to the eTec SuperCharge and Minit-Charger systems
      are
      other fast charge suppliers, including AeroVironment, Inc., Aker Wade Power
      Technologies LLC, Power Designers, LLC, and C&D Technologies, Inc. Some of
      the major industrial battery suppliers have begun to align themselves with
      fast
      charge suppliers, creating a potentially more significant source of competition.
      In addition, the eTec SuperCharge and Minit-Charger systems compete against
      the
      traditional method of battery changing. Competitors in this area include
      suppliers of battery changing equipment and infrastructure, designers of battery
      changing rooms, battery manufacturers and dealers who may experience reduced
      sales volume because the eTec SuperCharge and Minit-Charger fast charge systems
      reduces or eliminate the need for extra batteries.





**Retail
      Fuel Cell Competition**





Fuel
      Cell
      Store has active operations in the United States, Japan, Russia, Italy, and
      Portugal, and is an online retailer (e-commerce) that develops, manufacturers,
      and sells a diverse and comprehensive range of fuel cell products. We believe
      that the principal competitive factors in the retail fuel cell and e-commerce
      markets include breadth of product offerings, product quality, product
      availability, distribution capabilities, internet rankings, ease of use of
      the
      website, customer service, technical support, brand and reputation.




The
      primary direct competitors to Fuel Cell Store are fuel cell manufacturers,
      and
      other fuel cell e-commerce sites. Fuel cell manufacturers that sell products
      directly to consumers include Heliocentris Fuel Cells AG, Horizon Fuel Cell
      Technologies, Ltd., BCS Fuel Cells, Inc., Electrochem, Inc., and Fuel Cell
      Scientific, LLC. New e-commerce sites that are coming online in the U.S. and
      abroad and are duplicating the Fuel Cell Store format and sourcing from the
      same
      vendors are providing growing competition. These companies include GasHub
      Technology, JHT Power, H-Tech, Inc., Element-1 Power Systems, and miniHYDROGEN.
      Other renewable technologies, including solar and wind, as well as advanced
      batteries and conventional fossil fuel technologies are also competing
      technologies for fuel cells.





**Solar
      Competition**





The
      market for solar electric power technologies is competitive and continually
      evolving. Innergy’s solar products compete with a large number of competitors in
      the solar power market, including BP Solar International Inc., Evergreen Solar,
      Inc., First Solar Inc., Kyocera Corporation, Mitsubishi Electric Corporation,
      Motech Industries Inc., Q-Cells AG, Sanyo Corporation, Sharp Corporation,
      SolarWorld AG and Suntech Power Holdings Co., Ltd. Many of these companies
      have
      established strong market positions, greater name recognition, a more
      established distribution network and a larger installed base of customers.
      Some
      competitors also have more available capital and significantly greater access
      to
      financial, technical, manufacturing, marketing, sales, distribution, management
      and other resources than we do. Many of our competitors also have
      well-established relationships with our current and potential suppliers,
      resellers and their customers and have extensive knowledge of our target
      markets. As a result, our competitors may be able to devote greater
      resources to the research, development, promotion and sale of their products
      and
      respond more quickly to evolving industry standards and changing customer
      requirements than we can.




In
      addition to intense market competitors, universities, research institutions
      and
      other companies have brought to market advanced and alternative technologies
      such as thin films and concentrators, which may compete with our technology
      in
      certain applications. Furthermore, the solar power market in general competes
      with other sources of renewable energy and conventional power generation.




The
      principal elements of competition in the solar systems market include technical
      expertise, experience, delivery capabilities, diversity of product offerings,
      financing structures, marketing and sales, price, product performance, quality
      and reliability, and technical service and support. We believe that we compete
      favorably with respect to each of these factors, although we may be at a
      disadvantage in comparison to larger companies with broader product lines and
      greater technical service and support capabilities and financial
      resources.





