** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****Washington,D.C. 20549**

**FORM 10-QSB**

**(MarkOne)**

**x****                             ****QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For thequarterly period ended: June 30, 2007**

**Or**

**o****                                ****TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For thetransition period from             to**

**CommissionFile Number: 000-50983**

**ECOTALITY,INC.** (Exact name ofregistrant 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 telephonenumber, including area code)

(Former name, former address and former fiscal year, if changed since lastreport)

 Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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 checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

Yes o  No x

**APPLICABLEONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVEYEARS:**

 Indicate by check mark whether the registranthas filed all documents and reports required to be filed by Sections 12, 13 or15(d) of the Securities Exchange Act of 1934 subsequent to the distribution ofsecurities under a plan confirmed by a court.

Yes o    No o

**APPLICABLE ONLY TO CORPORATE ISSUERS:**

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date: 106,999,906

 

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**Ecotality, Inc.(A Development Stage Company)**

**Table of Contents**
|                                                       | ** ** | ** ** |
|-------------------------------------------------------|------------|------------|
| PART  I - FINANCIAL INFORMATION                       |       |       |
|                                                  |       |       |
| Unaudited Condensed Consolidated Financial Statements |       |       |
|                                                  |       |       |
| Condensed Consolidated Balance Sheet                  |       |       |
|                                                  |       |       |
| Condensed Consolidated Statements of Operations       |       |       |
|                                                  |       |       |
| Condensed Consolidated Statements of Cash Flows       |       |       |
|                                                  |       |       |
| Notes                                                 |       |       |
|                                                  |       |       |
| Changes in and Disagreements with Accountants         |       |       |
|                                                  |       |       |
| Management’s Discussion and Plan of Operation    |       |       |
|                                                  |       |       |
| Controls  and Procedures                              |       |       |
|                                                  |       |       |
| PART  II - OTHER INFORMATION                          |       |       |
|                                                  |       |       |
| Legal  Proceedings                                    |       |       |
|                                                  |       |       |
| Unregistered Sales of Equity Securities               |       |       |
|                                                  |       |       |
| Submission of Matters to a Vote of Security Holders   |       |       |
|                                                  |       |       |
| Exhibits  and Reports on Form 8-K                     |       |       |
|                                                  |       |       |
| SIGNATURES                                            |       |       |

 

2

----

**PART I - FINANCIAL INFORMATION**

**UnauditedCondensed Consolidated Financial Statements**

 The accompanying unaudited condensedconsolidated financial statements have been prepared in accordance withgenerally accepted accounting principles for interim financial reporting andpursuant to the rules and regulations of the Securities and Exchange Commission(“Commission”).  While these statements reflect all normal recurringadjustments which are, in the opinion of management, necessary for fairpresentation of the results of the interim period, they do not include all ofthe information and footnotes required by generally accepted accountingprinciples for complete financial statements.  For further information,refer to the financial statements and footnotes thereto, which are included inthe Company’s Registration Statement on Form 10-KSB previously filed with theCommission on March 30, 2007, and subsequent amendments made thereto.

3

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**Ecotality,Inc.**(a Development Stage Company)

**CondensedConsolidated Balance Sheet(unaudited)**
| ** **                                                                                                 | ** ** | **June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|
| ** **                                                                                                 | ** ** | **2007**          | ** ** |
| **Assets**                                                                                                 |       |              |       |
|                                                                                                       |       |              |       |
| Current assets:                                                                                            |       |              |       |
| Cash                                                                                                       |       | $                 | 1,201,394  |   |
| AccountsReceivable                                                                                         |       | 29,490            |       |
| Prepaid expenses                                                                                           |       | 663,695           |       |
| Inventory                                                                                                  |       | 248,977           |       |
| Certificate of  Deposit                                                                                    |       | 2,050,135         |       |
|                                                                                                       |       |              |       |
| Total current  assets                                                                                      |       | 4,193,691         |       |
|                                                                                                       |       |              |       |
| Fixed assets                                                                                               |       |              |       |
| Building                                                                                                   |       | 575,615           |       |
| Computers and  Equipment                                                                                   |       | 51,735            |       |
| Vehicle                                                                                                    |       | 795,848           |       |
| Accumulated  Depreciation                                                                                  |       | (117,377          | )          |
| Total Fixed  Assets                                                                                        |       | 1,305,821         |       |
|                                                                                                       |       |              |       |
| Total Assets                                                                                               |       | 5,499,512         |       |
|                                                                                                       |       |              |       |
| **Liabilities and Stockholders’  Equity**                                                             | ** ** | ** **        | ** ** |
|                                                                                                       |       |              |       |
| Current liabilities:                                                                                       |       |              |       |
| Accounts payable                                                                                           |       | 517,342           |       |
| Payroll  liabilities                                                                                       |       | 20,901            |       |
| Contingent  Liability-Potential Registration Rights Penalty                                                |       | 1,897,495         |       |
| Total current  liabilities                                                                                 |       | 2,435,738         |       |
|                                                                                                       |       |              |       |
| Long Term Liabilities                                                                                      |       |              |       |
| Mortgage Payable                                                                                           |       | 287,500           |       |
| Total Long Term  Liabilities                                                                               |       | 287,500           |       |
|                                                                                                       |       |              |       |
| Total Liabilities                                                                                          |       | 2,723,238         |       |
|                                                                                                       |       |              |       |
| Stockholders’ 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, 106,999,906 shares issued  and outstanding |       | 107,000           |       |
| Common stock  owed, not issued, 300,000 shares                                                             |       | 300               |       |
| Additional  paid-in capital                                                                                |       | 23,183,099        |       |
| (Deficit)  accumulated during development stage                                                            |       | (20,514,125       | )          |
| Total  Stockholders’ Equity                                                                           |       | 2,776,274         |       |
|                                                                                                       |       |              |       |
| Total Liabilities and Stockholders’ Equity                                                            |       | $                 | 5,499,512  |   |

 

The accompanying notes are an integral part of thesefinancial statements.

4

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**Ecotality, Inc.**(a Development Stage Company)

**Condensed Consolidated Statement ofOperations(unaudited)**
| ** **                                                         | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** | **April 21, 1999** | ** ** |
|--------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|------------------------------|------------|
| ** **                                                         | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** | **(Inception) to**      | ** ** |
| ** **                                                         | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007**                     | ** ** | **2006** | ** ** | **June 30, 2007** | ** ** |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| Revenue                                                            |       | $                                | 35,464     |                           | $          |                         |       | $ | 35,464 |   | $ |   |   | $ | 36,315 |   |
| Cost of Goods  Sold                                                |       | 20,326                           |       |                           |       | 20,326                       |       |   |   | 20,833 |   |
|                                                               |       |                             |       |                           |       |                         |       |   |   | — |   |
| Gross Profit                                                       |       | 15,138                           |       |                           |       | 15,138                       |       |   |   | 15,482 |   |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| Expenses:                                                          |       |                             |       |                           |       |                         |       |   |   |   |   |
| Depreciation                                                       |       | 48,202                           |       | 1,348                          |       | 96,289                       |       | 1,489 |   | 117,376 |   |
| Licenses and permits                                               |       | 450                              |       | 8,220,487                      |       | 1,789                        |       | 8,220,887 |   | 8,224,361 |   |
| General and administrative expenses                                |       | 621,028                          |       | 327,938                        |       | 1,162,222                    |       | 3,129850 |   | 5,967,359 |   |
| Research and Development                                           |       | 319,993                          |       | 50,000                         |       | 693,523                      |       | 400,000 |   | 1,781,627 |   |
| Impairment Expense                                                 |       | 326,782                          |       |                           |       | 326,782                      |       |   |   | 326,782 |   |
| Settlement Expense                                                 |       | 0                                |       | 0                              |       | 1,800,000                    |       | 0 |   | 1,800,000 |   |
| Total expenses                                                     |       | 1,316,455                        |       | 8,599,773                      |       | 4,080,605                    |       | 11,752,226 |   | 18,217,505 |   |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| Operating Loss                                                     |       | (1,301,317                       | )          | (8,599,773                     | )          | (4,065,467                   | )          | (11,752,226 | ) | (18,202,023 | ) |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| Other income                                                       |       |                             |       |                           |       |                         |       |   |   |   |   |
| Interest income                                                    |       | 13,625                           |       | 0                              |       | 35,368                       |       | 0 |   | 50,275 |   |
| Total other income                                                 |       | 13,625                           |       | 0                              |       | 35,368                       |       | 0 |   | 50,275 |   |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| Other expenses:                                                    |       |                             |       |                           |       |                         |       |   |   |   |   |
| Interest expense                                                   |       | 4,852                            |       | 19,680                         |       | 8,086                        |       | 38,898 |   | 464,882 |   |
| Accrued expense-potential registration rights  penalty             |       | (1,103,998                       | )          | 0                              |       | 1,897,495                    |       | 0 |   | 1,897,495 |   |
| Total other expenses                                               |       | (1,099,146                       | )          | 19,680                         |       | 1,905,581                    |       | 38,898 |   | 2,362,377 |   |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| Loss from  operations before income taxes                          |       | (188,546                         | )          | (8,619,453                     | )          | (5,935,680                   | )          | (11,791,124 | ) | (20,514,125 | ) |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| Provision for  income taxes                                        |       | —                           |       | —                         |       | —                       |       | — |   | — |   |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| (Loss) from  continuing operations                                 |       | $                                | (188,546   | )                              | $          | (8,619,453                   | )          | $ | (5,935,680 | ) | (11,791,124 | ) | (20,514,125 | ) |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| Net (loss)                                                         |       | $                                | (188,546   | )                              | $          | (8,619,453                   | )          | $ | (5,935,680 | ) | $ | (11,791,124 | ) | $ | (20,514,125 | ) |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| Weighted average  number of common shares outstanding — basic |       | 107,062,543                      |       | 73,855,934                     |       | 108,523,110                  |       | 70,902,438 |   |   |   |
|                                                               |       |                             |       |                           |       |                         |       |   |   |   |   |
| Net (loss) per  share — basic                                 |       | $                                | (0.00      | )                              | $          | (0.12                        | )          | $ | (0.05 | ) | $ | (0.15 | ) |   |   |

