As filed with the Securities and Exchange Commission on August 5, 2004

                                           Registration Statement No. 333-117321


--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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                               AMENDMENT NO. 1 to
                                    FORM S-1
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

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                               ENOVA SYSTEMS, INC.
             (Exact name of Registrant as specified in its charter)

           California                                         3711
           --------------------------------------------------------
(State or Other Jurisdiction of                     (Primary Standard Industrial
Incorporation or Organization)                       Classification Code Number)

                                   95-3056150
                                (I.R.S. Employer
                             Identification Number)
               --------------------------------------------------
                           19850 South Magellan Drive
                           Torrance, California 90502
                                 (310) 527-2800
               (Address, Including Zip Code, and Telephone Number
        Including Area Code, of Registrant's Principal Executive Offices)
               --------------------------------------------------
                                  Carl D. Perry
                             Chief Executive Officer
                               Enova Systems, Inc.
                           19850 South Magellan Drive
                           Torrance, California 90502
                                 (310) 527-2800
            (Name, Address, Including Zip Code, and Telephone Number
                   Including Area Code, of Agent for Service)
               --------------------------------------------------
                                   Copies to:
                             Donald C. Reinke, Esq.
                                 Reed Smith LLP
                        1999 Harrison Street, Suite 2200
                            Oakland, California 94612
                                 (510) 763-2000
                             Deborah L. Gunny, Esq.
                                 Reed Smith LLP
                       1901 Avenue of the Stars, Suite 700
                              Los Angeles, CA 90067
                                 (310) 734-5200

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Approximate  date of  commencement  of proposed  sale to the public:  As soon as
practicable after the effective date of this Registration Statement.

If any of the  securities  being  registered on this form are to be offered on a
delayed or continuous  basis  pursuant  under Rule 415 of the  Securities Act of
1933, check the following box. [X]

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                         CALCULATION OF REGISTRATION FEE


 Title of Each Class                           Proposed Maximum       Proposed Maximum
 of Securities To Be        Amount to be      Offering Price Per     Aggregate Offering          Amount of
      Registered           Registered (1)          Share(2)                 Price            Registration Fee
-----------------------  -------------------  --------------------   --------------------   ------------------
                                                                                  
   Common Stock, no
   par value                 16,250,001               $0.15               $2,437,500          $309.15

------------------


(1)  Includes an  indeterminate  number of additional  shares of common stock as
     may from time to time  become  issuable  by reason of stock  splits,  stock
     dividends  and other  similar  transactions,  which  shares are  registered
     hereunder pursuant to Rule 416 under the Securities Act.

(2)  The price of $0.15 per  share,  which was the  average of the bid and asked
     prices for the common stock on June 22,  2004,  is set forth solely for the
     purpose of calculating the  registration fee in accordance with Rule 457(c)
     of the Securities Act of 1933, as amended.



--------------------------------------------------------------------------------

                                      -1-

The Registrant hereby amends this  Registration  Statement on such date or dates
as may be necessary to delay its effective date until the Registrant  shall file
a further amendment which specifically  states that this Registration  Statement
shall  thereafter  become  effective  in  accordance  with  Section  8(a) of the
Securities  Act of  1933 or  until  this  Registration  Statement  shall  become
effective on such date as the Commission,  acting pursuant to said Section 8(a),
may determine.


                                      -2-



     As filed with the Securities and Exchange Commission on August 5, 2004

                                   Prospectus

                                16,250,001 Shares
                                  Common Stock

This is a public  offering of up to  16,250,001  shares of common stock of Enova
Systems, Inc. and an indeterminate number of shares that may become available by
reason of stock splits, stock dividends and other similar  transactions.  All of
these shares are being offered by the selling  shareholders in this  prospectus.
We will not receive  any of the  proceeds  from the sale of shares.  The selling
shareholders may sell the shares offered by this prospectus from time to time in
the  national   over-the-counter  market  at  their  prevailing  prices,  or  in
negotiated transactions.

Our common stock is traded on the National  Association  of Securities  Dealers,
Inc.  Electronic  Bulletin Board ("OTC Bulletin Board") under the symbol "ENVA".
On June 22, 2004,  the OTC Bulletin  Board reported that the bid price per share
was $0.15 and the asked price per share was $0.16.



              ---------------------------------------------------
                  Investing in the common stock involves risks.
                     See "Risk Factors" beginning on page 6.
              ---------------------------------------------------



Neither  the  Securities  and  Exchange  Commission  nor  any  state  securities
commission has approved or disapproved of these securities or determined if this
prospectus  is truthful or  complete.  Any  representation  to the contrary is a
criminal offense.

The shares of common stock offered by this  prospectus  have not been registered
under the blue sky or  securities  laws of any  jurisdiction,  and any broker or
dealer should assure itself of the existence of an exemption  from  registration
or the effect of such registration in connection with the offer and sale of such
shares.


                  The date of this prospectus is August 5, 2004




                                      -3-

                               PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This
summary is not  complete  and does not  contain all the  information  you should
consider  before  buying  shares in this  offering.  You should  read the entire
prospectus  carefully,  including  the risk factors and  consolidated  financial
statements  and  related  notes  appearing  elsewhere  in this  prospectus.  The
prospectus  contains  forward-looking   statements,   which  involve  risks  and
uncertainties. Our actual results could differ materially from those anticipated
in these  forward-looking  statements as a result of various factors,  including
those  described  under "Risk  Factors" and  elsewhere in this  prospectus.  See
"Cautionary Note on Forward-Looking Statements."

Our Company

We develop and produce advanced software, firmware and hardware for applications
in  the  growing  alternative  power  industry.   Our  focus  is  digital  power
conversion,  power  management,  and system  integration,  for two broad  market
applications - vehicle power generation and stationary power generation.

Our  products  and  systems are the  enabling  technologies  for power  systems.
Without them,  power cannot be converted into the  appropriate  form required by
the  vehicle or device;  and  without  them,  power is not  properly  managed to
protect the battery, vehicle or device, and user.

Specifically,   we  develop,  design  and  produce  drive  systems  and  related
components  for electric,  hybrid-electric,  fuel cell and  microturbine-powered
vehicles.  We also  develop,  design  and  produce  power  management  and power
conversion components for stationary power generation - both on-site distributed
power  and  on-site   telecommunications   back-up  power  applications.   These
stationary  applications  also  employ fuel cells,  microturbines  and  advanced
batteries for power storage and generation. Additionally, we perform significant
research and development to augment and support others' and our internal related
product development efforts.

We were  incorporated in California on July 30, 1976 under the name Clover Solar
Corporation,  Inc. which was changed to Solar Electric Engineering, Inc. in June
1979.  In January  1994 our name was  changed to U.S.  Electricar,  Inc. In July
2000,  we  changed  our name to Enova  Systems,  Inc.  The  Company's  principal
executive office is located at 19850 South Magellan Drive,  Torrance  California
90502 and our telephone number is (310) 527-2800

The Offering


Common stock offered by
the selling shareholders:                     16,250,001 shares

Securities to be outstanding
after this offering (1):                      401,853,232 shares of common stock

                                              2,790,000   shares   of  Series  A
                                              Convertible     Preferred    Stock
                                              (convertible  into an aggregate of
                                              2,790,000  shares of Common Stock)
                                              ("Series A Stock")

                                              1,217,196   shares   of  Series  B
                                              Convertible     Preferred    Stock
                                              (convertible  into an aggregate of
                                              2,434,392  shares of Common Stock)
                                              ("Series B Stock")

Voting Rights:
Common Stock:               401,895,856 votes
Series A Stock:             2,74790,000 votes
Series B Stock:             2,434,392   votes

Use of proceeds from this offering:           We  will  not  receive  any of the
                                              proceeds from the shares of common
                                              stock   sold   by   the    selling
                                              shareholders.     See     "Selling
                                              Shareholder".

OTC Bulletin Board symbol:                    "ENVA"

-----------------
(1)  Securities  outstanding on June 22, 2004 shares reserved for issuance under
     our stock option plans, (B) approximately 10,000,000 shares of Common Stock
     issuable under a contractual commitment with Hyundai Heavy Industries,  and
     (C) 2,500,000 shares issuable upon exercise of outstanding warrants.

                                      -4-


Summary Financial Data


                                             Three                                                             Five
                                             Months                                                           Months     Fiscal Year
                                             Ended         As of and for the year ended December 31           Ended         Ended
                                            Mar. 31,         (in thousands, except per share data),          Dec. 31,      July 31,
                                              2004         2003         2002         2001         2000         1999          1999
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
                                            unaudited
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
                                                                                                     
NET SALES                                   $   1,108    $   4,310    $   4,455    $   3,780    $   2,883    $     629    $   2,774
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------

COST OF SALES                                     658        3,304        3,784        2,783        2,013          377        1,460
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------

GROSS MARGIN                                      450        1,006          671          997          870          252        1,314
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
OTHER COSTS AND EXPENSES
    Research and Development                      128          799        1,152          879          626          262          499
    Selling, general and administrative           394        2,919        2,837        2,894        1,999          796        1,141
    Interest and financing fees                    64          234          199          113          174          244          724
    Other expenses (income)                       (19)         200         --             (7)           6         --            (41)
    Gain on Warranty
    Reevaluations                                --           --           --           --           --           --           (474)

    Equity in losses                               44           40         --           --           --           --           --
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
Legal Settlements
                                                 --           --             81          900           75          125         --
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
Total other costs and expenses                    611        4,192        4,269        4,779        2,880        1,427        1,849
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
LOSS FROM CONTINUING OPERATIONS                  (161)      (3,186)      (3,598)      (3,782)      (2,010)      (1,175)        (535)
GAIN ON DEBT RESTRUCTURING                        --           --           --           354        1,551          214          140
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
NET LOSS
                                                 (161)      (3,186)      (3,598)      (3,428)        (459)        (961)        (395)
PER COMMON SHARE:
    Loss from continuing operations             (0.01)       (0.01)       (0.01)       (0.01)       (0.01)       (0.01)       (0.01)
    Gain on debt restructuring                     --           --           --           --           0.01         --           --
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
Net loss per common
share                                           (0.01)       (0.01)       (0.01)       (0.01)        --          (0.01)       (0.01)
                                            =========    =========    =========    =========    =========    =========    =========
WEIGHTED AVERAGE NUMBER COMMON

SHARES OUTSTANDING                            374,644      334,840      326,390      275,189      235,199      251,994      152,077
                                            =========    =========    =========    =========    =========    =========    =========
Total Assets                                    4,864        4,870        6,224        4,340        3,094        2,697        3,940
                                            =========    =========    =========    =========    =========    =========    =========
Long-term debt                                  3,355        3,347        3,332        3,332        3,332        3,332        3,332
                                            =========    =========    =========    =========    =========    =========    =========
Shareholder's equity (deficit)                   (821)        (864)         287         (232)      (1,648)      (5,015)      (7,316)
                                            =========    =========    =========    =========    =========    =========    =========


                                      -5-

                                  RISK FACTORS

You should  carefully  consider the  following  risks and all other  information
contained in this prospectus  before you decide to buy our common stock. We have
included a discussion of each  material  risk that we have  identified as of the
date of this  prospectus.  If any of the following  risks  actually  occur,  our
business, financial condition or operating results could suffer. If this occurs,
the trading price of our common stock could  decline,  and you could lose all or
part of the money you paid to buy our common stock.


Risks Relating to this Offering

Economic conditions beyond our control may keep the price of our stock low.

Numerous  factors,  many of which are beyond our  control,  may cause the market
price of our common stock to fluctuate significantly. These factors include, but
are not limited to, the following:

     o    continued losses;

     o    announcements concerning us, our competitors or our customers;

     o    market  conditions  in the  electric  vehicle and the hybrid  electric
          vehicle industry and the general state of the securities markets.

General  economic,   political  and  market  conditions,   including  recession,
international  instability or military tension or conflicts may adversely affect
the market  price of our common  stock.  If we are named as a  defendant  in any
securities-related  litigation  as a result of  decreases in the market price of
our shares, we may incur substantial  costs, and our management's  attention may
be diverted,  for lengthy  periods of time. The market price of our common stock
may not increase  above the offering price or maintain its price at or above any
particular level.


Securities  traded on the OTC Bulletin Board are generally  thinly traded and an
active market may never develop.

Our common  stock  trades on the OTC Bulletin  Board.  Shares  traded in the OTC
market are generally  bought and sold in small amounts,  highly volatile and not
usually  followed by analysts.  You may therefore have  difficulty  selling your
shares in the resale market.


"Penny stock" regulations may impose restrictions on marketability of our stock.

The Securities and Exchange  Commission has adopted  regulations which generally
define "penny stock" to be any equity  security that is not traded on a national
securities exchange or NASDAQ and that has a market price of less than $5.00 per
share or an  exercise  price of less than  $5.00 per  share,  subject to certain
exceptions. Since our securities that are currently included on the OTC Bulletin
Board are trading at less than $5.00 per share at any time, our stock may become
subject  to  rules  that  impose  additional  sales  practice   requirements  on
broker-dealers  who sell such  securities  to  persons  other  than  established
customers and  accredited  investors.  Accredited  investors  generally  include
investors  that have  assets in excess of  $1,000,000  or an  individual  annual
income  exceeding  $200,000,  or together with the  investor's  spouse,  a joint
income of $300,000.  For transactions  covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of the securities
and must receive the purchaser's written consent to the transaction prior to the
purchase.  Additionally,  for any  transaction  involving  penny  stock,  unless
exempt,  the rules  require,  among other  things,  the  delivery,  prior to the
transaction,  of a risk disclosure  document mandated by the SEC relating to the
penny stock market and the risks associated  therewith.  The broker-dealer  must
also  disclose  the  commission  payable  to  both  the  broker-dealer  and  the
registered  representative,  current  quotations for the securities  and, if the
broker-dealer  is the sole market  maker,  the broker  dealer must disclose this
fact and the broker-dealer's  presumed control over the market. Finally, monthly
statements must be sent disclosing  recent price information for the penny stock
held in the  account and  information  on the  limited  market in penny  stocks.
Consequently,  the penny stock rules may restrict the ability of  broker-dealers
to sell our  securities  and may affect your  ability to sell your shares in the
secondary market.


We do not expect to pay dividends in the foreseeable future.

We have not declared or paid any cash dividends in the past and do not expect to
pay cash  dividends in the  foreseeable  future.  We intend to retain our future
earnings, if any, to finance the development of our business. We are required to
pay  dividends  on our Series A Stock and our  Series B Stock  before we may pay


                                      -6-


dividends on our common stock. At March 31, 2004, we had an accumulated  deficit
of  approximately  $97,238,000  and,  until this deficit is  eliminated,  we are
prohibited  from paying  dividends  on any class of our stock  except out of net
profits  unless we can meet  certain  assets and other tests under  Sections 500
through 511 of the  California  Corporations  Code.  Our board of directors will
determine  any  future  dividend  policy  in light  of the all of the  foregoing
information  and then existing  conditions,  including  our earnings,  financial
condition and financial  requirements.  You may never receive dividend  payments
from us.


The market price of our Common  Stock could be adversely  affected by sales of a
substantial number of shares of our Common Stock

As of the date of this  prospectus,  we have outstanding  401,853,232  shares of
common stock,  2,790,136 shares of Series A Stock,  each of which is convertible
into one share of common stock, and 1,217,196 shares of Series B Stock,  each of
which is  convertible  into two shares of common  stock.  Sales of a substantial
number  of  shares of our  common  stock in the  public  market  following  this
offering  could cause our stock  price to  decline.  All the shares sold in this
offering will be freely tradable.  Currently  154,180,500 shares of common stock
are freely  tradable  and an  additional  5,224,500  shares of Series A Stock or
Series B Stock  would be  freely  tradable  upon  conversion  to  common  stock.
Approximately an additional  247,672,700 shares of common stock are eligible for
sale in the  public  market  subject  to  volume  restrictions  of Rule  144 and
15,594,288 shares of common stock issuable upon exercise of outstanding  options
will become freely tradable upon issuance. In addition, the sale of these shares
could cause our stock  price to decline and impair our ability to raise  capital
through the sale of additional stock. See "Shares Eligible for Future Sale."


Our principal  shareholders,  executive  officers and directors have substantial
control  over most  matters  submitted  to a vote of the  shareholders,  thereby
limiting your power to influence corporate action.

Our   officers,   directors   and  principal   shareholders   beneficially   own
approximately  60% of our common stock  (including in that percentage  shares of
our Series A Stock and Series B Stock). As a result, these shareholders have the
power  to  control  the  outcome  of  most  matters   submitted  to  a  vote  of
shareholders,  including the election of members of our board,  and the approval
of significant  corporate  transactions.  The shareholders  purchasing shares in
this offering will have little influence on these matters. This concentration of
ownership  may also have the  effect of making it more  difficult  to obtain the
needed approval for some types of transactions that these  shareholders  oppose,
and may result in delaying,  deferring or  preventing a change in control of our
company.

The effects of anti-takeover  provisions in our charter and bylaws could inhibit
the acquisition of us by others.

Several  provisions of our articles of incorporation and bylaws could discourage
potential  acquisition  proposals and could delay or prevent a change in control
of our company.


Risks Related to Our Business

Our industry is new and is subject to technological changes.

The mobile and stationary  power markets  including  electric vehicle and hybrid
electric vehicles continue to be subject to rapid technological  change. Most of
the major  domestic  and  foreign  automobile  manufacturers:  (1) have  already
produced  electric  and  hybrid  vehicles,  and/or (2) have  developed  improved
electric storage, propulsion and control systems, and/or (3) are now entering or
have  entered  into  production,  while  continuing  to  improve  technology  or
incorporate  newer technology.  Various  companies are also developing  improved
electric storage,  propulsion and control systems.  In addition,  the stationary
power market is still in its infancy.  A number of established  energy companies
are  developing  new  technologies.  Cost-effective  methods to reduce price per
kilowatt have yet to be established  and the stationary  power market is not yet
viable.

Our current products are designed for use with, and are dependent upon, existing
technology.  As  technologies  change,  and  subject  to our  limited  available
resources,  we plan to upgrade or adapt our  products  in order to  continue  to
provide products with the latest technology. We cannot assure you, however, that
we will be able to avoid  technological  obsolescence,  that the  market for our
products will not  ultimately be dominated by  technologies  other than ours, or
that we will be able to adapt to changes in or create "leading-edge" technology.
In  addition,  further  proprietary  technological  development  by others could
prohibit us from using our own technology.

                                      -7-

There are substantial risks involved in the development of unproven products.

In order to remain  competitive,  we must  adapt  existing  products  as well as
develop new  products and  technologies.  In fiscal years 2003 and 2002 we spent
$799,000 and $1,152,000 respectively on research and development of new products
and technology.  Despite our best efforts, a new product or technology may prove
to be unworkable, not cost effective, or otherwise unmarketable. We can give you
no  assurance  that  any  new  product  or  technology  we may  develop  will be
successful or that an adequate  market for such product or technology  will ever
develop.


We  may  be  unable  to  effectively  compete  with  other  companies  who  have
significantly greater resources than we have.

Many of our competitors, in the automotive, electronic and other industries, are
larger,  more established  companies that have substantially  greater financial,
personnel,  and other  resources  than we do.  These  companies  may be actively
engaged in the research  and  development  of power  management  and  conversion
systems. Because of their greater resources, some of our competitors may be able
to adapt more  quickly to new or emerging  technologies  and changes in customer
requirements, or to devote greater resources to the promotion and sales of their
products than we can. We believe that  developing and  maintaining a competitive
advantage   will   require   continued   investment   in  product   development,
manufacturing  capability and sales and marketing.  We cannot assure you that we
will have  sufficient  resources to make the necessary  investments to do so. In
addition,   current  and  potential  competitors  may  establish   collaborative
relationships  among  themselves or with third parties,  including third parties
with whom we have relationships.  Accordingly,  new competitors or alliances may
emerge and rapidly acquire significant market share.


We have continued losses.

We have experienced recurring losses from operations and have been profitable in
only one year,  fiscal 1986. For the three months ended March 31, 2004, we had a
net loss of  $161,000  on sales of  $1,108,000  and an  accumulated  deficit  of
$97,238,000. For the twelve months ended December 31, 2003, we had a net loss of
$3,186,000  on sales of  $4,310,000.  For the twelve  months ended  December 31,
2002,  we had a net loss of $3,598,000  on sales of  $4,455,000.  For the twelve
months  ended  December 31, 2001,  we had a net loss of  $3,428,000  on sales of
$3,780,000.  There can be no assurance that we will achieve profitability in the
near or foreseeable future or that any net operating losses will be available to
us in the future as an offset against future profits for income tax purposes.


If we do not raise  significant  additional  capital,  we will be unable to fund
continuing  operations  and will  likely  be  forced  to  reduce  or even  cease
operations.

We need  substantial  working  capital to fund our  operations.  As of March 31,
2004,  we had cash,  cash  equivalents  and  short-term  investment  balances of
approximately  $587,000.  Our internal  projections show that cash on hand as of
March 31, 2004, together with anticipated  revenues should be sufficient to fund
operations at the current level for at least the next 12 months December 2004.

We are  currently  negotiating  to correct a payment  default  with respect to a
$120,000 unsecured note to Jeann Schulz. Unless we are successful in our efforts
to raise  additional  funds,  our cash  resources  will be used to  satisfy  our
existing liabilities,  such as that of Ms. Schulz, and we will be unable to fund
our current operations, which may result in the reduction of operations. Even if
we are  successful  in these  efforts  to raise  funds,  such  funds  may not be
adequate to fund our operations on a long-term basis.


Future equity financings may dilute your holdings in our company.

We need to obtain  additional  funding  through public or private equity or debt
financing,   collaborative  agreements  or  from  other  sources.  If  we  raise
additional  funds  by  issuing  equity  securities,   current  shareholders  may
experience  significant  dilution of their holdings.  We may be unable to obtain
adequate  financing on acceptable  terms,  if at all. If we are unable to obtain
adequate  funds,  we may be required to reduce  significantly  our  spending and
delay, scale back or eliminate research,  development or marketing programs,  or
cease operations altogether.


Potential intellectual property, shareholder or other litigation could adversely
impact our business.

Because  of the  nature of our  business,  we may face  litigation  relating  to
intellectual property matters,  labor matters,  product liability or shareholder
disputes.  Any litigation could be costly, divert management attention or result
in increased  costs of doing business.  Although we intend to vigorously  defend
any future lawsuits,  we cannot assure you that we would  ultimately  prevail in


                                      -8-


these  efforts.  An adverse  judgment could  negatively  impact the price of our
common stock and our ability to obtain future financing on favorable terms or at
all.


We may be exposed to product  liability  or tort  claims if our  products  fail,
which could adversely impact our results of operations.

A malfunction or the  inadequate  design of our products could result in product
liability or other tort claims.  Accidents  involving our products could lead to
personal  injury or physical  damage.  Any liability for damages  resulting from
malfunctions  could be substantial  and could  materially  adversely  affect our
business and results of operations.  In addition,  a  well-publicized  actual or
perceived  problem  could  adversely  affect  the  market's  perception  of  our
products. This could result in a decline in demand for our products, which would
materially adversely affect our financial condition and results of operations.


We are highly subject to general economic conditions.

The financial  success of our company is sensitive to adverse changes in general
economic conditions,  such as inflation,  unemployment,  and consumer demand for
our products.  These changes could cause the cost of supplies,  labor, and other
expenses to rise faster than we can raise prices.  Such changing conditions also
could significantly  reduce demand in the marketplace for our products.  We have
no control over any of these changes.


We are an early growth stage company.

Although  our  company  was  originally  founded  in 1976,  many  aspects of our
business  are still in the early  growth  stage  development,  and our  proposed
operations  are  subject to all of the risks  inherent  in a start-up or growing
business enterprise,  including the likelihood of continued operating losses. We
are relatively new in focusing our efforts on electric  systems,  hybrid systems
and fuel cell managed systems.  The likelihood of our success must be considered
in light of the  problems,  expenses,  difficulties,  complications,  and delays
frequently  encountered in connection  with the growth of an existing  business,
the  development of new products and channels of  distribution,  and current and
future  development in several key technical  fields, as well as the competitive
and regulatory environment in which we operate.


We operate in a highly regulated business  environment and changes in regulation
could impose costs on us or make our products less economical.

Our  products  are  subject  to  federal,  state,  local  and  foreign  laws and
regulations,  governing,  among other things, emissions as well as laws covering
occupational   health  and  safety.   Regulatory  agencies  may  impose  special
requirements   for   implementation   and  operation  of  our  products  or  may
significantly  impact or even eliminate some of our target markets. We may incur
material  costs or  liabilities in complying  with  government  regulations.  In
addition,  potentially  significant  expenditures  could be required in order to
comply with evolving  environmental and health and safety laws,  regulations and
requirements  that may be  adopted  or  imposed  in the  future.


We are  highly  dependent  on a few key  personnel  and will need to retain  and
attract such personnel in a labor competitive market.

Our success is largely  dependent on the  performance  of our key management and
technical  personnel,  including Carl Perry, our Chief Executive Officer,  Larry
Lombard,  our Acting Chief Financial Officer,  Edward Moore, our Chief Operating
Officer and Don Kang, our Vice President of Engineering, the loss of one or more
of  whom  could  adversely  affect  our  business.  Additionally,  in  order  to
successfully  implement  our  anticipated  growth,  we will be  dependent on our
ability to hire additional qualified  personnel.  There can be no assurance that
we will be able to retain or hire other necessary personnel.  We do not maintain
key man life insurance on any of our key  personnel.  We believe that our future
success will depend in part upon our continued ability to attract,  retain,  and
motivate  additional  highly skilled  personnel in an  increasingly  competitive
market.


There are minimal barriers to entry in our market.

We presently  license or own a limited  amount of  proprietary  technology  and,
therefore, have created little or no barrier to entry for competitors other than
the time and  significant  expense  required  to assemble  and  develop  similar
production and design  capabilities.  Our  competitors  may enter into exclusive
arrangements  with our current or  potential  suppliers,  thereby  giving them a
competitive edge which we may not be able to overcome,  and which may exclude us
from similar relationships.

                                      -9-

Our industry is affected by political and legislative changes.

In recent years there has been significant  public pressure to enact legislation
in the United  States and abroad to reduce or  eliminate  automobile  pollution.
Although  states such as  California  have enacted such  legislation,  we cannot
assure you that there will not be further  legislation  enacted changing current
requirements or that current  legislation or state mandates will not be repealed
or amended,  or that a different  form of zero emission or low emission  vehicle
will not be  invented,  developed  and  produced,  and  achieve  greater  market
acceptance than electric or hybrid electric vehicles. Extensions,  modifications
or reductions of current federal and state  legislation,  mandates and potential
tax  incentives   could  also  adversely   affect  our  business   prospects  if
implemented.

