Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The statements contained in all parts of this Quarterly Report that are not historical facts are, or may be deemed to be, forward-looking statements. These forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, those relating to the following: our ability to secure necessary financing; expected growth; future operating expenses; future margins; fluctuations in interest rates; ability to continue to grow and implement growth, and regarding future growth, cash needs, operations, business plans and financial results and any other statements that are not historical facts.

When used in this Quarterly Report, the words "anticipate", "estimate", "expect", " may", "plans", "project", "believe", and similar expressions are intended to be among the statements that identify forward-looking statements. Our results may differ significantly from the results discussed in the forward-looking statements. Such statements involve known and unknown risks and uncertainties including, but not limited to, those relating to costs, delays and difficulties related to our dependence on our ability to attract and retain skilled managers and other personnel; the intense competition within our industry; the uncertainty of our ability to manage and continue our growth and implement our business strategy; our vulnerability to general economic conditions; accuracy of accounting and other estimates; our future financial and operating results, cash needs and demand for services; and our ability to maintain and comply with permits and licenses; as well as other risk factors described in this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those projected.

We caution you that actual outcomes and results may differ materially from what is expressed, implied or forecast by our forward-looking statements. The forward-looking statements in this document are made as of the date on which they are made and we do not undertake to update our forward-looking statements.

Overview

We are a leader in advanced electric vehicle ("EV") charging and storage systems with 20 years of experience in designing, manufacturing, testing and commercializing these technologies. Leveraging that experience, we are currently building an EV smart charging network in the U.S. Our cloud-based smart charging network, branded as the Blink Network, is focused on supporting the adoption of EVs across the U.S. Through innovation and strategic partnerships, with companies such as ABB Inc. ("ABB"), we are establishing and monetizing the Blink Network. Initial commercial customers hosting our chargers include Best Buy, Cracker Barrel, Fred Meyer/Kroger, Ikea, Macy's, Sears and WalMart.

We were incorporated in the State of Nevada in 1999 under the name Alchemy Enterprises, Ltd. to market biodegradable products. In November 2006, we changed our name to ECOtality, Inc. to better reflect our clean technology energy strategy. Our primary North American operating segments consist of ECOtality North America, Innergy Power ("Innergy") and ECOtality Stores (d.b.a. Fuel Cell Store). Our International operating segment includes the results of ECOtality Australia Pty, Ltd. We acquired ECOtality Stores, Innergy and ECOtality North America in 2007. In conjunction with our acquisition of Innergy, we also acquired Innergy's wholly owned subsidiary in Mexico, Portable Energy de Mexico S.A. de C.V., that provides manufacturing and assembly services. We also have a wholly owned subsidiary in Australia, ECOtality Australia Pty Ltd., that markets and distributes our Blink and Minit-Charger equipment in Australia. In 2011, we established a new, wholly-owned subsidiary, ECOtality Asia Pacific Limited. This subsidiary, headquartered in Hong Kong, will hold our joint venture interest in Tianjin Eco-Power Technology Co. Ltd. ("Tianjin Eco-Power"). Tianjin Eco-Power is a joint venture in China which is being established between us and Changchun Eco-Power Technology Co. Ltd. to manufacture and distribute ECOtality charging products for a range of EVs, including two and three-wheel vehicles, buses, material handling equipment, and airport ground support; all specifically designed for the Asian marketplace. The establishment of this joint venture is subject to the approval of Chinese government authorities.

Our Innergy division is based in San Diego, California and provides us the ability to further expand our production, manufacturing and assembly capabilities for Innergy's solar products and energy storage devices, as well as products of our other subsidiaries, including ECOtality North America's Blink and Minit-Charger products.

Fuel Cell Store is a wholly owned subsidiary and operates as our online retail division. Fuel Cell Store (www.fuelcellstore.com) is an e-commerce marketplace that offers consumers a wide array of fuel cell products from around the globe. Based in San Diego, California, Fuel Cell Store develops, manufactures, and sells a diverse and comprehensive range of fuel cell products that includes fuel cell stacks, systems, component parts and educational materials. Fuel Cell Store is a market place for fuel cell stack, component, and hydrogen storage manufacturers to unite with consumers and is an attractive source for hydrogen and fuel cell industry activity and direction.