 

The accompanying notes are an integral part of thesefinancial statements.

5

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**Ecotality,Inc.**(a Development Stage Company)

**Condensed Consolidated Statements ofCash Flows(unaudited)**
| ** **                                                                       | ** ** | **Six Months Ended** | ** ** | **April 21, 1999** | ** ** |
|----------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------------------|------------|
| ** **                                                                       | ** ** | **June 30,**              | ** ** | **(Inception) to**      | ** ** |
| ** **                                                                       | ** ** | **2007**                       | ** ** | **2006**                     | ** ** | **June 30, 2007** | ** ** |
|                                                                             |       |                           |       |                         |       |   |   |
| **Cash  flows from operating activities**                                        | ** ** | ** **                     | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Net (loss)                                                                       |       | $                              | (5,935,680 | )                            | $          | (11,791,124 | ) | $ | (20,514,125 | ) |
| Adjustments to  reconcile net (loss) to Net cash (used) by operating activities: |       |                           |       |                         |       |   |   |
| Stock compensation - related party                                               |       | —                         |       | 2,475,006                    |       | 2,475,006 |   |
| Shares issued for services                                                       |       | —                         |       | —                       |       | 1,000 |   |
| Shares issued for licenses                                                       |       | —                         |       | 8,217,391                    |       | 8,217,391 |   |
| Shares issued for settlement                                                     |       | 1,200,000                      |       | —                       |       | 1,200,000 |   |
| Shares Accrued for registration penalty                                          |       | 1,897,495                      |       | 0                            |       | 1,897,495 |   |
| Depreciation                                                                     |       | 96,289                         |       | 1,489                        |       | 117,376 |   |
| Warrants issued with notes payable                                               |       | —                         |       | 72                           |       | 382,656 |   |
| Stock split adjustments                                                          |       | —                         |       | —                       |       | 38,412 |   |
| Changes in  operating assets and liabilities:                                    |       |                           |       |                         |       |   |   |
| (Increase) decrease in inventory                                                 |       | (69,202                        | )          | 2,453                        |       | (69,202 | ) |
| (Increase) decrease in accounts receivable                                       |       | (5,646                         | )          |                         |       | (5,466 | ) |
| (Increase) in interest income from Certificate of  Deposit                       |       | (35,368                        | )          | —                       |       | (35,368 | ) |
| (Increase) in prepaid expenses                                                   |       | (574,810                       | )          | (42,075                      | )          | (663,695 | ) |
| Increase in accounts payable                                                     |       | (76,732                        | )          | 1,425                        |       | 517,342 |   |
| Increase in accrued interest                                                     |       | —                         |       | 23,826                       |       | — |   |
| Increase in payroll liabilities                                                  |       | 8,497                          |       | 16,475                       |       | 20,901 |   |
| Net cash (used)  by operating activities                                         |       | (3,495,158                     | )          | (1,095,062                   | )          | (6,379,444 | ) |
|                                                                             |       |                           |       |                         |       |   |   |
| **Cash  flows from investing activities**                                        | ** ** | ** **                     | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Purchase of fixed assets                                                         |       | (615,697                       | )          | (18,198                      | )          | (1,414,597 | ) |
| Impairment of assets                                                             |       | 326,782                        |       |                         |       | 326,782 |   |
| Investment in subsidiaries                                                       |       | (350,000                       | )          |                         |       | (350,000 | ) |
| Purchase of Certificate of Deposit                                               |       | —                         |       |                         |       | (2,014,767 | ) |
| Net cash (used)  by investing activities                                         |       | (638,915                       | )          | (18,898                      | )          | (3,429,364 | ) |
|                                                                             |       |                           |       |                         |       |   |   |
| **Cash  flows from financing activities**                                        | ** ** | ** **                     | ** ** | ** **                   | ** ** | ** ** | ** ** |
| Proceeds from mortgage payable                                                   |       | 287,500                        |       | —                       |       | 287,500 |   |
| Proceeds from notes payable                                                      |       | —                         |       | 750,000                      |       | 1,425,000 |   |
| Repayments of notes payable                                                      |       | —                         |       | —                       |       | (1,425,000 | ) |
| Issuance of common stock                                                         |       | —                         |       | 375,000                      |       | 10,786,934 |   |
| Net cash  provided by financing activities                                       |       | 287,500                        |       | 1,125,000                    |       | 11,074,434 |   |
|                                                                             |       |                           |       |                         |       |   |   |
| Net (decrease)  increase in cash                                                 |       | (3,846,574                     | )          | 11,740                       |       | 1,265,626 |   |
| Cash - beginning                                                                 |       | 5,047,968                      |       | 5,878                        |       | — |   |
| Cash - ending                                                                    |       | $                              | 1,201,394  |                         | $          | 17,618 |   | $ | 1,265,626 |   |
|                                                                             |       |                           |       |                         |       |   |   |
| Supplemental  disclosures;                                                       |       |                           |       |                         |       |   |   |
| Interest paid                                                                    |       | $                              | 8,086      |                         | $          | 15,000 |   | $ | 65,608 |   |
| Income taxes paid                                                                |       | $                              | —     |                         | $          | — |   | $ | — |   |
|                                                                             |       |                           |       |                         |       |   |   |
| Non-cash  transactions:                                                          |       |                           |       |                         |       |   |   |
| Stock compensation-Related Party                                                 |       | $                              | —     |                         | $          | 2,475,006 |   | $ | 2,475,006 |   |
| Number of shares issued for executive compensation                               |       | —                         |       | 7,500,018                    |       | 7,500,018 |   |
|                                                                             |       |                           |       |                         |       |   |   |
| Share issued for services                                                        |       | $                              | —     |                         | $          | — |   | $ | 1,000 |   |
| Number of shares issued for services                                             |       | —                         |       | —                       |       | 35,294,200 |   |
|                                                                             |       |                           |       |                         |       |   |   |
| Share issued for licenses                                                        |       | $                              | —     |                         | $          | — |   | $ | 8,217,391 |   |
| Number of shares issued for licenses                                             |       | —                         |       |                         |       | 5,869,565 |   |
|                                                                             |       |                           |       |                         |       |   |   |
| Share issued for financing costs                                                 |       | $                              | —     |                         | $          | — |   | 382,656 |   |
|                                                                             |       |                           |       |                         |       |   |   |
| Shares issued for settlement                                                     |       | $                              | 1,200,000  |                         | $          | — |   | $ | 1,200,000 |   |
| Number of shares issued for settlement                                           |       | 1,500,000                      |       | —                       |       | 1,500,000 |   |
|                                                                             |       |                           |       |                         |       |   |   |
| Shares issued for acquisition                                                    |       | $                              | 189,000    |                         | 0          |   | 0 |   |
| Number of Shares  issued for acquisition                                         |       | 300,000                        |       | 0                            |       | 0 |   |

 

The accompanying notes are an integral part of thesefinancial statements.