                  CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

Some of the matters  discussed  under the captions  "Prospectus  Summary," "Risk
Factors,"  "Management's  Discussion  and  Analysis of Financial  Condition  and
Results of  Operations,"  "Business"  and elsewhere in this  prospectus  include
forward-looking  statements.  We have based these forward-looking  statements on
our current expectations and projections about future events.

In some cases, you can identify  forward-looking  statements by terminology such
as  "may,"  "will,"  "should,"  "could,"  "predicts,"  "potential,"  "continue,"
"expects,"  "anticipates," "future," "intends," "plans," "believes," "estimates"
and similar  expressions.  These  statements  are based on our current  beliefs,
expectations  and  assumptions  and  are  subject  to  a  number  of  risks  and
uncertainties. Actual results, levels of activity, performance, achievements and
events  may  vary  significantly  from  those  implied  by  the  forward-looking
statements.  A description of risks that could cause our results to vary appears
under the  caption  "Risk  Factors"  and  elsewhere  in this  prospectus.  These
forward-looking  statements  are  made as of the date of this  prospectus,  and,
except as required under  applicable  securities law, we assume no obligation to
update them or to explain the reasons why actual results may differ.



                                      -10-

                                 USE OF PROCEEDS

All  proceeds  from any sale of shares of common  stock  offered by the  selling
shareholders will be received by the selling shareholders and not by us.

                           PRICE RANGE OF COMMON STOCK

Our common stock is traded in the National  Association  of Securities  Dealers,
Inc.  Electronic  Bulletin Board ("OTC Bulletin Board") under the symbol "ENVA".
The following table sets forth, for the fiscal quarters indicated,  the high and
low bid prices for our common stock as reported on the OTC Bulletin Board by the
National Quote Bureau. The following  over-the-counter market quotations reflect
inter-dealer prices, without retail mark-up, markdown or commission, and may not
necessarily represent actual transactions.

                                           Common Stock
                                      ------------------------
                                        High            Low        Average Daily
                                        Price          Price           Volume
                                      ---------      ---------     -------------
Calendar 2002
First Quarter.....................      $0.23          $0.14          265,875
Second Quarter....................      $0.19          $0.10          111,600
Third Quarter.....................      $0.15          $0.09           38,861
Fourth Quarter....................      $0.13          $0.07          146,977

Calendar 2003
First Quarter.....................      $0.09          $0.06          172,237
Second Quarter....................      $0.09          $0.06          119,057
Third Quarter.....................      $0.10          $0.05          465,683
Fourth Quarter....................      $0.14          $0.07          463,240

Calendar 2004
First Quarter.....................      $0.18          $0.12        1,513,231
Second Quarter (through June 22)..      $0.19          $0.14          495,024

As of June 22, 2004, we had approximately 9,750 holders of our Common Stock, 110
holders of our Series A Preferred Stock and 34 holders of our Series B Preferred
Stock.


                                      -11-


                                 DIVIDEND POLICY

We have never  declared  or paid any cash  dividends  on our capital  stock.  We
retain any future earnings to fund our business.  Additionally,  we are required
to pay  dividends on our Series A Stock and our Series B Stock before we may pay
dividends  on our common  stock.  Therefore,  we do not  anticipate  paying cash
dividends on our common stock in the foreseeable  future.  At March 31, 2004, we
had an accumulated deficit of approximately  $97,238,000.  Until this deficit is
eliminated,  we are prohibited  from paying  dividends on any class of our stock
except out of net  profits  unless we can meet  certain  assets and other  tests
under Sections 500 through 511 of the California Corporations Code. Our board of
directors will determine any future  dividend  policy in light of the all of the
foregoing  information  and then  existing  conditions,  including our earnings,
financial condition and financial requirements.

                                 CAPITALIZATION

The  following  table  summarizes  our balance  sheet data as of March 31, 2004,
December 31, 2003 and December 31, 2002:



SHAREHOLDERS' DEFICIT (in thousands):                                 As of
                                                                   03/31/2004      As of          As of
                                                                   unaudited    12/31/2003     12/31/2002
                                                               ----------------------------  -------------
                                                                                        
Series A convertible preferred stock - No par value;
     30,000,000 shares authorized; 2,800,000;
     2,820,000 and 2,824,000 shares issued and
     outstanding at 03/31/04,
     12/31/03 and 12/31/02, respectively                              1,812          1,837         1,842

Series B convertible preferred stock - No par value;
     5,000,000 shares authorized; 1,217,196 shares
     issued and outstanding at 03/31/04, 12/31/03
     and 12/31/02, respectively                                       2,434          2,434         2,434

Stock notes receivable                                               (1,203)        (1,203)       (1,203)

Common Stock - No par value; 500,000,000 shares
     authorized; 380,144,000, 378,341,000 and
     345,194,000 shares issued and outstanding at
     03/31/04, 12/31/03 and 12/31/02,
     respectively                                                    86,167         86,054        84,026

Common stock subscribed                                                 176             60           130

Additional paid-in capital                                            7,031          7,031         6,949

Accumulated deficit                                                 (97,238)       (97,077)      (93,891)
                                                               ----------------------------  -------------

Total Shareholders' Equity (Deficit)                                   (821)          (864)          287
                                                               ============================  =============


This information  should be read together with our Financial  Statements and the
related Notes and "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations" appearing elsewhere in this prospectus.


                                      -12-


                             SELECTED FINANCIAL DATA

The following  selected  financial data tables set forth selected financial data
for the three months ended March 31, 2004 and the years ended December 31, 2003,
2002,  2001 and 2000,  the five month  period  ended  December  31, 1999 and the
fiscal year ended July 31, 1999. The five-month period is related to a change in
the fiscal year end which was  effective  December 31, 1999. . The  statement of
income data and balance sheet data for the three months ended March 31, 2004 are
unaudited. The statement of income data and balance sheet data for and as of the
end of the years ended  December 31, 2003,  2002,  2001 and 2000, the five month
period ended December 31, 1999 and the year ended July 31, 1999 are derived from
our audited Financial  Statements.  The following selected financial data should
be read in  conjunction  with,  and are  qualified  in their  entirety  by,  our
financial statements,  including the notes thereto and "Management's  Discussion
and Analysis of Financial  Condition and Results of Operations"  included in the
following pages of this prospectus.



                                              Three                                                             Five
                                              Months                                                           Months       Fiscal
                                              Ended         As of and for the year ended December 31           Ended      Year Ended
                                             Mar. 31,         (in thousands, except per share data),          Dec. 31,     July 31,
                                              2004          2003         2002        2001          2000         1999         1999
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
                                            unaudited
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
                                                                                                     
NET SALES                                   $   1,108    $   4,310    $   4,455    $   3,780    $   2,883    $     629    $   2,774

COST OF SALES                                     658        3,304        3,784        2,783        2,013          377        1,460
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------

GROSS MARGIN                                      450        1,006          671          997          870          252        1,314
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
OTHER COSTS AND EXPENSES

    Research and Development                      128          799        1,152          879          626          262          499
    Selling, general and  administrative          394        2,919        2,837        2,894        1,999          796        1,141
    Interest and financing fees                    64          234          199          113          174          244          724

    Other expenses (income)                       (19)         200         --             (7)           6         --            (41)
    Gain on Warranty
    Reevaluations                                --           --           --           --           --           --           (474)

    Equity in losses                               44           40         --           --           --           --           --
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
Legal Settlements                               --           --             81          900           75          125         --
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
Total other costs and expenses                    611        4,192        4,269        4,779        2,880        1,427        1,849
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
LOSS FROM CONTINUING OPERATIONS                  (161)      (3,186)      (3,598)      (3,782)      (2,010)      (1,175)        (535)

GAIN ON DEBT RESTRUCTURING                       --           --           --            354        1,551          214          140
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
NET LOSS
                                                 (161)      (3,186)      (3,598)      (3,428)        (459)        (961)        (395)
PER COMMON SHARE:
    Loss from continuing operations             (0.01)       (0.01)       (0.01)       (0.01)       (0.01)       (0.01)       (0.01)
    Gain on debt restructuring                   --           --           --           --           0.01         --           --
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
Net loss per common share                      (0.01)       (0.01)       (0.01)       (0.01)        --          (0.01)       (0.01)
                                            =========    =========    =========    =========    =========    =========    =========
EIGHTED AVERAGE  NUMBER OF COMMON
SHARES OUTSTANDING                            374,644      334,840      326,390      275,189      235,199      251,994      152,077
                                            =========    =========    =========    =========    =========    =========    =========
Total Assets                                    4,864        4,870        6,224        4,340        3,094        2,697        3,940
                                            =========    =========    =========    =========    =========    =========    =========
Long-term debt                                  3,355        3,347        3,332        3,332        3,332        3,332        3,332
                                            =========    =========    =========    =========    =========    =========    =========
Shareholder's equity (deficit)                   (821)        (864)         287         (232)      (1,648)      (5,015)      (7,316)
                                            =========    =========    =========    =========    =========    =========    =========


                                      -13-



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read this Management's Discussion and Analysis of Financial Condition
and Results of Operations in conjunction with our 2003 Financial  Statements and
Notes  thereto.  The  matters  addressed  in this  Management's  Discussion  and
Analysis of Financial Condition and Results of Operations, with the exception of
the  historical   information   presented,   contains  certain   forward-looking
statements  involving risks and  uncertainties.  Our actual results could differ
materially  from those  anticipated  in these  forward-looking  statements  as a
result of certain factors,  including those set forth under the heading "Certain
Factors That May Affect Future Results" and elsewhere in this report.


Cautionary Note on Forward-looking Statements

Some of the matters  discussed  under the caption  "Management's  Discussion and
Analysis of  Financial  Condition  and Results of  Operations,"  "Business"  and
elsewhere in this Prospectus include forward-looking  statements.  We have based
these  forward-looking  statements on our current  expectations  and projections
about future events.

In some cases, you can identify  forward-looking  statements by terminology such
as  "may,"  "will,"  "should,"  "could,"  "predicts,"  "potential,"  "continue,"
"expects,"  "anticipates," "future," "intends," "plans," "believes," "estimates"
and similar  expressions.  These  statements  are based on our current  beliefs,
expectations  and  assumptions  and  are  subject  to  a  number  of  risks  and
uncertainties. Actual results, levels of activity, performance, achievements and
events  may  vary  significantly  from  those  implied  by  the  forward-looking
statements.  These  forward-looking  statements  are made as of the date of this
Prospectus,  and, except as required under applicable  securities law, we assume
no  obligation  to update them or to explain the reasons why actual  results may
differ.


OVERVIEW

Enova  believes it is a leader in the  development  and production of commercial
digital power management  systems.  Power management systems control and monitor
electric power in an automotive or commercial  application such as an automobile
or a  stand-alone  power  generator.  Drive systems are comprised of an electric
motor,  an  electronics  control  unit and a gear unit which  power an  electric
vehicle.  Hybrid  systems,  which are similar to pure  electric  drive  systems,
contain  an  internal  combustion  engine in  addition  to the  electric  motor,
eliminating  external recharging of the battery system. A fuel cell based system
is similar to a hybrid  system,  except that  instead of an internal  combustion
engine,  a fuel cell is  utilized as the power  source.  A fuel cell is a system
which combines hydrogen and oxygen in a chemical process to produce electricity.
Stationary  power  systems  utilize  similar  components to those which are in a
mobile drive system in addition to other elements.  These stationary systems are
effective  as  power-assist  or  back-up   systems,   alternative   power,   for
residential, commercial and industrial applications.

Enova  develops  and  produces  advanced  software,  firmware  and  hardware for
applications  in these  alternative  power  markets.  Our focus is digital power
conversion,  power  management,  and system  integration,  for two broad  market
applications - vehicle power generation and stationary power generation.

Specifically,   we  develop,  design  and  produce  drive  systems  and  related
components  for electric,  hybrid-electric,  fuel cell and  microturbine-powered
vehicles.  We also  develop,  design  and  produce  power  management  and power
conversion components for stationary distributed power generation systems. These
stationary  applications  can employ  fuel  cells,  microturbines,  or  advanced
batteries for power storage and generation.  Additionally,  we perform  research
and  development  to augment  and support  others'  and our own related  product
development efforts.

Our  product  development   strategy  is  to  design  and  introduce  to  market
successively advanced products,  each based on our core technical  competencies.
In each of our product / market  segments,  we provide  products and services to
leverage our core competencies in digital power management, power conversion and
system integration. We believe that the underlying technical requirements shared
among the market  segments  will allow us to more  quickly  transition  from one
emerging market to the next, with the goal of capturing early market share.

The financial  statements present the financial position of Enova Systems,  Inc.
as of March 31, 2004,  December 31, 2003 and 2002 and the results of  operations
and cash flows for the three  months  ended  March 31,  2004 and the years ended
December 31, 2003, 2002 and 2001.

                                      -14-


Critical Accounting Policies

Financial  Reporting  Release  No.  60  requires  all  companies  to  include  a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 1 of the notes to the financial statements includes a
summary  of  the  significant  accounting  policies  and  methods  used  in  the
preparation of our financial statements.  The following is a brief discussion of
the more significant accounting policies and methods that we use.

Our discussion and analysis of our financial  condition and result of operations
are based on our  financial  statements,  which have been prepared in conformity
with accounting  principles  generally accepted in the United States of America.
Our preparation of these financial  statements requires us to make estimates and
assumptions  that affect the  reported  amounts of assets and  liabilities,  the
disclosure of contingent  assets and  liabilities  at the dates of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting  periods.  We based our  estimates  on  historical  experience  and on
various  other   assumptions   that  we  believe  to  be  reasonable  under  the
circumstances.  The most significant estimates and assumptions relate to revenue
recognition and potential  allowances for doubtful accounts.  Actual amounts may
differ from such  estimates  under  different  assumptions  or  conditions.  The
following summarizes our critical accounting policies and significant  estimates
used in preparing our consolidated financial statements:

     o    The first-in, first-out (FIFO) method to value our inventories;

     o    The intrinsic value method,  or APB Opinion No. 25, to account for our
          stock options;

     o    Review of customers' receivable to determine the need for an allowance
          for credit losses based on estimates of customers'  ability to pay. If
          the  financial  condition of our  customers  were to  deteriorate,  an
          allowance may be required.

     o    Revenue  recognition - The Company is required to make judgments based
          on  historical   experience  and  future   expectations,   as  to  the
          reliability of shipments made to its  customers.  These  judgments are
          required to assess the propriety of the  recognition  of revenue based
          on Staff Accounting  Bulletin ("SAB") No. 101, "Revenue  Recognition,"
          and related guidance. The Company makes these assessments based on the
          following  factors:  i)  customer-specific   information,  ii)  return
          policies,   and  iii)   historical   experience  for  issues  not  yet
          identified.

These accounting policies are applied consistently for all years presented.  Our
operating results would be affected if other alternatives were used. Information
about the impact on our  operating  results is included in the  footnotes to our
financial statements.


LIQUIDITY AND CAPITAL RESOURCES

We have  experienced  cash flow  shortages  due to  operating  losses  primarily
attributable to research, development, marketing and other costs associated with
our  strategic  plan as an  international  developer  and  supplier  of electric
propulsion  and  power  management  systems  and  components.  Cash  flows  from
operations have not been sufficient to meet our obligations.  Therefore, we have
had to raise funds through  several  financing  transactions.  At least until we
reach  breakeven  volume in sales and develop  and/or  acquire the capability to
manufacture and sell our products  profitably,  we will need to continue to rely
on cash from external financing  sources.  We are seeking new investment capital
to fund research and development and create new market  opportunities.  In order
to fuel our  growth in the  stationary  power  market,  we will need  additional
capital to further  these  development  programs  and augment  our  intellectual
properties.  We believe that for at least the next 12 months, assuming there are
no  unanticipated  material  adverse  developments  and no material  decrease in
revenues, our cash flows from operations and through credit facilities should be
sufficient to enable us to pay our debts and obligations as they mature. We will
continue  to benefit in fiscal  2004 from  expense  reductions  through  reduced
number of employees and other expenses undertaken in fiscal 2003.  However,  our
current  sources of funds are not sufficient to provide the working  capital for
material  growth,  and we need to obtain  additional debt or equity financing to
support such growth.


Three Months ended March 31, 2004

In the  first  quarter  of 2004,  Enova  entered  into  several  stock  purchase
agreements  to issue  16,250,000  shares of our common  stock  through a private
placement  offering at $0.12 per share for a total cash purchase of  $1,950,000.
The  funds  were  received  and the  shares  were  issued in April  2004.  These
investors represented that they were accredited investors. We relied on Rule 506
of Regulation D and Section 4(2) of the Securities Act of 1933, as amended,  for
the exemption from  registration of the sale of such shares.  Enova continues to
seek  additional  investment  capital to fund its  operations,  development  and


                                      -15-


expansion  plans.  As of June 22,  2004,  there were no other firm  commitments.
Enova also has a commitment  from Hyundai Heavy  Industries  to invest,  in June
2004,  an  additional  $1,500,000  in Enova  under the same terms as the initial
investment,  subject to stock price adjustments, in accordance with the terms of
the Joint Venture Agreement.

Current  liabilities  decreased  by a net of $38,000  from  December 31, 2003 to
March 31, 2004,  due  primarily to  reductions of  outstanding  vendor  payables
primarily due Hyundai  Heavy  Industries in  connection  with  additional  power
management and conversion  component inventory and Hyundai Autonet for materials
associated with the terminated Ballard/Ford Th!nk city program.

Capital  lease  obligations  decreased  by $8,000  during the three months ended
March 31, 2004, from December 31, 2003, also due to scheduled  payments of these
liabilities.

Interest  accruing on notes  payable  increased  by $62,000 for the three months
ended March 31, 2004.

The  operations  of we during  the first  quarter of fiscal  2004 were  financed
primarily  by the funds  received on  engineering  contracts  and sales of drive
system components as well as cash reserves provided by equity financings.  It is
management's  intention to continue to support current  operations through sales
of products and engineering  contracts,  as well as to seek additional financing
through private placements and other means to increase inventory reserves and to
continue internal research and development.


Contractual Obligations

The following  table  outlines  payments due under our  significant  contractual
obligations over the next five years, exclusive of interest:



                                        Payments Due by Period

Contractual Obligations                  Less than 1     1-3          4-5        After 5
At December 31, 2003                         Year       Years        Years        Years
------------------------                 ----------   ----------   ----------   ----------
                              Total
                                                                 
Long Term Debt              $3,478,000   $  131,000   $   15,000   $     --     $3,332,000
Capital Lease Obligations       28,000       20,000        8,000         --           --
Operating Leases               614,000       97,000      489,000       28,000         --
Unconditional Purchase
Obligations                       --           --           --           --           --

Total Contractual Cash
Obligations                 $4,120,000   $  248,000   $  512,000   $   28,000   $3,332,000


The above table  outlines our  obligations  as of December 31, 2003 and does not
reflect the changes in our obligations that occurred after that date.


Year ended December 31, 2003

Throughout 2003, our management  reassessed our current resource allocations and
overhead costs.  Due to the loss of the Advanced  Vehicle Systems (AVS) programs
(refer to "Legal Proceedings" below) and an overall slowdown in heavy-duty drive
system  purchases,  our management  analyzed  current  processes and budgets for
potential  targets  for  cost  reduction.  As a  result  of this  analysis,  our
management  implemented  several cost reduction  programs,  including  personnel
reductions, workweek modifications and other cost restraint endeavors to achieve
these goals.  Personnel levels were reduced to 28 employees at December 31, 2003


                                      -16-


from 45 at December 31, 2002. Because of the workforce reductions and other cost
containment policies, we continue to realize a reduction in monthly cash outlays
of  approximately  $120,000 via these cost reductions  compared with the monthly
average  for  the  first  six  months  of 2003  without  impact  to our  current
operations.

In 2003,  we expanded our sales and  development  efforts to capture  additional
global  market  share  for our  product  line and our  technical  expertise.  We
expanded further into U.S., European and Asian markets with our heavy duty drive
systems and added to our  development  programs with Ford,  Hyundai and the U.S.
Department of  Transportation  with major  customers such as Mack Truck / Volvo,
EDO Corporation,  MTrans of Malaysia,  the U.S. Navy and others.  We continue to
focus on building our product line,  increasing  our market share and developing
the next generation of advanced power management and conversion systems.

Our  operations  during  the year  ended  December  31,  2003 were  financed  by
development  contracts  and  product  sales,  as well as  from  working  capital
reserves.

During the year ended December 31, 2003, our operations required $1,378,000 more
in cash than was  generated.  We continue to increase  research and  development
spending,  as well as increased  sales,  marketing and  administrative  expenses
necessary for expansion to meet customer demand.  Accounts receivable  increased
by $142,000 from $1,256,000,  or approximately  11% from the balance at December
31, 2002 (net of write-offs).  Accounts receivable were $803,000 (which includes
$595,000 of accounts  receivable  of AVS that were  written off) at December 31,
2003 or 36% lower than  comparable  balances at December  31,  2002.  To a large
extent,  the decrease is due to the $595,000  write-off caused by the bankruptcy
of AVS, as noted  below,  and the overall  slowdown in new business in the third
and fourth quarters of 2003. We began several new  development  contracts in the
fourth quarter of 2003, which we anticipate will increase  receivables in future
quarters.  During the twelve  months ended  December  31,  2003,  we charged off
approximately  $595,000  primarily  for sales  made to AVS in 2002 and 2003.  We
continually  monitor our receivables and have had immaterial  charge-offs during
the years, other than AVS, due to this policy.  Inventory  decreased slightly by
$46,000 from $1,652,000 or less than 3% from December 31, 2002 balances.  During
late 2002, we increased our inventory stock to meet  forecasted  customer demand
from AVS and other heavy-duty drive systems customers. In 2003, several of these
customers  experienced  slower demand than  anticipated  which resulted in fewer
purchases  from Enova.  We sold these  systems  throughout  2003 and  anticipate
additional  sales  of  these  systems  in 2004.  Additionally,  included  in our
inventory are raw materials and equipment related to the Ballard/Ford Th!nk city
program, as noted below under Ballard Power Systems,  which have a book value of
approximately  $180,000 based on our negotiated  settlement with Ballard.  These
materials have an original cost value of over  $700,000.  It is our intention to
resell these materials during 2004.

Fixed assets  increased by $112,000 or 7%, before  depreciation and a write-down
of $200,000 for our Hawaii  demonstration  tram, for the year ended December 31,
2003 from the prior year balance of  $1,668,000  primarily due purchases of test
equipment,  production machinery, software and tooling for programs and products
developed during the year. The Hawaii tram was originally  booked as an asset at
a value of $350,000  based on then  applicable  market  conditions for such pure
electric  vehicles.  We determined  that,  after  allowing for  depreciation  of
$100,000,  the tram has a net realizable  value in the range between $50,000 and
$100,000. It is our intent to sell the tram in 2004.

Investments  increased  by $960,000  during 2003,  net of our pro-rata  share of
losses  attributable  to the  investment,  which reflect our forty percent (40%)
interest in the Hyundai-Enova Innovative Technology Center as noted elsewhere in
this  Prospectus.  For the year ended December 31, 2003, the ITC generated a net
loss of  approximately  $100,000,  resulting  in a charge  to  Enova of  $40,000
utilizing the equity method of accounting  for our interest in the ITC. Based on
contractual  obligations  of our Joint  Venture  Agreement  with  Hyundai  Heavy
Industries  Co.,  such  investment is  anticipated  to increase by $1,000,000 in
2004.

Other  assets  decreased  by  $94,000  during  2003 from  $498,000 in 2002 as we
continued  to  amortize  the  asset  relating  to the Ford  Value  Participation
Agreement.  Intellectual  property  assets,  including  patents and  trademarks,
increased  by $11,000 in 2003 from  $78,000 at December 31, 2002 as we continued
to capitalize new intellectual property rights on our technology.



                                      -17-

RESULTS OF OPERATIONS

Three Months Ended March 31, 2004

Net  revenues  for the three months  ending  March 31, 2004 were  $1,108,000  as
compared to $1,339,000  for the  corresponding  period in 2003.  Net  production
sales for the quarter ended March 31, 2004 decreased to $672,000 from $1,016,000
in the same period in 2003.  The decrease in production  revenues is a result of
the overall  slowdown  in  heavy-duty  alternative  fuel drive  system  sales as
manufacturers  assess the various new types of systems on the market.  There has
been a greater  shift to  parallel  hybrid  type  systems,  however,  as yet, no
particular type of system has gained a major foothold. Management's strategy, in
this regard,  is to provide a dual path  approach in offering  both a series and
parallel  hybrid  drive  systems  solution  commencing  in 2004.  To offset this
temporary  decline in production sales, we are aggressively  pursuing  privately
and governmental  funded  development  programs.  This allows we to increase its
revenue base,  form new alliances with major OEMs and  participate in the latest
trends in  alternative  fuel  technologies.  Research and  development  revenues
increased to $436,000 from $323,000 during the same period in 2003. Research and
development  revenues are a result of  engineering  services for the  Mack/Volvo
hybrid drive system, the EDO minesweeper  project and the HEVDP Hickam fuel cell
bus program.

Cost of revenues for the three months ended March 31, 2004 decreased to $658,000
compared  to cost of revenues of  $977,000  for the same  three-month  period in
2003.  The  decrease  in cost of sales is directly  attributable  to lower sales
volumes for the quarter.

Internal research,  development and engineering  expenses decreased in the three
months  ended March 31, 2004 to $128,000 as compared  with  $488,000 in the same
period in 2003. Due to an increase in externally funded development programs and
the decrease in the our workforce,  Enova has allocated less of its own funds to
new product development.  Enova continues to allocate increased resources to the
development  of  its  diesel  generation  motor,  upgraded  proprietary  control
software,  enhanced DC-DC  converters and advanced  digital  inverters and other
power management  firmware.  We are utilizing external funding,  however,  for a
greater percentage of these development costs.

Selling,  general and administrative expenses decreased $132,000 to $353,000 for
the three  months  ended  March 31,  2004 from the  previous  year's  comparable
period.  The  decrease  is  a  direct  result  of  management's  cost  reduction
strategies  which we will  strive to  maintain in 2004 in its efforts to achieve
profitability,  although  management  cannot assure that  profitability  will be
achieved.

Interest  and  financing  fees  remained  relatively  constant at  approximately
$64,000 for the first  quarter of 2004, up slightly from the same period in 2003
due to an increase in the  interest  rate charged per the terms of our long term
note.

We incurred a loss from  continuing  operations of $161,000 in the first quarter
of 2004  compared  to a loss of  $743,000  in the first  quarter of 2003,  which
represents a 78% reduction in loss. As noted above,  this decrease was primarily
due to  cost  reduction  strategies  implemented  by  management  and  workforce
restructurings.  By  increasing  sales  revenues  while  maintaining  these cost
management  strategies,  we  believes  it will be able to reduce its annual loss
from operations as compared with prior years results; however, management cannot
assure that these results will be achieved.