In 2009, ECOtality North America was selected by the Department of Energy ("DOE") for a cost-share grant to undertake the largest deployment of EVs and charging infrastructure in U.S. history, known as the "EV Project." In September 2009, ECOtality North America accepted the original contract of approximately $99.8 million, of which $13.4 million was sub-funded to federally funded research and development centers. In June 2010, ECOtality North America was awarded an additional $15.0 million extension from the DOE, of which $1.2 million was sub-funded to federally funded research and development centers, to expand the market footprint of the EV Project and include the Chevrolet Volt. We believe that leading the world's largest EV infrastructure project gives us distinct competitive advantages that will support our global business development initiatives.

Through the EV Project, we are developing, installing, and managing our networked charging stations across the U.S. in support of the launch of the Nissan LEAF battery electric vehicles and the Chevrolet Volt range extended electric vehicles. The goal of the EV Project is to develop, implement and study techniques for optimizing the deployment of charging infrastructure to support widespread market acceptance of EVs in the U.S. and internationally, as well as identify commercially viable business models to create a sustainable EV charging industry. Through The EV Project, we have deployed our Blink residential and commercial charging stations in the following major metropolitan areas: Phoenix (AZ), Tucson (AZ), Los Angeles (CA), San Diego (CA), San Francisco (CA), Dallas (TX), Fort Worth (TX), Houston (TX), Seattle (WA), Portland (OR), Eugene (OR), Salem (OR), Corvallis (OR), Nashville (TN), Knoxville (TN), Memphis (TN), Chattanooga (TN), Chicago (IL), Philadelphia (PA), Atlanta (GA) and Washington, DC.

In November 2010, ECOtality Australia was awarded part of the Victorian Electric Vehicle Trial from the Victoria Department of Transportation. This trial will deploy our Blink residential, commercial, and DC Fast Chargers in the State of Victoria for testing and data collection. The trial is expected to continue for three years from its inception and will expand the Blink product line outside the borders of the U.S.

In February 2011, ECOtality North America was awarded a $2.2 million contract with the Bay Area Air Quality Management District to expand the EV Project into the San Francisco Bay Area. The Company entered into a definitive contract with respect to this award in April 2011.

In September 2011, ECOtality North America was awarded a $26.4 million contract by the DOE to conduct the DOE's Advanced Vehicle Testing and Evaluation project. This award is for a 5-year term to conduct work as the sole vehicle tester for the DOE's Advanced Vehicle Testing Activity.

Segment Information

We operate our business in four segments, which are described as follows:

ECOtality North America ("ECONA") is a leader in the research, development and testing of advanced transportation and energy systems with a focus on alternative-fuel, hybrid and electric vehicles and infrastructures. ECONA also holds exclusive patent rights to the SuperCharge and Minit-Charger systems - battery fast charge systems that allow for faster charging with less heat generation and longer battery life than conventional chargers.

Innergy, a division of Ecotality, provides unique power solutions including solar and battery pack manufacturing and assembly, and electric charging station assembly, repair and maintenance. Our Mexico production facility supports these low cost services with a well-trained labor force.

Fuel Cell Store is an online marketplace for fuel cell-related products and technologies with online distribution sites in the U.S., Japan, Russia, Italy and Portugal.

International - ECOtality Australia Pty Ltd., is our wholly owned subsidiary in Australia which markets and distributes our Blink and Minit-Charger equipment in Australia. The Company includes Australia Pty Ltd. in its International segment and as other international subsidiaries are established, they will be included in the International segment as well.

Material changes in results of operations by segment for the three and nine months ended September 30, 2012 as compared to 2011 are described in the Results of Operations section below.

