Form
                10-Q
              
              ECOTALITY,
                INC. - ETLY
              
              Filed:
                August 14, 2008 (period: June 30, 2008)
              
              Quarterly
                report which provides a continuing view of a company's financial
                position







Table
                of Contents10-Q
                
                PART
                  IPART
                IISIGNATURES
              
              EX-31
                (Certifications required under Section 302 of the Sarbanes-Oxley
                Act of
                2002)
              
              EX-32
                (Certifications required under Section 906 of the Sarbanes-Oxley
                Act of
                2002)









**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**





**Washington,
      D.C. 20549**





**FORM
      10-Q**




**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the quarterly period ended: June 30, 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 filero
            
            Accelerated
                filero
            
            Non-accelerated
                filero
              (Do
                not check of a smaller reporting company)
            
            Smaller
                reporting companyþ




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 August 13, 2008**


**124,732,861**










**ECOtality,
      Inc.**




**Table
      of Contents**




PART
                I - FINANCIAL INFORMATION
            3Financial
                Statements:
            3Condensed
                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
            32Controls
                and Procedures
            32PART
                II - OTHER INFORMATION
            33Legal
                Proceedings
            33Risk
                Factors
            33Unregistered
                Sales of Equity Securities
            33Defaults
                Upon Senior Securities
            34Submission
                of Matters to a Vote of Security Holders
            34Exhibits
                and Reports on Form 8-K
            35SIGNATURES
            37




2




**PART 1.
      FINANCIAL INFORMATION**





**ECOtality,
                Inc.****Condensed
                Consolidated Balance
                Sheets**


**June
                  30,2008**
              
              **December
                  31, 2007**(unaudited)
              
              (audited)**Assets**Current
                  assets:Cash
              
              $
              600,931
              
              $
              677,318Certificates
                  of deposit
              
              
              5,818
              
              
              1,197,784Receivables,
                  net of allowance for bad debt of $21,126 and $21,743 as of 06/30/08
                  and
                  12/31/07 respectively
              
              
              1,827,240
              
              
              2,387,542Inventory,
                  net of allowance for obsolescence of $73,000 and $293,934 as of
                   06/30/08 and 12/31/07 respectively
              
              
              1,567,569
              
              
              1,791,174Prepaid
                  expenses and other current assets
              
              
              308,085
              
              
              477,186Total
                  current assets
              
              
              4,309,643
              
              
              6,531,004Fixed
                  assets, net accumulated depreciation of $4,087,788 and $3,884,302
                  as of
                  06/30/08 and 12/31/07 respectively
              
              
              1,901,453
              
              
              2,027,142Goodwill
              
              
              3,095,878
              
              
              3,095,878Total
                  assets
              
              $
              9,306,974
              
              $
              11,654,025**Liabilities
                  and Stockholders’ Equity**Current
                  liabilities:Accounts
                  payable
              
              $
              955,950
              
              $
              1,317,916Accrued
                  liabilities
              
              
              782,961
              
              
              670,746Liability
                  for purchase price
              
              
              2,518,000
              
              
              4,075,000Current
                  portion of LT Debt, net of discount of $1,530,101 and 1,174,075
                  as of
                  06/30/08 and 12/31/07 respectively
              
              
              1,782,202
              
              
              1,147,241Total
                  current liabilities
              
              
              6,039,113
              
              
              7,210,903Total
                  LT Liabilities, net of discount of $1,313,786 and $2,494,910 as
                  of
                  06/30/08 and 12/31/07 respectively
              
              
              1,416,883
              
              
              1,808,314Stockholders’
                  equity:Preferred
                  stock, $0.001 par value, 200,000,000 shares authorized, no shares
                  issued
                  and outstanding
              
              
              -
              
              
              -Common
                  stock, $0.001 par value, 300,000,000 shares authorized, 124,732,861and
                  124,224,528 shares issued and outstanding as of 06/30/08 and 12/31/07,
                  respectively
              
              
              124,733
              
              
              124,225Additional
                  paid-in capital
              
              
              32,928,435
              
              
              30,780,992Retained
                  deficit
              
              
              (31,172,230
              )
              
              (28,270,409
              )Accumulated
                  Foreign Currency Translation Adjustments
              
              
              (29,961
              )
              
              -Total
                  stockholders' equity
              
              
              1,850,977
              
              
              2,634,808Total
                  liabilities and stockholders' equity
              
              $
              9,306,974
              
              $
              11,654,025




The
      accompanying notes are an integral part of these financial
      statements


3





**ECOtality,
                Inc.****Condensed
                Consolidated Statement of Operations****(Unaudited)**


**Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Revenue
              
              $
              2,936,150
              
              $
              35,464
              
              $
              5,754,049
              
              $
              35,464Cost
                  of goods sold
              
              
              1,667,945
              
              
              20,326
              
              
              3,284,300
              
              
              20,326Gross
                  profit
              
              
              1,268,205
              
              
              15,138
              
              
              2,469,749
              
              
              15,138Expenses**:**Depreciation
              
              
              124,118
              
              
              48,202
              
              
              266,004
              
              
              96,289General
                  and administrative expenses
              
              
              1,539,570
              
              
              621,478
              
              
              3,896,579
              
              
              1,164,011Research
                  and development
              
              
              31,947
              
              
              319,993
              
              
              147,633
              
              
              693,523Settlement
                  Expense
              
              
              -
              
              
              -
              
              
              -
              
              
              1,800,000Impairment
                  Expense
              
              
              -
              
              
              326,782
              
              
              -
              
              
              326,782Total
                  expenses
              
              
              1,695,635
              
              
              1,316,455
              
              
              4,310,216
              
              
              4,080,605Operating
                  loss
              
              
              (427,430
              )
              
              (1,301,317
              )
              
              (1,840,467
              )
              