Years Ended December 31, 2003 and 2002

Net sales of $4,310,000  for the twelve months ended December 31, 2003 decreased
$145,000 or 3% from  $4,455,000  during the same period in 2002.  Our sources of
revenue  for  2003  came  primarily  from  product  sales.  Product  sales  as a
percentage of total revenues of 56% in 2003 were  consistent to the 2002 product
sales to total  revenues  percentage  of 59%.  Sales of our Panther  120kW drive
systems  accounted  for a majority of our product sales in 2003. We believe this
trend will  continue  over the next several  years.  However we will continue to
seek out and  contract  for new  development  programs  with  both  our  current
partners such as Ford,  Mack/Volvo,  UTC,  Hyundai and our other U.S., Asian and
European  alliance  partners,  as well as with new alliances  with other vehicle
manufacturers and energy companies.

Cost of sales  consists of  component  and material  costs,  direct labor costs,
integration  costs and overhead related to manufacturing  our products.  Product
development  costs  incurred  in  the  performance  of  engineering  development
contracts for the U.S.  Government and private  companies are charged to cost of
sales  for this  contract  revenue.  During  2003,  we  continued  our  trend of
establishing new customers and  strengthening  current alliances with customers,
such as Tomoe and MTrans in the  heavy-duty  drive  system  market.  Because the
market is relatively nascent,  our customers require additional  integration and

                                      -18-

support services to customize,  integrate and evaluate our products.  We believe
these costs to be initial,  one-time  costs for these  customers and  anticipate
similar costs to be incurred with respect to new customers as we gain additional
market  share.  Cost of sales for the year ended  December  31,  2003  decreased
$438,000,  or 12%, from  $3,784,000 for the year ended  December 31, 2002.  This
decrease is attributable to follow-on orders from existing customers such as EPT
and  MTrans,  which no longer  require  as much  integration  support,  and from
decreased pricing from our contract  manufacturers as our order quantities rise.
As  we  increase  our  sales  volume,  we  believe  the  costs  associated  with
manufacturing  and  integrating  these  products  should  continue to  decrease,
improving our gross margins.

Research and development  expenses consist  primarily of personnel,  facilities,
equipment and supplies for our research and development  activities.  Non-funded
development costs are reported as research and development expense. Research and
development  expense  decreased in 2003 to $799,000 from $1,152,000 for the same
period in 2002,  a  decrease  of  $352,000,  or 31%.  During  2003,  we  reduced
non-essential expenses for internal research and development without sacrificing
that development  necessary to maintain our competitive edge in our markets.  We
supplemented  this reduction by teaming with other  companies in our sector such
as  Mack/Volvo,  Hyundai,  and the  U.S.  Government  to  offset  the  costs  of
development  for new  products  in the  areas of  mobile  and  stationary  power
management  and  conversion.  Programs  included our advanced  power  management
systems  for fuel  cells,  our  diesel  generation  engine/motor  system for our
heavy-duty drive systems, a dual 8kW inverter,  and upgrades and improvements to
our  current  power  conversion  and  management  components.  Additionally,  we
continue to enhance our  technologies  to be more  universally  adaptable to the
requirements of our current and prospective customers. By modifying our software
and  firmware,  we believe  we should be able to  provide a more  comprehensive,
adaptive and effective  solution to a larger base of customers and applications.
We will continue to research and develop new  technologies  and  products,  both
internally and in conjunction with our alliance partners and other manufacturers
as we deem beneficial to our global growth strategy.

Selling,  general and administrative expenses consist primarily of personnel and
related costs of sales and marketing employees, consulting fees and expenses for
travel,  trade shows and promotional  activities and personnel and related costs
for general corporate functions,  including finance,  accounting,  strategic and
business  development,   human  resources  and  legal.   Selling,   general  and
administrative expenses were further reduced in 2003 from 2002 levels continuing
a trend  from prior  years.  Net of the  $595,000  AVS bad debt  write-off,  our
selling,  general and  administrative  expenses  decreased  $515,000 in the year
ended December 31, 2003, to $2,322,000 from $2,837,000 for the similar period in
2002.  This  represents  an 18%  reduction  in these  expenses  as a  result  of
management's  cost  reduction  programs  implemented  throughout  2003 including
workforce cutbacks, elimination of non-essential expenses and exercising tighter
constraint  over  overhead  costs  in  general.  We  are  continually  reviewing
operations to lower overhead costs and increase operational efficiencies

For the year ended  December 31, 2003,  interest and financing fees increased by
$22,000 to  $242,000,  an increase  of 10%.  The  increase  was due solely to an
increase  in 2003 in the  interest  rate on the  note  due the  Credit  Managers
Association of California for $3.2 million per the terms of that note.

Our  $3,186,000  net loss for the year ended  December 31, 2003 is $411,000 less
than the loss incurred in 2002 of $3,598,000,  a decrease of 11%.  Excluding the
bad debt charge of $595,000 for the AVS  bankruptcy  and the  write-down  of the
Hawaii tram of  $200,000,  our loss for the year would be  $1,206,000  less,  or
$2,392,000  for the year  ended  December  31,  2003,  over 34% lower  than that
incurred  in 2002.  This  decrease  is a  significant  milestone  in our goal to
break-even  in the near future.  Management  will  continue to seek  operational
efficiencies and methods to reduce  manufacturing  and overhead costs as well as
increase revenues to achieve this goal of profitability.

Ballard Power Systems

Our  development  and  production  program  with Ballard  Power  Systems for low
voltage 30kW  electric  drive system  components  for use in Ford's Global Th!nk
City was  terminated by Ford and Th!nk Nordic in early 2003.  Under the terms of
the  contract,  Ballard is liable for all costs we incurred  which are  normally
associated  with  production,  including  inventory  and  other  development  or
production   costs.  We  invoiced   Ballard  for   approximately   $952,000  for
work-in-process inventory and other additional material, tooling and engineering
costs for the initial production of the drive system component.  Of this amount,
Ballard remitted $580,400 during the second quarter of 2003. In October 2003, we
reached a settlement with Ballard on all remaining  balances due wherein we will
receive $198,125 in cash and title to all inventory, raw materials,  tooling and
equipment in our possession that is associated  with the program.  We are in the
process of selling such inventory,  raw materials,  tooling and equipment in the
resale  markets.  We believe that the resale market value of such  inventory and


                                      -19-


equipment  will be at least equal to the value of the  remaining  balance of the
receivable, or approximately $173,000.

Hyundai-Enova Innovative Technology Center

In September 2003, we funded, with Hyundai Heavy Industries, Co. Ltd. (HHI), the
Hyundai-Enova Innovative Technology Center (HEITC) to be located at our Torrance
headquarters.  In  connection  with the Joint  Venture  Agreement  entered  into
between HHI and us in March 2003, HHI purchased  $1,500,000 of our common stock,
for an aggregate of 23,076,923  shares  representing  a 6.2% ownership in Enova.
Enova used $1,000,000 of such funds to invest in HEITC for a forty percent (40%)
equity ownership interest.  HHI invested an additional $1,500,000 in HEITC for a
sixty percent (60%) equity  ownership  interest in HEITC. In July 2004, HHI will
invest an additional  $1,500,000 in Enova and $1,500,000 in HEITC under the same
terms  as the  initial  investment,  subject  to  stock  price  adjustments,  in
accordance  with  the  Joint  Venture  Agreement.   The  joint  venture  company
officially  opened in November 2003 to pursue advanced  research and development
in hybrid automotive and stationary applications for fuel cell technologies


Years Ended December 31, 2002 and 2001

Net sales of $4,455,000  for the twelve months ended December 31, 2002 increased
$675,000 or 18% from $3,780,000 during the same period in 2001. Our revenue base
is shifting  to higher  concentration  in product  sales as we expand our market
penetration  in these areas.  Product  sales as a percentage  of total  revenues
increased to 59% in 2002 as compared with 26% of total  revenues in 2001.  Sales
of our Panther 240kW,  120kW and 90kW drive systems  accounted for a majority of
our product sales.

Cost of sales  consists of  component  and material  costs,  direct labor costs,
integration  costs and overhead related to manufacturing  our products.  Product
development  costs  incurred  in  the  performance  of  engineering  development
contracts for the U.S.  Government and private  companies are charged to cost of
sales for this  contract  revenue.  During  2002,  we  established  several  new
customers,  such as AVS,  Tomoe and MMT, in the  heavy-duty  drive system market
which  required  additional  integration  and  support  services  to  customize,
integrate and evaluate our products. During the year ended December 31, 2002, we
charged off approximately  $200,000 in obsolete  inventory and other engineering
costs related to the cancellation of the Ballard/Ford Th!nk program.. Due to the
increase  in  net  sales,   the   aforementioned   costs,  the  Ballard  program
cancellation  and other inventory  adjustments,  cost of sales of $3,784,000 for
the year ended December 31, 2002 reflect an increase of $1,001,000, or 36%, from
$2,783,000 for the year ended December 31, 2001.

Research and development  expenses consist  primarily of personnel,  facilities,
equipment and supplies for our research and development  activities.  Non-funded
development costs are reported as research and development expense. Research and
development  expense  increased in 2002 to $1,152,000 from $879,000 for the same
period in 2001,  an increase of $273,000,  or 31%.  During 2002, we continued to
expend  funds for  research  and  development  for new  technologies  to enhance
existing  products  as well as develop  new  products in the areas of mobile and
stationary  power management and conversion.  Programs  included our 240kW drive
system,  advanced power  management  systems for fuel cells, a Panther 90kW Dual
Motor drive system, a diesel generation  engine/motor  system for our heavy-duty
drive systems,  a 18kW on-board  charger system and upgrades and improvements to
our current power conversion and management components. During 2002, we expended
additional  resources toward these types of programs and therefore  modified our
allocation  of  engineering  costs to reflect this shift.  Selling,  general and
administrative  expenses  consist  primarily of personnel  and related  costs of
sales and marketing  employees,  consulting fees and expenses for travel,  trade
shows and  promotional  activities  and  personnel and related costs for general
corporate  functions,  including  finance,  accounting,  strategic  and business
development,  human  resources and legal.  Selling,  general and  administrative
expense  decreased  in the year  ended  December  31,  2002 to  $2,837,000  from
$2,894,000  for the similar  period in 2001.  During 2002,  legal and accounting
fees of  approximately  $318,000 in conjunction  with two Form S-1  Registration
Statements,  required quarterly,  annual and other periodic SEC filings, as well
as  compliance  with the  Sarbanes-Oxley  Act of 2002 and other  legal  matters,
accounted for the majority of these expenses..

For the year ended  December 31, 2002,  interest and financing fees increased by
$86,000 to $199,000,  an increase of 76%.  The increase was due  primarily to an
increase  in the  rate  on the  Note  due the  Credit  Managers  Association  of
California  for $3.2 million per its terms and additional  lease  financings for
equipment during 2002.

                                      -20-


Our net loss for the year ended December 31, 2002 of $3,598,000 is comparable to
the loss incurred in 2001 of $3,428,000.  Certain  factors,  such as the Ballard
program cancellation,  could not be anticipated and did contribute substantially
to the net loss from operations

In  2001,  we  entered  into  several  supplier  agreements  and  commenced  new
development programs with automotive and transit manufacturers both domestically
and internationally. Additionally, we completed various research and development
programs sponsored by the U.S. Government and private corporations.

Ford Motor Company Programs
---------------------------

In July 2001, we entered into a strategic  relationship  with Ford Motor Company
under which we were selected by Ford's Th!nk brand to develop and  manufacture a
high power, high voltage conversion module for their upcoming fuel cell vehicle.
The high voltage conversion module will convert high voltage power from the fuel
cell into a lower voltage.

Hyundai Motor Company Programs
------------------------------

We continue to develop  hybrid and fuel cell based  systems with  Hyundai  Motor
Company,   the  world's  seventh   largest   automobile   manufacturer.   Having
successfully  completed our hybrid drive system and fuel cell  electric  vehicle
program,  we  are  working  with  Hyundai  on  advanced  hybrid  and  fuel  cell
applications. We delivered four series-hybrid drive systems for use in Hyundai's
county bus at the World Cup Soccer in Seoul, Korea in June 2002.

Hyundai  continues to contract with our company for the  development of advanced
hybrid and fuel cell powered  drive  systems.  In regards to  passenger  vehicle
programs,  we continue in our efforts to develop a commercially  viable parallel
hybrid motor and controller for Hyundai's new hybrid vehicle to be introduced in
2004.  The  prototype  drive system for this program was delivered to Hyundai in
February  2002.  Development  programs  with  Hyundai  generated   approximately
$450,000 in sales in the year ended December 31, 2002.

Light-Duty Drive Systems
------------------------

In addition to the 30kW motor controller,  charger and DC-DC converter which we,
in alliance with Hyundai Autonet,  are  manufacturing  for Ballard Power, we are
also marketing our PantherTM 90kW drive systems. Our 90kW controller,  motor and
gear unit  provide  outstanding  performance  for light  duty  vehicles  such as
midsize automobiles and delivery vehicles.

Heavy-Duty Drive Systems
------------------------

Sales of our  PantherTM  120kW  drive  systems  continue  to  provide  increased
revenues  for our  company.  We  have  entered  into  supplier  agreements  with
manufacturers  in  Europe  and  Japan  as well as  domestically.  Hyundai  Heavy
Industries is also our outsource  manufacturer  for the Panther 120kW as well as
the motor and controller for our Panther 240kW drive systems.

Eco Power  Technology  of Italy  purchased 15  PantherTM  120kW  electric  drive
systems,  which  were  delivered  during  2001,  as well as  three  of our  Fast
Chargers.  Eco Power is one of the largest  integrators  of medium size  transit
buses for the European  shuttle bus market with key customers in Rome and Genoa.
Total sales for the year ended December 31, 2001 from Eco Power were $360,000.

Wrights Environment, a division of Wrights Bus, one of the largest low-floor bus
manufacturers  in  the  United  Kingdom,  has  integrated  our  hybrid  electric
PantherTM  120kW drive  system,  which  utilizes a  microturbine  from  Capstone
Turbine  Corporation  as its power source.  Wrights  purchased  additional  pure
electric  drive systems for their  midsize buses for sale in the United  Kingdom
and the European Continent..

We  entered   the   Japanese   bus  market   with  two  new   customers,   Tomoe
Electro-Mechanical Engineering and Manufacturing, Inc. and Moriah Corporation in
2001.  Both of these companies  entered into supplier  agreements with us and we
delivered our first Panther 120kW system to Tomoe in 2001.

In the high  performance  heavy-duty  drive system area,  we completed the first
prototype of our  PantherTM  240kW drive  system in 2001.  In  conjunction  with
Hyundai  Heavy  Industries  and  Ricardo,  Inc, of  Michigan,  a  developer  and


                                      -21-

manufacturer  of  advanced  transmissions,   we  produced  a  drive  system  for
heavy-duty  applications  including  transit buses,  heavy-duty trucks and other
applications.

Research and Development Programs
---------------------------------

Our development  and integration  contracts with the DOT and the State of Hawaii
continue to create new opportunities for our drive systems.

During 2001, Enova,  Hyundai and the State of Hawaii introduced 15 Hyundai Santa
Fe electric vehicles in Honolulu,  Hawaii for test and evaluation prior to their
entry into the U.S. markets. The contract has two elements,  one for integration
of our BCU II  battery  care unit,  which  allows the  vehicles  to accept  fast
charging,  and a  second  contract  for  maintenance  of the  vehicles  over the
two-year  program.  The  participants  in the  program  include  state and local
offices as well as Hickam Air Force base.

Our  contract  with the DOT to design and test a three-car  tram  utilizing  the
PantherTM  120kW drive system was completed and delivered to the High Technology
Development  Corporation's  facility in Honolulu in 2001. This tram,  capable of
carrying 100 passengers, was delivered to the Honolulu International Airport for
further test and evaluation in 2001.

We completed the  integration  of our drive systems into several State of Hawaii
and DOT vehicles.  We upgraded eight  Chevrolet S-10 trucks owned by the City of
Honolulu to our PantherTM  60kW drive system,  including our BCU-II battery care
unit for fast-charge capability in 2001.

Also, we e converted an Eldorado 30-foot bus utilizing our PantherTM 120kW drive
system for the Hickam Air Force base in 2001.  All of these programs were funded
in conjunction with the Hawaii Electric Vehicle Development Project, the DOT and
the State of Hawaii.

Development  programs  with the  Department of  Transportation  and the State of
Hawaii  accounted for  approximately  $1,180,000 of total  revenues for the year
ended December 31, 2001.

Stationary Power Applications
-----------------------------

Our  stationary  power programs  continue to attract new potential  partners and
customers from both fuel cell manufacturers and petroleum  companies.  It is our
belief that utilizing our power management  systems for stationary  applications
for fuel cells will open new markets  for our  company.  We are also  developing
applications  for  these  products  in the  telecommunications  and  distributed
generation markets.  We can make no assurance that we will successfully  develop
such  applications  or that any such  applications  will find  acceptance in the
marketplace.

We view  stationary  power  applications of our power  management  systems as an
important new area of product  development.  In the stationary  power management
field, we are developing applications for our products in the telecommunications
and  distributed  generation  markets.  We believe our approach of providing the
enabling  technology in power  management  and  conversion  to power  generation
companies  is key to early  access to these  markets.  Our joint  marketing  and
development  efforts  with  Capstone  Turbine  Corporation,  UTC Fuel  Cells and
Hydrogenics  of Canada  have the  potential  to assist us in  penetrating  these
markets.

Investment Funding
------------------

We are seeking new  investment  capital to fund  research  and  development  and
create new market  opportunities.  In order to fuel our growth in the stationary
power  market,  we will need  additional  capital in order to create  additional
intellectual property.

In June 2002, several accredited  investors  purchased  42,100,000 shares common
stock through a private  placement  offering at $0.10 per share for a total cash
purchase of $4,210,000.  These investors  represented  that they were accredited
investors.  We  relied  on Rule  506 of  Regulation  D and  Section  4(2) of the
Securities Act of 1933, as amended,  for the exemption from  registration of the
sale of such shares.

A finder's fee of $205,500 was paid in conjunction  with this private  placement
funding to The Global Value Investment Portfolio Management Pte Ltd, a Singapore
Company  which  is  substantially  owned  by  two  affiliated  parties;  Anthony


                                      -22-


Rawlinson,  Chairman of the Board of our Company and Borl partnership,  owned by
Boris Liberman  Family Trusts,  which is also  affiliated with Jagen Pty Ltd., a
large shareholder in Enova Systems.

In May 2001, Jagen Pty, Ltd exercised warrants to purchase  41,666,666 shares of
common stock at $0.06 per share for a total of $2,500,000. In July 2001, Anthony
Rawlinson,  our chairman,  exercised  warrants to purchase  8,333,334  shares of
common stock at $0.06 per share for a total of $500,000. Jagen and Mr. Rawlinson
represented  that  they  were  accredited  investors.  We  relied on Rule 506 of
Regulation D and Section 4(2) of the Securities Act of 1933, as amended, for the
exemption from registration of the sale of such shares.

In June 2001, we issued warrants to purchase  15,000,000  shares of common stock
of Enova Systems to Ford Motor Company with respect to a participation  program.
We relied on Rule 506 of Regulation D and Section 4(2) of the  Securities Act of
1933,  as  amended,  for the  exemption  from  registration  of the sale of such
shares.

In early 2001,  we retained  Merrill Lynch as our  investment  advisor to pursue
equity financing options and other strategic alternatives.

During the year ended December 31, 2001, our operations required $3,023,000 more
in cash then was  generated.  We continue to increase  research and  development
spending,  as well as increased  sales,  marketing and  administrative  expenses
necessary for expansion to meet customer demand.  Accounts receivable  increased
by $233,000 from $1,004,000, or 23% from the balance at December 31, 2000, as we
continued to expand our customer base and increased sales.  Inventory  increased
by  $520,000  from  $406,000 or 128% from  December  31,  2000  balances.  As we
continue to enter into  additional  production  contracts with companies such as
Eco Power,  Ford, Ballard and others, we will continue to require additional raw
materials and finished goods to meet demand.

Fixed assets increased by $219,000 or 28% before depreciation for the year ended
December 31, 2001 from the prior year  balance of $784,220 as we increased  both
the number of engineers and the  complexity  of our programs.  Increases in test
equipment,  production  machinery  and  both  technical  hardware  and  software
attributed to the increase.

Other assets  increased by $668,000  during 2001 from $68,000 in 2000  primarily
due to the  booking  of an asset in  relation  to the Ford  Value  Participation
Agreement.  We determined,  utilizing the Black Scholes method, the value of the
initial  tranche  of the vested  warrants  under this  program is  $577,000.  As
additional warrants become vested in the coming years, they will be valued under
the same  methodology  and booked as an expense  and into  stockholders  equity.
Additionally, increases were due to intellectual property expenses being applied
as they relate to several new patents on our technology.

As of December 31, 2001, we completed our  restructuring of the remainder of our
antecedent payables, reducing those accounts to zero from $210,000 in 2000.

Long term debt includes a secured promissory note to Credit Managers Association
of  California  in the amount of  $3,332,000,  with interest at 3% for the first
five years  beginning  June 1996, 6% for years six and seven,  and then at prime
plus 3% through maturity;  interest payments are made upon payment of principal,
which is due no later than April 2016;  a sinking  fund escrow is required to be
funded with 10% of future equity  financing,  as defined in the  agreement.  The
note is secured with a UCC-1 filing for all the assets of our Company.

Due to the nature of our  industry  and the amount of research  and  development
which has been necessary to begin to produce  commercially  viable products,  we
have  experienced  the need for cash for  operations  from outside  sources.  We
changed  our  business  strategy  in 1997 to focus on the  development  of drive
systems and  components for electric,  hybrid-electric  and fuel cell mobile and
stationary applications. Invested capital from 1997 to the present has been used
for the development and advancement of these systems which are now being sold as
discussed  elsewhere  in this  prospectus.  We may,  from time to time,  require
additional invested capital to fund development of new or advanced  technologies
for our products.

The future  unavailability or inadequacy of financing to meet future needs could
force us to delay,  modify,  suspend or cease some or all aspects of our planned
operations.

                                      -23-

Recent accounting pronouncements

In January 2003, the Financial  Accounting  Standards Board ("FASB") issued FASB
Interpretation No. 46 ("FIN 46"),  "Consolidation of Variable Interest Entities"
which addresses the  consolidation of business  enterprises  (variable  interest
entities) to which the usual condition (ownership of a majority voting interest)
of  consolidation  does not  apply.  The  interpretation  focuses  on  financial
interests  that  indicate  control.  It  concludes  that in the absence of clear
control through voting interests,  a company's exposure  (variable  interest) to
the economic  risks and potential  rewards from the variable  interest  entity's
assets and activities are the best evidence of control.  Variable  interests are
rights and obligations  that convey economic gains or losses from changes in the
values of the  variable  interest  entity's  assets  and  liabilities.  Variable
interests may arise from financial  instruments,  service  contracts,  nonvoting
ownership interests and other arrangements. If an enterprise holds a majority of
the  variable  interests  of an  entity,  it would  be  considered  the  primary
beneficiary.  The primary  beneficiary  would be required to include the assets,
liabilities and the results of operations of the variable interest entity in its
financial statements.  In December 2003, the FASB issued a revision to FIN 46 to
address certain implementation issues. This statement is not applicable to us.

In April  2003,  FASB  issued  SFAS No.  149,  "Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities."  SFAS  No.  149  amends  and
clarifies  accounting  and  reporting  for  derivative  instruments  and hedging
activities  under SFAS No.  133,  "Accounting  for  Derivative  Instruments  and
Hedging  Activities."  SFAS No. 149 is effective for derivative  instruments and
hedging activities entered into or modified after September 30, 2003, except for
certain forward  purchase and sale  securities.  For these forward  purchase and
sale securities,  SFAS No. 149 is effective for both new and existing securities
after September 30, 2003. This statement is not applicable to us.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures in its statement
of financial position certain financial instruments with characteristics of both
liabilities and equity. In accordance with the standard,  financial  instruments
that  embody  obligations  for the  issuer  are  required  to be  classified  as
liabilities.  SFAS No. 150 will be effective for financial  instruments  entered
into or  modified  after May 31, 2003 and  otherwise  will be  effective  at the
beginning  of the first  interim  period  beginning  after June 15,  2003.  This
statement is not applicable to us.


                                      -24-

                                    BUSINESS

General

Enova Systems,  Inc., a California  Corporation ("Enova" or the "Company"),  was
incorporated  on July 30, 1976. The Company's  fiscal year ends December 31. All
year references refer to fiscal years.

Enova  believes it is a leader in the  development  and production of commercial
digital power management  systems.  Power management systems control and monitor
electric power in an automotive or commercial  application such as an automobile
or a  stand-alone  power  generator.  Drive systems are comprised of an electric
motor,  an  electronics  control  unit and a gear unit which  power an  electric
vehicle.  Hybrid  systems,  which are similar to pure  electric  drive  systems,
contain  an  internal  combustion  engine in  addition  to the  electric  motor,
eliminating  external recharging of the battery system. A fuel cell based system
is similar to a hybrid  system,  except that  instead of an internal  combustion
engine,  a fuel cell is  utilized as the power  source.  A fuel cell is a system
which combines hydrogen and oxygen in a chemical process to produce electricity.
Stationary  power  systems  utilize  similar  components to those which are in a
mobile drive system in addition to other elements.  These stationary systems are
effective  as  power-assist  or  back-up   systems,   alternative   power,   for
residential, commercial and industrial applications.

Enova  develops  and  produces  advanced  software,  firmware  and  hardware for
applications  in these  alternative  power  markets.  Our focus is digital power
conversion,  power  management,  and system  integration,  for two broad  market
applications - vehicle power generation and stationary power generation.

Specifically,   we  develop,  design  and  produce  drive  systems  and  related
components  for electric,  hybrid-electric,  fuel cell and  microturbine-powered
vehicles.  We also  develop,  design  and  produce  power  management  and power
conversion components for stationary distributed power generation systems. These
stationary  applications  can employ  fuel  cells,  microturbines,  or  advanced
batteries for power storage and generation.  Additionally,  we perform  research
and  development  to augment  and support  others'  and our own related  product
development efforts.

Our  product  development   strategy  is  to  design  and  introduce  to  market
successively advanced products,  each based on our core technical  competencies.
In each of our product / market  segments,  we provide  products and services to
leverage our core competencies in digital power management, power conversion and
system integration. We believe that the underlying technical requirements shared
among the market  segments  will allow us to more  quickly  transition  from one
emerging market to the next, with the goal of capturing early market share.