Results of Operations

Three months ended September 30, 2012 compared to three months ended September 30, 2011

The following table sets forth our results of operations for the three months ended September 30, 2012 and 2011 (in thousands, except percentages):

                                       Three Months Ended September 30,        $ Increase /      % Increase /
                                           2012                 2011            (Decrease)        (Decrease)
Revenue                             $        14,442       $         9,510     $      4,932               52 %
Cost of goods sold                            8,267                 6,638            1,629               25

Gross profit (loss)                           6,175                 2,872            3,303              115
Operating expenses:
Sales and marketing                             956                   878               78                9
Research and development                        671                   117              554              474
General and administrative                    5,604                 5,118              486                9
Impairment losses                             3,496                    -             3,496               -
Total operating expenses                     10,727                 6,113            4,614               75
Loss from operations                         (4,552 )              (3,241 )         (1,311 )            (40 )%
Interest income (expense), net                  (88 )                (156 )             68
Other income, net                                27                     4               23
Income (loss) before income taxes            (4,613 )              (3,393 )         (1,220 )
Income tax expense                              (24 )                  -               (24 )
Net loss                            $        (4,637 )     $        (3,393 )   $     (1,244 )

Revenue

Revenues primarily consist of cost reimbursements through government grants and cooperative agreements related to clean energy technologies; agreements under which we deliver services such as the development of the infrastructure for deployment of electric vehicles, including gathering and compilation of related data analysis; consulting services; retail sales of electric vehicle supply equipment ("EVSE"); and sales of industrial material handling products.

Revenues increased $4.9 million to $14.4 million during the third quarter of 2012, primarily resulting from increased revenue in our ECONA segment.

ECONA segment revenues increased $5.1 million to $14.1 million during the third quarter of 2012. Revenue recognized under the EV Project increased $4.3 million to $11.1 million, primarily due to: (i) significant increase in the number of operating vehicles and residential and commercial installations under the EV Project, and (ii) DOE contract amendments, which became effective during the third quarter of 2012 and which are described below under the section titled "Critical Accounting Policies and Estimates." Consulting revenues increased $0.6 million to $1.5 million, primarily related to consulting services provided under three new programs associated with the EV Project. Retail sales decreased $0.3 million to $0.1 million due to a $0.4 million decrease in EVSE retail sales resulting from prioritization of EVSE deployment under the EV Project, partially offset by a $0.1 million increase in revenue generated from microclimate studies. Sales of industrial material handling products increased $0.4 million to $1.4 million.

Revenues for all other segments decreased $0.2 million to $0.3 million during the third quarter of 2012, reflecting no significant change from the third quarter of 2011.

We anticipate the majority of our revenue in 2012 will be derived from the DOE Contract based on deliveries of chargers and the reporting of in-kind costs relating to cost share of EV Project participants.

Cost of Goods Sold

Cost of goods sold primarily consists of labor, materials, facilities and equipment related to the manufacturing of chargers and development of the Blink Network.

Cost of goods sold increased $1.6 million to $8.3 million during the third quarter of 2012, primarily due to increased activity and associated costs incurred under the DOE Contract in our ECONA segment.

ECONA segment cost of goods sold increased $1.7 million to $8.1 million during the third quarter of 2012, primarily due to direct costs related to revenue increases and increased depreciation on equipment in service under the DOE Contract. Depreciation expense reflects the effect of a July 2012 DOE Contract amendment which extended the performance period under the contract. This extension resulted in the recognition of depreciation of certain assets in the project over an extended period, thereby reducing equipment depreciation under the project by $2.5 million during the third quarter of 2012. Excluding depreciation, ECONA segment cost of goods sold was 48% and 58% of ECONA segment revenue (net of cumulative catch-up adjustment described above) for the third quarter of 2012 and 2011, respectively. The resulting cost of goods sold reduction per revenue dollar and related favorable gross margin impact is the result of an increased percentage of DOE Contract revenues related to reporting of cost share for in-kind costs. In-kind costs include allowable costs of ownership incurred by the owners of vehicles in the program, which results in reportable cost share and revenue to us under the program for which we incur minimal related costs.

Cost of goods sold for all other segments decreased $0.1 million to $0.2 million during the third quarter of 2012, reflecting no significant change from the third quarter of 2011.

Operating Expenses

Total operating expenses increased $4.6 million to $10.7 million during the third quarter of 2012. The majority of our operating expenses, including corporate administrative and support costs, are related to our ECONA segment. Operating expenses in our ECONA segment increased $4.4 million to $10.0 million during the third quarter of 2012. Operating expenses in our other segments increased $0.2 million to $0.7 million during the third quarter of 2012, reflecting no significant change from the third quarter of 2011.