              (4,065,467
              )Other
                  income:Interest
                  income
              
              
              1,011
              
              
              13,625
              
              
              9,161
              
              
              35,368Total
                  other income
              
              
              1,011
              
              
              13,625
              
              
              9,161
              
              
              35,368Other
                  expenses:Interest
                  expense
              
              
              503,309
              
              
              4,852
              
              
              1,065,613
              
              
              8,086(Gain)
                  / Loss on Disposal of Assets
              
              
              (20,126
              )
              
              -
              
              
              4,894
              
              
              -Accrued
                  expense - Potential RegistrationRights
                  Penalty
              
              
              -
              
              
              (1,103,998
              )
              
              -
              
              
              1,897,495Total
                  other expenses
              
              
              483,183
              
              
              (1,099,146
              )
              
              1,070,507
              
              
              1,905,581Loss
                  from operations before income taxes
              
              
              (909,602
              )
              
              (188,546
              )
              
              (2,901,813
              )
              
              (5,935,680
              )Provision
                  for income taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  (loss)
              
              $
              (909,602
              )
              $
              (188,546
              )
              $
              (2,901,813
              )
              $
              (5,935,680
              )Weighted
                  average number of common shares outstanding - basic and fully
                  diluted
              
              
              124,732,861
              
              
              107,062,543
              
              
              124,601,241
              
              
              108,523,110Net
                  (loss) per share-basic and fully diluted
              
              $
              (0.01
              )
              $
              (0.00
              )
              $
              (0.02
              )
              $
              (0.05
              )




The
        accompanying notes are an integral part of these financial
        statements


4





**ECOtality,
                Inc.****Condensed
                Consolidated Statement of Cash Flows****(unaudited)**




**Six
                Months Ended****June
                30,****2008**
            
            **2007****Cash
                flows from operating activities**Net
                Income (loss)
            
            $
            (2,901,813
            )
            $
            (5,935,680
            )Adjustments
                to reconcile:Stock
                and options issued for services and compensation
            
            
            70,126
            
            
            -Shares
                issued for settlement
            
            
            -
            
            
            1,200,000Shares
                Accrued for registration penalty
            
            
            -
            
            
            1,897,495Depreciation
            
            
            266,004
            
            
            96,289Amortization
                of stock issued for services
            
            
            182,826
            
            
            -Amortization
                of discount on notes payable
            
            
            825,097
            
            
            -Loss
                on disposal of assets
            
            
            31,618
            
            
            -Changes
                in operating assets and liabilities:Certificate
                of deposit
            
            
            1,191,966
            
            
            (35,368
            )Accounts
                Receivable
            
            
            567,066
            
            
            (5,646
            )Inventory
            
            
            198,580
            
            
            (69,202
            )Prepaid
                expenses and other
            
            
            162,337
            
            
            (574,810
            )Accounts
                Payable
            
            
            (361,967
            )
            
            (76,732
            )Accrued
                Liabilities
            
            
            (78,186
            )
            
            8,497Net
                cash provided (used) by operating activities
            
            
            153,658
            
            
            (3,495,158
            )**Cash
                flows from investing activities**Purchase
                of fixed assets
            
            
            (168,254
            )
            
            (615,697
            )Proceeds
                from sales of fixed assets
            
            
            21,339
            
            
            -Impairment
                of assets
            
            
            -
            
            
            326,782Investment
                in subsidiaries
            
            
            -
            
            
            (350,000
            )Net
                cash (used) by investing activities
            
            
            (146,915
            )
            
            (638,915
            )**Cash
                flows from financing activities**Proceeds
                from mortgage payable
            
            
            -
            
            
            287,500Payments
                on notes payable
            
            
            (53,168
            )
            
            -Net
                cash provided (used) by financing activities
            
            
            (53,168
            )
            
            287,500Effects
                of exchange rate changes
            
            
            (29,961
            )
            
            -Net
                increase (decrease) in cash
            
            
            (76,386
            )
            
            (3,846,574
            )Cash
                - beginning
            
            
            677,318
            
            
            5,047,968Cash
                - ending
            
            $
            600,931
            
            $
            1,201,394Supplemental
                disclosures:Interest
                paid
            
            $
            124,270
            
            $
            8,086Non-cash
                transactions:Stock
                and options issued for services
            
            $
            70,126
            
            $
            -Number
                of options issued
            
            
            250,000
            
            
            -Stock
                issued for settlement
            
            $
            -
            
            $
            1,200,000Shares
                of stock issued
            
            
            -
            
            
            1,500,000Stock
                issued for acquisition
            
            $
            -
            
            $
            189,000Shares
                of stock issued
            
            
            -
            
            
            300,000Amortization
                of stock issued for services
            
            $
            182,826
            
            $
            -Amortization
                of discount on notes payable
            
            $
            825,097
            
            $
            -Note
                Payable converted for common stock
            
            $
            100,000
            
            $
            -Shares
                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 develops
      and
      provides fast-charge systems designed for electric vehicle (EVs and PHEVs)
      mobile material handling, airport ground support and marine and transit
      applications. eTec also tests and develops plug-in hybrids, advanced battery
      systems and hydrogen ICE conversions. 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
      mobile material handling equipment using revolutionary proprietary technologies.
      See note 3 for further information.





The
      consolidated financial statements as of June 30, 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 three months ended June
      30, 2008 and 2007 interest income was $1,011 and $13,625, respectively. For
      the
      six months ended June 30, 2008 and 2007 interest income was $9,161 and $35,368
      respectively.





Credit
      Risk


Financial
      instruments that potentially subject the Company to concentrations of credit
      risk consist principally of cash deposits and accounts receivable. 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 June 30, 2008 and 2007, the Company had approximately
      $325,881 and $1,101,394 in excess of FDIC insured limits,
      respectively.