**Intellectual
      Property**





Our
      success depends, in part, on our ability to maintain and protect our proprietary
      technology and to conduct our business without infringing on the proprietary
      rights of others. We rely primarily on a combination of patents, trademarks
      and
      trade secrets, as well as employee and third party confidentiality agreements,
      to safeguard our intellectual property. As of December 31, 2007, in the
      United States we held three patent applications and 16 issued patents, which
      will expire at various times between 2010 and 2021 if all maintenance fees
      are
      paid. We also held two PCT patent applications, two Canadian patent
      applications, one Japanese patent application, one European patent application,
      11 issued Canadian patents, four issued Japanese patents, seven issued European
      patents, and one issued Australian patent. Our patent applications and any
      future patent applications, might not result in a patent being issued with
      the
      scope of the claims we seek, or at all and any patents we may receive may be
      challenged, invalidated, or declared unenforceable. We continually assess
      appropriate occasions for seeking patent protection for those aspects of our
      technology, designs and methodologies and processes that we believe provide
      significant competitive advantages. Our patents and patent applications
      generally relate to our hydrogen, battery charging, and thin-cell battery
      technologies.





27





In
      May
      2006, CalTech filed a provisional patent application on the hydrogen technology
      being developed pursuant to a task plan between ECOtality and Jet
      Propulsion Laboratory (“JPL”), a Federally Funded Research and Development
      Center for the National Aeronautics and Space Administration (“NASA”).  The
      California Institute of Technology (“CalTech”) is the operator of JPL and
      assignee of its patent and technology rights.  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
      ECOtality, Inc. 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, which did not occur prior December 31, 2007 .
      The
      patent application is generally directed towards the hydrogen reactor design
      that has been under development.





On
      June
      12, 2006, we entered into a License Agreement with California Institute of
      Technology, which operates 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, as well as a
      nonexclusive licensed technology rights developed as a result of the Task Plan.
       The license agreement with CalTech relates to CalTech’s rights to patents
      and technology based on inventions that are:  (a) identified in the license
      agreement, (b) developed under the development agreement with JPL, (c) related
      to electric power cell technology developed at JPL with the involvement of
      our
      personnel, or (d) funded, in whole or in part, by us (the “CalTech Rights”).
 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.





With
      regard to patented CalTech Rights, CalTech has granted us the exclusive
      worldwide license, with the right to grant and authorize sublicenses, to make,
      have made, import, use, sell, and offer for sale any products, devices, systems,
      articles of manufacture, and compositions of matter, or processes or services
      that are covered by the patented CalTech Rights.  With regard to
      non-patented CalTech Rights, CalTech has granted us a non-exclusive worldwide
      license, with the right to grant and authorize sublicenses, to make, have made,
      import, use, sell, offer for sale, reproduce, distribute, display, perform,
      create derivative works of, and otherwise exploit products, devices, systems,
      articles of manufacture, and compositions of matter, or processes or services
      that utilize the technology covered by the non-patented CalTech Rights.
 The non-patented CalTech Rights include technology necessary for the
      development or use of our products or services, as may be disclosed in any
      patent applications filed by CalTech or requested by us and consented to by
      CalTech.





All
      license rights granted by CalTech are subject to a reservation of rights by
      CalTech for non-commercial education and research purposes and U.S. Government
      rights provided under the Bayh-Dole Act, 35 U.S.C. § 200 et seq. and 37 C.F.R. §
401 et seq. as indicated below.





As
      of
      March 31, 2008, we held six United States federal trademark
      registrations **** (including
      eTec SUPERCHARGE®, MINIT-TRAK®, MINIT-WATCH®, INNERGY POWER®, THINLINE®, and
      POWER PLANT®) and 13 pending applications for federal registration of trademarks
      (including ECOTALITYTM, HYDRALITYTM, ELETRICELLTM, ELECTRAWINDTM, BIOSOLINATM,
      SOLATRICITYTM, MAKING HYDROGEN POWER A REALITYTM, and related logos). We also own
      various common law trademark rights and Canadian trademark registrations.





With
      respect to, among other things, proprietary know-how that is not patentable
      and
      processes for which patents are difficult to enforce, we rely on trade secret
      protection and confidentiality agreements to safeguard our interests. We believe
      that many elements of our products and manufacturing process involve proprietary
      know-how, technology, or data that are not covered by patents or patent
      applications, including technical processes, equipment designs, algorithms
      and
      procedures. We have taken security measures to protect these elements. All
      of
      our research and development personnel have entered into confidentiality and
      proprietary information agreements with us. These agreements address
      intellectual property protection issues and require our employees to assign
      to
      us all of the inventions, designs and technologies they develop during the
      course of employment with us. We also require our customers and business
      partners to enter into confidentiality agreements before we disclose any
      sensitive aspects of our solar cells, technology, or business plans.