6

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**Ecotality, Inc**(a Development Stage Company)

**Condensed Consolidated FinancialStatements**(Unaudited)

**Note1 - Basis of presentation**

The interimcondensed consolidated financial statements included herein, presented inaccordance with United States generally accepted accounting principles andstated in US dollars, have been prepared by the Company, without audit,pursuant to the rules and regulations of the Securities and Exchange Commission(SEC).  Certain information and footnote disclosures normally included infinancial statements prepared in accordance with generally accepted accountingprinciples have been condensed or omitted pursuant to such rules andregulations, although the Company believes that the disclosures are adequate tomake the information presented not misleading.

These statementsreflect all adjustments, consisting of normal recurring adjustments, which, inthe opinion of management, are necessary for fair presentation of theinformation contained therein.  It is suggested that these consolidatedinterim financial statements be read in conjunction with the financialstatements of the Company for the year ended December 31, 2006 and notesthereto included in the Company’s 10-KSB annual report.  The Companyfollows the same accounting policies in the preparation of interim reports.

Resultsof operations for the interim periods are not indicative of annual results.

**Note2 - History and organization of the company**

The Company wasorganized April 21, 1999 (Date of Inception) under the laws of the State ofNevada, as Alchemy Enterprises, Ltd.  The Company has limited operationsand is considered a development stage company.  The Company was initiallyauthorized 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 itsauthorized capital to 25,000,000 shares with a par value of $0.001.  OnJanuary 26, 2005, the Company amended its articles of incorporation again,increasing authorized capital to 100,000,000 shares of common stock with a parvalue of $0.001.  Subsequently, on March 1, 2006, the Company amended itsarticles of incorporation, increasing authorized capital to 300,000,000 sharesof common stock, each with a par value of $0.001, and 200,000,000 shares of preferredstock, each with a par value of $0.001.

On November 26,2006, the Company amended its articles of incorporation to change its name fromAlchemy Enterprises, Ltd. to Ecotality, Inc.

The formerbusiness of the Company was to market a private-label bio-degradable productline.  During the year ended December 31, 2006, the board of directorschanged the Company’s focus toward developing an electric power celltechnology.

On June 11, 2007,the Company bought the assets of the FuelCellStore.com, a small web basedseller of educational fuel cell products. The FuelCellStore.com product lineincludes demonstration kits, educational materials, fuel cell systems andcomponent parts.  It also offers consulting services on establishingeducational programs for all levels of educational institutions.

**Note3 - Fixed assets**

Fixed assets as ofJune 30, 2007 consisted of the following:

| Computer equipment        |   | $        | 51,735    |   |
|---------------------------|--------|----------|-----------|--------|
| Vehicles                  |   | 795,848  |      |
| Building                  |   | 575,615  |      |
| Accumulated  depreciation |   | (117,377 | )         |
|                      |   | $        | 1,305,821 |   |

 

Depreciationexpense totaled $96,289 and $1,489 for the six months ended June 30, 2007and 2006 respectively.

7

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**Ecotality,Inc**(a Development Stage Company)

**Notesto Condensed Consolidated Financial Statements**(Unaudited)

**Note 4 - Debt and interest expense**

On February 9,2006, the Company conducted a private offering of debt securities, whereby itraised $750,000 in bridge loan financing from three non-affiliated individuals. The notes were due August 9, 2006, bear an interest rate of 10.5%calculated annually and contain no prepayment penalty.  The maturity dateof the notes was subsequently extended to October 9, 2006.  The notes wererepaid on September 29, 2006 including interest of $50,056.

In connection withthe February 9, 2006 debt offering, the note holders were issued warrants topurchase shares of the Company’s par value common stock.  Resultantly, adiscount of $92 was attributed to the value of the notes, which amount is beingamortized over a period of six months.  As of December 31, 2006, a totalof $92 has been amortized and recorded as interest expense.  See note 7for additional discussion regarding the issuance of warrants.

On July 7, 2006,the Company raised $275,000 in bridge loan financing from one shareholder andone non-affiliated entity.  The notes are due December 29, 2006, bear aninterest rate of 10.5% calculated annually and contain no prepayment penalty. The notes were repaid on October 2, 2006 including interest of $6,724.

In connection withthe July 7, 2006 debt offering, the note holders were issued warrants topurchase shares of the Company’s par value common stock.  Resultantly, adiscount of $223,391 was attributed to the value of the notes, which amount isbeing amortized over a period of approximately six months.  As of December31, 2006, a total of $223,391 has been amortized and recorded as interestexpense.  See note 7 for additional discussion regarding the issuance ofwarrants.

On August 3, 2006,the Company raised $100,000 in bridge loan financing from one shareholder andone non-affiliated entity.  The notes are due December 29, 2006, bear aninterest rate of 10.5% calculated annually and contain no prepayment penalty. The notes were repaid on October 2, 2006 including interest of $1,668.

In connection withthe August 3, 2006 debt offering, the note holders were issued warrants topurchase shares of the Company’s par value common stock.  Resultantly, adiscount of $79,079 was attributed to the value of the notes, which amount isbeing amortized over a period of approximately five months.  As ofDecember 31, 2006, a total of $79,079 has been amortized and recorded asinterest expense.  See note 7 for additional discussion regarding theissuance of warrants.

On September 9,2006, the Company raised $100,000 in bridge loan financing from one shareholderand one non-affiliated entity.  The notes are due December 29, 2006, bearan interest rate of 10.5% calculated annually and contain no prepaymentpenalty.  The notes were repaid on October 2, 2006 including interest of$552.

In connection withthe September 9, 2006 debt offering, the note holders were issued warrants topurchase shares of the Company’s par value common stock.  Resultantly, adiscount of $80,094 was attributed to the value of the notes, which amount isbeing amortized over a period of approximately four months.  As ofDecember 31, 2006, a total of $80,094 has been amortized and recorded asinterest expense.  See note 7 for additional discussion regarding theissuance of warrants.

On September 27,2006, the Company raised $200,000 in bridge loan financing from one shareholderand one non-affiliated entity.  The notes are due December 29, 2006, arenon-interest bearing and contain no prepayment penalty.  The notes wererepaid on October 2, 2006.

Interestexpense totaled $8,086 and $38,898 for the six months ended June 30, 2007 and2006 respectively.

8

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**Ecotality,Inc**(a Development Stage Company)

**Notesto Condensed Consolidated Financial Statements**(Unaudited)

**Note 5 - Long Term Debt**

On January 16,2007, the Company purchased an office building for an aggregate price of$575,615.  A total of $287,959 has been paid and a tax credit has beenrecorded in the amount of $156.  The remaining balance of $287,500 isstructured as an interest-only loan from a third-party, bears an interest rateof 6.75% calculated annually, with monthly payments in the amount of $1,617 duebeginning on February 16, 2007.  The entire principal balance is due on orbefore January 16, 2012.

**Note6 - Stockholders’ equity**

The Company isauthorized to issue 300,000,000 shares of its $0.001 par value common stock and200,000,000 shares of $0.001 par value preferred stock.

On May 17, 2004,the Company closed their Regulation D, Rule 504 offering, registered in Nevada,and issued a total of 14,647,094 shares of its $0.001 par value common stock inexchange for cash of $41,500.

On February 15,2006, the Company issued 7,500,018 shares of its $0.001 par value common stockto an individual who is an officer and director as executive compensationvalued at $2,475,006, calculated at the fair market value of $0.33, on March 2,2006 when the company began trading shares of stock..

On March 23, 2006,three warrant holders exercised their rights to purchase shares of par valuecommon stock of the Company.  As a result, the Company issued an aggregateof 1,071,429 shares of common stock at a price per share of $0.35, for totalcash proceeds of $375,000.  See note 7 for additional discussion on thisissue.

On June 12, 2006,the Company entered into a License Agreement with California Institute ofTechnology, whereby the Company issued 5,869,565 shares of common stock at afair market value of $1.40 per share, based on the quoted market price on thegrant date, for licenses and permits carrying an aggregate value of $8,217,391. See note 8 for additional discussion on this issue.

During the yearended December 31, 2006, the Company conducted a private placement of itscommon stock pursuant to Regulation D, Rule 506.  As of December 31, 2006,the Company issued 34,499,920 shares of its $0.001 par value common stock at aprice per share of $0.35, for total gross proceeds of $12,074,935.  Thetotal offering costs related to this issuance was $9,352,713.