Accounts
      receivable at June 30, 2008 was $1,827,240, and at December 31, 2007 was
      $2,387,542. At June 30, 2008 we had only one customer that represented in excess
      of 10% of our receivable balance. This customer had a balance of $228,503.
      The
      Company has not experienced significant losses in the past from this or any
      other significant customers and continues to monitor its exposures to minimize
      potential credit losses.





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 June 30, 2008 and 2007, the Company had
      impairment expense of $0 and $326,782, respectively. For the six months ended
      June 30, 2008 and 2007, the Company had impairment expense of $0 and $326,782
      respectively.




Revenue
      recognition


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





Sales
      related to long-term contracts for services (such as engineering, product
      development and testing) extending over several years are accounted for under
      the percentage-of-completion method of accounting under the American Institute
      of Certified Public Accountants’ Statement of Position 81-1, *Accounting
      for Performance of Construction-Type and Certain Production-Type
      Contracts* .
      Sales and earnings under these contracts are recorded based on the ratio of
      actual costs incurred to total estimated costs expected to be incurred related
      to the contract under the cost-to-cost method. Anticipated losses on contracts
      are recognized in full in the period in which losses become probable and
      estimable.





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





Warranty
      Liability


The
      Company warrants a limited number of Minit-Charger products against defects
      for
      periods up to 33 months. The estimate of warranty liability is based on
      historical product data and anticipated future costs. Should actual failure
      rates differ significantly from our estimates, we record the impact of these
      unforeseen costs or cost reductions in subsequent periods and update our
      assumptions and forecasting models accordingly. At the time of our acquisition
      of Minit-Charger at December 31, 2007 the warranty reserve was $231,303. At
      June
      30, 2008 the reserve was $192,177.





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 $21,126 and $21,743 as of June 30, 2008 and December
      31,
      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 June 30, 2008 and December 31,
      2007
      was $73,000 and $293,934. ****





Advertising
      costs


The
      Company expenses all costs of advertising as incurred. Included in general
      and
      administrative expenses for the quarter ended June 30, 2008 and 2007 were
      advertising costs of $2,100 and $0 respectively. Included in general and
      administrative expenses for the six months ended June 30, 2008 and 2007 were
      advertising costs of 17,554 and $0 respectively.





Research
      and development costs


Research
      and development costs are charged to expense when incurred. For the quarter
      ended June 30, 2008 and 2007, research and development costs were
      $31,947 **** and
      $319,993, respectively. For the six months ended June 30, 2008 and 2007 research
      and development costs were $147,633 and $693,523 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 June 30, 2008 and December
      31, 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 and the six months ended
      June 30, 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 losses
      and are excluded in determining diluted loss per share.





Foreign
      Currency Translation


In
      2008, a Company subsidiary, Portable 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.





In
      2008, a Company subsidiary, eTec, conducted a portion of their business in
      Canadian Dollars. Because their functional currency is US dollars, the impact
      of
      the translation was taken directly to the income statement and included in
      General and Administrative expense.





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 June 30, 2008 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 and 6 months
      ended June 30, 2008; ECOtality Stores segment, Innergy Power segment and eTec
      segment. The ECOtality Stores segment is the online marketplace for fuel
      cell-related products and technologies with online distribution sites in the
      U.S., Japan, Russia, Italy and Portugal. The Innergy Power segment is comprised
      of the sale of solar batteries and other solar and battery powered devices
      to
      end-users. The eTec segment relates to sale of fast-charge systems for material
      handling and airport ground support applications to the testing and development
      of plug-in hybrids, advanced battery systems and hydrogen ICE conversions and
      consulting revenues. This segment also includes the Minit-Charger business
      which
      relates to the research, development and testing of advanced transportation
      and
      energy systems with a focus on alternative-fuel, hybrid and electric vehicles
      and infrastructures.  eTec holds exclusive patent rights to the eTec
      SuperChargeTM and Minit-Charger systems - battery fast charge systems that allow
      for faster charging with less heat generation and longer battery life than
      conventional chargers. The Company has aggregated these subsidiaries into three
      reportable segments: Ecotality/Fuel Cell Store, eTec and Innergy.





While
      management is currently assessing how it evaluates segment performance, we
      currently utilize income (loss) from operations, excluding depreciation of
      corporate assets. We also exclude goodwill from segment assets. There were
      no
      inter-segment sales during the quarter or six months ended June 30,
      2008.





Recent
      Accounting pronouncements





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 or the six months ended June 30, 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 called 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 and six months ended June
      30, 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 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 (a) issue additional shares such that the total shares are worth
      $3,000,000 at that time or, (b) issue a total of 4,000,000 new shares, or (c)
      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 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 June 30, 2008, assuming option (b) above, that a
      maximum of 4,000,000 shares will be issued. The amount of the current liability
      for purchase price has been updated to $560,000 on the consolidated balance
      sheet at June 30, 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 develops
      and
      provides fast-charge systems designed for electric vehicle (EVs and PHEVs),
      mobile material handling, airport ground support, and marine and transit
      applications. eTec also tests and develops plug-in hybrids, advanced battery
      systems and hydrogen ICE conversions. 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 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 June 30, 2008 was $250,000.





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 June 30, 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
      mobile material handling equipment using revolutionary proprietary technologies.
      The acquisition has been accounted for under the purchase accounting method
      pursuant to SFAS 14.





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 increased to reflect the value of
      the
      closing price of the Company’s common stock of June 30, 2008 and the amount of
      the current liability for purchase price has been updated to $1,720,000 on
      the
      consolidated balance sheet at June 30, 2008.