We continue to receive  much  greater  recognition  from both  governmental  and
private industry with regards to U.S. military  applications of our hybrid drive
systems and fuel cell power management technologies. During the first quarter of
2004,  Enova  expanded  its market  reach into China,  capturing  new  customers
Shenzhen  Minghua  Environmental  Protection  Vehicle  Co.,  Ltd.  and  Tsinghua
University  of China and  entering  into  negotiations  with  several  other bus
manufacturers  for sales of Panther  120kW and  advanced  parallel  hybrid drive
systems for  implementation  for the 2008 Beijing  Summer  Olympics.  Management
believes that current negotiations with these Chinese companies as well as other
will result in  development  and  production  contracts  during 2004 and beyond;
however,  at this time;  there are no assurances that such additional  contracts
will be consummated.

During the quarter  ended March 31,  2004,  we  continued to develop and produce
electric and hybrid electric drive systems and components for  Mack/Volvo,  Ford
Motor  Company  (Ford),  Wright  Bus and Eneco of the United  Kingdom,  EcoPower
Technology of Italy, Tomoe of Japan and several other domestic and international
vehicle and bus manufacturers.  Our various electric and  hybrid-electric  drive
systems,  power  management  and power  conversion  systems  are  being  used in
applications  including  Class 8 trucks,  monorail  systems,  transit  buses and
industrial  vehicles.  Enova has furthered  its  development  and  production of
systems for both mobile and  stationary  fuel cell  powered  systems  with major
companies such as Ford, ChevronTexaco and Hydrogenics,  a fuel cell developer in
Canada.

Heavy-Duty  Drive Systems - Buses,  Trucks,  Vans and Other  Industrial  Vehicle
--------------------------------------------------------------------------------
Applications
------------

Enova's  primary market focus  continues to center around the  heavy-duty  drive
systems  sector  for  multiple  vehicle  and  marine  applications.  We  believe
series-hybrid  and parallel hybrid heavy-duty drive system sales offer Enova the
greatest  return on  investment  in both the short and long term.  Although this
market sector has developed more slowly than  anticipated,  management  believes
that this area will see significant growth over the next several years.

                                      -25-


Our PantherTM 120kW and PantherTM 240kW drive systems were developed  completely
in-house and are in production  and operating in global  markets  giving Enova a
potential edge on other  competitors in this sector.  As the Company  penetrates
more market areas,  we are  continually  refining and optimizing both our market
strategy and our product line to maintain our expertise in power  management and
conversion systems for mobile applications.

During the first quarter of 2004,  we sold six PantherTM  120kW drive systems to
two new customers in China,  Shenzhen Minghua  Environmental  Protection Vehicle
Co., Ltd. for diesel-hybrid  buses and Tsinghua  University for fuel cell hybrid
bus development.  China intends to use hybrid-electric buses to shuttle athletes
and guests at the 2008  Beijing  Summer  Olympics  and the 2010  World's Expo in
Shanghai.  Tsinghua is the premier research  university in China, its automotive
engineering department selecting Enova's drive systems for its government funded
hybrid fuel cell bus development.  Additionally,  we are in negotiations to sell
our PantherTM 120kW drive systems and other hybrid-electric  components to other
potential  China-based  bus  manufacturers  in 2004 and  beyond.  At this  time,
however,   there  are  no  assurances  that  such  additional   orders  will  be
forthcoming.

In Japan,  Tomoe  Electro-Mechanical  Engineering  and  Manufacturing,  Inc.  is
developing  many new  applications  for our electric and  hybrid-electric  drive
systems.  During the first quarter of 2004, Tomoe integrated our PantherTM 120kw
drive system into another of its industrial applications, a mine tunnel crawler.
This crawler is an ideal employment of Enova's  technology,  benefiting from its
high torque, low emissions and increased fuel efficiency. In the past few years,
Enova   successfully   integrated  its  PantherTM  drive  systems  into  Tomoe's
heavy-duty  Isuzu dump truck  application,  three  passenger  trams and the mine
tunnel crawler. Three Tomoe passenger trams are currently in service in Okinawa.
Tomoe and Enova continue to develop other commercial and industrial applications
for our drive systems, including potential light rail applications. For the year
ended  December 31, 2003,  we billed  approximately  $146,000 for these  various
systems.  Although we anticipate additional orders for these systems in 2004 and
beyond, there are no assurances that such additional orders will be forthcoming.

Wrights Environment, a division of Wrights Bus, one of the largest low-floor bus
manufacturers  in the United  Kingdom,  increased its volume of hybrid  electric
PantherTM 120kW drive systems,  ordering an additional four drive systems in the
first  quarter  of 2004 as well as one of our  PantherTM  240kW  drive  systems.
Additionally,  Wright Bus has agreed to partially fund development of our diesel
generator  system for diesel  engines  compatible  with  their  driveline.  Such
development is scheduled to commence in the second half of 2004.

EcoPower  Technology of Italy  continues to purchase  components  for its hybrid
electric  drive  systems  during  the  first  quarter  of 2004 for  service  and
maintenance  parts for its  fleet of buses  powered  by  PantherTM  120kw  drive
systems.  To date, we have sold 42 drive  systems to EcoPower for  approximately
$1,262,000,  forming  one of the  largest  fleets of hybrid  buses in the world.
EcoPower is one of the largest  integrators of medium size transit buses for the
European  shuttle bus market,  with key customers in five Italian  cities namely
Turin,  Genoa,  Brescia,  Ferrara and Vicenza.  For the year ended  December 31,
2003, we billed approximately $213,000 for these systems.

MTrans of Malaysia,  that country's leading monorail provider,  has procured and
integrated our high voltage  Panther 120kW systems into its monorail  trains for
service  on new  monorail  systems.  Each  monorail  train  requires  four drive
systems,  which may be modified  to operate as pure  hybrids or  connected  to a
power rail system. Additionally,  MTrans has integrated a standard Panther 120kW
drive  system into a hybrid  10-meter  bus with a Capstone  microturbine  as its
power  source.  For the year ended  December 31, 2003,  we billed  approximately
$184,000  for these  various  systems.  MTrans has  discussed  the  potential of
utilizing Enova drive systems for all of its hybrid and monorail requirements in
2004 and  beyond.  At this  time,  however,  there are no  assurances  that such
additional orders will be forthcoming.

Although  Advanced  Vehicle  Systems no longer  exists,  we gained  immeasurable
experience  and  recognition  from  the  programs  and  vehicles  into  which we
integrated them. Enova delivered drive systems and integrated these into both 30
and  38-foot  transit  buses  as well as a Class  8 urban  delivery  truck.  The
integration  of these systems into this wide variety of vehicles  assisted Enova
in developing  more efficient and cost  beneficial  integration  and maintenance
programs  for use with  other  customers.  Additionally,  the fleet and  transit
operators of these  vehicles are  beginning to provide Enova with a new customer
base for upgrades and service of the installed systems.

Hyundai Heavy  Industries has been selected as a major partner for our outsource
manufacturer for the Panther 120kW controller,  the motor and controller for our
Panther  240kW  drive  systems  and many other Enova  digital  power  management
components.  Enova's  strategy  is to  minimize  capital  outlays  and  maximize
efficiencies by utilizing proven manufacturing partners.

                                      -26-

Light-Duty Drive Systems - Automobiles and Delivery vehicles
------------------------------------------------------------

Our 90kW controller, motor and gear unit is utilized in light duty vehicles such
as midsize  automobiles  and delivery  vehicles.  The topology of this system is
being  adapted to also be utilized  as a parallel  hybrid  motor and  controller
system. We are beginning to receive more interest in our light-duty systems from
both European and Asian customers.

Eneco of the  United  Kingdom,  a  vehicle  integrator  which  utilizes  Enova's
PantherTM  120kW drive  systems in its hybrid bus  applications,  purchased  two
PantherTM 90kW drive systems for integration into delivery vans for $45,000.

The City of Honolulu  contracted  with us to upgrade  several S-10 trucks in its
electric  vehicle  fleet.  During the third  quarter of 2003,  we completed  the
upgrade of 3 trucks to our Panther 90kW drive system and two additional vehicles
were upgraded in March 2004. Through March 2004, this program generated $139,000
in revenues.

Fuel Cell Technologies
----------------------

The High Voltage Energy  Converter  (HVEC)  development  program with Ford Motor
Company for their fuel cell  vehicle was  essentially  completed  in 2003.  This
converter  is a key  component  in Ford's  Focus Fuel Cell  Vehicle  (FCV) which
utilizes the Ballard fuel cell system.  It converts  high voltage power from the
fuel  cell  into a lower  voltage  for use by the drive  system  and  electronic
accessories.  Enova  delivered 36 HVEC  production  systems to Ford in the first
quarter  of  2004  valued  at  approximately  $410,000.  These  systems  will be
integrated  into the Ford Focus FCV which will be part of an evaluation  program
into be implemented  by Ford later in 2004.  There is a potential for additional
production  orders  from  Ford in  2004;  however  at this  time,  there  are no
assurances that such additional orders will be forthcoming.

Furthermore,  we are applying the technology  and  components  derived from this
program to other applications. The HVEC is a critical component of our Fuel Cell
bus programs,  noted below in development programs,  and other fuel cell powered
systems  such as the Hyundai fuel cell  vehicle  noted below under  research and
development programs.

Enova's fuel cell enabling  components  are part of the proposed  fleets of fuel
cell  vehicles  being  utilized by both Ford Motor Company - the Ford Focus FCV-
and Hyundai Motor Company - the Hyundai Tucson fuel cell hybrid electric vehicle
- in  response  to  the  U.S.  Department  of  Energy's  solicitation,  entitled
"Controlled  Hydrogen  Fleet and  Infrastructure  Demonstration  and  Validation
Project." This government-funded  project will last over five years,  commencing
in late 2004,  evaluating the economic and performance  feasibility of fuel cell
vehicles and infrastructure across the U.S.

Our fuel cell  management and control  systems work with a variety of fuel cells
provided by such manufacturers as Hydrogenics of Canada, UTC Fuel Cells, part of
the UTC Power unit of United Technologies  Corporation and Ballard Power Systems
of Canada. Our strategy is to provide power components that are impartial to the
type of power source,  therefore  allowing our systems to work  efficiently with
any alternative source available such as fuel cells, diesel generators, advanced
batteries, microturbines, in-line power and other advanced energy sources.

During 2003,  UTC Fuel Cells  purchased 32 Fuel Cell Care units from us over the
course of the year for  approximately  $67,000.  We intend to work with both UTC
Fuel Cells  directly and as a partner in our alliance  development  programs for
fuel cell applications in the future.

Research and Development Programs
---------------------------------

We are  pursuing  several  government  and  commercially  sponsored  development
programs for both ground and marine heavy-duty drive system applications.

Our program  with Mack Truck,  Inc.,  Powertrain  division - a unit of The Volvo
Group,  Sweden,  is for the development  and manufacture of a motor  controller,
electric motor and battery  management  systems for a new parallel  hybrid drive
system continues on schedule. The new parallel hybrid vehicle program is part of
the Air  Force's  efforts to improve  efficiency,  reduce  fuel and  maintenance
costs,  provide  re-generative  brake energy and reduce emissions.  The refueler
fleet consists of approximately 300 vehicles and, upon successful completion and
evaluation  of the  refueler  vehicle,  there is the  potential  for  additional
upgrades to the parallel  hybrid  drive  system.  As part of the  program,  Mack


                                      -27-


Trucks will also  evaluate the  applicability  of the drive system to commercial
vehicles  commencing  with its  Class 8 Refuse  Hauler.  Mack  Trucks  currently
produces  approximately 3,000 refuse vehicles per annum for major customers such
as Waste Management. We anticipate completing this program in late 2004 followed
by an  evaluation  period of  approximately  three to six  months.  The  program
generated  $75,000 in revenues for us in the first quarter of 2004. This program
has  opened  several  avenues  within  Mack and Volvo for Enova to  develop  and
manufacture  advanced drive system components.  However, at this time, there are
no assurances that such additional orders will be forthcoming.

Our  development  contract with EDO  Corporation  of New York for the design and
fabrication of a high voltage DC-DC power conversion system utilizing a Capstone
microturbine as the primary power source for the U.S. Navy unmanned  minesweeper
project,  also  continues  to  progress  during the first  quarter of 2004.  The
electronics  package will include Enova's advanced power components  including a
new, enhanced 50V, 700A DC-DC power converter,  our Battery Care Unit and Hybrid
Control  Unit  which  will  power the  minesweeper's  electromagnetic  detection
system.  Our power  management  and  conversion  system  will be used to provide
on-board  power  to other  accessories  on the  platform.  We  believe  that the
aggregate value of the program will be approximately $420,000, of which $188,000
was billed in the first  quarter of 2004.  Although  this  program  also has the
potential for additional system sales following the demonstration  phase,  there
are no assurances that such additional orders will be forthcoming.

Our  program  with the U.S.  Air Force and the  State of Hawaii to  integrate  a
Panther 120kW hybrid drive system into a second  30-foot bus for the Hickman Air
Force base was amended to develop this propulsion system as a hydrogen fuel cell
hybrid  vehicle  teaming with  Hydrogenics of Canada.  In  integrating  this new
system for Enova, our engineers  developed several new power management systems,
including our dual 8kW inverter,  380V DC/DC  converter and our Mobile Fuel Cell
Generator that utilizes our HVEC from our Ford development program.  This latest
fuel cell  vehicle  application  utilized  a  Hydrogenics  20kW fuel cell  power
generation  module  underscoring our technologies  ability to optimize fuel cell
performance  across a range of fuel cell products.  The program was completed in
the fourth  quarter of 2003 and the bus has met all  performance  requirements..
For the year ended December 31, 2003, we billed approximately  $550,000 for this
program.

The all-electric  Hyundai Santa Fe SUV demonstration  project in Honolulu Hawaii
has been extended for another two years for three of the vehicles. Fast-charging
capabilities  and  performance  will be the  primary  focus  of  this  continued
evaluation.  This is a  continuation  of the State of Hawaii and  Hyundai  Motor
Company's program for pure electric vehicle performance.

Enova continues its development for Hyundai Motor Company of the fuel cell power
management  and  conversion  components  for  Hyundai's  latest fuel cell hybrid
electric  vehicle,  the  Tucson,  which was  unveiled at the Geneva Auto Show in
March 2004. Enova is developing the next generation hybrid-electric drive-train,
motor and  control  unit based on its prior  development  work on both light and
heavy-duty power-trains for both electric and hybrid-electric vehicle platforms.
Enova is working in conjunction with UTC Fuel Cells,  part of the UTC Power unit
of United  Technologies  Corporation,  to develop the power electronics for this
vehicle.  This program will continue through the second quarter of 2004. For the
year ended December 31, 2003, we billed approximately $271,000 for this program.
This program will continue  through the second  quarter of 2004 and is estimated
to generate approximately $400,000 in revenues for us. Although we believe there
is potential  for further  production  of these drive system  components in late
2004, there can be no assurances at this time that such orders will be realized.

Stationary Power Applications
-----------------------------

It is our belief that  utilizing  our power  management  systems for  stationary
applications for fuel cells will open new markets for our Company.

Our process  controller for ChevronTexaco  Technology  Ventures (CTTV) for their
fuel reformer for a stationary  fuel cell  application  is currently in test and
evaluation as it is integrated into CTTV's overall systems.  The first prototype
of the controller board for this system performed to customer requirements.  The
process  controller  is now in final  integration  and test phases at CTTV which
will last through the first half of 2004.  For the year ended December 31, 2003,
Enova has billed CTTV $492,000 for this program.

We believe the  stationary  power market will play a key role in our future.  We
continue to pursue alliances with leading manufacturers in this area. There are,
however, no assurances that this market will develop as anticipated or that such
alliances will occur.

                                      -28-

During the year ended December 31, 2003, we completed development on several new
power management and drive systems such as our High Voltage version of our 120kW
drive  system,  Dual 8kW  inverter,  380V  DC/DC  converter,  Mobile  Fuel  Cell
Generator, a multi-functional processor, as well as upgrades to our Battery Care
Management  system,  Fuel Cell  Management  system  and our High  Voltage  Power
Converter.

For the year ended December 31, 2003, the following customers accounted for more
than ten percent (10%) of the Company's total revenues:


  Customer                                                    Percent
 ------------                                               ------------

 Advanced Vehicle Systems                                      18.5%

 Ballard Power Systems                                         16.9%

 Hawaii Electric Vehicle Development Project                   13.4%

 ChevronTexaco                                                 11.2%


Environmental Initiatives and Legislation

Because vehicles powered by internal  combustion engines cause pollution,  there
has been significant  public pressure in Europe and Asia, and enacted or pending
legislation in the United States at the federal level and in certain states,  to
promote  or  mandate  the use of  vehicles  with no  tailpipe  emissions  ("zero
emission vehicles") or reduced tailpipe emissions ("low emission vehicles").  We
believe  legislation  requiring  or promoting  zero or low emission  vehicles is
necessary  to create a  significant  market for  hybrid-electric  vehicles.  The
California Air Resources  Board (CARB) is  continually  modifying its limits for
low emission  vehicles.  Recently,  CARB proposed  additional  amendments to the
regulations.  Furthermore,  several  car  manufacturers  have  challenged  these
mandates in court and have obtained  injunctions to delay these mandates.  There
can be no  assurance  that further  legislation  will be enacted or that current
legislation  or  state  mandates  will not be  repealed  or  amended,  or that a
different  form of zero  emission or low emission  vehicle will not be invented,
developed and produced,  and achieve  greater  market  acceptance  than electric
vehicles.  Extensions,  modifications or reductions of current federal and state
legislation,  mandates and potential tax incentives  could adversely  affect the
Company's business prospects if implemented.

Our  products  are  subject  to  federal,  state,  local  and  foreign  laws and
regulations,  governing,  among other things, emissions as well as laws relating
to  occupational  health and  safety.  Regulatory  agencies  may impose  special
requirements   for   implementation   and  operation  of  our  products  or  may
significantly  impact or even eliminate some of our target markets. We may incur
material  costs or  liabilities in complying  with  government  regulations.  In
addition,  potentially  significant  expenditures  could be required in order to
comply with evolving  environmental and health and safety laws,  regulations and
requirements that may be adopted or imposed in the future.


Strategic Alliances, Partnering and Technology Developments

Our continuing  strategy is to adapt ourselves to the ever-changing  environment
of  alternative  power  markets  for both  stationary  and mobile  applications.
Originally  focusing  on pure  electric  drive  systems,  we  believe we are now
positioned as a global  supplier of drive systems for electric,  hybrid and fuel
cell applications.  We are now entering  stationary power markets with its power
management  systems and intends to develop  other systems to monitor and control
the  complex  fuel  cell  and  ancillary  device  systems  being  developed  for
distributed generation and mobile applications.

We  continue  to  seek  and  establish  alliances  with  major  players  in  the
automotive,  stationary  power  and  fuel  cell  fields.  For  instance,  we are
partnering with the Hyundai Group of Korea in the development of advanced hybrid
and hydrogen fuel cell drive-train technology and related systems.

Our recent joint venture alliance with Hyundai Heavy Industries (HHI) is a prime
example of our  partnering  strategy  to  maximize  the  utilization  of Enova's
knowledge and expertise in power  management  and control.  Teaming with HHI may
lead to other  additive  technologies  and  products  which  Enova can market to
current and prospective customers. The joint venture corporation,  Hyundai-Enova
Innovative  Technology Center (ITC),  commenced operations in the second quarter
of 2003. The advanced technology center focuses on leading-edge  technologies in
power  management and power conversion for industrial,  commercial,  residential
and vehicle  applications.  The ITC's first  development  program  focuses on an


                                      -29-

advanced  parallel  hybrid  drive  system for  Hyundai  Motor  Company  which is
currently in the initial evaluation phases. Another major project for the ITC is
the   commercialization   of  our  diesel  genset.  Other  projects  slated  for
development for the ITC include commercial  inverters and other power management
systems which build on Enova's and HHI's  technology  base. We intend to utilize
the resources  provided through the ITC to optimize our current product line for
greater  performance  and production  cost  efficiencies,  while we continue new
research and  development  for the next  generation of digital power  management
systems for mobile and stationary applications.

Our alliances with other major OEMs in the automotive,  transit,  commercial and
energy  sectors  continue to expand.  During 2003, we formed new alliances  with
Mack/Volvo,  EDO,  MTrans of Malaysia,  CARTA  (Chattanooga  Area Rapid  Transit
Agency),  Eneco,  Hydrogenics  of Canada  and other  commercial  and  industrial
intermediaries  and OEMS to find new markets and  applications  for our products
and  technologies.  We  continue  our  strategy  as a  "systems  integrator"  by
establishing relationships to utilize other independently developed technologies
such as  those  provided  by HHI,  UTC  Fuel  Cells,  Hydrogenics  and  national
universities.  We have  implemented our plans to outsource  manufacturing of our
components to companies such as HHI, Ricardo, and other Asian manufacturers.  We
believe  that one of our  competitive  advantages  is our  ability to  identify,
attract and  integrate the latest  technology  available to produce state of the
art products at competitive prices.

Our products are "production-engineered,"  meaning they are designed so they can
be   commercially   produced  in  all  formats  and  files  are  designed   with
manufacturability  in mind from the start. For the automotive  market, we design
our products to QS 9000 manufacturing and quality standards. We believe that our
redundancy  of  systems  and  rigorous   quality   standards  result  in  higher
performance and reduced risk. For every  component and piece of hardware,  there
are  detailed  performance  specifications.  Each piece is tested and  evaluated
against  these  specifications,  which  enhances the value of the systems to OEM
customers.

We  perform  low-volume   production   in-house  and  assembly  and  out-sources
manufacturing  for mass production.  Outsourcing  enables us to keep our capital
investment to a minimum,  reducing  expenditures for hardware,  installation and
training,  to  avoid  the  problems  of  manufacturing  equipment  obsolescence.
Outsourcing  also enables Enova to search out and work with a number of the best
QS 9000-certified  manufacturers worldwide. We believe our strategy ensures that
our OEM customers have confidence in our products and receive quality products.


Products

Our focus is digital power management, power conversion, and system integration.
Our  proprietary  software,  firmware and hardware  manage and control the power
that drives a vehicle or device.  They  convert  the power into the  appropriate
forms required by the vehicle or device, whether DC to AC, AC to DC or DC to DC,
and they manage the flow of this energy to protect the  battery,  the vehicle or
device,  and the driver or operator.  Enova's  systems work "from drive train to
drive wheel" for both vehicle and stationary applications.

The latest state-of-the-art technologies, such as hybrid vehicles, fuel cell and
micro turbine based systems,  and stationary power generation,  all require some
type of power management and conversion mechanism. Enova, utilizing our enabling
technologies,  supplies these essential  components.  We believe our drive train
systems will work with any kind of fuel/power source, from electric to hybrid to
fuel cell to turbine.  They are essential components for any vehicle,  system or
device that uses power.

We are  moving to  expand  our  product  base into new  markets  outside  of the
traditional  electric and hybrid-electric  automotive fields. Key areas which we
have begun to penetrate include energy  management in distributed  generation in
the utility  industry,  and  stand-by/backup  power generation in the commercial
electronics  industry.  Both of these  markets can be served  with our  existing
energy management and power control products. We have entered into agreements or
begun discussions with various  alternative power generation  manufacturers such
as  Capstone  Turbine,  UTC Fuel Cells and  Hydrogenics  as well as  others.  We
believe  our  enabling  technologies  will prove  beneficial  to these  types of
companies   in  their   strategies   to  bring   these  new  power   systems  to
commercialization.

We have embraced fuel cell  technology  and have begun to develop  various power
management  and  control  systems to enable  fuel cell  manufacturers  and their
ancillary industries to achieve greater  efficiencies from their systems.  These
systems are also designed to provide added reliability and safety by monitoring,
adjusting and reporting on operation of the unit.

                                      -30-


PantherTM Electric and Hybrid-Electric Drive Systems

Our Panther electric drive system provides all the  functionality one would find
under the hood of an internal  combustion  engine powered  vehicle.  The Panther
system consists of an enhanced  electric motor and the electronic  controls that
regulate the flow of electricity  to and from the batteries at various  voltages
and power to propel the vehicle.  In addition to the motor and  controller,  the
system includes a gear reduction/differential unit. The system is designed to be
installed in a "drop in," fully  integrated  turnkey  fashion,  or on a modular,
"as-needed" basis for OEMs.

Our family of light-duty drive systems  includes 30kW,  60kW, 90kW  all-electric
drives,  90kW fuel cell powered  series-hybrid  drive and  combinations of these
systems based on customer requirements.  Our family of heavy-duty electric drive
systems  includes a 120kW  all-electric  drive, a 120kW turbine or diesel genset
powered series-hybrid drive, and a new 240kW turbine powered series-hybrid drive
system  with our 120kW and  240kW  diesel  genset  powered  series-hybrid  drive
systems anticipated to be introduced in the third quarter of 2004.

Electric Drive Motors

The  electric  drive unit is  essentially  an  electric  motor  with  additional
features and functionality. The motor is liquid-cooled,  environmentally sealed,
designed to handle  automotive  shock and vibration,  and includes parking pawl,
which  stops  the  vehicle  when  the  driver  parks  the car.  It also  permits
regenerative  braking to provide power recovery,  in which the mechanical energy
of momentum  is  converted  into  electrical  energy as the motor  slows  during
braking or  deceleration.  The optional gear  reduction  unit takes the electric
motor's  high rpm and gears it down to the lower rpm  required by the  vehicle's
conventional  drive shaft.  As the  revolutions  per minute  (rpm) go down,  the
torque of the electric motor increases.

The Panther drive systems exclusively utilize induction AC motors for their high
performance,  power  density,  robustness  and low cost.  The AC drive system is
scaleable and can be customized  for  different  applications.  Due to the large
operating  range that these  propulsion  systems  offer,  all  parameters can be
optimized;  the user will not have to  choose  between  acceleration,  torque or
vehicle speed.

Electric Motor Controllers

The controller houses all the components  necessary to control the powering of a
vehicle,  in one  easy-to-install  package.  Our main  component is an inverter,
which  converts  DC  electricity  to AC  electricity.  We  also  offer  optional
controllers for the air conditioning,  power steering and heat pump, 12VDC/24VDC
DC-to-DC  converter  for vehicle  auxiliary  loads such as cell  phones,  radio,
lights, and a 6.6kW AC-to-DC on-board conductive charger which allows for direct
110 VAC or 220 VAC battery  charging.  These are located in the same  housing as
the  controller,  thus  extra  interconnects  are not  required.  This  approach
simplifies the vehicle wiring harness and increases system reliability.

Using our proprietary Windows(TM) based software package, vehicle interfaces and
control parameters can be programmed  in-vehicle.  Real-time vehicle performance
parameters can be monitored and collected.