On February 15,2007, the Company entered into a Settlement Agreement and Release to theTechnology Contribution Agreement, originally entered into on February 15,2006, to settle and resolve all known disputes and uncertainties between theCompany and Howard Foote, Elliott Winfield and Universal Power Vehicles, Inc. In accordance with the Settlement, the Parties confirm the assignment,transfer and conveyance of all right, title and interest in and to theIntellectual Property transferred in the Contribution Agreement.  Inconsideration, the Company agreed to pay to Foote, Winfield and UPV cash in theamount of $600,000.  Additionally, the Parties received common stock inthe aggregate amount of 1,500,000 shares of the Company, as per a separateescrow agreement between Foote, Winfield and and Mr Harlod Sciotto, an officerand director of the Company. The shares were owned by Mr Sciotto and not thecompany. The escrow also provided for: (1) the immediate release from escrowand return to Harold Sciotto of 32,500,000 shares of our common stock; and (2)the immediate release to Ecotality of 6,000,000 shares of our common stock fromescrow for cancellation.  The 6,000,000 shares were cancelled immediatelyupon receipt at their par value amount of $6,000 and that paid in capital wasreduced by that amount.  The value of the shares transferred was basedupon market value ($1,200,000) at the time of the transaction and have beenreflected as an expense in our financial statements with a corresponding creditto paid in capital in accordance with SEC bulletins topic 5:T.

On June 11, 2007,we agreed to buy the assets of the FuelCellStore.com for $350,000 in cash andto issue 300,000 shares of our common stock. .. Our common stock was valued at its closing market price on the date ofthe agreement.  The closing price was$.63 per share, on that date for a total value of $189,000 and a total pricepaid,,cash and  stock, of $539,000.  The 300,000 shares of our common stock havenot been issued as of June 30, 2007 and therefore is posted in our Company’s consolidatedcondensed financial statements as common stock owed,but not issued.

9

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**Ecotality,Inc**(a Development Stage Company)

**Notesto Condensed Financial Statements**(Unaudited)

**Note 7 - Warrants**

As ofJanuary 1, 2006, there were no warrants outstanding.

On February 9,2006, the Company issued warrants to purchase shares of the Company’s par valuecommon stock to three non-affiliated individuals in conjunction with bridgeloan agreements.  The warrant holders were granted the right to purchase atotal of 1,071,429 shares of common stock of the Company for an aggregatepurchase price of $375,000 or $0.35 a share.  The aggregate fair value ofsuch warrants totaled $92 based on the Black Schoeles Merton pricing modelusing the following estimates:  4 % risk free rate, 100 % volatility andexpected life of the warrants of 6 months.  On March 23, 2006, all ofthese warrants were exercised for total gross proceeds of $375,000.

On July 7, 2006,the Company issued warrants to purchase shares of the Company’s par valuecommon stock to one shareholder and one non-affiliated entity in conjunctionwith bridge loan agreements.  The warrant holders were granted the rightto purchase a total of 1,100,000 shares of common stock of the Company for an apurchase price of $1,562,00 or $1.42 a share.  The aggregate fair value ofsuch warrants totaled $223,391 based on the Black Schoeles Merton pricing modelusing the following estimates:  4% risk free rate, 100% volatility andexpected life of 5 years.

On August 3, 2006,the Company issued warrants to purchase shares of the Company’s par valuecommon stock to one shareholder and one non-affiliated entity in conjunctionwith bridge loan agreements.  The warrant holders were granted the rightto purchase a total of 400,000 shares of common stock of the Company for apurchase price of $496,000 or $1.24 a share.  The aggregate fair value ofsuch warrants totaled $79,079 based on the Black Schoeles Merton pricing modelusing the following estimates:  4% risk free rate, 100% volatility andexpected life of 5 years.

On September 6,2006, the Company issued warrants to purchase shares of the Company’s par valuecommon stock to one shareholder and one non-affiliated entity in conjunctionwith bridge loan agreements.  The warrant holders were granted the rightto purchase a total of 400,000 shares of common stock of the Company for apurchase price of $528,000 or $1.32 a share.  The aggregate fair value ofsuch warrants totaled $80,094 based on the Black Schoeles Merton pricing model usingthe following estimates:  4% risk free rate, 100% volatility and expectedlife of 5 years.

On October 27,2006 the Company issued warrants to purchase shares of the Company’s par valuecommon stock to the brokers of Brookstreet Securities Corporation as additionalconsideration for their acting as placement agent.  The warrant holderswere granted the right to purchase a total of 6,899,982 shares of common stockof the Company for a purchase price of $2,414,994, or $0.35 per share. The aggregate fair value of such warrants totaled $7,638,212 based on theBlack Schoeles Merton pricing model using the following estimates:  4%risk free rate, 91% volatility and expected life of 5 years.  The Companynetted the fair market value of the warrants against expenses related theoffering of common stock conducted by Brookstreet Securities Corporation.

Paragraph 5(Registration Rights) of the Subscription Agreement for the private placementdescribed above states that  ”If the Company fails to (i) file theRegistration Statement with the SEC on or prior to 60 days after the ClosingDate, (ii) obtain effectiveness of the Registration Statement by the SEC on orprior to 150 days after the Closing Date, or (iii) maintain effectiveness ofthe Registration Statement for 12 months after the date of effectiveness, theCompany shall be obligated to issue to the undersigned additional Shares” The Registration Rights paragraph further holds that if we fail or failto obtain or maintain the effectiveness of the registration statement, within30 days following the determination date (date upon which we fail to meet the60 or 150 day requirement)  we are to issue to the subscribers the numberof shares equal 1% of the number of shares issued as a part of thissubscription and do so on a weekly basis until such time as we are incompliancewith the registration requirement.  Further, the number of shares issuedas “penalty shares” in aggregate cannot exceed 10% of the number of sharesoriginally subscribed..  As of March 31, 2007 the Company  had notincurred any penalties (compensatory or otherwise), however, the Companyreserved $3,001,493 on March 31, 2007 for incurring any penalties inconjunction with this registration.  Theamount reserved was based upon the maximum number of shares that may be issuedand the closing price of a share of common stock of $.87 on March 31,2007.  At June 30, 2007, the closingprice of a share of the Company’s common stock was $.55. The Company reducedthe amount  reserved by $1,103,996 on itsJune 30, 2007 condensed consolidated financial statements such that the amountreserved is $1,897,495 No shares of the Company’s common stock have been issuedin relation to this penalty.

10

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**Ecotality,Inc**(a Development Stage Company)

**Notesto Condensed Consolidated Financial Statements**(Unaudited)

**Note 7 - Warrants (Continued)**

The following is asummary of the status of all of the Company’s stock warrants as of June 30,2007 and changes during the six months ended:
| ** **                             | ** ** | **Number  Of Shares** | ** ** | **Weighted-Average  Exercise Price** | ** ** |
|----------------------------------------|------------|----------------------------|------------|-------------------------------------------|------------|
| Outstanding at  December 31, 2005      |       | 0                          |       | $                                         | 0.00       |   |
| Granted                                |       | 1,071,429                  |       | $                                         | 0.35       |   |
| Exercised                              |       | (1,071,429                 | )          | $                                         | 0.35       |   |
| Cancelled                              |       | 0                          |       | $                                         | 0.00       |   |
| Outstanding at  June 30, 2006          |       | 0                          |       | $                                         | 0.00       |   |
| Granted                                |       | 8,799,982                  |       | $                                         | 0.57       |   |
| Exercised                              |       | 0                          |       | $                                         | 0.00       |   |
| Cancelled                              |       | 0                          |       | $                                         | 0.00       |   |
| Outstanding at  December 31, 2006      |       | 8,799,982                  |       | $                                         | 0.57       |   |
| Granted                                |       | 0                          |       | $                                         | 0.00       |   |
| Exercised                              |       | 0                          |       | $                                         | 0.00       |   |
| Cancelled                              |       | 0                          |       | $                                         | 0.00       |   |
| Outstanding at  June 30, 2007          |       | 8,799,982                  |       | $                                         | 0.57       |   |
| Warrants exercisable at  June 30, 2007 |       | 8,799,982                  |       | $                                         | 0.57       |   |

 

Thefollowing tables summarize information about stock warrants outstanding andexercisable at June 30, 2007