Pro
      forma financial statements





The
      unaudited pro forma consolidated statement of operations for the quarter and
      six
      months ended June 30, 2008 and 2007 combine 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 and six
      months ended June 30, 2008 and 2007 as if the acquisitions had occurred on
      January 1, 2007:




13




**ECOTALITY,
      INC.**




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


**Three
                  Months ended June 30, 2008**2008
              
              2007Reported
              
              Pro
                  Forma
              
              Reported
              
              Pro
                  FormaNet
                  Revenues
              
              $
              2,936,150
              
              $
              2,936,150
              
              $
              35,464
              
              $
              3,118,107Net
                  Income (loss)
              
              $
              (909,602
              )
              $
              (909,602
              )
              $
              (188,546
              )
              $
              (351,919
              )Net
                  (loss) per share-basic and fully diluted
              
              $
              (0.01
              )
              $
              (0.01
              )
              $
              (0.00
              )
              $
              (0.00
              )
 
 **Six
                  Months Ended June 30, 2008**2008
              
              2007Reported
              
              Pro
                  Forma
              
              Reported
              
              Pro
                  FormaNet
                  Revenues
              
              $
              5,754,049
              
              $
              5,754,049
              
              $
              35,464
              
              $
              6,386,180Net
                  Income (loss)
              
              $
              (2,901,813
              )
              $
              (2,901,813
              )
              $
              (5,935,680
              )
              $
              (6,616,906
              )Net
                  (loss) per share-basic and fully diluted
              
              $
              (0.02
              )
              $
              (0.02
              )
              $
              (0.05
              )
              $
              (0.06
              )





**Note
      4 - Fixed assets**





Fixed
      assets as of June 30, 2008 and December 31, 2007 consisted of the
      following:


**At
                  June 30,**
              
              **At
                  December 31,****2008**
              
              **2007**Equipment
              
              $
              3,196,342
              
              $
              3,350,128Buildings
              
              
              575,615
              
              
              617,765Vehicles
              
              
              1,677,785
              
              
              1,589,315Furniture
                  and fixtures
              
              
              47,409
              
              
              47,957Leasehold
                  improvements
              
              
              470,380
              
              
              306,280Computer
                  Software
              
              
              21,710
              
              
              -5,989,241
              
              
              5,911,445Less:
                  accumulated depreciation
              
              
              (4,087,788
              )
              
              (3,884,302
              )$
              1,901,453
              
              $
              2,027,142





Depreciation
      expense totaled $124,118 and $48,202, for the quarters ended June 30, 2008
      and
      2007 respectively. Depreciation expense for the six months ended June 30, 2008
      was $266,004, and for the 6 months ended June 30, 2007 was $96,289.





**Note
      5 - Notes payable**





For
      the six months ended June 30, 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 $4,852 for the quarter ended June 30, 2007.





As
      of June 30, 2007, there were no other outstanding notes payable.





For
      the six months ended June 30, 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 June
      30,
      2008, $22,137 was owed on the note; $3,480 of which is due in the next 12 months
      with the remainder, $18,657 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 June 30, 2008,
      $250,000 was owed and recorded as an accrued liability 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. Debenture principal payments
      are due beginning in May and June of 2008 (1/24th of the outstanding amount
      is
      due each month thereafter). We are currently in discussions with our debenture
      holders to defer payment of principal and interest through December 31, 2008
      in
      exchange for additional consideration related to the debentures. The purpose
      of
      these discussions is to provide us the time needed to begin funding our
      requirements internally through planned organic growth and other equity
      financing options. 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, and 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 June 30, 2008, a total of
      $825,098 had been amortized and recorded as interest expense and $2,843,887
      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 $1,530,101 discount,
      is
      $1,778,722 at June 30, 2008. The long-term portion of the debentures is
      recorded, net of a $1,313,786 discount, is $1,110,726 at June 30,
      2008.





Accrued
      interest relating to the debentures included in accrued liabilities was $115,322
      at June 30, 2008 and $60,129 at December 31, 2007.





Interest
      expense totaled $503,309 and $4,852 for the quarter ended June 30, 2008 and
      2007
      respectively, and $1,065,613 and $8,086 for the six months ended June 30, 2008
      and 2007 respectively.





**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 six months ended June 30, 2008, $112,500 has been
      amortized and $0 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, a 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 and
      the
      six months ended June 30, 2008 $35,163 and $70,325 respectively have been
      amortized into expense and at June 30, 2008 $187,533 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 291,669 of these
      options were earned as of June 30, 2008. The options amortized in the six months
      ended June 30, 2008 were valued on a monthly basis using the Black-Scholes
      pricing model and totaled $43,001. This amount was expensed during the six
      months ended June 30, 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 for services. 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 and the six months ended June 30,
      2008, $49,725 and $99,450 respectively have been amortized and into expense
      and
      $16,575 remains in prepaid expenses.




There
      were 124,732,861 shares of common stock issued and outstanding at June 30,
      2008.





There
      is no preferred stock issued or outstanding as of June 30, 2008.




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, and 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 291,669 of these options were earned as of June 30, 2008.
      The
      options amortized in the six months ended June 30, 2008 were valued on a monthly
      basis using the Black-Scholes pricing model and totaled $43,001. This amount
      was
      expensed during the 6 months ended June 30, 2008. **** The
      remainder of the options will be expensed over the two-year term of the
      agreement as they are earned.