Hybrid Drive Systems

Our Panther  hybrid-electric  drive systems are based on the component  building
blocks of the  electric  drive  family,  including  the  motor,  controller  and
optional components.  As an example, the 120/30 kW series hybrid system uses the
120kW electric drive components to propel the vehicle,  and uses a 30kW Capstone
micro-turbine to generate power while the vehicle is in operation.  This synergy
of design reduces the development cost of our hybrid systems by taking advantage
of existing  designs.  Accessories for these drives include battery  management,
chargers and 12-volt power supplies for the electric drive family.

Our  hybrid  systems  are  designed  to work  with a  variety  of  hybrid  power
generation  technologies.  In our 120/60kW hybrid system, an internal combustion
engine connected to a motor and motor controller  performs the power generation.
Other power options include liquid fueled turbines, such as the Capstone system,
fuel cells, such as the UTC Fuel Cell,  Ballard or Hydrogenics  system, and many
others.  In all of these examples,  our battery  management  system provides the
power management to allow for proper power control.

                                      -31-

Battery Care Unit

We place a great amount of focus on our power  management  systems.  Our Battery
Care Unit ("BCU")  monitors,  manages,  protects,  and reports.  It controls and
manages battery performance,  temperature,  voltage and current to avoid harm to
the batteries, to the entire system, and to the driver, operator and passengers.
It also allows for monitoring for service to the battery and drive system.  This
battery  management  system  is  capable  of  providing  communication  to  both
inductive and conductive  chargers  simultaneously and managing the on-board and
off-board charging systems with multiple  technologies.  The versatility of this
system  allows us to adapt the  hardware  and  software  for a variety  of power
sources such as batteries, turbines and fuel cells.

The BCU monitors the battery pack voltage and 28 additional  individual voltages
with a range of 0 to  18vDC.  Optional  expansion  modules  allow 28  additional
inputs  per  module,  with  up  to 16  modules  permitted.  The  BCU  has  eight
user-programmable  outputs  and four  user-programmable  inputs  to  allow  full
integration  into the vehicle.  These can be used to customize  input and output
parameters, and to provide for other custom monitoring and battery pack control.

The BCU directly  interfaces with the Panther family of drive systems as well as
others,  and controls the Safety Disconnect Unit (see description  below). It is
capable of  supporting  any  battery  technology,  and  provides  each type with
optimized charging and protection algorithms. An internal real-time clock allows
the BCU to wake up at user-specified  times to initiate battery charging or pack
monitoring.  A  precision  shunt  allows  it to offer a wide  dynamic  range for
monitoring  charging and motoring  current,  without errors commonly  associated
with other types of sensors.

The on-board memory allows the BCU to update,  store and report key battery pack
parameters  such as amp hours,  kilowatt-hours  and state of  change.  Using our
proprietary  Windows(TM)-based  diagnostic software,  the BCU control parameters
can be programmed in-vehicle. Additionally, battery performance can be monitored
in real-time. Reports can be output to a laptop computer.

Hybrid Control Unit

We have reconfigured our BCU to perform the critical role of hybrid  controller.
The Hybrid Control Unit "HCU" continuously monitors the condition of the battery
pack through  communications  with the BCU, monitors the driver commands through
communications with the motor controller, and the state of the hybrid generator.
Based upon the data received,  the HCU provides continuous updates to the hybrid
generator with instructions on mode of operation and power level. The purpose of
this innovative control loop is to ensure that the entire system is optimized to
provide  quick  response to driver  commands  while  providing the best possible
system efficiency.

Safety Disconnect Unit

The Safety  Disconnect  Unit "SDU" is under the  control of the BCU,  and allows
vehicle systems to seamlessly  connect and disconnect from the battery pack when
necessary to prevent damage or harm. It also disconnects the battery pack during
charging, protects it from surges, and constantly verifies that the battery pack
is isolated from the vehicle  chassis.  In the event a ground isolation fault is
detected,  the BCU commands the SDU to break the battery connection.  The SDU is
available in two configurations to match the requirements of the drive systems.

Fuel Cell Power Conditioning Unit

We have  developed and are now producing a 30kW  bi-directional  Fuel Cell Power
Conditioning  System.  This  system has been  designed to meet the demands of an
automotive Fuel Cell propulsion system. This unique unit, not much larger than a
conventional  briefcase,  provides a transparent interface between the Fuel Cell
or  Turbine,  the battery  pack,  accessory  loads,  and the output  load.  Fast
response time allows the output load to be serviced without  interruption  while
the Fuel Cell or Turbine ramps up.

This unit is designed to interface  directly  with the master  controller of the
vehicle over a CAN bus. Other communications protocols supported are SAE J-1850,
RS-232,  and RS-485.  This proprietary  package allows all key parameters of the
Power Conditioner to be monitored and control boundaries to be adjusted.

                                      -32-


50kW ICE Generator Unit

We provide a complete 50kW Internal  Combustion  Engine Generator Set. This unit
is powered by a 4-cylinder direct injection diesel engine and is controlled over
the common CAN bus shared with the rest of the Panther  product  line.  The same
HCU that  controls  the  Capstone  micro-turbine  in other Enova  series  hybrid
configurations provides power command, start command, and stop commands.

Fuel Cell Management Unit

We have added a Fuel Cell  Control Unit "FCU" to broaden our market in the power
management  field.  The FCU is  designed  to manage  fuel cell  powered  systems
whether  stationary or mobile,  such as  automobiles.  The FCU can be adapted to
regulate  the  input and  output  to and from the fuel cell as well as  regulate
temperature and  communications.  We continue to develop our current systems for
new products and markets.

We have  reconfigured  our  Battery  Management  Unit to perform  the  functions
required to monitor, manage, and report on the status of a Fuel Cell Stack. This
new unit,  the FCU,  is  currently  being used by UTC Fuel Cells as a Fuel Stack
Management System.

An internal real-time clock allows the FCU to wake up at user-specified times to
initiate  battery  charging or pack  monitoring.  A precision shunt allows it to
offer a wide dynamic range for monitoring charging and motoring current, without
errors  commonly  associated  with other types of sensors.  The built-in  memory
allows the FCU to update,  store and report key battery pack  parameters such as
amp  hours,   kilowatt-hours   and  state  of  change.   Using  our  proprietary
Windows(TM)-based  diagnostic  software,  the  FCU  control  parameters  can  be
programmed  in-system.  Additionally,  fuel cell performance can be monitored in
real-time. Reports can be output to a laptop computer.

Distributed   Power   Generation  for  Industrial  /  Commercial  /  Residential
Applications

Our  distributed   generation   products  are  virtually   identical  in  system
configuration  to that of a series hybrid  vehicle,  including a controller  and
battery  management.  For this market  segment,  we intend to provide  DC-DC and
DC-AC power conversion  components to convert power supplied by batteries,  fuel
cells,  generators  and  turbines  to AC  power  that  will  be  used by the end
customer.  Additionally,  our BCU will  provide  power  management  functions to
control  the entire  system.  The main  difference  is that the 3-phase AC power
typically  supplied to the motor for propulsion  power is, in this case, sent to
the customer to supply power for their household or business.


Competitive Conditions

The  competition  to develop and market  electric,  hybrid and fuel cell powered
vehicles  has  increased  during  the last  year  and we  expect  this  trend to
continue.  The  competition  consists of development  stage companies as well as
major  U.S.  and  international  companies.  Our  future  prospects  are  highly
dependent upon the successful  development and introduction of new products that
are  responsive  to market needs and can be  manufactured  and sold at a profit.
There can be no assurance that we will be able to successfully develop or market
any such products.

The  development of  hybrid-electric  and  alternative  fuel  vehicles,  such as
compressed natural gas, fuel cells and hybrid cars poses a competitive threat to
our  markets  for low  emission  vehicles  or  LEVs  but  not in  markets  where
government  mandates call for zero emission vehicles or ZEVs. We are involved in
the development of hybrid vehicles and fuel cell systems in order to meet future
requirements and applications.

Various  providers of electric vehicles have proposed products or offer products
for sale in this emerging  market.  These  products  encompass a wide variety of
technologies aimed at both consumer and commercial markets. The critical role of
technology in this market is demonstrated through several product offerings.  As
the industry  matures,  key  technologies  and capabilities are expected to play
critical  competitive  roles.  Our goal is to position  ourselves as a long term
competitor  in this  industry  by  focusing  on  electric,  hybrid and fuel cell
powered drive systems and related sub systems, component integration, technology
application and strategic alliances. The addition of new strategies to penetrate
stationary  power  markets with current  technologies  will assist in creating a
more  diversified  product mix. We believe that this  strategy  will enhance our
position as a power  management and conversion  components  supplier to both the
mobile and stationary power markets.

                                      -33-

Research and Development

We believe  that timely  development  and  introduction  of new  technology  and
products are essential to maintaining a competitive advantage.  We are currently
focusing our development efforts primarily in the following areas:

     o    Power Control and Drive Systems and related  technologies  for vehicle
          applications;

     o    Stationary Power Management and Conversion and related technologies;

     o    Heavy Duty Drive System  development  for Buses;  Trucks,  Industrial,
          Military and Marine application

     o    Fuel Cell Generation system power management and process control

     o    Systems Integration of these technologies;

     o    Technical and product  development under DOE/DOT/DOD and Hyundai Group
          Contracts

     o    OEM Technical and Product development.

For the  years  ended  December  31,  2003,  2002 and 2001,  we spent  $799,000,
$1,152,000  and $879,000,  respectively,  on internal  research and  development
activities.  We are  continually  evaluating  and  updating the  technology  and
equipment  used in developing  each of our products.  The power  management  and
conversion industry utilizes rapidly changing technology and we will endeavor to
modernize  our current  products as well as continue to develop new leading edge
technologies to maintain our competitive edge in the market.


Intellectual Property

We  currently  hold four U.S.  patents  and have one  patent  pending,  in power
management and control,  with an additional  patent in crash management  safety,
which was originally issued in 1997. We also have trademarks or service marks in
the United States and are reviewing  international patent protection as well. We
continually review and append our protection of proprietary technology.  We have
placed  renewed  emphasis  on the  development  and  acquisition  of  patentable
technology in 2003 and will  continue to do so in future  years.  We maintain an
internal  review and  compensation  process to encourage our employees to create
new patentable  technologies.  The status of patents  involves complex legal and
factual questions, and the breadth of claims allowed is uncertain.  Accordingly,
there can be no assurance  that patent  applications  filed by us will result in
patents being  issued.  Moreover,  there can be no assurance  that third parties
will not assert claims against us with respect to existing and future  products.
Although we intend to vigorously  protect our rights,  there can be no assurance
that these measures will be successful.  In the event of litigation to determine
the  validity  of any  third  party  claims,  such  litigation  could  result in
significant expense to us. Additionally,  the laws of certain countries in which
our products are or may be developed,  manufactured  or sold may not protect our
products and intellectual  property rights to the same extent as the laws of the
United States.

Our  success  depends  in  part  on  our  ability  to  protect  our  proprietary
technologies.  Our pending or future patent applications may not be approved and
the claims covered by such applications may be reduced. If allowed,  patents may
not be of sufficient scope or strength, others may independently develop similar
technologies  or products,  duplicate  any of our products or design  around its
patents,  and the  patents  may not  provide  us  with  competitive  advantages.
Further,  patents  held by third  parties may prevent the  commercialization  of
products  incorporating  our technologies or third parties may challenge or seek
to narrow,  invalidate or circumvent  any of our pending or future  patents.  We
also believes that foreign patents, if obtained,  and the protection afforded by
such foreign patents and foreign intellectual property laws, may be more limited
than that provided under United States patents and  intellectual  property laws.
Litigation,  which could result in substantial  costs and diversion of effort by
us, may also be necessary to enforce any patents  issued or licensed to us or to
determine the scope and validity of  third-party  proprietary  rights.  Any such
litigation,  regardless of outcome,  could be expensive and time-consuming,  and
adverse determinations in any such litigation could seriously harm our business.

We  also  rely  on  unpatented   trade  secrets  and  know-how  and  proprietary
technological   innovation  and  expertise   which  are  protected  in  part  by
confidentiality and invention assignment agreements with its employees, advisors
and consultants and non-disclosure  agreements with certain of its suppliers and
distributors.  These  agreements  may be  breached,  we may  not  have  adequate
remedies for any breach of our unpatented proprietary  intellectual property may
otherwise become known or independently discovered by competitors.  Further, the
laws of certain  foreign  countries may not protect our products or intellectual
property rights to the same extent as do the laws of the United States.

                                      -34-


Employees

As of March 31, 2004,  we had 28 full time  employees.  Additionally,  we employ
three individuals as independent contractors, engaged on an hourly basis, one of
whom  is  domiciled  in  South  Korea.  The  departmental   breakdown  of  these
individuals  includes 3 in  administration,  1 in sales,  20 in engineering  and
research and development, and 7 in production.


Facilities

Our  corporate  offices are located in Torrance,  California,  in leased  office
space of  approximately  20,000 square feet.  This  facility  houses our various
departments,  including engineering,  operations,  executive, finance, planning,
purchasing,  investor  relations and human  resources.  This lease terminates in
February 2008. Our monthly lease expense is $13,500.  We also lease an office in
Hawaii  on a  month-to-month  basis at  $1,500  per month and an office in South
Korea on a month-to-month basis at $500 per month. We believe that these offices
are suitable and adequate for our current and readily foreseeable needs.


Legal Proceedings

We may from time to time become a party to various legal proceedings  arising in
the ordinary  course of business.  However,  we are not currently a party to any
material legal proceedings.



                                      -35-

                                   MANAGEMENT

The following table sets forth certain  information  regarding our directors and
executive officers as of June 22, 2004.



Name                                      Age         Position
----                                      ---         --------
                                                
Anthony N. Rawlinson                      48          Chairman of the Board
Carl D. Perry                             71          Chief Executive Officer, President and Director
Malcolm R. Currie, Ph.D. (2)              77          Director
Donald H. Dreyer (1)                      66          Director
John J. Micek III (1)                     51          Director
Edwin O. Riddell (2)                      61          Director
John R. Wallace                           55          Director
Bjorn Ahlstrom                            70          Director
Larry B. Lombard                          43          Acting Chief Financial Officer
Edward M. Moore                           42          Chief Operating Officer

------------------
(1)  Member of Compensation Committee

(2)  Member of Audit Committee



Anthony  N.  Rawlinson,  Chairman  of the Board.  Mr.  Rawlinson  was  appointed
non-executive  Chairman of the Board in July 1999. Since 1996, Mr. Rawlinson has
been Managing Director of the Global Value Investment  Portfolio Management Pte.
Ltd.,  a  Singapore  based   International   Fund  Management  Company  managing
discretionary  equity  portfolios  for  institutions,  pension funds and clients
globally.  Mr.  Rawlinson has more than twenty years experience in international
fund  management.  Mr.  Rawlinson is a specialist in analysis and  investment in
high technology companies. From 1996 to 1999, Mr. Rawlinson was Chairman of IXLA
Ltd., an Australian  public company in the field of PC photography  software and
its wholly owned subsidiary,  photohighway.com. Mr. Rawlinson is also a Chairman
of Cardsoft,  Inc., a high  technology  software  company with secure java based
solutions for mobile phones and handheld devices.

Carl D. Perry, Chief Executive Officer, President and Director. Mr. Perry served
as a Director and as an Executive  Vice  President of the Company from July 1993
until  November 1997. In November 1997, Mr. Perry was elected as Chairman of the
Board and Chief Executive  Officer of the Company,  and was elected President in
June 1999.  In July 1999,  Mr.  Perry  resigned  his position as Chairman of the
Board to allow Mr.  Anthony  Rawlinson to become  Chairman.  He served as Acting
Chief  Financial  Officer of the Company from November  1997 to March 2004.  Mr.
Perry  continues as Chief  Executive  Officer and  President  and as a Director.
Prior to joining the Company,  he was an  international  aerospace and financial
consultant  from 1989 to 1993.  Mr. Perry served as Executive  Vice President of
Canadair Ltd., Canada's largest aerospace corporation,  from 1984 to 1989, where
he conducted strategic planning,  worldwide  marketing,  and international joint
ventures. From 1979 to 1983, Mr. Perry served as Executive Vice President of the
Howard Hughes Helicopter Company, now known as Boeing Helicopter Company,  where
he was responsible for general management,  worldwide business development,  and
international operations.

Bjorn Ahlstrom, Proposed Director. Mr. Ahlstrom currently is a consultant in the
heavy-duty  vehicle  industry.  Mr. Ahlstrom  retired as Chairman of Volvo Group
North America,  Inc. on April 1, 2004. Prior to that, Mr. Ahlstrom was President
and Chief Executive  Officer of Volvo North America  Corporation from 1971 until
1994.  During this term,  Volvo North  America  Corporation  owned and  operated
Volvo's  businesses  in the  United  States  and  Canada.  Under Mr.  Ahlstrom's
leadership, VNAC grew from a $50 million car importer in the early 1970s to a $6
billion company with  manufacturing and marketing  operations for cars,  trucks,
marine engines, and financial services. In 1981, Mr. Ahlstrom received the Royal
Order of the North Star from King Carl XVI Gustaf of Sweden.  The United  States
Government  awarded him the Medal of Peace and Commerce in 1983. He received the
Ellis Island  Medal of Honor in 1990.  Mr.  Ahlstrom  has been awarded  honorary
Doctor of Law degree from St John's  University,  NY, and Ramapo  College of New
Jersey.

                                      -36-


Malcolm R. Currie,  Ph.D.,  Director.  Dr. Currie was re-elected to the Board of
Directors in 1999.  Dr. Currie had served as a Director of the Company from 1995
through  1997.  From 1986 until 1992,  Dr.  Currie  served as Chairman and Chief
Executive  Officer of Hughes  Aircraft Co., and from 1985 until 1988, he was the
Chief  Executive  Officer of Delco  Electronics.  His career in electronics  and
management  has included  research with many patents and papers in microwave and
millimeter wave electronics,  laser,  space systems,  and related fields. He has
led major programs in radar,  commercial satellites,  communication systems, and
defense  electronics.  He served as  Undersecretary  of Defense for Research and
Engineering,  the Defense Science Board,  and currently  serves on the Boards of
Directors of LSI Logic,  Inamed Corp.,  Innovative Micro Technology,  Regal One,
and Currie  Technologies.  He is past  president  of the  American  Institute of
Aeronautics  and  Astronautics,  and is a Member of the Board of Trustees of the
University of Southern California.

Donald H. Dreyer,  Director. Mr. Dreyer was elected a Director of the Company in
January  1997.  Mr.  Dreyer is  President  and CEO of Dreyer & Company,  Inc., a
consultancy in credit,  accounts  receivable and insolvency  services,  which he
founded  in 1990.  Mr.  Dreyer  has  served as  Chairman  of the Board of Credit
Managers  Association  of California  during the 1994 to 1995 term and remains a
current member. Mr. Dreyer is also a member of the American Bankruptcy Institute
and the National Advisory Committee of Dun & Bradstreet, Inc.

John J. Micek III, Director.  Mr. Micek was elected a Director of the Company in
April 1999. Mr. Micek served as the Company's Vice  President,  General  Counsel
and Secretary from March 1994 to March 1997.  From June 1997 to August 1998, Mr.
Micek was COO  Sboof  Pelion  Systems,  Inc.  Mr.  Micek is  currently  Managing
Director  of Silicon  Prairie  Partners,  LP. He also is a  practicing  attorney
specializing in corporate finance and business  development in Palo Alto, CA. He
is a Board  Member of  Universal  Warranty  and also sits on the  boards of UTEK
Corp.,  Pelion Systems,  Inc.,  Universal  Assurors  Agency,  Inc., and Armanino
Foods.

Edwin O. Riddell,  Director. Mr. Riddell has served as a Director of the Company
since June 1995. From March 1999 to the present,  Mr. Riddell has been President
of CR  Transportation  Services,  a consultant to the electric vehicle industry.
From  January  1991 to March  1999,  Mr.  Riddell  has  served as Manager of the
Transportation Business Unit in the Customer Systems Group at the Electric Power
Research Institute in Palo Alto, California,  and from 1985 until November 1990,
he served with the  Transportation  Group, Inc. as Vice President,  Engineering,
working on electric  public  transportation  systems.  From 1979 to 1985, he was
Vice President and General Manager of Lift U, Inc., the leading  manufacturer of
handicapped  wheelchair  lifts for the transit  industry.  Mr.  Riddell has also
worked  with  Ford,  Chrysler,  and  General  Motors in the area of auto  design
(styling),  and has  worked  as a member of  senior  management  for a number of
public  transit  vehicle  manufacturers.  Mr.  Riddell  has been a member of the
American Public  Transportation  Association's  (APTA) Member Board of Governors
for over 15 years, and has served on APTA's Board of Directors.  Mr. Riddell was
also Managing Partner of the U.S. Advanced Battery Consortium.

John R. Wallace,  Director. Mr. Wallace was elected as a Director of the Company
in  December  2002.  He  retired  from the Ford Motor  Company  in 2002,  and is
currently  serving  as a  consultant  to the  Company  for fuel cell and  hybrid
electric vehicle strategy. Prior to his retirement, he was executive director of
TH!NK Group. He has been active in Ford Motor Company's alternative fuel vehicle
programs  since  1990,  serving  first  as:  Director,   Technology  Development
Programs;  then as Director,  Electric Vehicle Programs;  Director,  Alternative
Fuel Vehicles and finally Director,  Environmental Vehicles. He is past Chairman
of the Board of Directors  of TH!NK  Nordic;  he is past  chairman of the United
States  Advanced  Battery  Consortium;   Co-Chairman  of  the  Electric  Vehicle
Association  of the  Americas,  and past  Chairman of the  California  Fuel Cell
Partnership.  He  served  as  Director  of Ford's  Electronic  Systems  Research
Laboratory,  Research  Staff,  from 1988  through  1990.  Prior to joining  Ford
Research  Staff,  he was president of Ford  Microelectronics,  Inc., in Colorado
Springs,  Colorado.  His other experience  includes work as program manager with
Intel Corporation.  He also served as Director,  Western Development Center, for
Perkin-Elmer Corporation and as President of Precision Microdesign, Inc.

There  are no  family  relationships  among any of the  directors  or  executive
officers of our company.


Board of Directors, Committees and Compensation

Each of the  directors  is  elected  to  serve a  one-year  term and  until  his
successor is duly elected and qualified.  The authorized  number of directors is
currently  fixed at  eight.  The  holders  of the  Series B Stock,  voting  as a
separate class, are entitled to elect two directors. The holders of the Series A
Stock and the Common Stock,  voting together as a single class,  are entitled to
elect the balance of the directors. See "Description of Capital Stock."

                                      -37-


The Board currently has two committees: the Compensation Committee and the Audit
Committee.  The Compensation  Committee  currently consists of Mr. Edwin Riddell
and  Dr.  Malcolm  Currie.   Its  functions  are  to  establish  and  apply  our
compensation policies with respect to our executive officers,  and to administer
our stock option plans. The Audit Committee currently consists of Messrs. Donald
Dreyer  and  John  Micek.  The  Audit  Committee  recommends  engagement  of the
independent  auditors and is primarily  responsible  for  approving the services
performed by the  independent  auditors and for reviewing and evaluating the our
accounting principles and system of internal accounting controls.

In September  1999, our Board of Directors  unanimously  approved a compensation
package for outside  directors  consisting  of the  following:  for each meeting
attended  in person,  each  outside  director  is to receive  $1,000 in cash and
$2,000 of stock  valued on the date of the meeting at the average of the closing
ask and bid prices; for each telephonic Board meeting,  each outside director is
to receive  $250 in cash and $250 of stock  valued on the date of the meeting at
the  average of the  closing  ask and bid  prices;  for each  meeting of a Board
committee  attended in person,  the committee  chairperson is to receive $500 in
cash and $500 of stock  valued on the date of the  meeting at the average of the
closing  ask and bid prices.  As of January  2002,  this  package was amended to
include  like  compensation  of $500 in cash and $500 in stock to all  committee
members  in  attendance  at each  committee  meeting.  All  Directors  are  also
reimbursed  for  out-of-pocket  expenses  incurred in connection  with attending
Board and committee  meetings.  In May 2004,  the  Company's  Board of Directors
unanimously  approved an increase in  compensation  for outside  directors which
doubled the amount of cash and stock paid for the various directors' meetings.

For and with  respect to fiscal 2003,  754,167  shares of the  Company's  Common
Stock  were  issued  under the above  described  compensation  plan for  outside
directors.  As of June 22, 2004,  an  aggregate  of  2,841,476  shares have been
issued  under  the  compensation  plan for  Directors  since  its  inception  in
September 1999.


Consulting Agreements

James M. Strock

We had  entered  into a  consulting  agreement  with James  Strock & Company,  a
corporation  wholly owned by James M. Strock. Mr. Strock served as a Director of
Enova from July 2000 until his  resignation  in March  2004.  Under the terms of
that  consulting  agreement,  we retained  Mr.  Strock's  services for a minimum
monthly retainer of $3,000 plus reasonable  expenses.  This consulting agreement
was  terminated in April 2003.  During 2003, the Company paid Mr. Strock $17,000
in cash for  consulting  services and expenses  and $12,000 for  directors  fees
(which latter amount includes the cash paid and the value of the stock issued to
him pursuant to the outside directors' compensation package described above).

John R. Wallace

We  entered  into a  consulting  agreement  with  John  R.  Wallace  whereby  we
compensate  Mr. Wallace at the rate of $1,500 per day plus  reasonable  expenses
for  consulting  services  rendered.  Mr.  Wallace is not  compensated  per this
agreement  when acting in the capacity of a Director.  During 2003,  we paid Mr.
Wallace  $6,000 in cash for  consulting  services  and  expenses and $12,000 for
directors fees (which latter amount  includes the cash paid and the value of the
stock  issued to him  pursuant to the outside  directors'  compensation  package
described above).

Donald H. Dreyer

We also utilize the consulting service of Donald Dreyer and we compensate him at
the rate of $150 per hour  plus  reasonable  expenses  for  consulting  services
rendered.  Mr.  Dreyer  is not  compensated  when  acting in the  capacity  of a
Director other than the fees noted above. During 2003, we paid Mr. Dreyer $6,500
in cash for  consulting  services and $12,000 for  directors  fees (which latter
amount  includes the cash paid and the value of the stock issued to him pursuant
to the outside directors' compensation package described above).

Executive Compensation

Summary Compensation Table

The following  table sets forth all  compensation  earned by the Company's Chief
Executive  Officer  and each of the  other  most  highly  compensated  executive
officers of the Company whose annual salary and bonus exceeded  $100,000 for the
years ended December 31, 2003, 2002 and 2001 (collectively, the "Named Executive


                                      -38-


Officers").  Mr.  Carl D. Perry was the sole  executive  officer of the  Company
whose salary exceeded $100,000 as of December 31, 2003.