**STOCKWARRANTS OUTSTANDING**
| **Range of  Exercise Prices** | ** ** | **Number of  Shares  Outstanding** | ** ** | **Weighted-Average  Remaining  Contractual  Life in Years** | ** ** | **Weighted-Average  Exercise Price** | ** ** |
|-----------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------------------------------------|------------|-------------------------------------------|------------|
| $ 0.35                             |       | 6,899,982                               |       | 4.33                                                                  |       | $                                         | 0.35       |   |
| $ 1.24 - $ 1.42               |       | 1,900,000                               |       | 4.07                                                                  |       | $                                         | 1.36       |   |
|                                    |       | 8,799,982                               |       | 4.27                                                                  |       | $                                         | 0.57       |   |

 

**STOCK WARRANTS EXERCISABLE**
| **Range of  Exercise Prices** | ** ** | **Number of  Shares  Exercisable** | ** ** | **Weighted-Average  Exercise Price** | ** ** |
|-----------------------------------------|------------|-----------------------------------------|------------|-------------------------------------------|------------|
| $ 0.35                             |       | 6,899,982                               |       | $                                         | 0.35       |   |
| $ 1.24-$ 1.42                 |       | 1,900,000                               |       | $                                         | 1.36       |   |
|                                    |       | 8,799,982                               |       | $                                         | 0.57       |   |

 

**Note 8 - Commitments and contingencies**

On February 15,2006, the Company entered into a Technology Contribution Agreement with twoindividuals to acquire the rights, titles and interests to the intellectualproperty for the development of an electric power cell.  In exchange forthe rights to this intellectual property, the Company agreed to finance thedevelopment of the electric power cell system up to $1,350,000 and payoff$15,000 in interest costs for related debt.  To date through June 30,,2007, $1,781,627 has been recorded as research and development expense inrelation to the technology and $15,000 as interest expense.

11

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**Ecotality,Inc**(a Development Stage Company)

**Notesto Condensed Consolidated Financial Statements**(Unaudited)

**Note 8 - Commitments and contingencies (continued)**

On February 15,2006, the Company entered into a consulting agreement with Universal PowerVehicles Corporation for annual compensation of $200,000.  The term of theagreement is three years and may be extended upon agreement by both parties. The Company prepaid one-half of the compensation upon execution of theagreement, with the remaining compensation to be paid monthly beginning August15.  The Company fully amortized $100,000 as an expense in the year endedDecember 31, 2006.  The consulting agreement has subsequently beenterminated, without penalty, and no additional payments will be made.

On February 15,2006, the Company entered into an employment agreement with an individual whois an officer and director of the Company.  The compensation is $120,000annually.  Additionally, the Company issued 7,500,018 shares of par valuecommon stock to this individual as executive compensation valued at $21,250. The term of the agreement is one year and is automatically renewedannually.  On February 15, 2007, the employment agreement was renewed withcompensation to be $222,000 annually.

On February 16,2006, the Company entered into an employment agreement with an individual whois an officer and director of the Company for annual compensation of $120,000. The term of the agreement is for one year and was automatically renewedon February 15, 2007.

On March 21, 2006,the Company entered into a lease agreement to rent office space at a rate of$547 per month and requires a refundable deposit of $500, which was paid by theCompany during the period ended March 31, 2006.  On October 31, 2006, theCompany added an addendum to the original lease agreement to rent additional officespace at a rate of $547 per month and requires an additional refundable depositof $500, which was paid by the Company during the period ended December 31,2006.  The deposits were recorded in prepaid expenses, but have beenexpensed during the three months ended March 31, 2007.  The lease andaddendum expired collectively on March 31, 2007 and was not renewed.

On June 12, 2006,the Company entered into a License Agreement with California Institute ofTechnology, whereby the Company obtained certain exclusive and non-exclusiveintellectual property licenses pertaining to the development of an electronicfuel cell technology, in exchange for 5,869,565 shares of common stock of theCompany with a fair market value of $8,217,391, which amount has been recordedas licenses and permits expense.  The License Agreement carries an annualmaintenance 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 LicenseAgreement and the licenses granted thereby.

On  April 5,2007 we were obligated to issue 344,999 shares per week for a maximum of 10weeks as a penalty to the investors of the private placement for failure toregister their shares by that date.  We are currently obligated, thereforeto issue an aggregate of 3,449,990 shares pro rata to the investors but are notrequired to register these shares. On March 31,2007 , the Company reserved$3,001,493  for incurring any penaltiesin conjunction with the registration. The amount reserved was based upon the maximum number of shares that maybe issued and the closing price of a share of common stock of $.87 on March 31,2007.  However at June 30, 2007,theclosing price of a share of the Company’s common stock was $.55. The Companyreduced the amount  reserved by$1,103,996 on its June 30, 2007 condensed consollidated financial statementssuch that the amount reserved is $1,897,495. No shares of the Company’s commonstock have been issuedin relation to this penalty.

On June 11, 2007,we agreed to buy the assets of the FuelCellStore.com for $350,000 in cash andto issue 300,000 shares of our common stock. .. Our common stock was valued at its closing market price on the date ofthe agreement.  The closing price was$.63 per share, on that date for a total value of $189,000 and a total pricepaid,,cash and  stock, of $539,000.  The 300,000 shares of our common stock havenot been issued as of June 30, 2007 and therefore are reflected in the Company’s consolidated condensed financialstatements as common stock owed,but not issued.

12

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**Ecotality,Inc**(a Development Stage Company)

**Notesto Condensed Consolidated Financial Statements**(Unaudited)

Note 9 Impairment of Intangible Assets

We agreed to buy the assets of the FuelCellStore.comfor $350,000 in cash and to issue 300,000 shares of our common stock. Ourcommon stock was valued at its closing market price on the date of theagreement.  The closing price was $.63 per share, on that date for a totalvalue of $189,000 and a total price paid, cash and  stock, of$539,000.  Of the assets acquired the Company assigned a value to $179,775to merchandise inventory, $8,600 to fixed assets, and  $23,843 to current accounts receivable.  In accordance with SFAS No. 144 “Accounting for the Impairment ordisposal of Long Lived assets”  theCompany reviewed the intangible assets that were acquired, including thecustomer data base, and internally developed software and determined that theintangible assets did not have value to the company. Therefore, the differencebetween the assets noted and the price paid for the assets $326,782 have beenallocated to intangible assets and have been impaired and written off due tothe lack of proven future cash flows generated by the assets acquired.

13

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**Ecotality,Inc**(a Development Stage Company)

**Notesto Condensed Consolidated Financial Statements**(Unaudited)

**Changes inand Disagreements with Accountants**

 On January 25, 2007, our Audit Committeeapproved the dismissal of Beckstead and Watts, LLP as our principal certifyingaccountants.  None of the reports of Beckstead and Watts, LLP on ourfinancial statements contained any adverse opinion or disclaimer of opinion, orwas qualified or modified as to uncertainty, audit scope or accounting principles,except as follows: Beckstead and Watts, LLP’s report on our financialstatements as of and for the years ended December 31, 2005 and 2004.

Duringthe Registrant’s two most recent fiscal years and during any subsequent interimperiods preceding the date of termination, there were no disagreements withBeckstead and Watts, LLP on any matter of accounting principles or practices,financial statement disclosure, or auditing scope or procedure, whichdisagreement(s), if not resolved to Beckstead and Watts, LLP’s satisfaction,would have caused them to refer to the subject matter of the disagreement(s) inconnection with their report; and there were no “reportable events” as definedin Item 304 (a)(1)(v) of the Securities and Exchange Commission’s RegulationS-K.

On January25, 2007, the Registrant engaged Weaver & Martin, CPAs, 411 Valentine,Suite 300, Kansas City, Missouri 64111, as its independent registered publicaccounting firm commencing January 25, 2007, for the fiscal year ended December31, 2006.  During the most recent two fiscal years through January 25,2007 (the date of engagement), neither the Registrant nor anyone engaged on itsbehalf has consulted with Weaver & Martin, CPAs regarding: (i) either theapplication of accounting principles to a specified transaction, eithercompleted or proposed; or the type of audit opinion that might be rendered onthe Registrant’s financial statements; or (ii) any matter that was either thesubject of a disagreement (as defined in Item 304(a)(1)(v) of Regulation S-K).

A Form 8-K has been filed with the Commissionregarding this matter.

14

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**Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

*Forward-LookingStatements*

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

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

 There may be other risks and circumstancesthat management may be unable to predict.  When used in this QuarterlyReport, words such as,  *“believes,”*   *“expects,”“intends,”*   *“plans,”*  *“anticipates,”*   *“estimates”*  and similar expressions are intended toidentify forward-looking statements, although there may be certainforward-looking statements not accompanied by such expressions.