**Employees**








As
      of
      March 31, 2008, we had 63 employees, including
      43 in manufacturing and the rest in research and development, sales and
      marketing, and general and administration positions. None of our employees
      are
      represented by labor unions or covered by a collective bargaining agreement.
      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, 2008, COMPARED WITH QUARTER ENDED MARCH 31, 2007





28


CONSOLIDATED
      RESULTS





It
      is
      difficult to compare 1 st quarter
      2008 results to those of 1 st quarter
      2007 as we have transformed ourselves from being a development stage company
      to
      a growth oriented renewable energy company. Thus, the variations reflected
      in
      our results of operations described below are based upon this transformation.


In
        the
        quarter ended March 31, 2008, we had revenues of $2,817,899 compared to the
        quarter ended March 31, 2007 of $0. This increased revenue was generated
        from
        our four new acquisitions made in 2007. The cost of goods sold percentage
        for
        the quarter ending March 31, 2008 was 57% leaving us with a gross profit
        of
        $1,201,544.****The increase in revenues is consistent with
        our efforts to move from being a development stage company in 2006 to a
        revenue-generating renewable energy company during the year ended December
        31,
        2007. We had anticipated a higher gross margin percentage; however, we
        experienced additional costs in the production of goods and services due
        to
        integration efforts related to our acquisitions during 2007.





*Operating
      Expense for the quarter ended March 31, 2008 can be characterized as being
      impacted by our efforts to complete the transition and integration of the
      acquisitions by our management and staff. Extensive efforts were required to
      ensure that all actions were accomplished including the transition of the
      manufacturing processes related to Minit-Charger.*





Total
      operating expenses during the three months ended March 31, 2008 were $2,614,581
      compared to $964,150 for the three months ended March 31, 2007. General and
      administrative expenses were $2,364,576 or 90% of total operating expenses
      for
      the three months ended March 31, 2008 co mpared
      with $542,533 or 56% for the three months ended March 31, 2007. While not
      comparable to the general and operating expenses incurred during the
      1 st quarter,
      2007, changes in these expenses are described below: ****


Professional
        fees were $303,595 for the three months ended March 31, 2008 compared with
        $81,762 for the three months ended March 31, 2007. This increase is related
        to
        the increased resources being utilized given the increased size of the company
        post-acquisitions. New media, marketing, advertising and investor and public
        relations expenses of $90,583 for the three months ended March 31, 2008
        were in line with prior year of $109,529 for the three months ended March
        31,
        2007. Legal fees were $229,778 for the quarter ended March 31, 2008
        compared with $37,713 for the quarter ended March 31, 2007 and accounting
        fees
        were $109,381 for the quarter ended March 31, 2008 compared with $74,223
        for the
        quarter ended March 31, 2007.  Both legal and accounting fee increases are
        a direct result of regulatory and audit work in support of the business
        post-acquisition and ongoing integration of the new businesses. Executive
        compensation was $138,000 for the three months ended March 31, 2008 compared
        with $77,140 for the three months ended March 31, 2007. The higher figure
        in
        2008 is attributable to stock awards to our chief executive officer.
        Depreciation expense was $141,886 for the quarter ended March 31, 2008 compared
        to $48,087 for the quarter ended March 31, 2007. The increase is based on
        the
        purchase of a hydrogen-powered bus in November 2006 which is being depreciated
        over 5 years, as well as new depreciation for the assets acquired as part
        of the
        acquisitions. All other general and administrative spending totaled $1,485,672
        for the three months ended March 31, 2008 compared to $114,079 for the three
        months ended March 31, 2007. The increase is attributable to our acquisitions
        which represent $1,159,951 of quarter ended March 31, 2008 expenses, as compared
        to a total of $0 for a comparable period in 2007. Expenses
        for research and development totaled $115,686 for the three months ended
        March
        31, 2008 compared to $373,530 for the three months ended March 31,
        2007 with expenses for both years related to engineering work performed for
        us
        by the Jet Propulsion Laboratory and other firms supporting our Hydrality
        technology development. As outlined in the commercialization discussion above,
        as we move forward we will be limiting our expense in support of this research
        through securing grants and increasing the focus in areas showing potential
        for
        short-term commercialization to help defray costs.
 