Sales and Marketing

Sales and marketing expenses were $1.0 million during the third quarter of 2012, reflecting minimal change from the third quarter of 2011. Sales and marketing expenses primarily consist of payroll and related benefits, consulting services, fees associated with attendance and booth rental at trade shows, and related expenses incurred in the support and promotion of our brand and our product and service offerings.

Research and Development

Research and development expenses increased $0.6 million to $0.7 million during the third quarter of 2012. Research and development expenses primarily consist of payroll and related benefits, contract labor, and consulting services in support of development activities related to EV products. The $0.6 million increase between comparable periods primarily relates to payroll and related benefits and consulting services incurred in connection with EV product development and EVSE connectivity enhancement activities.

General and Administrative

General and administrative expenses increased $0.5 million to $5.6 million during the third quarter of 2012. General and administrative expenses primarily consist of payroll and related benefits, facilities and data communication related expenses, legal fees and professional fees.

Payroll and related benefits expenses decreased by $0.6 million, primarily due to improved staff utilization on projects, which leads to a higher portion of wages being charged to cost of goods sold rather than general and administrative.

Severance expense increased by $0.6 million related to the termination of employment of two executives and two other employees.

Professional services increased by $0.1 million; primarily owing to an increase in consulting services related to customer resource management ("CRM") system maintenance and support.

All other general and administrative expenses increased by $0.4 million and by category were individually less than $0.1 million.

Impairment Losses

Goodwill impairment losses recorded during the third quarter of 2012 totaled $3.5 million; no impairment losses were incurred in the third quarter of 2011. See "Goodwill Impairment" following the comparison of the nine month periods ended September 30, 2012 and 2011 below for further details regarding this impairment loss.

Nine months ended September 30, 2012 compared to nine months ended September 30, 2011

The following table sets forth our results of operations for the nine months ended September 30, 2012 and 2011 (in thousands, except percentages):

                                        Nine Months Ended September 30,        $ Increase /     % Increase /
                                          2012                  2011            (Decrease)       (Decrease)
Revenue                             $       41,106       $         19,885     $     21,221              107 %
Cost of goods sold                          26,720                 18,851            7,869               42

Gross profit (loss)                         14,386                  1,034           13,352            1,291
Operating expenses:
Sales and marketing                          3,493                  2,213            1,280               58
Research and development                     1,296                    363              933              257
General and administrative                  15,784                 12,257            3,527               29
Impairment losses                            3,496                     -             3,496               -
Warrant expense                                 -                   1,784           (1,784 )           (100 )
Total operating expenses                    24,069                 16,617            7,452               45
Loss from operations                        (9,683 )              (15,583 )          5,900               38 %
Interest income (expense), net                 (28 )                 (193 )            165
Other income, net                            2,432                     13            2,419
Income (loss) before income taxes           (7,279 )              (15,763 )          8,484
Income tax expense                             (45 )                   -               (45 )
Net loss                            $       (7,324 )     $        (15,763 )   $      8,439

Revenue

Revenues primarily consist of cost reimbursements through government grants and cooperative agreements related to clean energy technologies; agreements under which we deliver services such as the development of the infrastructure for deployment of electric vehicles, including gathering and compilation of related data analysis; consulting services; retail sales of electric vehicle supply equipment ("EVSE"); and sales of industrial material handling products.

Revenues increased $21.2 million to $41.1 million during the first three quarters of 2012, primarily resulting from increased revenue in our ECONA segment.

ECONA segment revenues increased $21.7 million to $39.9 million during the first three quarters of 2012. Revenue recognized under the EV Project increased $16.7 million to $28.8 million, primarily due to: (i) significant increase in the number of operating vehicles and residential and commercial installations under the EV Project, and (ii) DOE contract amendments, which became effective during the third quarter of 2012 and which are described below under the section titled "Critical Accounting Policies and Estimates." In addition, $2.6 million in licensing revenue was recorded during the first quarter of 2012 in connection with a licensing agreement entered into with ABB, Inc. during that quarter; as compared to zero licensing revenue during the first three quarters of 2011. Consulting revenues increased $2.0 million to $4.4 million, primarily related to consulting services provided on programs associated with the EV Project and consulting services provided in support of the CEC Project and new programs associated with the EV Project. Sales of industrial material handling products increased $0.2 million to $3.1 million. Retail sales of electric vehicle supply equipment and revenue generated from microclimate studies increased $0.2 million to $1.0 million.