**Overview**

 We were incorporated in the State of Nevada onApril 21, 1999, as a marketer of private-label biodegradable cleaningchemicals.  On February 15, 2006, we entered into and closed a TechnologyContribution Agreement with Howard Foote and Elliot Winfield (“Transferors”),pursuant to which we acquired all of Transferors’ right, title and interest inand to a certain electric power cell (“EPC”) technology to be used inconnection with the development of an improved electric battery represented bya U.S. Patent Office patent application (the “Technology”).  As a resultof the Technology Contribution Agreement, our board of directors made adecision to change our business focus from marketing chemical products towarddeveloping the EPC technology.

 We are a development stage company seeking todesign and license a cost efficient electric power cell for use in motorizedvehicles and industrial equipment.  A power or fuel cell is anelectrochemical device that combines hydrogen and oxygen to produce electricpower without combustion.  We have entered into a development agreementwith JPL to develop, build and patent a prototype 100 kilowatts electric powercell.  We also have entered into a license agreement for certain exclusivepatent rights and non-exclusive technology rights from CalTech, which is the operatorof JPL and assignee of its patent and technology rights.

 Under our agreement with JPL, we have hired itto engineer a magnesium-based system that produces a hybrid power sourcecreating hydrogen fuel and electricity on demand, for which we expect to payJPL a total of $1,350,000.  We believe that available hydrogen fuel celltechnology methods are bulky, unreliable, expensive or energy inefficient. We are seeking to build and improve upon existing hydrogen fuel celltechnologies and combine it with our system to achieve safe, clean and reusablepower.  A cost efficient EPC and storage system may make future electricpropulsion devices as practical as the current generation of gasoline-poweredsystems.  If we are successful in commercially developing our EPC, weintend to sublicense the technology under our exclusive license agreement withCalTech for a broad range of applications including various types of motorizedvehicles and industrial equipment.  We hope to derive revenue fromtechnology sublicense fees, fuel licensing fees and fees for the design andtechnical support of refueling stations and royalty fees.

 On February 15, 2007, we entered into aSettlement Agreement with Howard Foote, Elliott Winfield and Universal PowerVehicles Corporation (UPV) to settle and resolve all known disputes anduncertainties between them and us related to all agreements and contractsentered into concerning the fuel cell intellectual property and technology. In accordance with the Settlement, Foote, Winfield and UPV confirmed theassignment, transfer and conveyance of all right, title and interest in and tothe electric power cell and reactor technology being developed by us.  Inconsideration, we paid to Foote, Winfield and PV cash in the amount of$600,000.  Additionally, Foote, Winfield and UPV received 1,500,000 sharesof our common stock.

 

15

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 In connection with the Settlement, an officerand director of Ecotality entered into an escrow agreement with Foote, Winfieldand UPV, which cancels and supersedes separate prior escrow agreements enteredinto with Foote and Winfield, UPV individually, on February 15, 2006.  The2006 Escrow provided for the potential issuance of an aggregate of 40,000,082shares of our common stock to Foote, Winfield, UPV, upon the achievement ofcertain performance standards, as set forth in said 2006 Escrow.  The 2007Escrow provides for: (1) the immediate release of 1,500,000 shares of ourcommon stock held per the 2006 Escrow to the Foote, Winfield, UPV; (2) theimmediate release from escrow and return to Harold Sciotto of 32,500,000 sharesof our common stock; and (3) the immediate release to Ecotality of 6,000,000shares of our common stock from escrow for cancellation.

 On March 19, 2007, we received a memorandumfrom the National Aeronautics and Space Administration’s Jet PropulsionLaboratory reporting that significant performance advancements have been madewith regard to the HydratusTM, an on-demand hydrogen storage and delivery systemfueled by magnesium and water, JPL has been developing on our behalf.  Insummary, the JPL memo states that, in laboratory tests of the modifiedHydratusTM, the following has occurred:

 1.

 Hydrogen-fuelstorage capacity, by weight for the entire system, has increased from 4.7% tobetween 8% and 9%, depending on operating mode, allowing the modified HydratusTMto meet the Department of Energy’s 2010 goal of 6% hydrogen storage capacity.

 2.

 A drop inoperating temperature of the modified HydratusTM of 300-400 degrees Centigradewill allow the use of less expensive materials in system construction.

 3.

 The amount ofheat generated by the modified HydratusTM has decreased significantly byapproximately 80% is expected to result in reduced system complexity, in termsof cost and size.  Additionally, because less energy is generated, andsubsequently wasted during operation, the regeneration efficiency of thereaction products is increased by approximately 400%.

 As a result of the technical, performance andcost advancements, JPL has recommended all future research and developmentefforts be shifted to focus on the modified HydratusTM and all associatedsystems and processes.  JPL and Ecotality have agreed to develop and testa 7kW prototype, which JPL believes is suitable to power various commercialapplications, as well as can be scaled for future systems.  Additionally,JPL and Ecotality plan to design and test a full-size 65kW HydratusTM suitablefor application in a bus.  We believe the modified 65kW HydratusTM will be implementedin a proof of concept vehicle in the second half of 2007.

       On June 11, 2007, we bought the assetsof the FuelCellStore.com, a small web based seller of educational fuel cellproducts. The FuelCellStore.com product line includes demonstration kits, educationalmaterials, fuel cell systems and component parts.  It also offersconsulting services on establishing educational programs for all levels ofeducational institutions.  Since the FuelCell Store was significantly smaller than we are, we were not required toprovide audited financial statements for it.  We operate the  Fuel Cell Store. through our wholly-ownedsubsidiary, Ecotality Stores, Inc.  Whilerevenue producing activities, facilities and employees have intitially remainedthe same, we intend to change the distribution system through bar coding andinventory control procedures, and expand the customer base through increasedemphasis on marketing.  We sell Fuel CellStore Products through our own Ecotality Store’s website.

      We agreed to buy the assets of theFuelCellStore.com for $350,000 in cash and to issue 300,000 shares of ourcommon stock.  . Our common stock will bevalued at its closing market price on the date of the agreement.  The closing price was $.63 per share, on thatdate for a total value of $189,000 and a total price paidcash and  stock, of $539,000.   We concluded thisto be an asset  purchase rather than abusiness purchase because we did not acquire their debt and they continue toexist after the purchase is completed.  Ofthe assets acquired we identified and assigned a value to $179,775 inmerchandise inventory, $8,600 in fixed assets,, and $23,843 in current accountsreceivable.   We reviewed the intangible assets that we acquired,including the customer data base, and internally developed software anddetermined that the intangible assets did not have value to us. Therefore,the difference between the assets noted and the price paid for the assets $326,782 have been allocated to intangibleassets and   impaired and written off dueto the lack of proven future cash flows generated by the assets acquired.

**Management’s Discussion**

*OperatingExpensesThree Months Ended June 30, 2007 Compared to the Three Months Ended June 30,2006*

Total expenses forthe three month period ended June 30, 2007 were $1,316,455.  Approximately24% of these expenses were research and development costs related toengineering work performed for us by the Jet Propulsion Laboratories and otherfirms supporting our project. In addition to the research and development costsfor the three months ended June 30, 2007, we incurred $621,028 in general andadministrative expenses, of which $159,100 can be attributed to legal, andprofessional fees related to registration of our common stock, public entity accountingand reporting requirements and acquisition of the assets of the Fuel CellStore. In addition, we incurred $109,100 in executive compensation and $48,202in depreciation expenses.  The majordifference in operating expenses for the three month period ending June 30,2007 and June 30, 2006 is the expense recorded as a result of our licenseagreement with the California Institute of Technology and the expensesattributed to the costs of being a public entity.

16

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 In comparison, total expenses during the threemonth period ended June 30, 2006 were $8,599,773.  A material component oftotal expenses during this period was attributable to $50,000 in research anddevelopment costs specifically related to the power cell technology acquiredunder the Technology Contribution Agreement. In addition to the research anddevelopment expenses, we also incurred $327,938 in general and administrativeexpenses, including $53,750 in executive compensation. We entered into aLicense Agreement with California Institute of Technology, whereby we obtainedcertain exclusive and non-exclusive intellectual property licenses pertainingto the development of an electronic fuel cell technology, in exchange for5,869,565 shares of common stock of the Company with a fair market value of$8,217,391, which we recorded  aslicenses and permits expense during the three months ended June 30, 2006 Wealso incurred $1,348 in depreciation expense during this period.