 The
        settlement expense of $1,800,000 for quarter ended March 31, 2007 is related
        to
        the settlement with Howard Foot and Elliot Winfield in resolution of all
        known
        disputes and uncertainties between them and us related to all agreements
        and
        contracts entered into concerning the fuel cell intellectual property and
        technology. We have included this expense as part of our operating costs
        due to
        the nature of our business regarding intellectual property. Since a primary
        objective of ours has been the commercial advancement of clean electric
        technologies that reduce our dependence upon carbon based fuels, we have
        retained a strong 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.
  Our
        operating loss of $1,413,037 for
        the three months ended March 31, 2008 compared with a loss of $2,764,150
        for the
        three months ended March 31, 2007 reflects the one-time settlement expense
        in the first quarter of 2007, as well as the increased the general and
        administrative expenses incurred as part of our acquisition integration efforts
        in 2008.
 
 For
        the quarter ended March 31, 2008, we earned interest income in the amount
        of
        $8,150 compared with $21,743 for the quarter ended March 31, 2007.
 
 Interest
        expense was $562,304 for the
        three months ended March 31, 2008 compared to $3,234 for the three months
        ended
        March 31, 2007. The higher amount for 2008 was driven by the interest on
        the
        convertible debentures we issued in November and December of 2007. Other
        expense
        was $25,020 for the quarter ended March 31, 2008 compared to $3,001,493 for
        the
        quarter ended March 31, 2007. The higher 2007 figure is primarily attributable
        to a reserve we established in the quarter ending March 31, 2007 to cover
        penalties in conjunction with registering our common shares of stock with
        the
        SEC.  The amount we reserved was based upon the number of shares that were
        issued.





29


Our
      net
      loss after other income and expenses compared favorably for quarter ended March
      31, 2008 at a $1,992,211 loss compared with a $5,747,134 loss for the quarter
      ended March 31, 2007.





*Liquidity
      and Capital Resources*


As
        of
        March 31, 2008, we had $616,712 of cash on hand and held certificates of
        deposit
        in the amount of $50,727 compared to quarter end 2007 balances of $3,124,771
        of
        cash on hand and $2,036,510 in certificates of deposit.
 
 We
        generated cash for operating activities in the first quarter of 2008 in the
        amount of $92,634 compared to a use of cash of ($1,599,678) for 2007. Cash
        used
        in investing activities was $143,277 for the three months ended March 31,
        2008
        compared to $611,019 for 2007. The higher spend in quarter ending March 31,2007
        was related to the purchase of a building.
 
 Cash
        used
        in financing activities was ($2,180) in the first quarter of 2008 compared
        to
        the generation of $287,500 in cash in 2007. Our current financing activities
        are
        described below:





The
      ability to fund our operating cash requirements, planned capital expenditures
      and debt service requirements for the foreseeable future is based largely from
      internal cash generation through the planned organic growth of our recent
      acquisitions as well as through the use of additional financing activities.
      We
      are also exploring the addition of a modest bank credit facility to supplement
      our sources of operating capital.




We
      believe that we have the ability to fund our operating cash requirements,
      planned capital expenditures and debt service requirements for the foreseeable
      future largely from internal cash generation through the planned organic growth
      of our recent acquisitions as well as through the potential cash generation
      associated with our private placement warrants. We are also exploring the
      addition of a modest bank credit facility to supplement our sources of operating
      capital.




*Management’s
      Plan of Operation*





Our
      plan
      of operation calls for sustained organic growth. We believe that the
      acquisitions we completed during 2007 will provide us with a base to support
      this objective and that this growth is reflected in our budget and business
      plans for 2008.





We
      plan
      to continue to leverage current invested capital through focused cash
      management, lean corporate staffing, and the implementation a company-wide
      Enterprise Resource Planning (ERP) system to support more automation, tight
      inventory controls and cost-effective operating procedures throughout our
      organization.