As
      of June 30, 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
                  Of Shares***
              
              ***Weighted-Average***
                ***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 June 30, 2008
              
              
              **19,075,462**
              
              
              **$0.42**
  **STOCK
                  WARRANTS OUTSTANDING*****Range
                  of Exercise Prices***
              
              ***Number
                  of Shares Outstanding***
              
              ***Weighted-Average
                Remaining Contractual Life in Years***
              
              ***Weighted-Average
                  Exercise Price*****$0.35**
              
              
              **5,421,537**
              
              
              **3.33**
              
              **$**
              **0.35****$1.24
                  - $1.42**
              
              
              **1,900,000**
              
              
              **3.05**
              
              **$**
              **1.36****$0.32**
              
              
              **6,862,748**
              
              
              **4.33**
              
              **$**
              **0.32****$0.32**
              
              
              **2,941,177**
              
              
              **4.42**
              
              **$**
              **0.32****$0.30**
              
              
              **1,000,000**
              
              
              **9.33**
              
              **$**
              **0.30****$0.18**
              
              
              **950,000**
              
              
              **9.50**
              
              **$**
              **0.18**
              ******19,075,462**
              
              
              **4.45**
              
              **$**
              **0.42**
  **STOCK
                  WARRANTS EXERCISABLE*****Range
                  of Exercise Prices***
              
              ***Number
                  of Shares
                  Exercisable***
              
              ***Weighted-Average
                  Exercise 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 June 30, 2008, the Company has five leases in effect for operating space.
      Future obligations under these commitments are $126,116 for 2008, $202,045
      for
      2009, $150,324 for 2010, and $217,468 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 battery fast-charge systems
      and
      to the testing and development of electric vehicles, plug-in hybrids, advanced
      battery systems and hydrogen ICE conversions and consulting revenues. Consulting
      services related to the research, development and testing of advanced
      transportation and energy systems with a primary focus on alternative-fuel,
      hybrid and electric vehicles and infrastructures. The eTec segment also includes
      the *Minit-Charger* business which is engaged in the sale of proprietary battery fast-charge systems
      and technologies for electric vehicle (EVs and PHEVs), mobile material handling,
      airport ground support, and marine and transit applications. eTec holds
      exclusive patent rights to the eTec *SuperChargeTM* and *Minit-Charger* systems - battery fast charge systems that allow for faster charging with less
      heat generation and longer battery life than conventional chargers. The Company
      has aggregated these subsidiaries into three reportable segments: ECOtality/Fuel
      Cell Store, eTec and Innergy.





While
      management is currently assessing how it evaluates segment performance, we
      currently utilize income (loss) from operations, excluding depreciation of
      corporate assets. We also exclude goodwill from segment assets. There were
      no
      inter-segment sales during the quarter or six months ended June 30,
      2008.





The
      Company did not have separate segments for the quarter or six months ended
      June
      30, 2007.




19




**ECOTALITY,
      INC.**




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





Summarized
      financial information concerning the Company’s reportable segments for the
      quarter and six months ended June 30, 2008 is as follows:


**SEGMENT
                  DATA FOR THE QUARTER ENDED JUNE 30, 2008****ETEC**
              
              **INNERGY**
              
              **FUEL
                  CELL STORE**
              
              **TOTAL**Total
                  net operating revenues
              
              $
              1,992,106
              
              $
              711,870
              
              $
              232,174
              
              $
              2,936,150Depreciation
                  and amortization*(note
                  1)*
              
              $
              95,301
              
              $
              (6,185
              )
              $
              890
              
              $
              90,006Operating
                  income (loss)
              
              $
              181,200
              
              $
              84,906
              
              $
              66,504
              
              $
              332,610Interest
                  Income
              
              $
              920
              
              $
              -
              
              $
              -Gain
                  / (Loss) on disposal of assets
              
              $
              27,074
              
              $
              -
              
              $
              -
              
              $
              27,074**Segment
                  Income before Corporate Overhead Allocation**
              
              **$**
              **209,194**
              
              **$**
              **84,906**
              
              **$**
              **66,504**
              
              **$**
              **360,604**Corporate
                  Overhead Allocation*(note
                  2)*
              
              $
              838,660
              
              $
              299,691
              
              $
              97,743
              
              $
              1,236,095Segment
                  Income / (Loss)
              
              $
              (629,466
              )
              $
              (214,785
              )
              $
              (31,239
              )
              $
              (875,491
              )Not
                  Included in segment income:Depreciation
                  on Corporate Assets
              
              
              
              
              
              
              
              
              
              
              $
              34,112Reported
                  Net income after tax
              
              
              
              
              
              
              
              
              
              
              $
              (909,602
              )Capital
                  Expenditures
              
              $
              29,540
              
              $
              (7,398
              )
              $
              -
              
              $
              22,142Total
                  segment assets - excluding inter company receivables
              
              $
              4,090,157
              
              $
              714,655
              
              $
              221,111
              
              $
              5,025,923Other
                  items Not included in Segment Assets:Goodwill
                  related to eTec Acquisition
              
              
              
              
              
              
              
              
              
              
              $
              3,095,878Other
                  Corporate Assets
              
              
              
              
              
              
              
              
              
              
              $
              1,185,083Total
                  Reported Assets
              
              
              
              
              
              
              
              
              
              
              $
              9,306,884
  
 **SEGMENT
                  DATA FOR THE SIX MONTHS ENDED JUNE 30, 2008****ETEC**
              
              **INNERGY**
              
              **FUEL
                  CELL STORE**
              
              **TOTAL**Total
                  net operating revenues
              
              $
              3,955,007
              
              $
              1,386,845
              
              $
              412,196
              
              $
              5,754,048Depreciation
                  and amortization
              
              $
              191,409
              
              $
              4,099
              
              $
              1,483
              
              $
              196,991Operating
                  income (loss)
              
              $
              83,013
              
              $
              122,113
              
              $
              (11,086
              )
              $
              194,040Interest
                  Income
              
              $
              3,757
              
              $
              435
              
              $
              -Gain
                  / (Loss) on disposal of assets
              
              $
              2,054
              
              $
              -
              
              $
              -
              
              $
              2,054**Segment
                  Income before Corporate Overhead Allocation**
              
              **$**
              **88,824**
              
              **$**
              **122,548**
              
              **$**
              **(11,086**
              **)**
              **$**
              **200,286**Corporate
                  Overhead Allocation (Note 2)
              