*SixMonths Ended June 30, 2007 Compared to the Six Months Ended June 30, 2006*

Total expenses forthe six month period ended June 30, 2007 were $4,080,605.  Approximately17% of these expenses were research and development costs related toengineering work performed for us by the Jet Propulsion Laboratories and otherfirms supporting our project. In addition to the research and development costsfor the six months ended June 30, 2007, we incurred $1,162,222 in general andadministrative expenses, of which approximately$278,000 can be attributed tolegal, and professional fees related to registration of our common stock,public entity accounting and reporting requirements and acquisition of theassets of the Fuel Cell Store. In addition, included in general andadministrative espepense is $215,000 in executive compensation and we incurred  $96,289 in depreciation expenses.Approximately 48% of our operating expenses for the six months are for the$1,800,000 in expenses for the settlement with Howard Foot and Elliot Winfield.  The settlement expense is considered part ofour operating costs due to the nature of our business regarding intellectualproperty.  Our expenses for the sixmonths compare favorably to the expenses incurred the first six months of 2006.

 In comparison, total expenses during the sixmonth period ended June 30, 2006 were $11,752,226.  A material componentof total expenses during this period was attributable to $400,000 in researchand development costs specifically related to the power cell technologyacquired under the Technology Contribution Agreement. In addition to researchand development expenses, for the six months ended June 30, 2006 we alsoincurred $3,129,850 in general and administrative expenses, including 2,528,756in executive compensation.  Approximately$2,475,006 in executive compensation was related to the issuance of our commonstock to our CEO.   As indicated above ,amaterial expense for the period was our entering into a License Agreement withCalifornia Institute of Technology. We incurred $1,489 in depreciation expense duringthis period.

17

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Werealized our first operating revenues during the three month period ended June30, 2007.  Since this was ourinitial  operating revenue, we do nothave comparability data for the first six months of 2006. These initialoperating revenues in the amount of $35,464 were generated from our purchase ofthe assets of the Fuel Cell Store and selling our first products .

Ouroperating loss for the six months ended June 30, 2007 was $4,065,467.  This compares favorably with the operatingloss of $11,752,226 for the six months ended June 30, 2006. While our operatingloss from inception to June 30, 2007 was $18,202,023, we expect tocontinue to incur ongoing operating losses for the foreseeable future, becausethe Technology acquired in the Technology Contribution Agreement is still inthe research and development stage as indicated above.   Our full revenuegenerating capacity will not be realized until we are able to effectivelydemonstrate the commercial ability of our Technology, of which there can be noassurance.

Forthe three months ended June 30, 2007, we realized total other income of$13,625, and for the six months ended June 30, 2007, $35,368 consisting solelyof interest income.  We also incurred interest expense in the amount of$4,852 during the three months ended June 30, 2007, and $8,086 for the sixmonths ended June 30, 2007 compared to the $19,680 incurred for the threemonths ended June30, 2006 and $38,898 for the six months ended June 30, 2006.  In addition to these other income and expense items,  we have reserved $1,897,495 for incurring anypenalties in conjunction with registering our common shares of stock with theSEC.  The amount we reserved is basedupon the maximum number of shares that potentially may be issued and theclosing price of a share of our common stock of $.55 on June 30, 2007.  No shares of our common stock have beenissued in conjunction with this reservation of shares. In conjunction with ouracquisition of the assets of the Fuel Cell Store, we impaired intangible assetsin the amount of $326,782 during the period ended June 30, 2007. After takingother income and expenses into account, our loss from continuing operations was$188,546 during the three months ended June 30, 2007 and $8,619,453 for thethree months ended June 30, 2006. Comparability for these periods is difficult as the June 30, 2007 losswas mitigated by our reducing the amount reserved in conjunction with thepenalty shares and the June 30, 2006 loss is based upon the license agreementwith the California Institute of Technology.

*Liquidity and Capital Resources*

 The availability of capital resources is alimiting factor to our continuing research and development efforts as arenewable energy company.

 On April 10, 2006, we entered into a letter ofintent with Brookstreet Capital, an investment banking firm, to act as aplacement agent in connection with a private placement of our unregisteredcommon stock, pursuant to Regulation D, Rule 506, offered solely to accreditedinvestors.  The private placement was conducted on a best efforts basisand there was no assurance that any or all of the securities offered therebywould be sold.  As of October 31, 2006, we sold 34,499,920 shares of our$0.001 par value common stock.  The aggregate gross proceeds received inthis private placement was $12,074,935. Total offering costs related to thisissuance was $9,352,713, of which $1,714,501 was paid in cash and $7,638,212 ofwhich was the fair market value of warrants to purchase shares of our commonstock issued to the placement agent.

 The warrants issued in conjunction with theprivate placement may generate approximately $2,414,994 in cash should all6,899,982 warrants be exercised at $.35 per share.

 The proceeds generated from the privateplacement should allow us to continue our EPC research and development programper our overall business plan.  However, there can be no assurance thatthese capital resources will result in profitable operations through the saleof commercial products and licenses.

*Management’s Plan of Operation*

 As described in Liquidity and CapitalResources, above, we raised gross proceeds of $12,074,935 in a privateplacement.  The warrants underlying the common shares issued in connectionwith this private placement may generate up to an additional $2,414,888 incapital over the next four (4) years beginning fiscal year 2007.  As ofJune30, 2007 we had available to us approximately $3,281,019 in cash,certificates of deposit and accounts receivable to meet our operatingrequirements.  In planning for fiscal year 2007, to achieve our researchand development goals we developed an overall operating budget of $3,650,000,including $2,100,000 for research and development projects.  In addition,we identified the following other major costs: (1) $717,000 for officer($400,000) and employee ($317,000) compensation, (2) $425,000 for advertising,marketing, website and new media operations, and (3) $260,000 for professionaland legal fees.  These identified categories and costs are generallyconsistent with our expenses incurred during the year ended December 31, 2006and remain consistent with the six months ended June 30, 2007.  We do notanticipate the purchase or sale of any major capital equipment, nor do weanticipate adding a significant number of employees.  The compensationamounts indicated above for both officers and employees do not reflect anystock options or grants that may be awarded during the course of the year inaccordance with our Stock Incentive Plan.

 Our efforts during fiscal year 2007 continueto be directed at achieving our research and development objectives, andrepresent at least 60% of our operating plan.  While we have establisheda budget for how we will spend our research and development funds, we mayhave to spend more dollars than planned.  However, givenavailable funds and our plan for fiscal 2007, we anticipate that we haveadequate capital resources complete our objectives for the year.

 

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*WorkingCapital*

 Net working capital is an important measure ofour ability to finance our operations.  Given that our net working capitalat December 31, 2006 was positive and continues to remain positive through thesix months ended June 30, 2007 by $1,757,953, and  that our private placement efforts have beensuccessful to date, we believe we have adequate working capital to maintain ourresearch and development efforts during 2007 as a minimum.  We may need toobtain additional financing prior to having profitable commercial operations.

 We do not haveany off-balance sheet arrangements.

 We currently donot own any significant plant or equipment that we would seek to sell in thenear future.

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

**Controlsand Procedures**

 We have established a set of disclosurecontrols and procedures designed to ensure that information required to bedisclosed by us in our reports filed under the Securities Exchange Act, isrecorded, processed, summarized and reported within the time periods specifiedby the SEC’s rules and forms.  Disclosure controls have also designed withthe objective of ensuring that this information is accumulated and communicatedto our management, including our chief executive officer and chief financialofficer, as appropriate, to allow timely decisions regarding requireddisclosure. In view of our restatement of the financial statements for thethree months ended March 31, 2007, we reevaluated our disclosure controls andhas deemed them ineffective for the three months ended March 31, 2007.  Subsequently, we made changes to ourdisclosure controls  to make them effectivefor gathering, analyzing and disclosing the information we are required to disclosein the reports we file under the Securities Exchange Act of 1934, within thetime periods specified in the SEC’s rules and forms.  These changes included adding an additionalindividual to record transactions in our books of account after they have beenreviewed by appropriate company officials., reemphasized proper posting oftransactions, having an independent accountant review transactions forcompliance with applicable guidance, reviewing our chart of accounts to ensurethat account classifications are in place, and ensuring accounting personnelattend continuing professional education. We believe our disclosure controls and internal controls are effectivefor the six months ended June 30, 2007.