Revenues for all other segments decreased $0.5 million to $1.2 million during the first three quarters of 2012, reflecting no significant change from the first three quarters of 2011.

Cost of Goods Sold

Cost of goods sold primarily consists of labor, materials, facilities and equipment related to the manufacturing of chargers and development of the Blink Network.

Cost of goods sold increased $7.9 million to $26.7 million during the first three quarters of 2012, primarily due to increased activity and associated costs incurred under the DOE Contract in our ECONA segment.

ECONA segment cost of goods sold increased $8.1 million to $26.3 million during the first three quarters of 2012 due to (i) $7.9 increase in direct costs related to revenue increases and increased depreciation on equipment in service under the DOE Contract, (ii) $0.2 million increase related to increased volume of electric vehicle supply equipment sales and related freight charges and warranty accruals, (iii) $0.3 million decrease in material handling products expenses, and (iv) $0.3 million increase in consulting and other. Depreciation expense reflects the effect of a July 2012 DOE Contract amendment which extended the performance period of the contract. This extension resulted in the recognition of depreciation of certain assets in the project over an extended period, thereby reducing equipment depreciation under the project by $2.5 million during the third quarter of 2012. Excluding depreciation, ECONA segment cost of goods sold was 49% and 102% of ECONA segment revenue for the first three quarters of 2012 and 2011, respectively. The resulting cost of goods sold reduction per revenue dollar and related favorable gross margin impact is the result of an increased percentage of DOE Contract revenues related to reporting of cost share for in-kind costs. In-kind costs include allowable costs of ownership incurred by the owners of vehicles in the program, which results in reportable cost share and revenue to us under the program for which we incur minimal related costs. In addition, the $2.6 million in license revenue recorded during the first quarter of 2012 incurred no direct costs, thus further increasing gross margin.

Cost of goods sold for all other segments decreased $0.2 million to $0.4 million during the first three quarters of 2012, reflecting no significant change from the first three quarters of 2011.

Operating Expenses

Total operating expenses increased $7.5 million to $24.1 million during the first three quarters of 2012. The majority of our operating expenses, including corporate administrative and support costs, are related to our ECONA segment. Operating expenses in our ECONA segment increased $7.3 million to $22.3 million during the first three quarters of 2012. Operating expenses in our other segments increased $0.2 million to $1.8 million for the first three quarters of 2012, reflecting no significant change from the first three quarters of 2011.

Sales and Marketing

Sales and marketing expenses increased $1.3 million to $3.5 million during the first three quarters of 2012. Sales and marketing expenses primarily consist of payroll and related benefits, consulting services, fees associated with attendance and booth rental at trade shows, and related expenses incurred in the support and promotion of our brand and our product and service offerings.

The $1.3 million increase between comparable periods is primarily owing to increased marketing efforts related to increased volumes under the EV Project, in addition to consulting and other professional services related to website design and maintenance and conceptual design initiatives related to our next generation of fast chargers. In addition, we have expanded up our sales and field operations organization to focus on the sale, installation and servicing of EVSE and to promote and secure membership in our Blink Network after the EV Project's completion.

Research and Development

Research and development expenses increased $0.9 million to $1.3 million during the first three quarters of 2012. Research and development expenses primarily consist of payroll and related benefits, contract labor, and consulting services in support of development activities related to EV products.

The $0.9 million increase between comparable periods primarily relates to payroll and related benefits incurred in connection with development projects related to our next generation of fast chargers, industrial chargers, and EVSE connectivity enhancement activities.

General and Administrative

General and administrative expenses increased $3.5 million to $15.8 million during the first three quarters of 2012. General and administrative expenses primarily consist of payroll and related benefits, facilities and data communication related expenses, legal fees and professional fees.

Payroll and related benefits expenses increased by $0.7 million due to increased headcount; partially offset by improved staff utilization on projects, which leads to a higher portion of wages charged to cost of goods sold rather than general and administrative.

Severance expense increased by $0.6 million related to the termination of employment of two executives and two other employees.

Legal fees increased by $0.3 million, primarily due to (i) timing impact (litigation costs are expensed when incurred; reimbursements are recorded when received) of reimbursement during the first three quarters of 2011 through our . . .