                                Summary Compensation Table

Name and Principal Position                            Annual Compensation
-------------------------------                      ------------------------
                                                       Year        Salary         Bonus
                                                                     ($)           ($)
                                                     ----------  ------------   -----------
                                                          
Carl D. Perry (1)                                      2003        139,615         --
Chief Executive Officer and President                  2002        150,000         --
                                                       2001        160,989        30,000
                                                                                (earned
                                                                                 in 2000)

------------------
(1)  Mr.  Perry was elected as Chief  Executive  Officer in November  1997.  Mr.
     Perry's current salary is $120,000 per year, a 20% voluntary reduction from
     the prior year's salary. Mr. Perry served as Acting Chief Financial Officer
     during the periods reflected in the above chart and through March 6, 2004.




Option/SAR Grants

No grants of stock  options  or stock  appreciation  rights  ("SARs")  were made
during fiscal 2003 to the Named Executive Officer.


Option Exercises and Option Values

The Named  Executive  Officer did not exercise any options during the year ended
December 31, 2003. All options of the Named  Executive  Officer expired prior to
December 31, 2003 without exercise.


Stock Option Plans

A general description of the principal terms of the 1996 Employee and Consultant
Stock  Option Plan (the "1996 Plan") are set forth below.  This  description  is
qualified  in its  entirety by the terms of the 1996 Plan.  A copy of the actual
1996 Plan document has been  previously  filed with the  Securities and Exchange
Commission.

Our board of directors  adopted the 1996  Employee and  Consultant  Stock Option
Plan in October 1996 which was subsequently  approved by our shareholders in May
1997. A total of 15,000,000  shares were  initially  reserved for issuance under
the 1996 Plan. Options granted under the 1996 Plan may be either incentive stock
options,  as defined in Section 422 of the  Internal  Revenue  Code of 1986,  or
nonstatutory  stock options.  The 1996 Plan provides that options may be granted
to  employees  (including  officers  and  directors  who  are  also  employees),
directors  and  consultants.  Incentive  stock  options  may only be  granted to
employees.  In 1999,  our  board  of  directors  and  shareholders  approved  an
amendment  to the 1996 Plan to  increase  the  number of shares of common  stock
reserved for issuance thereunder by 30,000,000 shares, bringing the total number
of shares issuable under the 1996 Plan to 45,000,000.  The share increase to the
1996 Plan assured that a sufficient reserve of common stock shares are available
to provide us with the continuing  opportunity  to utilize equity  incentives to
attract and retain the services of employees  essential to our long-term  growth
and financial  success.  A copy of the actual 1996 Plan document was  previously
filed with the Securities and Exchange Commission.

Options  granted  under the amended 1996 Plan will vest over such periods as may
be  determined  by the board of directors  and will  generally  have an exercise
price equal to the closing price for our stock on the NASDAQ OTC Bulletin  Board
on the last trading day  immediately  prior to the date of grant. As of December
31, 2003,  the Company had reserved but unissued  23,844,000  common  shares for
future  grants under the 1996 Plan,  as amended.  Options to purchase  9,998,000
shares of Enova common stock were granted to employees in 2003.

With  respect to the grant of options to  directors  or  employees  who are also
officers  or  directors,  the  1996  Plan is  administered  by (i) our  board of
directors, or (ii) a committee designated by the board and constituted in such a
manner as to comply  with  applicable  laws to permit  such  grants and  related
transactions  to be exempt from Section  16(b) of the Exchange Act in accordance
with Rule 16b-3.  With  respect to grants to employees  or  consultants  who are


                                      -39-


neither officers nor directors, the 1996 Plan is administered by the board or by
a committee of the board.

The  administrators  of the 1996 Plan have full power to select,  from among our
employees,  directors and  consultants  eligible for grants,  the individuals to
whom options will be granted,  to determine the specific terms and conditions of
each grant,  including the number of shares subject to each option, to amend the
terms of  outstanding  options  granted  under  the 1996 Plan  (except  that any
amendments that would adversely affect an optionee's rights under an outstanding
option may not be made without the optionee's written consent), and to interpret
and  construe  the terms of the 1996 Plan and options  granted  thereunder,  all
subject to the provisions of the 1996 Plan. The  interpretation and construction
of any  provision  of the 1996  Plan by the  administrators  shall be final  and
conclusive.  Members of the board receive no additional  compensation  for their
services in connection with the administration of the 1996 Plan.

The 1996 Plan  provides  that  options  may be granted to  employees  (including
officers and  directors  who are also  employees),  directors  and  consultants.
Incentive stock options may only be granted to employees.

Each option  granted  under the 1996 Plan is to be evidenced by a written  stock
option  agreement  between us and the optionee  and is subject to the  following
additional terms and conditions:

The board or its  committee  determines  on the date of grant when  options will
become exercisable. An option is exercised by giving written notice of exercise,
specifying  the  number  of full  shares  of common  stock to be  purchased  and
tendering payment of the purchase price.

The exercise  price of options  granted under the 1996 Plan is determined on the
date of grant.  The exercise  price of incentive  stock options must be at least
100% of the fair  market  value  per  share of the  common  stock at the time of
grant.  In the case of incentive stock options granted to an employee who at the
time of grant owns more than 10% of the voting  power of all classes of stock or
any parent or  subsidiary,  the exercise price must be at least 110% of the fair
market  value per share of the common  stock at the time of grant.  The exercise
price of  nonstatutory  stock  options  must be at least 85% of the fair  market
value per share of the common stock at the time of grant.  The exercise price of
nonstatutory  stock options granted to an employee who at the time of grant owns
more than 10% of the voting power of all classes of our stock including stock of
any parent or  subsidiary,  the exercise price must be at least 110% of the fair
market value per share of the common stock at the time of grant. In the event of
the grant of a  nonstatutory  option with an exercise  price below the then fair
market value of the common stock,  the  difference  between fair market value on
the date of grant and the  exercise  price  would be treated  as a  compensation
expense for accounting purposes and would therefore affect the our earnings. For
purposes  of the 1996 Plan,  fair market  value is defined as the  closing  sale
price of the common stock as reported on the OTC  Bulletin  Board on last market
trading day prior to the time of grant.

If the optionee's employment, directorship or consulting relationship with us is
terminated  for any reason  (other  than death or  disability),  options  may be
exercised  within such period as is determined by the board or its committee (up
to three months in the case of incentive  stock options) after such  termination
as to all or part of the  shares  as to  which  the  optionee  was  entitled  to
exercise at the date of such termination,  provided that the option is exercised
no later than its expiration date.

At the time an option is  granted,  the board or its  committee  determines  the
period within which the option may be exercised.  In no event may the term of an
incentive stock option be longer than ten (10) years. No option may be exercised
by any person  after the  expiration  of its term.  An  incentive  stock  option
granted to an  optionee  who,  at the time such  option is  granted,  owns stock
possessing  more than 10% of the voting  power of all classes of our stock,  may
not have a term of more than five (5) years.

An incentive  stock option is not  transferable  by the optionee,  other than by
will or the laws of descent  and  distribution,  and is  exercisable  during the
optionee's  lifetime  only by the  optionee.  A  nonstatutory  option  shall  be
transferable to the extent determined by the administrator and as provided in an
optionee's option agreement.

The option agreement may contain such other terms, provisions and conditions not
inconsistent  with  the  1996  Plan as may be  determined  by the  board  or its
committee.

In the event any change,  such as a stock  split,  reverse  stock  split,  stock
dividend, or combination or reclassification of the common stock, is made in the
our  capitalization  without  receipt  of  consideration,  which  results  in an
increase or decrease in the number of  outstanding  shares of common  stock,  an


                                      -40-

appropriate adjustment shall be made in the number of shares under the 1996 Plan
and the price per share covered by each outstanding option.

In the event we merge or  consolidate  with  another  entity  and we are not the
surviving corporation,  or a proposed sale, transfer or other disposition of all
or  substantially  all of our assets in connection with complete  liquidation or
dissolution,  or a reverse  merger in which we are the  surviving  entity but in
which securities  possessing more than 50% of the total combined voting power of
our outstanding securities are transferred to a person or persons different from
those  who  held  such  securities   immediately  prior  to  such  merger,  each
outstanding option shall  automatically  become fully vested and exercisable and
released from any restrictions on transfer and repurchase or forfeiture  rights,
unless the option is assumed or  substituted  by the  successor  corporation  or
replaced  with a  comparable  option  with  respect  to shares in the  surviving
corporation,  or the option is replaced with a comparable cash incentive program
of the successor corporation, or unless the vesting,  exercisability and release
of the  option  is  subject  to  other  limitations  imposed  by the  1996  Plan
administrators at the time of granting the options.

The  board  may  amend  the 1996  Plan at any  time or from  time to time or may
suspend  or  terminate  the 1996  Plan  without  approval  of the  shareholders;
provided,  however,  that shareholder  approval is required for any amendment to
the 1996 Plan for which shareholder  approval would be required under applicable
law, as in effect at the time. Any  amendment,  suspension or termination of the
1996 Plan shall not affect  options  already  granted,  and such  options  shall
remain in full force and effect,  unless  mutually  agreed  otherwise in writing
between the optionee and the Plan  administrators.  The board may accelerate any
option or waive any  condition or  restriction  pertaining to such option at any
time. The board may also  substitute  new stock options for  previously  granted
stock options,  including  previously granted stock options having higher option
prices, and may reduce the exercise price of any option to the then current fair
market  value,  if the fair  market  value of the common  stock  covered by such
option shall have declined since the date the option was granted.  In any event,
the 1996 Plan shall terminate in October 2006. Any options outstanding under the
1996 Plan at the time of its  termination  shall remain  outstanding  until they
expire by their terms.

We cannot now  determine the number of options to be granted in the future under
the 1996 Plan, as proposed to be amended,  to executive  officers,  directors or
employees. The Company granted options covering an aggregate of 9,998,451 shares
of Common Stock to its other employees under the 1996 Plan during fiscal 2003.


Compensation Committee Interlocks and Insider Participation

Our Compensation Committee currently consists of Mr. Edwin Riddell, as Chairman,
and Dr. Malcolm  Currie.  Mr.  Riddell was elected  Chairman in August 1998. Dr.
Currie was elected to the Compensation Committee in July 1999 and also served on
the  Compensation  Committee  during  his  prior  term as a  director  until his
resignation in 1998.

Limitation on Liabilities and Indemnification Matters

Our articles of incorporation  limit the personal  liability of our directors to
our shareholders to the maximum extent  permitted by California law.  California
law provides that directors of a corporation  will not be personally  liable for
monetary damages for breach of their fiduciary duties as directors,  except with
respect to liability for:

     o    acts or omissions that involve intentional misconduct or a knowing and
          culpable violation of law;

     o    acts or omissions that a director  believes to be contrary to the best
          interests of the  corporation or our  shareholders or that involve the
          absence of good faith on the part of the director;

     o    any transaction from which the director  derived an improper  personal
          benefit.

     o    acts or omissions  that show a reckless  disregard for the  director's
          duty to the corporation or our  shareholders in circumstances in which
          the  director  was aware,  or should have been aware,  in the ordinary
          course of performing a director's  duties, of a risk of serious injury
          to the corporation or our shareholders;

     o    acts or omissions that constitute an unexcused  pattern of inattention
          that  amounts  to  an  abdication  of  the  director's   duty  to  the
          corporation or our shareholders;

     o    contracts or other  transactions  in which the director has a material
          financial interest that are not approved in the manner set forth under
          Section 310 of the California General Corporation Law; or

                                      -41-


     o    certain  distributions  or the making of certain  loans or  guarantees
          approved by (or deemed to have been approved by) directors as provided
          under Section 316 of the California General Corporations Law.

This  provision  will have no effect on any  non-monetary  remedies  that may be
available to us or to our shareholders, nor will it relieve us or other officers
or directors from compliance with federal or state securities laws.

Our articles of  incorporation  and bylaws also  generally  provide that we will
indemnify,  to  the  fullest  extent  permitted  under  the  California  General
Corporation  Law, any person who was or is a party or is threatened to be made a
party to any  threatened,  pending or  completed  action,  suit,  investigation,
administrative  hearing or any other proceeding by reason of the fact that he or
she is or was a director or officer of ours, or is or was serving at our request
as a director,  officer,  employee or agent of another entity,  against expenses
incurred by him or her in  connection  that  proceeding.  An officer or director
will not be entitled to indemnification by us if:

     o    the  officer  or  director  did not act in good  faith and in a manner
          reasonably believed to be in our best interests; and

     o    with  respect to any  criminal  action or  proceeding,  the officer or
          director  had no  reasonable  cause to believe  his or her conduct was
          unlawful.

At the present time there is no pending  litigation or proceeding  involving any
of our directors,  officers,  employees or agents for which indemnification will
be required  or  permitted.  We are not aware of any  threatened  litigation  or
proceeding which may result in a claim for indemnification.


                                      -42-


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During  2003,  Hyundai  Heavy  Industries,   Co.  purchased   23,076,923  shares
representing a 5.67%  ownership in Enova,  Inc. (see table below).  In the third
quarter of 2004,  Hyundai Heavy  Industries  will  purchase an  additional  $1.5
million of Enova Systems  restricted common stock at a price equal to the volume
weighted  average  closing  price  of our  stock  for the  ninety  trading  days
preceding  such  purchase.  Additionally,  during 2003 and for the three  months
ended  March  31,  2004,  we  purchased  from  HHI  approximately   $599,000  in
components,  materials  and services for  manufacture  of our drive  systems and
power  management  systems.  These  purchases  were made on terms and conditions
equal to or better than our standard  commercial  terms with other  vendors.  At
June 22,  2004,  our  outstanding  payables  balance  due HHI was  approximately
$188,000.

                             PRINCIPAL SHAREHOLDERS

The  following  table  sets  forth  certain  information   regarding  beneficial
ownership  of our stock as of June 22,  2004,  (i) by each  person  (or group of
affiliated persons) who we know to own beneficially more than 5% of any class of
our  voting  securities,  (ii) by  each of our  Directors,  (iii)  by our  Named
Executive  Officer listed in the Summary  Compensation  Table above, and (iv) by
our  directors  and  executive  officers as a group.  Except as indicated in the
footnotes to this table and subject to applicable  community  property laws, the
persons named in the table, based on information provided by such persons,  have
sole  voting  and  investment   power  with  respect  to  all  shares  of  stock
beneficially owned by them.



                                                        Shares              Percentage of
                                                     Beneficially         Shares Beneficially        Voting
   Name and Address of Beneficial Owner                Owned (1)               Owned (2)         Percentage (2)
--------------------------------------------     --------------------   ---------------------- -----------------
                                                                                            
Jagen, Pty., Ltd.                                     145,000,000               33.22%               35.62%
9 Oxford Street, South Ybarra 3141
Melbourne, Victoria Australia
Hyundai Heavy Industries, Co.                          33,076,923(4)             7.58%                5.67%
1 Cheona-Dong, Dong-Ku
Ulsan, Korea
Citibank N.A.                                          31,405,754                7.19%                7.71%
111 Wall Street, 8th Floor
New York, NY  10043
Jean Schulz                                             1,329,111(5)             *                    *
4900 Upper Ridge Road
Santa Rosa, CA 95404
Delphi Delco Electronics                                1,278,720(6)             *                    *
2151 E. Lincoln Road
Kokomo IN 46904-9005
Bjorn Ahlstrom                                                 -                 *                    *
Carl D. Perry                                          10,000,500                2.29%                2.46%
Anthony N. Rawlinson                                   25,430,759                5.83%                6.25%
John J. Micek III                                       1,521,691(7)             *                    *
Edwin O. Riddell                                          675,756                *                    *
Malcolm R. Currie, Ph.D.                                  565,126                *                    *
Donald H. Dreyer                                          488,620                *                    *
John R. Wallace                                           159,524                *                    *
Larry B. Lombard                                        1,800,000(8)             *                    *
Edward M. Moore                                         1,022,256(9)             *                    *
All Directors and executive officers                   41,664,232(10)            9.54%                9.87%
as a group (9 persons)

------------------
*    Indicates less than 1%

(1)  Number of Common Stock shares includes Series A Preferred  Stock,  Series B
     Preferred Stock and Common Stock shares issuable pursuant to stock options,
     warrants and other securities  convertible  into Common Stock  beneficially


                                      -43-


     held by the person or class in question which may be exercised or converted
     within 60 days after June 22, 2004.

(2)  The percentages are based on the number of shares of Common Stock, Series A
     Preferred  Stock and  Series B  Preferred  Stock  owned by the  shareholder
     divided by the sum of: (i) the total  Common  Stock  outstanding,  (ii) the
     Series A  Preferred  Stock  owned by such  shareholder;  (iii) the Series B
     Preferred Stock owned by such  shareholder;  and (iv) Common Stock issuable
     pursuant to warrants,  options and other convertible securities exercisable
     or  convertible by such  shareholder  within sixty (60) days after June 22,
     2004.

(3)  The percentages are based on the number of shares of Common Stock, Series A
     Preferred  Stock and/or Series B Preferred  Stock owned by the  shareholder
     divided by the sum of: (i) the total  Common  Stock  outstanding,  (ii) the
     total  Series A Preferred  Stock  outstanding  and (iii) the total Series B
     Preferred Stock outstanding.  This percentage calculation has been included
     to  show  more   accurately   the  actual  voting  power  of  each  of  the
     shareholders,  since the  calculation  takes into account the fact that the
     outstanding  Series A  Preferred  Stock and  Series B  Preferred  Stock are
     entitled  to vote  together  with the  Common  Stock  as a single  class on
     certain matters to be voted upon by the shareholders.

(4)  Includes  10,000,000  shares of Common Stock  issuable  pursuant to a Stock
     Purchase  Agreement  between  Hyundai  Heavy  Industries,  Ltd.  and  Enova
     Systems,  Inc. for $1.5M of Enova  restricted  common stock at an estimated
     prices of $0.15 per share  based on the  weighted  average  market  closing
     price of Enova's  common  stock at June 22,  2004 for the prior  ninety day
     period.

(5)  The number of shares shown  represents the ownership of 1,329,111 shares of
     Series A Preferred  Stock,  each of which is convertible  into one share of
     Common  Stock.  These  1,329,111  shares  represent  more  than  5% of  the
     outstanding shares of Series A Preferred Stock.

(6)  The number of shares shown  represents  the ownership of 639,360  shares of
     Series B Preferred  Stock,  each of which is convertible into two shares of
     Common  Stock.   These  639,360  shares  represent  more  than  5%  of  the
     outstanding shares of Series B Preferred Stock.

(7)  Includes  1,000,000  shares  of Common  Stock  issued  to  Silicon  Prairie
     Partners,  LP, a  limited  partnership  in which  John J.  Micek III is the
     general partner.

(8)  Includes  1,000,000  shares  of Common  Stock  issuable  pursuant  to stock
     options exercisable at a price of $.16.

(9)  Includes  1,000,000  shares  of Common  Stock  issuable  pursuant  to stock
     options exercisable at prices from $.17 to $.20.

(10) Includes  2,000,000  shares  of Common  Stock  issuable  pursuant  to stock
     options  exercisable  at prices  from $.16 to $.20 per share and  1,000,000
     shares of Common Stock issued to Silicon  Prairie  Partners,  LP, a limited
     partnership in which John J. Micek III is the general partner.



                                      -44-


                              SELLING SHAREHOLDERS

The following table sets forth information, as of June 22, 2004, with respect to
the selling shareholders. We issued the shares of our common stock being offered
pursuant to this prospectus by the selling  shareholders in a private  placement
in March,  2004. We issued and sold an aggregate of 16,250,001  shares of common
stock to the selling  shareholders at a purchase price of $0.12 per share.  This
prospectus covers the resale of these shares by the selling shareholders,  plus,
in accordance  with Rule 416 under the Securities Act of 1933,  such  additional
number of shares of our common stock as may be issued due to stock splits, stock
dividends  or other  similar  transactions.  The  number of shares  shown in the
following  table as being offered by the selling  shareholders  does not include
such presently indeterminate number of additional shares of our common stock.

Any and all of the shares of common stock may be offered for sale by the selling
shareholders pursuant to this prospectus from time to time. Accordingly,  we can
give no  estimate  as to the  amounts  of shares of our  common  stock  that the
selling shareholders will hold upon consummation of any such sales. In addition,
the selling shareholders may have sold, transferred or otherwise disposed of all
or a portion of our shares since the date on which the information regarding the
common  stock  was  provided  in  transactions   exempt  from  the  registration
requirements of the Securities Act of 1933.

The selling shareholders did not maintain any position, office or other material
relationship within the past three years with Enova.

                                      -45-



                                                                             Shares of
                                      Shares of                            Common Stock           Percent of
                                     Common Stock       Shares of           to be owned          Common Stock
                                    owned prior to     Common Stock            after            Owned after the
              Name                   the Offering      Offered (1)       the Offering (1)          Offering
---------------------------------  ----------------- -----------------  --------------------  --------------------
                                                                                       
Eruca Limited                                   --          5,000,000                --                     *

Tilehurst Pty Ltd.                              --          6,250,000                --                     *

Perla Blanca Investments, Ltd.           3,333,333          4,166,667         3,333,333                     *

MTrans International Limited                    --            833,334                --                     *
                                                     -----------------
                                         3,333,333         16,250,001
                                   ================= =================
* - indicates less than 1%

------------------
(1)  The  number  of  shares  listed  in  these   columns   include  all  shares
     beneficially  owned and all options and  warrants to purchase  shares held,
     whether  or  not  deemed  to  be   beneficially   owned,   by  the  selling
     shareholders.  The ownership  percentage  listed in these columns  includes
     only  shares  beneficially  owned by the selling  shareholders.  Beneficial
     ownership is determined in accordance  with the rules of the Securities and
     Exchange  Commission.  In computing the  percentage of shares  beneficially
     owned by the  selling  shareholders,  shares of  common  stock  subject  to
     options or warrants held by the  shareholder  that are  exercisable  now or
     within 60 days hereafter are deemed outstanding,  although those shares are
     not  deemed  outstanding  for  the  purpose  of  computing  the  percentage
     ownership of any other  person.  The  ownership  percentage  is  calculated
     assuming  that  401,853,232  shares of common  stock,  2,790,000  shares of
     Series A Stock and  1,217,196  shares of  Series B Stock  were  outstanding
     immediately prior to this offering.



                              PLAN OF DISTRIBUTION

We are  registering  all 16,250,001 of the shares of our common stock offered by
this  prospectus  on behalf of the  selling  shareholders,  and will  receive no
proceeds from this offering.

The selling shareholders may transfer their shares covered by this prospectus by
gift,  may pledge,  hypothecate  or otherwise  encumber  those share of may sell
those shares. The selling shareholders,  or their pledgees,  donees, transferees
or  other  successors-in-interest  selling  shares  received  from  the  selling
shareholders  as a gift,  partnership  distribution  or other  non-sale  related
transfer after the date of this prospectus are free to sell the shares from time
to time.  The  selling  shareholders  will  act  independently  of us in  making
decisions  with respect to the timing,  manner and size of each sale.  The sales
may be made in the national  over-the-counter market or otherwise, at prices and
at terms then  prevailing or at prices related to the then current market price,
or  in  negotiated  transactions.  The  selling  shareholders  may  effect  such
transactions by selling the shares to or through broker-dealers.  The shares may
be sold in one or more  transactions and by one or more of, or a combination of,
the following:

     o    block trade in which the broker-dealer so engaged will attempt to sell
          the  shares as agent,  but may  position  and  resell a portion of the
          block as principal to facilitate the transaction;

     o    purchases  by  a  broker-dealer   as  principal  and  resale  by  such
          broker-dealer for its account pursuant to this prospectus;

     o    an  exchange  distribution  in  accordance  with  the  rules  of  such
          exchange;

     o    a distribution  or other transfer to one or more of the equity holders
          of a selling shareholder;

     o    ordinary  brokerage  transactions and transactions in which the broker
          solicits purchasers; and

     o    in privately negotiated transactions.

                                      -46-


In  effecting  sales,  broker-dealers  engaged by any  selling  shareholder  may
arrange for other broker-dealers to participate in the resales.

The selling shareholders may enter into hedging transactions with broker-dealers
in  connection  with   distributions  of  the  shares  or  otherwise.   In  such
transactions,  broker-dealers  may  engage in short  sales of the  shares in the
course of hedging the positions they assume with the selling  shareholders.  The
selling  shareholders  also may sell shares  short and  redeliver  the shares to
close out such short positions.  The selling  shareholders may enter into option
or other  transactions  with  broker-dealers  that  require the  delivery to the
broker-dealer  of the shares.  The  broker-dealer  may then resell or  otherwise
transfer such shares pursuant to this prospectus.  The selling shareholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned or,  upon a default,  may effect  sales of the  pledged  shares
pursuant to this prospectus.

Broker-dealers  or agents may receive  compensation  in the form of commissions,
discounts or concessions from the selling shareholders. Broker-dealers or agents
may also receive  compensation  from the  purchasers of the shares for whom they
act as agents or to whom they sell as principals,  or both. Compensation as to a
particular broker-dealer might be in excess of customary commissions and will be
in amounts to be  negotiated  in connection  with the sale.  Brokers-dealers  or
agents and any other  participating  broker-dealers or the selling  shareholders
may be deemed to be  underwriters  within the  meaning  of Section  2(11) of the
Securities Act of 1933, in connection with sales of the shares. Accordingly, any
such commission,  discount or concession  received by them and any profit on the
resale  of the  shares  purchased  by  them  may be  deemed  to be  underwriting
discounts  or  commissions   under  the  Securities  Act.  Because  the  selling
shareholders  may be deemed to be an  underwriter  within the meaning of Section
2(11) of the  Securities  Act, the selling  shareholders  will be subject to the
prospectus  delivery  requirements of the Securities Act. Any securities covered
by this prospectus that qualify for sale pursuant to Rule 144 promulgated  under
the  Securities  Act may be sold  under Rule 144 rather  than  pursuant  to this
prospectus.  The selling shareholders have advised us that they have not entered
into any agreements,  understandings  or arrangements  with any  underwriters or
broker-dealers  regarding  the sale of the  shares;  nor is any  underwriter  or
coordinating broker acting in connection with the proposed sale of the shares.

The shares will be sold only through  registered or licensed  brokers or dealers
if required under  applicable  state  securities  laws. In addition,  in certain
states the shares may not be sold unless they have been  registered or qualified
for sale in the  applicable  state or an  exemption  from  the  registration  or
qualification requirements is available and is complied with.