 We do not expect that our disclosure controlsor internal controls over financial reporting will prevent all errors or allinstances of fraud.  A control system, no matter how well designed andoperated, can provide only reasonable, not absolute, assurance that the controlsystem’s objectives will be met.  Further, the design of a control systemmust reflect the fact that there are resource constraints, and the benefits ofcontrols must be considered relative to their costs.  Management isrequired to apply its judgment in evaluating the cost-benefit relationship ofpossible controls and procedures. Because of the inherent limitations in allcontrol systems, no evaluation of controls can provide absolute assurance thatall control issues and instances of fraud, if any, within our company have beendetected.  These inherent limitations include the realities that judgmentsin decision-making can be faulty, and that breakdowns can occur because ofsimple error or mistake.  Because of the inherent limitation of acost-effective control system, misstatements due to error or fraud may occurand not be detected.

 

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**PART II -OTHER INFORMATION**

**LegalProceedings**

 No Director, officer, significant employee, orconsultant of Ecotality, Inc. has been convicted in a criminal proceeding,exclusive of traffic violations.

 No Director, officer, significant employee, orconsultant of Ecotality, Inc. has been permanently or temporarily enjoined,barred, suspended, or otherwise limited from involvement in any type ofbusiness, securities or banking activities.

 No Director, officer, significant employee orconsultant of Ecotality, Inc. has been convicted of violating a federal orstate securities or commodities law.

 Ecotality, Inc.is not a party to any pending legal proceedings

** Unregistered Sales of Equity Securities**

 On or about March 1, 2004, we commenced anoffering of shares common stock in accordance with Regulation D, Rule 504 ofthe Securities Act, registered by qualification in the State of Nevada. On May17, 2004, we completed the offering, whereby we sold 830,000 shares of commonstock, par value, at a price of $0.05 per share to 30 investors, of which 29are unaffiliated shareholders of record and one is our sole officer anddirector. The 30 non-affiliated, non-accredited shareholders hold 790,000shares of our common stock. The one affiliated shareholder (Mr. HaroldSciotto) holds 40,000 shares of common stock. The offering was sold for $41,500in cash. All investors were, at the time of purchase, residents of the State ofNevada.

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

1.                                       Atthe time of the offering, we were not subject to the reporting requirements ofsection 13 or section 15(d) of the Exchange Act. Further, we are not now, norwere we at the time of the offering, considered to be an investment company.Finally, since inception, we have pursued a specific business plan, andcontinue to do so

2.                                       Wewere issued a permit to sell securities by the State of Nevada, pursuant to ourapplication for registration by qualification of offering of our common stockin that state. The application for registration by qualification was filedpursuant to the provisions of NRS 90.490, which requires the public filing anddelivery to investors of a substantive disclosure document before sale. In May2004, we completed an offering of shares of common stock pursuant to RegulationD, Rule 504 of the Securities Act of 1933, as amended, and the registration byqualification of said offering in the State of Nevada, whereby we sold 830,000shares of our common stock to a total of 30 shareholders. One of thesepurchasers is our sole officer and director, although at the time of purchase,he was not. The entire offering was conducted exclusively in the State ofNevada, pursuant to the permit issued by the State of Nevada.

3.                                       Theaggregate offering price for the offering closed in May 2004 was $41,500, allof which was collected from the offering.

 

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On June 12, 2006, we issued 5,869,565 shares of ourcommon stock, with a fair market value of $1.40 per share, for an aggregatevalue of $8,217,391, to CalTech pursuant to a License Agreement.  As aresult of the issuance, CalTech now holds approximately 8% of our issued andoutstanding common stock.  At the time of the issuance, CalTech had fairaccess to and all available material information about our company was madeavailable.  The shares bear a restrictive transfer legend.  Theissuance of stock to CalTech was made in accordance with an exemption fromregistration contained in Section 4(2) of the Securities Act of 1933.

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

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

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

In October 2006 we issued an aggregate of 34,499,920shares of our common stock to a group of 277 accredited investors throughBrookstreet Securities Corporation, as Placement Agent, at $0.35 per sharepursuant to the exemption provided by Section 4(2) of the Act and Rule 506 ofRegulation D promulgated thereunder.  The shares were offered solely toaccredited investors, no form of general advertising was used, all investorstook the shares as an investment and not with the intent to distribute and allshares were issued with a restrictive legend thereon.  The total offeringcosts related to this issuance was $9,352,713, of which $1,714,501 was paid incash and $7,638,212 of which was the fair market value of warrants to purchaseshares of our common stock issued to the placement agent.  As additionalconsideration for acting as our Placement Agent, we issued to Brookstreetwarrants to acquire 6,899,982 shares of our common stock at $0.35 per shareuntil October 27, 2011.  Since the close of the offering, the actual usesof the proceeds from the offering used for working capital, or for which atleast five percent of the total proceeds has been used, were as follows:

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

 

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

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

None

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**Exhibitsand Reports on Form 8-K**
| Exhibit Number | ** ** | **Name and/or Identification of Exhibit**                                          |
|----------------|------------|------------------------------------------------------------------------------------|
| ** **     | ** ** | ** **                                                                         | ** ** |
| 2              |       | Plan of Purchase, Sale, Reorganization, arrangement,  liquidation or succession    |
|           |       | a.                                                                                 | Technology Contribution Agreement and Exhibits  thereto (1) |
|           |       | b.                                                                                 | License Agreement with California Institute of  Technology (2) |
|           |       |                                                                               |   |
| 3              |       | Articles of Incorporation & By-Laws                                            |
|           |       | a.                                                                                 | Articles of Incorporation filed on April 21, 1999 (3) |
|           |       | b.                                                                                 | Amendment to Articles of Incorporation filed on  November 27, 2006 |
|           |       | c.                                                                                 | Amendment to Articles of Incorporation filed on  November 27, 2006 |
|           |       | d.                                                                                 | Amendment to Articles of Incorporation filed on  November 27, 2006 (4) |
|           |       | e.                                                                                 | Restated Bylaws (5) |
|           |       | Material Contracts                                                                 |
|           |       | a.                                                                                 | 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) Certification                                             |
|           |       |                                                                               |   |
| 32             |       | Certification under Section 906 of the  Sarbanes-Oxley Act (18 U S C Section 1350) |
|           |       |                                                                               |   |
| 99             |       | Additional Exhibits                                                                |
|           |       | a.                                                                                 | Escrow Agreement (6) |
|           |       | b.                                                                                 | Letter from NASA/Jet Propulsion Laboratories (8) |

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Notes: 

1.                                       Incorporatedby reference herein to the Form 8-K, previously filed with the SEC on February21, 2006. 

2.                                       Incorporatedby reference herein to the Form 8-K, previously filed with the SEC on July 12,2006. 

3.                                       Incorporatedby reference to the Registration Statement on Form 10SB12G, as amended,previously filed with the SEC on March 3, 2005. 

4.                                       Incorporatedby reference herein to the Form 8-K, previously filed with the SEC on December4, 2006. 

5.                                       Incorporatedby reference herein to the Form SB-2, previously filed with the SEC on February12, 2007. 

6.                                       Incorporatedby reference herein to the Form 8-K, previously filed with the SEC on February21, 2007. 

7.                                       Incorporatedby reference herein to the Form 8-K, previously filed with the SEC on January30, 2007. 

8.                                       Incorporatedby reference herein to the Form 8-K, previously filed with the SEC on March 27,2007.

 

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

 

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**SIGNATURES**

 In accordancewith the Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the registrant and in the capacities and on thedates indicated.

**ECOTALITY, INC.**
| Signature             | ** ** | **Title**                     | ** ** | **Date**        |
|-----------------------|------------|-------------------------------|------------|-----------------|
|                  |       |                          |       |            |
| /s/ Jonathan R. Read  |       | Chief Executive  Officer,     |       | August 20, 2007 |
| Jonathan R. Read      |       | President and  Director       |       |            |
|                  |       |                          |       |            |
| /s/ Harold W. Sciotto |       | Secretary,  Treasurer         |       | August 20, 2007 |
| Harold W. Sciotto     |       | and Director                  |       |            |
|                  |       |                          |       |            |
| /s/ Barry S. Baer     |       | Chief Financial  Officer      |       | August 20, 2007 |
| Barry S. Baer         |       | Principal  Accounting Officer |       |            |
|                  |       |                          |       |            |
| /s/ Jerry Y. S. Lin   |       | Director                      |       | August 20, 2007 |
| Jerry Y. S. Lin       |       |                          |       |            |

 

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