              $
              2,084,772
              
              $
              731,037
              
              $
              217,278
              
              $
              3,033,087Segment
                  Income / (Loss)
              
              $
              (1,995,948
              )
              $
              (608,489
              )
              $
              (228,364
              )
              $
              (2,832,801
              )Not
                  Included in segment income:Depreciation
                  on Corporate Assets
              
              
              
              
              
              
              
              
              
              
              $
              69,013Reported
                  Net income after tax
              
              
              
              
              
              
              
              
              
              
              $
              (2,901,813
              )Capital
                  Expenditures
              
              $
              164,727
              
              $
              -
              
              $
              -
              
              $
              164,727Total
                  segment assets - excluding inter company receivables
              
              $
              4,090,157
              
              $
              714,655
              
              $
              221,111
              
              $
              5,025,923Other
                  items Not included in Segment Assets:Goodwill
                  related to eTec Acquisition
              
              
              
              
              
              
              
              
              
              
              $
              3,095,878Other
                  Corporate Assets
              
              
              
              
              
              
              
              
              
              
              $
              1,185,083Total
                  Reported Assets
              
              
              
              
              
              
              
              
              
              
              $
              9,306,884




*Note
        1 - Negative amounts are result of reconciliation adjustments*
 *Note
        2 - Corporate Overhead is allocated based on Net
        Revenues*




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 leader
      in
      clean electric transportation and storage technologies. Through innovation,
      acquisitions, and strategic partnerships, we accelerate the market applicability
      of advanced electric technologies to replace carbon-based fuels. In 2007,
      through a number of platform acquisitions we transitioned from a
      development-stage company into a revenue-producing company focused on providing
      clean electric and 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.





The
      current operations of the Company consist of:





***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
      (recently consolidated into the eTec *Minit-Charger* brand) 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 these clean electric
      fast-charging technologies 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 United States Department of Energy
      (DoE), several national research laboratories, national energy storage
      consortiums, and large electric utilities where they provide services in energy
      storage, monitoring, systems design and fabrication, product and vehicle
      testing, and product development. Their work has been in the areas of 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 *Minit-Charger* 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 *Minit-Charger* ,
      for its unique fast charge and complex battery maintenance technologies that
      are
      primarily used in mobile material handling applications (forklifts, pallet
      jacks, etc.). Edison *Minit-Charger* has been, and continues to be a leader in providing battery fast-charging
      systems for the mobile material handling industry. The core *Minit-Charge* r
      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. *Minit-Charger* has
      a large customer base that consists of Fortune 500 companies and other corporate
      entities throughout North America.





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




22




***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.
      While we expect solar to become a major future energy source, Innergy’s battery
      systems that support the growing electric vehicle market is quickly expanding
      and we expect the combination of solar solutions and new batter sales to
      contribute to our long and short-term earnings and revenue growth. Innergy
      is
      actively pursuing growth opportunities through product line expansion, joint
      ventures, acquisitions, and manufacturing contracts.




***ECOtality
      Stores (dba Fuel Cell Store)***





ECOtality
      Stores (dba Fuel Cell Store) is our wholly owned subsidiary and operates as
      our
      online retail division. Fuel Cell Store (www.fuelcellstore.com) is an e-commerce
      marketplace that offers consumers 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.




***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.




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 (consolidated under the*eTec
                Minit-Charger*brand)





·
            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 maquilladora 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
      strategic 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, 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 “clean electric and 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* systems (recently consolidated under the *eTec
      Minit-Charger* brand) 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 similar
      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 June 30, 2008, we had 64 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 JUNE 30, 2008, COMPARED WITH QUARTER ENDED JUNE 30, 2007




28




CONSOLIDATED
      RESULTS





*Our
      results in the first half of the year are reflective of our work to integrate
      our acquisitions and to form a solid organizational base for future growth.
      The
      first quarter ended March 31, 2008 was one of transition with the second quarter
      ended June 30, 2008 being spent fine tuning our operations, reducing costs
      and
      aligning our newly formed organization around our goals for continued growth
      and
      enhanced profitability.*





It
      is difficult to compare 2nd quarter 2008 results to those of 2nd 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.





*As
      planned, the results for quarter ended June 30, 2008 strongly reflect our focus
      on tight overhead cost controls and improvement of operational efficiencies
      following the successful integration of our 2007 acquisitions in the previous
      quarter.*





In
      the quarter ended June 30, 2008, we had revenues of $2,936,150 compared to
      the
      quarter ended June 30, 2007 of $35,464. The 2007 revenue is attributable to
      approximately 2.5 weeks of revenue related to our June 11 th acquisition of Fuel Cell Store. The 2008 figure was generated from Fuel Cell
      Store, as well as the three subsequent acquisitions (eTec, Minit-Charger and
      Innergy) made in the fourth quarter of 2007. The cost of goods sold percentage
      for the quarter ending June 30, 2008 was 57% leaving us with a gross profit
      of
      $1,268,205. **** The increase in revenues in 2008 as compared to 2007 is consistent with our
      efforts in 2007 to move from being a development stage company in 2006 to a
      revenue-generating renewable energy company.