*Working
      Capital*


Net
        working capital is an important measure of our ability to finance our
        operations.  Our net working capital at March 31, 2008 was negative by
        $2,598,111 or a ratio of 0.66 to 1.**** This ratio is
        significantly impacted by the reserve we have established to cover the maximum
        possible liability associated with the issuance of common stock price guarantees
        due in 2008 per certain of our acquisition agreements. It should be noted
        that
        we have the ability to meet this obligation through the issuance of cash
        or
        equity at our discretion. When this reserve of $4,245,600 is excluded from
        the
        calculation, our working capital is positive $3,307,566 or a ratio of 1.5
        to 1.





We
      do not
      have any off-balance sheet arrangements.





We
      do not
      anticipate the need to add significant numbers of full- or part- time employees
      over the next 12 months.  We plan to outsource the research and development
      and production of our products.





*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, in exchange for 5,869,565 shares of common stock of the
      Company with a fair market value of $8,217,391.  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.





30




As
      of
      March 31, 2008, the Company has seven leases in effect for operating space.
      Future obligations under these commitments are $161,631 for 2008, $119,400
      for
      2009, $109,450 for 2010, and $0 for 2011 and thereafter.




**Quantitative
      and Qualitative Disclosures about Market Risk**





There
      were no material changes in the Company’s market risk from January 1, 2008 to
      March 31, 2008.





**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. In view of our restatement of the financial
      statements for the year ended December 31, 2006, management reevaluated its
      disclosure controls and deemed them ineffective.  We made the following
      changes in our disclosure controls during the year ended December 31, 2007
      to
      make them effective for gathering, analyzing and disclosing the information
      the
      information we are required to disclose in the reports filed under the
      Securities and Exchange Act of 1934, within the time periods specified in the
      Commission’s rules and forms.  These changes included adding an additional
      individual to record transactions in our books of account after they have been
      reviewed by appropriate company officials, reemphasized proper posting of
      transactions, having an independent accountant review transactions for
      compliance with applicable guidance, reviewing our chart of accounts to ensure
      that account classifications are in place, and ensuring accounting personnel
      attend continuing professional education. In addition to the above actions
      we
      have added a professional accountant to specifically oversee all reporting
      for
      us and our subsidiaries and performed an assessment of internal and disclosure
      controls at our acquired entities. As a result of these actions, we believe
      our
      disclosure controls and internal controls are effective for the quarter ended
      March 31, 2008.




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.





31





**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, 2007, 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, 2008 from
      the risk factors disclosed in the above-mentioned Form 10-K for the year
      ended December 31, 2007.





**Unregistered
      Sales of Equity Securities**





On
      or about March 1, 2004, we commenced an offering of shares common stock in
      accordance with Regulation D, Rule504 of the Securities Act, registered by
      qualification in the State of Nevada. On May 17, 2004, we completed the
      offering, whereby we sold 830,000 shares of common stock, par value, at a price
      of $0.05 per share to 30 investors, of which 29 are unaffiliated shareholders
      of
      record and one is our sole officer and director. The 30 non-affiliated,
      non-accredited shareholders hold 790,000 shares of our common stock. The one
      affiliated shareholder (Mr. Harold Sciotto) holds 40,000 shares of common
      stock. The offering was sold for $41,500 in cash. All investors were, at the
      time of purchase, residents of the State of Nevada.





This
      offering was made in reliance upon an exemption from the registration provisions
      of the Securities Act of 1933, as amended, in accordance with Regulation D,
      Rule
      504 of the Act. In addition, this offering was underwritten on a best efforts
      basis. In regards to the offering closed in May 2004, listed below are the
      factual circumstances which support the availability of Rule 504:





1.
            At the time of the offering,
              we
              were not subject to the reporting requirements of section 13 or section
              15(d) of the Exchange Act. Further, we are not now, nor were we at
              the
              time of the offering, considered to be an investment company. Finally,
              since inception, we have pursued a specific business plan, and continue
              to
              do so.2.
            We were issued a permit
              to sell
              securities by the State of Nevada, pursuant to our application for
              registration by qualification of offering of our common stock in that
              state. The application for registration by qualification was filed
              pursuant to the provisions of NRS 90.490, which requires the public
              filing
              and delivery to investors of a substantive disclosure document before
              sale. In May 2004, we completed an offering of shares of common stock
              pursuant to Regulation D, Rule 504 of the Securities Act of 1933, as
              amended, and the registration by qualification of said offering in
              the
              State of Nevada, whereby we sold 830,000 shares of our common stock
              to a
              total of 30 shareholders. One of these purchasers is our sole officer
              and
              director, although at the time of purchase, he was not. The entire
              offering was conducted exclusively in the State of Nevada, pursuant
              to the
              permit issued by the State of Nevada.3.
            The aggregate offering
              price for
              the offering closed in May 2004 was $41,500, all of which was collected
              from the offering.







32




On
      June
      12, 2006, we issued 5,869,565 shares of our common stock, with a fair market
      value of $1.40 per share, for an aggregate value of $8,217,391, to CalTech
      pursuant to a License Agreement.  As a result of the issuance, CalTech
      holds at September 30, 2007 approximately 5.4% of our issued and outstanding
      common stock.  At the time of the issuance, CalTech had fair access to and
      all available material information about our company was made available.
 The shares bear a restrictive transfer legend.  The issuance of stock
      to CalTech was made in accordance with an exemption from registration contained
      in Section 4(2) of the Securities Act of 1933.





On
      July
      7, 2006, we issued warrants to purchase shares of our common stock to one share
      holder and one non-affiliated entity in conjunction with bridge loan agreements.
       Each warrant holder was granted the right to purchase 550,000 shares of
      common stock for an aggregate purchase price of $781,000 or $1.42 a share.
       The issuance of the stock purchase warrants was made in accordance with an
      exemption from registration contained in Section 4(2) of the Securities Act
      of
      1933.




On
      August
      3, 2006, we issued warrants to purchase shares our common stock to one
      shareholder and on non-affiliated entity in conjunction with bridge loan
      agreements.  Each warrant holder was granted the right to purchase 200,000
      shares of common stock for an aggregate purchase price of $248,000 or $1.24 a
      share.  The issuance of the stock purchase warrants was made in accordance
      with an exemption from registration contained in Section 4(2) of the Securities
      Act of 1933.





On
      September 6, 2006, we issued warrants to purchase shares of our common stock
      to
      one shareholder and one non-affiliated entity in conjunction with bridge loan
      agreements.  Each warrant holder was granted the right to purchase 200,000
      shares of common stock for an aggregate purchase price of $264,000 or $1.32
      a
      share.  The issuance of the stock purchase warrants was made in accordance
      with an exemption from registration contained in Section 4(2) of the Securities
      Act of 1933.





In
      October 2006 we issued an aggregate of 34,499,920 shares of our common stock
      to
      a group of 277 accredited investors through Brookstreet Securities Corporation,
      as Placement Agent, at $0.35 per share pursuant to the exemption provided by
      Section 4(2) of the Act and Rule 506 of Regulation D promulgated there under.
       The shares were offered solely to accredited investors, no form of general
      advertising was used, and all investors took the shares as an investment and
      not
      with the intent to distribute and all shares were issued with a restrictive
      legend thereon.  The total offering costs related to this issuance was
      $9,352,713, of which $1,714,501 was paid in cash and $7,638,212 of which was
      the
      fair market value of warrants to purchase shares of our common stock issued
      to
      the placement agent.  As additional consideration for acting as our
      Placement Agent, we issued to Brookstreet warrants to acquire 6,899,982 shares
      of our common stock at $0.35 per share until October 27, 2011.  Since the
      close of the offering, the actual uses of the proceeds from the offering used
      for working capital, or for which at least five percent of the total proceeds
      has been used, were as follows:




**Item**
            
            
            **Amount****Use
                of Net Proceeds:**Development
                of EPC technology
            
            $
            8,749Investor
                relations expenses
            
            
            146,675General
                and administrative expenses
            
            
            445,039Repayment
                of debt
            
            
            1,425,000Working
                capital
            
            
            437,898**Total**
            
            $
            2,463,361




The
      actual uses of proceeds described above for legal and professional fees and
      working capital were consistent with the anticipated uses of proceeds described
      in the Prospectus for the offering.