Under  applicable  rules and  regulations  under the Securities  Exchange Act of
1934,   any  person  engaged  in  the   distribution   of  the  shares  may  not
simultaneously  engage in  market-making  activities  with respect to our common
stock  for a period  of two  business  days  prior to the  commencement  of such
distribution.  In addition,  we have advised the selling  shareholders that they
will be subject to applicable  provisions of the Exchange Act and the associated
rules and regulations  under the Exchange Act,  including the  anti-manipulation
rules under  Regulation M promulgated  under the Exchange Act, which  provisions
may limit the timing of purchases and sales of shares of our common stock by the
selling  shareholders.  We will make copies of this prospectus  available to the
selling  shareholders and we have informed the selling  shareholders of the need
for delivery of copies of this  prospectus to purchasers at or prior to the time
of any sale of the shares.

We will bear all costs, expenses and fees in connection with the registration of
the shares and will  supplement and amend this  prospectus  from time to time as
may be required under the Securities  Act.  During any time when a supplement or
amendment is required,  the selling shareholders will be required to cease sales
of the  shares  covered  by this  prospectus  until  this  prospectus  has  been
supplemented or amended.

Each  selling  shareholder  will bear all  commissions  and  discounts,  if any,
attributable to the sales of its shares.  Each selling  shareholder may agree to
indemnify any broker-dealer or agent that participates in transactions involving
sales of the shares against certain liabilities,  including  liabilities arising
under the Securities Act.

                          DESCRIPTION OF CAPITAL STOCK

Our authorized  capital stock consists of 500,000,000 shares of common stock, no
par  value,  and  35,000,000  shares  of  preferred  stock.  We  currently  have
outstanding  401,853,232  shares of common stock,  2,790,000  shares of Series A
Stock and 1,217,196 shares of Series B Stock.

                                      -47-

Common Stock

Voting Rights. Each outstanding share of common stock is entitled to one vote on
all matters submitted to a vote of our  shareholders,  including the election of
directors.

Dividends. Subject to the preferential dividend rights of the Series A Stock and
Series B Stock, holders of common stock are entitled to receive dividends at the
same rate if and when  dividends  are declared by our board of directors  out of
assets legally available for the payment of dividends.

Liquidation.  In the  event of a  liquidation,  dissolution  or  winding  up our
affairs,  whether voluntary or involuntary,  after payment of our debts or other
liabilities and making  provisions for the holders of the outstanding  shares of
preferred  stock as described  below,  our remaining  assets will be distributed
ratably among the holders of shares of common stock.

Rights  and  Preferences.  Our  common  stock  has  no  preemptive,  redemption,
conversion or subscription rights. The rights, powers, references and privileges
of holders of common stock are subject to, and may be adversely affected by, the
rights of the  holders  of shares of any series of  preferred  stock that we any
designate and issue in the future.

Fully Paid and  Nonassessable.  All of our  outstanding  shares of common stock,
including  the  shares   offered  by  this   prospectus,   are  fully  paid  and
nonassessable.


Preferred Stock

Voting Rights. Except with respect to the election of directors and as otherwise
provided  by law,  the Series B Stock,  the Series A Stock and the Common  Stock
vote together on all matters submitted to a vote of our shareholders. Until such
time as fifty percent (50%) of the Series B Stock shares  originally  issued and
outstanding  have been  redeemed by Enova or converted  into Common  Stock,  the
holders of the Series B Stock,  voting  separately  as a class,  are entitled to
elect two members of our board of directors. The remaining directors are elected
by the holders of the Common Stock and the Series A Stock  voting  together as a
single class on an as-converted basis.

Until such time as fifty percent  (50%) of the Series B Stock shares  originally
issued and  outstanding  have been  redeemed by Enova or  converted  into Common
Stock,  the  authorized  number of directors may not exceed  eleven  without the
consent of the holders of a majority of the  outstanding  shares of the Series B
Stock.

In addition to the voting rights  described  above, so long as any shares of the
Series B Stock are outstanding,  the Company cannot, without first obtaining the
affirmative  vote or  written  consent  of  holders  of a  majority  of the then
outstanding shares of the Series B Stock alter or change the rights, preferences
or privileges of the Series B Stock, increase the authorized number of shares of
the Series B Stock,  increase the authorized number of shares of preferred stock
or create any new class or series of shares having preference over or being on a
parity with the Series B Stock.

Dividends.  In preference to any declaration or payment of dividends (other than
dividends  payable in Common Stock) to the holders of the Series A Stock and the
Common   Stock,   the  holders  of  Series  B  Stock  are  entitled  to  receive
non-cumulative  cash  dividends  in an amount  equal to 7% of $2.00 per share of
Series B Stock per annum  when and if  dividends  are  declared  by our board of
directors out of assets legally available for the payment of dividends.

In preference to any  declaration or payment of dividends  (other than dividends
payable in Common Stock) to the holders of the Common Stock,  the holders of the
Series A Stock are  entitled  to  receive,  when and if declared by our board of
directors  out of  assets  legally  available  for  the  payment  of  dividends,
non-cumulative  cash  dividends  in cash in an  amount  equal to 6% of $0.60 per
share of Series A Stock per annum.

If a dividend is declared on the Series A Stock and the Series B Stock,  and the
amount  available for payment  thereof is  insufficient to permit the payment in
full of the  preferential  amounts to those holders,  then the amount  available
will be distributed  ratably among the holders of the Series B Stock first until
their  preferential  amount is paid in full.  If there is any  remaining  amount
available for distribution,  such amount would then be distributed ratably among
the  holders of the Series A Stock until  their  preferential  amount is paid in
full. Thereafter,  the holders of the Common Stock are entitled to receive (when
and if declared by the board of directors)  non-cumulative  cash dividends in an
amount  equal to the  as-converted  per share  amount paid to the Series A Stock
holders.

                                      -48-

After the holders of the Series B Stock, the Series A Stock and the Common Stock
have been paid the foregoing dividends in full, then the holders of the Series B
Stock,  the  Series A Stock and the  Common  Stock  will  share  ratably  in any
additional dividends during a fiscal year on an as-converted basis.

If the Company  declares a distribution  payable in securities of other persons,
evidences of  indebtedness  issued by the Company or any other  persons,  assets
(excluding  cash dividends) or options or rights to purchase any such securities
or  evidences  of  indebtedness,  then the holders of the Series A Stock and the
holders of the Series B Stock will be entitled to a proportionate  share of that
distribution on an as-converted basis.

Liquidation.  In the event of any liquidation,  dissolution or winding up of the
affairs of the Company, voluntarily or involuntarily, after payment or provision
for payment of all our debts, liabilities and obligations, the holders of Series
A Stock and the holders of the Series B Stock will  simultaneously  be paid, out
of the assets available for  distribution to shareholders,  prior to any payment
made in respect of the Common  Stock,  an amount equal to (a) in the case of the
holders of the Series A Stock, $0.60 per share for each share of Series A Stock,
plus all dividends  declared but unpaid on such shares of Series A Stock and (b)
in the case of the holders of the Series B Stock, $2.00 per share for each share
of Series B Stock,  plus the greater of (i) 7% of $2.00  compounded  annually at
the rate of 7% for each year (or fraction of a year) after March 15, 1996,  less
any cash dividends  actually paid to the Series B Stock holders through the date
of  liquidation  or (ii) any  dividends  declared  but unpaid on such  shares of
Series B Stock.  After  payment in full to the holders of Series A Stock and the
holders of the Series B Stock  their  respective  liquidation  preferences,  the
holders of Common  Stock will be paid an amount per share equal to the per share
Series A Stock  liquidation  price paid to the  holders  of Series A Stock.  Any
remaining  assets will be  distributed to the holders of shares of Common Stock,
Series A Stock and  Series B Stock  pro rata on an  as-converted  basis.  If the
assets  available for  distribution  upon liquidation are insufficient to pay in
full the liquidation preferences,  then the remaining assets will be distributed
first  ratably  among  the  holders  of the  Series  B Stock  based  upon  their
preference  amount,  then  ratably  among the  holders of the Series A Stock and
lastly  among the  holders of the Common  Stock.  Certain  transactions  will be
deemed to be a  liquidation  event for  purposes  of  payment  of the  foregoing
liquidation  preferences,  including the sale of all or substantially all of the
assets of the Company and certain stock transactions.

Conversion Rights. The holders of the Series A Stock and the Series B Stock have
the  right to  convert  their  shares  thereof  at any time  into  shares of the
Company's  Common Stock. As of the date hereof,  each share of Series A Stock is
convertible  into one share of Common  Stock and each share of Series B Stock is
convertible into two shares of Common Stock.

Each share of Series A Stock automatically will convert into Common Stock at the
then effective conversion price for the Series A Stock upon (a) the consummation
of the sale of the Common Stock in an underwritten  public  offering  registered
under the Securities Act; or (b) the registration of the underlying Common Stock
of the  holders'  Series A Stock  under the  Securities  Act; or (c) a merger or
consolidation of the Company with or into another  corporation or a sale of more
than fifty  percent (50%) of the Company's  outstanding  voting  securities or a
sale of all or substantially all of its properties and assets.

Each share of Series B Stock automatically will convert into Common Stock at the
then effective  conversion  price for the Series B Stock upon (a) the closing of
an underwritten public offering pursuant to an effective  registration statement
under the  Securities  Act  covering  the offer and sale of shares of the Common
Stock for the Company's account (with certain exceptions) resulting in aggregate
proceeds to the Company of more than  $10,000,000 and at a per share price of at
least $0.60 per share (as  adjusted  for  subdivisions,  combinations  and stock
dividends), or (b) a merger or consolidation with or into another corporation or
a sale of the shares of the Common Stock or a sale of all or  substantially  all
of the Company's assets in which the gross cash proceeds received by the Company
are at least $10,000,000 in cash or marketable securities.

There will be  appropriate  adjustments  made in the  conversion  prices for the
Series A Stock  and the  Series B Stock in the  event of stock  splits,  reverse
stock splits, and certain stock dividends or distributions.

Except upon the automatic conversion of the Series A Stock or Series B Stock, as
the case may be, if, at any time,  there occurs any dividend or  distribution of
securities  of the  Company  other  than  shares of Common  Stock (or  rights or
options  to  purchase  Common  Stock),  any  reclassification,  or  exchange  of
securities (other than those described above), any capital reorganization (other
than a  recapitalization,  division of shares,  combination of shares,  or other
similar  transactions  described  above) or a merger or consolidation or sale of
all or  substantially  all of the assets of the Company,  then,  as part of that
transaction,  the Company  will make such  provision as is necessary so that the
holders  of the  outstanding  shares of Series A Stock and  Series B Stock  will
thereafter receive upon conversion of those shares the number and kind of shares


                                      -49-


of stock or other  securities  or  property  to which a holder of the  number of
shares of Common  Stock into their shares of Series A Stock an/or Series B Stock
were convertible would have been entitled in connection with such transaction.

Fully Paid and  Nonassessable.  All of our outstanding shares of preferred stock
are fully paid and nonassessable.

Additional  Preferred Stock.  Our board of directors has the authority,  without
action by our  shareholders,  to provide for the issuance of preferred  stock in
one or more  classes or series and to  designate  the  rights,  preferences  and
privileges of each class or series,  which may be greater than the rights of the
common  stock.  We cannot  predict  the effect of the  issuance of any shares of
preferred  stock upon the rights of holders of the common  stock until the board
of  directors  determines  the specific  rights of the holders of the  preferred
stock. However, the effects could include one or more of the following:

     o    restricting dividends on the common stock;

     o    diluting the voting power of the common stock;

     o    impairing the liquidation rights of the common stock; or

     o    delaying  or  preventing  a change in control  of us  without  further
          action by the shareholders.

We have no present plans to issue any additional shares of preferred stock.


Warrants

As of June 22,  2004,  there were  outstanding  warrants to  purchase  2,500,000
shares of common stock at an average  exercise price of $0.29 per share (subject
to adjustment for certain anti-dilutive issuances).

Registration Rights

The warrants described above have so called "Piggyback"  registration rights. If
we at any time propose to file on our behalf or on behalf of any of our security
holders a registration  statement under the Securities Act on any form and other
than a registration  statement on Form S-4 or S-8 for any class that is the same
or similar to the warrants, we must give written notice of the proposed offering
to the warrant  holders at least  thirty (30) days before the initial  filing of
such  registration  statement,  and offer to include the warrant  holders in the
proposed offering.

We  have  entered  into  a  Registration   Rights  Agreement  with  the  selling
shareholders.  Under the terms of that  Agreement,  we agreed to use  reasonable
efforts to register the shares covered by this  prospectus  within 180 days from
the sale date (or by late September  2004).  Under the terms of the Registration
Rights  Agreement,  we agreed to indemnify  the selling  shareholders  and their
directors,  officers,  partners, agents, and any person controlling any of those
persons under certain  circumstances  relating to the registration of the shares
covered by this prospectus and the selling  shareholders  agreed to indemnify us
and our controlling  persons,  officers who sign the  registration  statement of
which this prospectus forms a part and our directors under certain circumstances
relating to the registration of the shares covered by this prospectus.


Transfer Agent and Registrar

Computershare Investor Services, Inc. serves as our transfer agent and registrar
for our common stock.

Currently  154,180,500  shares  of  common  stock  are  freely  tradable  and an
additional  5,224,500 shares of Series A Stock or Series B Stock would be freely
tradable  upon   conversion  to  common  stock.   Approximately   an  additional
247,672,700  shares of common stock are  eligible for sale in the public  market
subject to volume restrictions of Rule 144 and 15,594,288 shares of common stock
issuable upon exercise of outstanding  options will become freely  tradable upon
issuance.

                         SHARES ELIGIBLE FOR FUTURE SALE

Future sales of our common stock,  and the  availability of our common stock for
sale,  may  depress  the  market  price  for  our  common  stock.  Approximately
154,180,500  shares of our common stock currently are freely tradable,  of which
35,500,000  shares are currently  subject to the volume  limitations of Rule 144
discussed below. All of the shares sold in this offering will be freely tradable
except for any shares  purchased by our affiliates.  In addition,  approximately


                                      -50-


263,267,000  shares of our  common  stock  previously  issued  or upon  issuance
pursuant to the exercise of options  granted under our stock option plans may be
resold in reliance on Rule 144, as discussed  below.  All other shares of common
stock  outstanding  as of the date hereof are  restricted  or subject to lock-up
agreements.  These other shares will be available  for sale in the public market
as follows:

In  general,  under  Rule  144,  as  currently  in  effect,  a  person  who  has
beneficially  owned  shares of our  common  stock for at least one year would be
entitled to sell within any three-month  period a number of shares that does not
exceed the greater of:

     o    1% of the  number of shares of common  stock then  outstanding,  which
          will equal approximately shares immediately after this offering; or

     o    the average  weekly trading volume of the common stock during the four
          calendar  weeks  preceding  the  filing  of a notice  on Form 144 with
          respect to the sale.

Sales under Rule 144 are also  subject to manner of sale  provisions  and notice
requirements and to the availability of current public information about us.

Under Rule 144(k), a person who is not deemed to have been one of our affiliates
at any time during the 90 days preceding a sale, and who has beneficially  owned
the shares  proposed  to be sold for at least two years,  including  the holding
period of any prior  owner  other than an  affiliate,  is  entitled  to sell the
shares without  complying with the manner of sale,  public  information,  volume
limitation or notice provisions of Rule 144.

We filed a Registration Statement on Form S-8 registering shares of common stock
subject to the 1996 Plan.  As of June 22,  2004,  options to purchase a total of
15,594,288 shares were outstanding and 8,973,000 shares were reserved for future
issuance under our stock option plans.  Options to purchase 15,368,177 shares of
common stock are vested and available for immediate resale in the open market.

                                  LEGAL MATTERS

The validity of the shares of common stock being  offered will be passed upon by
Reed Smith, LLP, Oakland, California.

                                     EXPERTS

The financial  statements as of and for the years ended December 31, 2003,  2002
and 2001 included in this prospectus and in the registration statement have been
audited by Singer  Lewak  Greenbaum  &  Goldstein,  LLP and by Moss  Adams,  LLP
independent certified public accountants,  to the extent and for the periods set
forth  in their  reports  appearing  elsewhere  herein  and in the  registration
statement.


                       WHERE YOU CAN GET MORE INFORMATION


We are subject to the  reporting  requirements  of the  Exchange Act of 1934 and
file reports and other  information  statements with the Securities and Exchange
Commission.  We have  filed  with  the  Securities  and  Exchange  Commission  a
registration  statement on Form S-1 under the Securities Act with respect to the
shares of common stock being offered.  This  prospectus  does not contain all of
the information described in the registration statement and the related exhibits
and schedules.  For further  information with respect to us and the common stock
being offered,  reference is made to the registration  statement and the related
exhibits and schedule.  Reports and other  information  filed by us, including a
copy of the registration  statement and the related exhibits and schedule may be
inspected  without charge at the public reference  facilities  maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington,  D.C. 20549, and at
the Commission's regional offices located at the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago,  Illinois 60661 and 233 Broadway,  New
York,  New  York  10279,  and  copies  of all or any  part  of the  registration
statement  may be  obtained  from  these  offices  upon the  payment of the fees
prescribed  by the  Commission.  Information  on  the  operation  of the  Public
Reference Room may be obtained by calling the Commission at 1-800-SEC-0330.  The
Commission  maintains  a World Wide Web site that  contains  reports,  proxy and
information  statements and other  information  regarding  registrants that file
electronically   with   the   Commission.   The   address   of   the   site   is
http://www.sec.gov.


We intend to provide our shareholders with annual reports  containing  financial
statements  audited  by an  independent  accounting  firm  and to file  with the
Commission  quarterly reports containing  unaudited financial data for the first
three quarters of each year.

                                      -51-


                          INDEX TO FINANCIAL STATEMENTS


                                                                            Page
                                                                            ----
INDEPENDENT AUDITOR'S REPORT.................................................F-1

BALANCE SHEETS AT DECEMBER 31, 2003 AND 2002.................................F-3

STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
         DECEMBER 31, 2003, 2002 AND 2001....................................F-6

STATEMENTS OF STOCKHOLDERS' EQUITY FOR
         THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001....................F-7

STATEMENTS OF CASH FLOWS FOR THE YEARS
         ENDED DECEMBER 31, 2003, 2002 AND 2001.............................F-11

NOTES TO FINANCIAL STATEMENTS  .............................................F-13


BALANCE SHEET AT MARCH 31, 2004 (UNAUDITED)..................................Q-1

STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
         ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)...........................Q-2

STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
         ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)...........................Q-3

NOTES TO FINANCIAL STATEMENTS  ..............................................Q-5



                                      -52-



                                                             ENOVA SYSTEMS, INC.
                                                            FINANCIAL STATEMENTS
                                                             FOR THE YEARS ENDED
                                               DECEMBER 31, 2003, 2002, AND 2001




                                                             ENOVA SYSTEMS, INC.
                                                                        CONTENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------
                                                                            Page

INDEPENDENT AUDITOR'S REPORTS                                         F-1 to F-2

FINANCIAL STATEMENTS

     Balance Sheets                                                   F-3 to F-5

     Statements of Operations                                                F-6

     Statements of Stockholders' Equity                              F-7 to F-10

     Statements of Cash Flows                                       F-11 to F-12

     Notes to Financial Statements                                  F-13 to F-26

SUPPLEMENTAL INFORMATION

     Independent Auditor's Report on Financial Statement Schedule           S-2

     Valuation and Qualifying Accounts - Schedule II                        S-3




SLGG
                      SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
           Certified Public Accountants and Management Consultants
           www.slgg.com   Los Angeles    Orange County     Ontario


            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
Enova Systems, Inc.


We have audited the  accompanying  balance  sheet of Enova  Systems,  Inc. as of
December 31,  2003,  and the related  statements  of  operations,  stockholders'
equity, and cash flows for the year then ended.  These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the 2003 financial statements referred to above present fairly,
in all material respects,  the financial  position of Enova Systems,  Inc. as of
December 31, 2003,  and the results of its operations and its cash flows for the
year then ended in conformity with accounting  principles  generally accepted in
the United States of America.


/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
------------------------------------------
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 25, 2004


                                      F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Stockholders and Board of Directors
Enova Systems, Inc.


We have audited the  accompanying  balance  sheet of Enova  Systems  Inc., as of
December 31, 2002, and the statements of operations,  stockholders'  equity, and
cash flows for the two years then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall financial statement  presentation.  We believe our audits
provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Enova  Systems,  Inc., as of
December 31, 2002,  and the results of its operations and cash flows for the two
years then ended, in conformity with accounting principles generally accepted in
the United States of America.

                                            /s/ MOSS ADAMS LLP

Santa Rosa, California
February 24, 2003


                                      F-2

                                                             ENOVA SYSTEMS, INC.
                                                                  BALANCE SHEETS
                                                                    December 31,
--------------------------------------------------------------------------------


                                       ASSETS
                                                           2003           2002
                                                       ----------     ----------
Current assets
  Cash and cash equivalents                            $  530,000     $1,868,000
  Accounts receivable                                     803,000      1,256,000
  Inventories and supplies                              1,606,000      1,652,000
  Note receivable - related party                           8,000         32,000
  Prepaid expenses and other current assets                78,000        107,000
                                                       ----------     ----------

    Total current assets                                3,025,000      4,915,000

Property and equipment, net                               481,000        811,000
Investment                                                960,000           --
Other assets                                              404,000        498,000
                                                       ----------     ----------
Total assets                                           $4,870,000     $6,224,000
                                                       ==========     ==========

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


                                         F-3


                                                             ENOVA SYSTEMS, INC.
                                                                  BALANCE SHEETS
                                                                    December 31,
--------------------------------------------------------------------------------

                        LIABILITIES AND STOCKHOLDERS' EQUITY

                                                            2003         2002
                                                         ----------   ----------
Current liabilities
  Accounts payable                                       $  768,000   $1,192,000
  Line of credit                                            120,000       14,000
  Accrued payroll and related expenses                      120,000      240,000
  Other accrued expenses                                     98,000       95,000
  Current portion of notes payable                          131,000      120,000
  Current portion of capital lease obligations               23,000       28,000
                                                         ----------   ----------

    Total current liabilities                             1,260,000    1,689,000

Accrued interest payable                                  1,122,000      889,000
Capital lease obligations, net of current portion             5,000       27,000
Notes payable, net of current portion                     3,347,000    3,332,000
                                                         ----------   ----------

      Total liabilities                                   5,734,000    5,937,000
                                                         ----------   ----------

Commitments and contingencies


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



                                      F-4



                                                             ENOVA SYSTEMS, INC.
                                                                  BALANCE SHEETS
                                                                    December 31,
--------------------------------------------------------------------------------

                  LIABILITIES AND STOCKHOLDERS' EQUITY (Continued)



                                                                    2003           2002
                                                                ------------    ------------
                                                                          
Stockholders' equity
  Series A convertible preferred stock, no par value
    30,000,000 shares authorized
    2,820,000 and 2,824,000 shares issued and
    outstanding
  Liquidating preference at $0.60 per share, aggregating
    $1,692,000 and $1,706,000                                   $  1,837,000       1,842,000
  Series B convertible preferred stock, no par value
    5,000,000 shares authorized
    1,217,000 shares issued and outstanding
    Liquidating preference at $2 per share, aggregating
       2,434,000                                                   2,434,000       2,434,000
  Common stock, no par value
    500,000,000 shares authorized
    378,341,000 and 345,194,000 shares issued and outstanding     86,054,000      84,026,000
  Common stock subscribed                                             60,000         130,000
  Stock notes receivable                                          (1,203,000)     (1,203,000)
  Additional paid-in capital                                       7,031,000       6,949,000
  Accumulated deficit                                            (97,077,000)    (93,891,000)
                                                                ------------    ------------

      Total stockholders' equity                                    (864,000)        287,000
                                                                ------------    ------------

Total liabilities and stockholders' equity                      $  4,870,000    $  6,224,000
                                                                ============    ============


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



                                      F-5



                                                             ENOVA SYSTEMS, INC.
                                                        STATEMENTS OF OPERATIONS
                                                For the Years Ended December 31,
--------------------------------------------------------------------------------



                                             2003               2002            2001
                                         -------------    -------------    -------------
                                                                  
Net revenues
  Research and development contracts     $   1,889,000    $   1,843,000    $   2,813,000
  Production                                 2,421,000        2,612,000          967,000
                                         -------------    -------------    -------------

    Total net revenues                       4,310,000        4,455,000        3,780,000
                                         -------------    -------------    -------------

Cost of revenues
  Research and development contracts         1,326,000        1,288,000        2,149,000
  Production                                 1,978,000        2,496,000          634,000
                                         -------------    -------------    -------------

    Total cost of revenues                   3,304,000        3,784,000        2,783,000
                                         -------------    -------------    -------------

Gross profit                                 1,006,000          671,000          997,000

Other costs and expenses
  Research and development                     799,000        1,152,000          879,000
  Selling, general, and administrative       2,919,000        2,837,000        2,894,000
  Interest and financing fees, net             234,000          199,000          113,000
  Loss on disposal of property and
    equipment                                     --               --             (7,000)
  Equity in losses                              40,000             --               --
  Asset impairement                            200,000             --               --
  Legal settlements                               --             81,000          900,000
                                         -------------    -------------    -------------

    Total other costs and expenses           4,192,000        4,269,000        4,779,000
                                         -------------    -------------    -------------


Loss from continuing operations             (3,186,000)      (3,598,000)      (3,782,000)

Extraordinary item
  Gain on debt restructuring                      --               --            354,000
                                         -------------    -------------    -------------

Net loss                                 $  (3,186,000)   $  (3,598,000)   $  (3,428,000)
                                         =============    =============    =============

Basic loss and diluted per share
  Loss from continuing operations        $       (0.01)   $       (0.01)   $       (0.01)
  Gain on debt restructuring                      --               --                --
                                         -------------    -------------    -------------

Total basic and diluted loss per share   $       (0.01)   $       (0.01)   $       (0.01)
                                         =============    =============    =============

Weighted-average number of
  shares outstanding                       334,839,700      326,390,422      275,188,979
                                         =============    =============    =============



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



                                      F-6




                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                                  STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                                                    For the Years Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                             --------------------------------------------------                                  Common Stock
                                   Series A                   Series B                 Common Stock               Subscribed
                             ----------------------    -----------------------   -------------------------   -----------------------
                               Shares      Amount       Shares       Amount       Shares         Amount       Shares       Amount
                             ---------   -----------   ---------   -----------  -----------   ------------  ----------    ---------