Total
      operating expenses during the quarter ended June 30, 2008 were $1,695,635
      compared to $1,316,455 for quarter ended June 30, 2007. General and
      administrative expenses were $1,539,570 or 90% of total operating expenses
      for
      quarter ended June 30, 2008 compared with $621,478 or 47% for the quarter ended
      June 30, 2007. While not comparable to the general and operating expenses
      incurred during the 2nd quarter, 2007, changes in these expenses are described
      below: ****




Professional
      fees were $64,234 for the quarter ended June 30, 2008 compared with $128,360
      for
      the quarter ended June 30, 2007. This change demonstrates the positive effect
      of
      overhead cost controls in quarter ended June 30, 2008. New media, marketing,
      advertising and investor and public relations expenses of $32,582 for the
      quarter ended June 30, 2008 also shows significant reduction from prior year
      of
      $138,856 for the quarter ended June 30, 2007. Legal fees were $102,711 for
      the quarter ended June 30, 2008 compared with $84,302 for the quarter ended
      June
      30, 2007 and accounting fees were $12,175 for the quarter ended June 30, 2008
      compared with $10,331 for the quarter ended June 30, 2007. Executive
      compensation was $131,000 for the quarter ended June 30, 2008 compared with
      $109,100 for the quarter ended June 30, 2007. The higher figure in 2008 is
      attributable to stock awards to our chief executive officer. Depreciation
      expense was $124,118 for the quarter ended June 30, 2008 compared to $48,202
      for
      the quarter ended June 30, 2007. The increase is related to new depreciation
      for
      the assets acquired as part of the acquisitions. All other general and
      administrative spending totaled $1,196,868 for the quarter ended June 30, 2008
      compared to $150,530 for the quarter ended June 30, 2007. The increase is
      attributable to our acquisitions which represent $843,623 of quarter ended
      June
      30, 2008 expenses, as compared to a total of $28,833 for the comparable period
      in 2007.





Expenses
      for research and development totaled $31,947 for the quarter ended June 30,
      2008 compared to $319,993 for the quarter ended June 30, 2007. This
      reduction reflects our focused strategy on applications with short-term
      commercialization potential supported through joint projects and grants to
      help
      defray costs. Since a primary objective of the Company continues to be 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.





The
      impairment expense of $326,782 for quarter ended June 30, 2007 is attributable
      to the acquisition of Fuel Cell Store.




Our
      operating loss of $427,430 for the quarter ended June 30, 2008 compared with
      the
      loss of $1,301,317 for the quarter ended June 30, 2007 reflects our
      transition to a revenue generating company per the revenue and operational
      analysis above.





For
      the quarter ended June 30, 2008, we earned interest income in the amount of
      $1,011 compared with $13,625 for the quarter ended June 30, 2007.





Interest
      expense was $503,309 for the quarter ended June 30, 2008 compared to $4,852
      for
      the quarter ended June 30, 2007. The higher amount for 2008 was driven by the
      interest on the convertible debentures we issued in November and December of
      2007. Other income was $20,126 for the quarter ended June 30, 2008 compared
      to
      $1,103,988 for the quarter ended June 30, 2007. The higher 2007 figure is
      attributable to the reversal of reserve we established in the quarter ending
      June 30, 2007 to cover penalties in conjunction with registering our common
      shares of stock with the SEC.  The amount reserved was based upon the
      number of shares that were issued. This reserve was subsequently settled with
      equity.


29





Our
      net loss after other income and expenses for quarter ended June 30, 2008 was
      $909,602 as compared with a loss of $188,546 for the quarter ended June 30,
      2007. Excluding the impact of the $1,103,998 registration rights accrual
      reversal noted above, the 2008 quarter ended June 30, 2008 results represent
      a
      30% or $382,942 improvement over the same period ended June 30,
      2007.





SIX
      MONTHS ENDED JUNE 30, 2008, COMPARED WITH SIX MONTHS ENDED JUNE 30,
      2007





It
      is difficult to compare 6 months ended June 2008 results to for the same period
      in 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 six months ended June 30, 2008, we had revenues of $5,754,049 compared
      to
      the six months ended June 30, 2007 of $35,464. The 2007 revenue is attributable
      to approximately 2.5 weeks of revenue related to our June 11 th acquisition of Fuel Cell Store. The 2008 figure was generated from Fuel Cell
      Store, as well as the three subsequent acquisitions (eTec, Minit-Charger and
      Innergy) made in the fourth quarter of 2007. The cost of goods sold percentage
      for the six months ending June 30, 2008 was 57% leaving us with a gross profit
      of $2,469,749. The increase in revenues in 2008 as compared to 2007 is
      consistent with our efforts in 2007 to move from being a development stage
      company in 2006 to a revenue-generating renewable energy company.





Total
      operating expenses during the six months ended June 30, 2008 were $4,310,216
      compared to $4,080,605 for six months ended June 30, 2007. General and
      administrative expenses were $3,896,579 or 90% of total operating expenses
      for
      six months ended June 30, 2008 compared with $1,164,011 or 29% for the six
      months ended June 30, 2007. While not comparable to the general and operating
      expenses incurred during the 2nd quarter, 2007, changes in these expenses are
      described below: ****




Professional
      fees were $367,234 for the six months ended June 30, 2008 compared with $210,122
      for the six months ended June 30, 2007. This change reflects the increased
      resources required for our transition and our overall increase in size. New
      media, marketing, advertising and investor and public relations expenses of
      $123,165 for the six months ended June 30, 2008 also shows significant reduction
      from prior year of $248,385 for the six months ended June 30, 2007. This
      reduction may be attributed to our acquisition activities in 2007 that required
      significant public relation and investor activities. Legal fees were $332,489
      for the six months ended June 30, 2008 compared with $122,015 for the six months
      ended June 30, 2007 and accounting fees were $121,556 for the six months ended
      June 30, 2008 compared with $84,554 for the six months ended June 30,
      2007. The difference in legal fees may be attributed to transition phase
      post-acquisition filing and organizational requirements. The accounting fees
      in
      2007 included additional activities related to our acquisitions. Executive
      compensation was $269,000 for the six months ended June 30, 2008 compared with
      $186,240 for the six months ended June 30, 2007. The higher figure in 2008
      is
      attributable to stock awards to our chief executive officer. Depreciation
      expense was $266,004 for the six months ended June 30, 2008 compared to $96,289
      for the six months ended June 30, 2007. The increase is related to new
      depreciation for the assets acquired as part of the acquisitions. All other
      general and administrative spending totaled $2,683,135 for the six months ended
      June 30, 2008 compared to $312,695 for the six months ended June 30, 2007.
      The
      increase is attributable to our acquisitions which represent $2,003,574 of
      six
      months ended June 30, 2008 expenses, as compared to a total of $28,833 for
      the
      comparable period in 2007.