**Defaults
      upon Senior Securities**





There
      were no defaults upon senior securities in the quarter ended March 31,
      2008.





**Submission
      of Matters** **to a Vote of Security Holders**




None





33





**Exhibits
      and Reports** **on Form 8-K**




**Exhibit
                Number**
            
            **Name
                and/or Identification of Exhibit**2
            
            Plan
                of Purchase, Sale, Reorganization, arrangement, liquidation or
                successiona.
            
            Technology
                Contribution Agreement and Exhibits thereto (1)b.
            
            License
                Agreement with California Institute of Technology (2)c.
            
            Agreement
                for purchase and sale of assets (9)3
            
            Articles
                of Incorporation & By-Lawsa.
            
            Articles
                of Incorporation filed on April 21, 1999 (3)b.
            
            Amendment
                to Articles of Incorporation filed on November 27, 2006c.
            
            Amendment
                to Articles of Incorporation filed on November 27, 2006d.
            
            Amendment
                to Articles of Incorporation filed on November 27, 2006
                (4)e.
            
            Restated
                Bylaws (5)Material
                Contractsa.
            
            Purchase
                Order with Hydrogenics Corporation (4)b.
            
            Settlement
                Agreement and Release (6)16
            
            Letter
                on change in certifying accountant (7)31
            
            Rule
                13a-14(a/15d-14(a) Certification32
            
            Certification
                under Section 906 of the Sarbanes-Oxley Act (18 U S C Section
                1350)99
            
            Additional
                Exhibitsa.
            
            Escrow
                Agreement (6)b.
            
            Letter
                from NASA/Jet Propulsion Laboratories (8)c.
            
            Press
                Release (9)




Notes:





1.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on February 21, 2006.2.
            Incorporated
              by reference herein to the Form 8-K, previously filed with the SEC
              on July
              12, 2006.3.
            Incorporated by reference to the Registration
              Statement on Form 10SB12G, as amended, previously filed with the SEC
              on
              March 3, 2005.4.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on December 4, 2006.5.
            Incorporated by reference herein to
              the Form
              SB-2, previously filed with the SEC on February 12, 2007.6.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on February 21, 2007.7.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on January 30,
              2007.










34




8.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on March 27, 2007.9.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on June 15, 2007.10.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on July 10, 2007.11.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on September 20, 2007.12.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on November 2, 2007.13.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on November 9, 2007.14.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on December 7, 2007.15.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on December 11, 2007.16.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on December 26, 2007.17.
            Incorporated by reference herein to
              the Form
              8-K, previously filed with the SEC on December 31, 2007.18.
            Incorporated by reference herein to
              the Form
              SB-2, previously filed with the SEC on January 8, 2008.19.
            Incorporated by reference herein to
              the Form
              SB-2, previously filed with the SEC on January 31, 2008.20.
            Incorporated
                by reference herein to the Form 8-K, previously filed with the SEC
                on
                January 31, 2008.




**Date
                of 8-K**
            
            **Items
                Disclosed on Form 8-K**January
                30
            
            Items
                4.01, and  9.01January
                31
            
            Items
                2.01, and  9.01February
                21
            
            Items
                1.01, 1.02, 5.02 and 9.01March
                27
            
            Items
                7.01 and 9.01





35





**SIGNATURES**





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
                15, 2008**Jonathan
                R. Read
            President
                and Director/s/
                Harold W. Sciotto
            Secretary,
                Treasurer
            **May
                15, 2008**Harold
                W. Sciotto
            and
                Director/s/
                Barry S. Baer
            Chief
                Financial Officer
            **May
                15, 2008**Barry
                S. Baer
            Principal
                Accounting Officer/s/
                Jerry Y. S. Lin
            Director
            **May
                15, 2008**Jerry
                Y. S. Lin/s/
                E. Slade Mead
            Director
            **May
                15, 2008**E.
                Slade Mead/s/
                Donald B. Karner
            Director
            **May
                15, 2008**Donald
                B. Karner




36