Expenses
      for research and development totaled $147,633 for the six months ended June
      30,
      2008 compared to $693,523 for the six months ended June 30, 2007. This
      reduction reflects our focused strategy on applications with short-term
      commercialization potential supported through joint projects and grants to
      help
      defray costs. Since a primary objective of the Company continues to be 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.





The
      settlement expense of $1,800,000 for the six months ended June 30, 2007 is
      related to the settlement with Howard Foote and Elliott Winfield in resolution
      of all known disputes and uncertainties between them and us related to all
      agreements and contract 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.





The
      impairment expense of $326,782 for six months ended June 30, 2007 is
      attributable to the acquisition of Fuel Cell Store.




Our
      operating loss of $1,840,467 for the six months ended June 30, 2008 compared
      with the loss of $4,065,467 for the six months ended June 30, 2007 reflects
      the impact of the settlement and impairment expenses in 2007, as well as our
      transition to a revenue generating company per the revenue and operational
      analysis above.





For
      the six months ended June 30, 2008, we earned interest income in the amount
      of
      $9,161 compared with $35,368 for the six months ended June 30,
      2007.





Interest
      expense was $1,065,613 for the six months ended June 30, 2008 compared to $8,086
      for the six months ended June 30, 2007. The higher amount for 2008 was driven
      by
      the interest on the convertible debentures we issued in November and December
      of
      2007. Other income was ($4,894) for the six months ended June 30, 2008 compared
      to ($1,897,495) for the six months ended June 30, 2007. The 2007 figure is
      attributable to the reserve we established in the six months ending June 30,
      2007 to cover penalties in conjunction with registering our common shares of
      stock with the SEC.  The amount reserved was based upon the number of
      shares that were issued.




30




*Liquidity
      and Capital Resources*




As
      of June 30, 2008, we had $600,931of cash on hand and held certificates of
      deposit in the amount of $5,818 compared to June 30, 2007 balances of $677,318
      of cash on hand and $1,197,784 in certificates of deposit.





We
      generated cash for operating activities in the six months ended June 30, 2008
      in
      the amount of $153,658 compared to a use of cash of (3,495,158) for the same
      period in 2007. Cash used in investing activities was $146,915 for the six
      months ended June 30, 2008 compared to $638,915 for 2007. The higher spend
      in
      the six months ending June 30, 2007 was related to the purchase of a building
      and investment
      in our subsidiaries.





Cash
      used in financing activities was $53,168 in the six months ended June 30, 2008
      compared to the generation of $287,500 in cash in 2007. Our current financing
      activities are described below:





Focused
      cost controls and operational efficiencies implemented in the first six months
      of 2008 have enhanced our ability to generate funds internally to support our
      current operating cash requirements. We are currently in discussions with our
      debenture holders to defer payment of principal and interest through December
      31, 2008 in exchange for additional consideration related to the debentures.
      The
      purpose of these discussions is to provide us the time needed to begin funding
      our requirements internally through planned organic growth and other equity
      financing options. We are also considering 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, tight inventory controls and cost-effective
      operating procedures throughout our organization. This leveraged growth strategy
      supports our business model in developing commercial applications for the
      growing clean electric transportation business sector.





*Working
      Capital*




Net
      working capital is an important measure of our ability to finance our
      operations.  Our net working capital at June 30, 2008 was negative by
      $1,729,470 or a ratio of 0.71 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 $2,518,000 is excluded
      from the calculation, our working capital is positive $788,529 or a ratio of
      1.23 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.




31




As
      of June 30, 2008, the Company has five leases in effect for operating space.
      Future obligations under these commitments are $126,116 for 2008, $202,045
      for
      2009, $150,324 for 2010, and $217,468 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
      June 30, 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 instituted changes in
      our disclosure controls during the year ended December 31, 2007 to make them
      effective for gathering, analyzing and disclosing 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.  We performed an assessment of our disclosure controls and
      procedures to determine their effectiveness (as defined in Rule 13a-15e) under
      the Securities Exchange Act of 1934 as amended, during the fourth quarter 2007.
      Based on this evaluation, we concluded that our disclosure controls and
      procedures were effective as of December 31, 2007.





There
      were no changes in our internal controls and disclosure controls over financial
      reporting that occurred during the three months ended June 30, 2008. We believe
      our disclosure controls and procedures are effective for the three months ended
      June 30, 2008.




We
      do 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. We did not
      implement any changes in control during the three month period ended June 30,
      2008.




32




**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 June 30, 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.







33




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 six months ended June 30,
      2008





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




None




34




**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.  35
  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, 2008.21.
                Incorporated
                    by reference herein to the Form 8-K, previously filed with the
                    SEC on
                    April 11, 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




36


**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,
            
            **August
                14, 2008**Jonathan
                R. Read
            
            President
                and Director/s/
                Harold W. Sciotto
            
            Secretary,
                Treasurer
            
            **August
                14, 2008**Harold
                W. Sciotto
            
            and
                Director/s/
                Barry S. Baer
            
            Chief
                Financial Officer
            
            **August
                14, 2008**Barry
                S. Baer
            
            Principal
                Accounting Officer/s/
                Jerry Y. S. Lin
            
            Director
            
            **August
                14, 2008**Jerry
                Y. S. Lin/s/
                E. Slade Mead
            
            Director
            
            **August
                14, 2008**E.
                Slade Mead/s/
                Donald B. Karner
            
            Director
            
            **August
                14, 2008**Donald
                B. Karner




37