                                                                                                  
Balance, December 31,
  2000                       2,844,000   $ 1,867,000   1,217,000   $ 2,434,000  244,249,000   $ 75,680,000      45,000    $  13,000
Issuance of common
  stock for
    Exercise of warrants        --          --              --         --        50,000,000      3,000,000         --           --
    Exercise of options         --          --              --         --         1,805,000        181,000         --           --
    Services                    --          --              --         --           448,000         98,000     955,000      147,000
    Legal settlement            --          --              --         --         6,000,000        900,000         --           --
Warrants issued for
  value participation
  agreement                     --          --              --         --             --              --           --           --
Net loss                        --          --              --         --             --              --           --           --
                             ---------   -----------   ---------   -----------  -----------   ------------  ----------    ---------


Balance, December 31,
  2001                       2,844,000     1,867,000   1,217,000     2,434,000   302,502,000    79,859,000   1,000,000      160,000
Conversion of Series
  A preferred stock            (20,000)      (25,000)       --         --             20,000        25,000
Issuance of common
  stock for
    Cash, net of offering
      costs of $206,000                                                           41,100,000     3,904,000   1,000,000      100,000
    Exercise of options                                                               30,000         3,000         --           --
    Services                                                                       1,242,000       190,000    (628,000)    (130,000)
    Legal settlement                                                                 300,000        45,000         --           --
Stock notes receivable         --          --              --         --             --              --           --           --
Net loss                       --          --              --         --             --              --           --           --
                             ---------   -----------   ---------   -----------  -----------   ------------  ----------    ---------




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



                                      F-7





                                                                            ENOVA SYSTEMS, INC.
                                                            STATEMENTS OF STOCKHOLDERS' EQUITY
                                                              For the Years Ended December 31,
----------------------------------------------------------------------------------------------


                                    Stock         Additional
                                    Notes          Paid-In      Accumulated
                                 Receivable       Capital        Deficit          Total
                                ------------    -----------   -------------    ------------

                                                                   
Balance, December 31,
  2000                          $ (1,149,000)   $ 6,372,000   $ (86,865,000)   $ (1,648,000)
                                ============    ===========   =============    ============
Issuance of common
  stock for
    Exercise of warrants               --            --            --             3,000,000
    Exercise of options              (59,000)        --            --               122,000
    Services                           --            --            --               245,000
    Legal settlement                   --            --            --               900,000
Warrants issued for
  value participation
  agreement                            --           577,000        --               577,000
Net loss                               --            --          (3,428,000)     (3,428,000)
                                ------------    -----------   -------------    ------------


Balance, December 31,
  2001                            (1,208,000)     6,949,000     (90,293,000)       (232,000)
Conversion of Series
  A preferred stock
Issuance of common
  stock for
    Cash, net of offering
      costs of $206,000                --            --            --             4,004,000
    Exercise of options                --            --            --                 3,000
    Services                           --            --            --                60,000
    Legal settlement                   --            --            --                45,000
Stock notes receivable                 5,000         --            --                 5,000
Net loss                               --            --          (3,598,000)     (3,598,000)
                                ============    ===========   =============    ============


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



                                      F-8







                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                                  STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                                                    For the Years Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                     Convertible Preferred Stock
                            --------------------------------------------------                                  Common Stock
                                  Series A                   Series B                 Common Stock               Subscribed
                            ----------------------    -----------------------   -------------------------   -----------------------
                              Shares      Amount       Shares      Amount        Shares         Amount       Shares       Amount
                            ---------   -----------   ---------  -----------   -----------   ------------  ----------    ---------

                                                                                                   
Balance, December 31,
  2002                      2,824,000   $ 1,842,000   1,217,000  $ 2,434,000   345,194,000   $ 84,026,000    1,372,000    $ 130,000
                            =========   ===========   =========  ===========   ===========   ============    =========    =========
Conversion of Series
  A preferred stock            (4,000)       (5,000)       --        --              4,000          5,000          --           --
Issuance of common
  stock for
    Cash                       --          --              --        --         23,077,000      1,500,000          --           --
    Issuance of subscribed
      common stock             --          --              --        --          1,000,000        100,000   (1,000,000)    (100,000)
    Exercise of options        --          --              --        --          8,694,000        398,000          --           --
    Stock option               --          --              --        --                --             --           --           --
    Services                   --          --              --        --            372,000         34,000      754,000       30,000
Net loss                       --          --              --        --                --             --           --           --
                            ---------   -----------   ---------  -----------   -----------   ------------    ---------    ---------

Balance, December 31,
  2003                      2,820,000   $ 1,837,000   1,217,000  $ 2,434,000   378,341,000   $ 86,054,000    1,126,000     $ 60,000
                            =========   ===========   =========  ===========   ===========   ============    =========    =========



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



                                      F-9







                                                                           ENOVA SYSTEMS, INC.
                                                            STATEMENTS OF STOCKHOLDERS' EQUITY
                                                              For the Years Ended December 31,
----------------------------------------------------------------------------------------------


                                  Stock         Additional
                                  Notes          Paid-In      Accumulated
                               Receivable       Capital        Deficit          Total
                              ------------    -----------   -------------    ------------

                                                                    
Balance, December 31,
  2002                         $ (1,203,000)   $ 6,949,000     $ (93,891,000)   $     287,000
Conversion of Series
  A preferred stock                   --            --              --                    --
Issuance of common
  stock for
    Cash                              --            --              --              1,500,000
    Issuance of subscribed
      common stock                    --            --              --                    --
    Exercise of options               --            --              --                389,000
    Stock option                      --           82,000           --                 82,000
    Services                          --            --              --                 64,000
Net loss                              --            --            (3,186,000)      (3,186,000)
                               ------------    -----------     -------------    -------------

Balance, December 31,
  2003                         $ (1,203,000)   $ 7,031,000     $ (97,077,000)   $    (864,000)
                               ============    ===========     =============    =============




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



                                      F-10





                                                                      ENOVA SYSTEMS, INC.
                                                                 STATEMENTS OF CASH FLOWS
                                                          For the Years Ended December 31,
-----------------------------------------------------------------------------------------

                                                   2003            2002            2001
                                                -----------    -----------    -----------
                                                                     
Cash flows from operating activities            $(3,186,000)   $(3,598,000)   $(3,428,000)
   Net loss
   Adjustments to reconcile net loss
    to net cash used in operating  activities
      Depreciation and amortization                 351,000        134,000        205,000
      Bad debt expense                              595,000           --              --
      Provision for asset impairment                200,000           --              --
      Equity in losses                               40,000           --              --
      Gain on debt restructuring                       --             --         (210,000)
      Issuance of common stock for
        services                                     34,000         60,000        245,000
      Issuance of common stock for
        legal settlement                                --          45,000        900,000
      (Increase) decrease in
        Accounts receivable                        (138,000)       (19,000)      (233,000)
        Inventories and supplies                     48,000       (727,000)      (520,000)
        Related party receivable                     24,000         25,000         25,000
        Prepaid expenses and other
          current assets                             29,000        (20,000)       (19,000)
        Other assets                                (14,000)        76,000        (39,000)
      Increase (decrease) in
        Accounts payable and
          accrued expenses                         (536,000)     1,112,000       (112,000)
        Accrued interest payable                    234,000        212,000        163,000
                                                -----------    -----------    -----------

Net cash used in operating activities            (2,319,000)    (2,700,000)    (3,023,000)
                                                -----------    -----------    -----------
Cash flows from investing activities
  Purchase of property and equipment               (113,000)      (613,000)      (219,000)
                                                -----------    -----------    -----------

Net cash used in investing activities              (113,000)      (613,000)      (219,000)
                                                -----------    -----------    -----------


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



                                      F-11





                                                                              ENOVA SYSTEMS, INC.
                                                                         STATEMENTS OF CASH FLOWS
                                                                 For the Years Ended December 31,
-------------------------------------------------------------------------------------------------
                                                           2003           2002          2001
                                                       -----------    -----------    -----------
                                                                            
Cash flows from financing activities
  Net increase from line of credit                     $   106,000    $    14,000    $      --
  Payments on notes payable and
    capital lease obligations                               (1,000)       (24,000)       (11,000)
  Proceeds from sale of common stock                       600,000      4,210,000           --
  Offering costs                                              --         (206,000)          --
  Proceeds from exercise of warrants and options           389,000          3,000      3,122,000
  Payments on stock notes receivable                          --            5,000           --
                                                       -----------    -----------    -----------

Net cash provided by financing activities                1,094,000      4,002,000      3,111,000
                                                       -----------    -----------    -----------

Net increase (decrease) in cash and cash equivalents    (1,338,000)       689,000       (131,000)

Cash and cash equivalents, beginning of year             1,868,000      1,179,000      1,310,000
                                                       -----------    -----------    -----------

Cash and cash equivalents, end of year                 $   530,000    $ 1,868,000    $ 1,179,000
                                                       ===========    ===========    ===========

Supplemental disclosures of cash flow information
  Interest paid                                        $     9,000    $     8,000    $     5,000
                                                       ===========    ===========    ===========
  Income taxes paid                                    $      --      $      --      $      --
                                                       ===========    ===========    ===========

Supplemental schedule of non-cash
  investing and financing activities

Equipment acquired under capital lease agreements      $      --      $    52,000    $      --
                                                       ===========    ===========    ===========

Conversion of preferred stock to common stock          $     5,000    $    25,000    $      --
                                                       ===========    ===========    ===========

Acquired investment under common stock purchase        $ 1,000,000    $      --      $      --
                                                       ===========    ===========    ===========


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



                                      F-12


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS

         General
         -------
         Enova Systems,  Inc. (the "Company") is a California  corporation  that
         develops  drive  trains and related  components  for  electric,  hybrid
         electric, and fuel cell systems for mobile and stationary applications.
         The Company retains development and manufacturing rights to many of the
         technologies   created,   whether  such  research  and  development  is
         internally  or  externally  funded.  The  Company  develops  and  sells
         components  in the United  States  and Asia,  and sells  components  in
         Europe.

         Liquidity
         ---------
         At  December  31,  2003,  the  Company  had a net  working  capital  of
         approximately  $1,765,000 as compared  to  $3,226,000  at December  31,
         2002,  representing  a decrease  of  $1,461,000.  This  decrease is due
         mostly to losses from  operations.  Operating and investing  activities
         used  approximately  $2,306,000  and  $113,000,   respectively,   while
         financing activities provided $1,094,000.

         During the year ended  December  31,  2003,  the  Company  reduced  its
         headcount and other  administrative  expenses.  The Company anticipates
         realizing the full impact of expense  reductions in 2004. The Company's
         business plan for 2004 provides for raising additional capital in order
         to continue with the Company's  operations until it becomes profitable.
         The Company will also  continue to search for areas in which to further
         reduce expenses and increase sales.

         In  addition,  additional  payment of $500,000 is expected in June 2004
         from HHI under the stock purchase  agreement  (Note 1), which will help
         the Company to fund its operations.

         See Note 15 for additional funding.

         Stock Purchase Agreement
         ------------------------
         The Company has entered into a joint venture  agreement (the Agreement)
         with  Hyundai  Heavy  Industries  of Korea  ("HHI")  to  create a joint
         venture corporation,  Hyundai-Enova  Innovative  Technology Center (the
         "ITC") to be domiciled in Torrance,  California.  In  conjunction  with
         this  Agreement,  HHI and the  Company  entered  into a stock  purchase
         agreement  in which HHI agreed to make a $3 million  investment  in the
         Company through the purchase of shares of the Company's  authorized and
         unissued common stock pursuant to Regulation D of the Securities Act of
         1933.  This  investment  was to be  made  in two  installments  of $1.5
         million each. The first installment was made upon  incorporation of the
         ITC and in  consideration  for the  issuance  to HHI by the  Company of
         23,076,923 shares of common stock at $0.065 per share.




                                      F-13


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------


NOTE 1 - ORGANIZATION AND LINE OF BUSINESS (Continued)

         Stock Purchase Agreement (Continued)
         ------------------------
         The second  installment of $1.5 million will be made one year after the
         first   installment  in  consideration  for  the  issuance  to  HHI  of
         additional  shares of the  Company's  common stock at a price per share
         equal  to the  average  daily  volume  weighted  closing  price  of the
         Company's  common  stock,  as  quoted  on the  NASDAQ  OTC  market  (or
         successor  trading  market) for the three month  period  preceding  the
         closing date of the second installment.

         The Company  agreed to invest $1 million of each  installment  into the
         [VC in  consideration  for the  issuance to the Company of a 40% equity
         interest in the ITC (the balance of the installments,  in the amount of
         $500,000  each,  is to be  retained by Enova).  HHI will  acquire a 60%
         equity  interest  in ITC by  investing  $3  million  in the  ITC in two
         installments of $1.5 million each, to be made concurrently with the two
         installment  payments to be paid by HHI for the Company's common stock.
         At the conclusion of these transactions,  HHI and the Company will have
         invested an aggregate of $5 million in the ITC.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Revenue Recognition
         -------------------
         Revenue on  engineering  and  research  and  development  contracts  is
         recognized  at the  completion  of  specified  engineering  or  billing
         milestones,  as set forth in each  agreement.  Revenues  from  sales of
         components  are  recognized  when  shipped  and  title  passes  to  the
         customer.

         Comprehensive Income
         --------------------
         The  Company  utilizes  Statement  of  Financial  Accounting  Standards
         ("SFAS") No. 130,  "Reporting  Comprehensive  Income."  This  statement
         establishes  standards  for  reporting  comprehensive  income  and  its
         components in a financial  statement.  Comprehensive  income as defined
         includes  all  changes  in equity  (net  assets)  during a period  from
         non-owner  sources.  Examples of items to be included in  comprehensive
         income,  which are excluded from net income,  include foreign  currency
         translation  adjustments,  minimum pension liability  adjustments,  and
         unrealized   gains  and   losses  on   available-for-sale   securities.
         Comprehensive  income  is  not  presented  in the  Company's  financial
         statements  since the  Company  did not have any changes in equity from
         non-owner sources.

         Cash and Cash Equivalents
         -------------------------
         Highly liquid  investments with an original maturity of three months or
         less are considered cash equivalents.




                                      F-14


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Accounts Receivable
         -------------------
         Receivables  are reported at net  realizable  value and are  considered
         past due when  payments have not been received for 90 days. In general,
         receivables  are  charged  off as  uncollectible  upon  exhausting  all
         avenues of collection.  Receivables older than 90 days totaled $678,000
         (of which $595,000 have been reserved for) and $365,000 at December 31,
         2003 and 2002, respectively.

         Inventories and Supplies
         ------------------------
         Inventories  and supplies are comprised of materials used in the design
         and  development  of  electric,  hybrid  electric,  and fuel cell drive
         systems,  and other power and ongoing management and control components
         for production and ongoing development contracts,  and is stated at the
         lower of cost (first-in, first-out) or market.

         Property and Equipment
         ----------------------
         Property and  equipment  are stated at cost and  depreciated  using the
         straight-line  method over the  estimated  useful  lives of the related
         assets,  which range from three to seven years.  Long-lived  assets are
         reviewed for  impairment  whenever  events or changes in  circumstances
         indicate  the sum of expected  cash flows from use of the asset is less
         than its carrying value.  Long-lived assets that management  commits to
         sell or abandon are  reported  at the lower of carrying  amount or fair
         value less cost to sell.

         Investment
         ----------
         Investment in joint venture (see Note 1) is accounted for by the equity
         method.

         Fair Value of Financial Instruments
         -----------------------------------
         The Company's financial  instruments include cash and cash equivalents,
         accounts  receivable and accounts payable.  The book value of all other
         financial  instruments  are  representative  of their fair values.  The
         Company's short and long term debt may be  substantially  less than the
         carrying value since there is no readily  ascertainable  market for the
         debt given the financial position of the Company.

         Stock-Based Compensation
         ------------------------
         SFAS No. 123,  "Accounting for Stock-Based  Compensation,"  establishes
         and encourages the use of the fair value based method of accounting for
         stock-based compensation  arrangements under which compensation cost is
         determined using the fair value of stock-based  compensation determined
         as of the date of grant and is recognized over the periods in which the
         related services are rendered.  The statement also permits companies to
         elect to continue using the current  implicit value  accounting  method
         specified  in  Accounting  Principles  Board  ("APB")  Opinion  No. 25,
         "Accounting  for Stock Issued to Employees," to account for stock-based
         compensation.  The Company has elected to use the intrinsic value based
         method and has  disclosed  the pro forma effect of using the fair value
         based method to account for its stock-based compensation.




                                      F-15


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Advertising Expense
         -------------------
         The Company expenses all advertising  costs,  including direct response
         advertising,  as they are incurred.  Advertising  expense for the years
         ended  December 31, 2003,  2002,  and 2001 was  $21,000,  $20,000,  and
         $32,000, respectively.

         Income Taxes
         ------------
         The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which
         requires the recognition of deferred tax assets and liabilities for the
         expected  future tax  consequences of events that have been included in
         the financial  statements or tax returns.  Under this method,  deferred
         income taxes are recognized for the tax consequences in future years of
         differences  between the tax bases of assets md  liabilities  and their
         financial  reporting amounts at each year-end based on enacted tax laws
         and  statutory  tax  rates  applicable  to the  periods  in  which  the
         differences are expected to affect taxable income. Valuation allowances
         are established,  when necessary,  to reduce deferred tax assets to the
         amount expected to be realized.

         Loss Per Share
         --------------
         The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per
         share is computed by dividing loss available to common  stockholders by
         the  weighted-average number of common shares outstanding. Diluted loss
         per share is computed  similar to basic loss per share  except that the
         denominator  is  increased to include the number of  additional  common
         shares that would have been  outstanding if the potential common shares
         had been issued and if the  additional  common  shares  were  dilutive.
         Common  equivalent  shares are excluded from the  computation  if their
         effect is anti-dilutive. The Company's common share equivalents consist
         of stock options.

         Estimates
         ---------
         The  preparation of financial  statements  requires  management to make
         estimates and  assumptions  that affect the reported  amounts of assets
         and liabilities and disclosure of contingent  assets and liabilities at
         the  date of the  financial  statements  and the  reported  amounts  of
         revenue and expenses during the reporting period.  Actual results could
         differ from those estimates.

         Concentrations of Credit Risk
         -----------------------------
         Financial   instruments  which  potentially   subject  the  Company  to
         concentrations  of credit risk consist of cash and cash equivalents and
         accounts  receivable.  The Company places its cash and cash equivalents
         with high credit, quality financial  institutions.  At times, such cash
         and cash equivalents may be in excess of the Federal Deposit  Insurance
         Corporation   insurance   limit  of  $100,000.   The  Company  has  not
         experienced  any losses in such accounts and believes it is not exposed
         to any  significant  credit  risk on cash  and cash  equivalents.  With
         respect to accounts  receivable,  the Company  routinely  assesses  the
         financial  strength of its customers  and, as a  consequence,  believes
         that the receivable credit risk exposure is limited.



                                      F-16


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Major Customers
         ---------------
         During the year ended December 31, 2003, the Company conducted business
         with four  customers  whose sales  comprised  18%, 17%, 13%, and 11% of
         total revenues.  As of December 31, 2003, these customers accounted for
         5%, 0%, 23%, and 3%, respectively, of total accounts receivable.

         During the year ended December 31, 2002, the Company conducted business
         with two customers whose sales  comprised 46% of total revenues.  As of
         December 31, 2002, these customers accounted for 24%, of total accounts
         receivable.

         In addition,  one of the Company's  stockholders accounted for 1%, 16%,
         and 13% of total  revenues  during the years ended  December  31, 2003,
         2002, and 2001,  respectively.  This stockholder  holds less than 5% of
         the total issued and  outstanding  common  stock.  Demand  deposits are
         placed with known, creditable financial institutions.


NOTE 3 - PROPERTY AND EQUIPMENT

         Property and  equipment at December 31, 2003 and 2002  consisted of the
         following:


                                                           2003          2002
                                                        ----------    ----------
      Computers                                         $  213,000    $  177,000
      Machinery and equipment                              715,000       643,000
      Furniture and office equipment                       192,000       189,000
      Demonstration vehicles and buses                     297,000       497,000
      Equipment under capital lease obligations             94,000        94,000
      Leasehold improvements                                68,000        68,000
                                                        ----------    ----------
                                                         1,579,000     1,668,000
      Less accumulated depreciation and amortization     1,098,000       857,000
                                                        ----------    ----------
         Total                                          $  481,000    $  811,000
                                                        ==========    ==========

         Depreciation  and  amortization  expense was  $241,000,  $134,000,  and
         $205,000  for the  years  ended  December  31,  2003,  2002,  and 2001,
         respectively.

NOTE 4 - INVESTMENT

         During the year ended  December  31, 2003,  the Company  formed a joint
         venture with HHI (see Note 1), whereby the Company invested  $1,000,000
         of the proceeds received from sale of common stock to HHI into ITC. The
         Company's share of income and losses is 40% as stated in the agreement.
         During the year ended December 31, 2003, the Company  recorded  $40,000
         as its proportionate share of losses in the joint venture.




                                      F-17


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------


NOTE 4 - INVESTMENT (Continued)

         The  following  is the  condensed  financial  position  and  results of
         operations of ITC, as of and for the year ended December 31, 2003:

          Financial position
              Current assets                                   $ 2,413,000
              Property and equipment, net                           12,000
              Liabilities                                          (27,000)
                                                               -----------
                 Equity                                        $ 2,398,000
                                                               ===========

          Operations
              Net revenues                                     $     6,000
              Expenses                                            (107,000)
                                                               -----------
                 Net loss                                      $  (101,000)
                                                               ===========

          Company's proportionate share of net loss            $    40,000
                                                               ===========


NOTE 5 - OTHER ASSETS

         During the year ended  December 31, 2002,  the Company  incurred  legal
         costs of $78,000  associated with two patents.  These patents have been
         capitalized and are being amortized over their estimated useful lives.

         In June 2001,  a  strategic  relationship  with Ford Motor  Company was
         entered  into to develop and  manufacture  a high power,  high  voltage
         conversion module for Ford's fuel cell vehicle. Warrants were issued to
         Ford Motor  Company in exchange for Ford's  commitment  to enter into a
         five-year  agreement.  The  issuance of the  warrants was recorded as a
         non-current  asset (Value  Participation  Agreement) at its fair market
         value of $577,000,  which was determined using the Black-Scholes option
         pricing model, and is being amortized on a straight-line basis over the
         life of the contract.

                                                  2003          2002
                                                --------      --------
         Patents                                $ 92,000      $ 78,000
         Valuation Participation Agreement       577,000       577,000
                                                --------      --------

                                                 669,000       655,000
         Less accumulated amortization           265,000       157,000
                                                --------      --------

             Total                              $404,000      $498,000
                                                ========      ========



                                      F-18


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------


NOTE 6 - LINE OF CREDIT

         The Company has available $250,000 revolving line of credit from a bank
         with interest  payable monthly at 3.25%.  The line of credit is secured
         by $250,000  Certificate of Deposit and it's maturity has been extended
         until April 2004.


NOTE 7 - NOTES PAYABLE

         Notes payable at December 31, 2003 consisted of the following:


                                                      2003           2002
                                                  ------------    ------------
         Secured note payable to Credit
           Managers Association of
           California, bearing interest at
           6% per annum during 2003 and
           2002 and at prime plus 3% per
           annum through maturity.
           Principal and unpaid interest
           at due in April 2016. A sinking
           fund escrow is required to be
           funded with 10% of future
           equity financing, as defined in
           the agreement.                          $ 3,332,000     $ 3,332,000

         Unsecured note payable, bearing
           interest at 10% per annum. This
           note payable is in default.                 120,000         120,000

         Secured note payable to a
           financial institution in the
           original amount of $33,000,
           bearing interest at 8% per
           annum, payable in 36 equal
           monthly installments.                        26,000             --
                                                  ------------    ------------

                                                     3,478,000       3,452,000
         Less current portion                          131,000         120,000
                                                  ------------    ------------

              Long-term portion                   $  3,347,000    $  3,332,000
                                                  ============    ============



                                      F-19


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------


NOTE 7 - NOTES PAYABLE (Continued)

         Future minimum principal payments of notes payable at December 31, 2003
         consisted of the following:

                  Year Ending
                  December 31,
                  ------------
                     2004                             $   131,000
                     2005                                  12,000
                     2006                                   3,000
                     2007                                     --
                     2008                                     --
                     Thereafter                         3,332,000
                                                      -----------
                                                      $ 3,478,000
                                                      ===========
NOTE 8 - COMMITMENTS AND CONTINGENCIES

         Leases
         ------
         The Company leases its facilities  under an operating lease  agreement,
         which  requires  monthly  payments  of $11,000  and expires in February
         2008. In addition, the Company rents manufacturing and office equipment
         under various capital lease agreements.

         Future minimum lease payments under these non-cancelable  operating and
         capital lease obligations at December 31, 2003 were as follows:

                Year Ending                            Operating   Capital
                December 31,                             Leases     Leases
                ------------                             ------     ------
                    2004                               $ 97,000   $ 23,000
                    2005                                155,000      8,000
                    2006                                166,000       --
                    2007                                168,000       --
                    2008                                 28,000       --
                                                       --------   --------

                                                       $614,000     31,000
                                                       ========
                Less amount representing interest          --        3,000
                                                                  --------
                                                           --       28,000

                Less current portion                       --       23,000
                                                                  --------

                Long-term portion                          --     $  5,000
                                                                  ========

         Rent expense was $150,000, $206,000, and $210,000 for the years ended
         2003, 2002, and 2001, respectively.



                                      F-20


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------


NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)

         Contingency
         -----------

         Ballard Power Systems cancelled its development and production  program
         for low voltage 30kw electric drive system components that were for use
         in Ford's  Th!nk City  vehicle.  At  December  31,  2002,  included  in
         inventories  and  supplies  was  approximately  $450,000  of  materials
         related  to this  program.  Approximately  $300,000  of  materials  and
         engineering  costs have been incurred by a subcontractor  for which the
         Company may be liable for payment.

         In  October  2003,  Enova  and  Ballard  reached  a  settlement  on all
         remaining  balances due whereas  Enova will receive  $198,125  cash and
         title to all  inventory,  raw  materials,  tooling and equipment in its
         possession that is associated with the program.  The Company intends to
         sell this  equipment and recover at least the remaining  balance of the
         receivable of approximately $173,000.


NOTE 9 - STOCKHOLDERS EQUITY

         Series A Preferred Stock
         ------------------------
         Series A preferred stock is currently unregistered and convertible into
         common  stock on a  one-to-one  basis at the  election of the holder or
         automatically upon the occurrence of certain events including:  sale of
         stock  in  an  underwritten   public  offering;   registration  of  the
         underlying conversion stock; or the merger,  consolidation,  or sale of
         more than 50% of the Company.  Holders of Series A preferred stock have
         the  same  voting  rights  as  common  stockholders.  The  stock  has a
         liquidation  preference  of $0.60 per share plus any accrued and unpaid
         dividends in the event of voluntary or  involuntary  liquidation of the
         Company. Dividends are non-cumulative and payable at the annual rate of
         $0.036 per share if, when,  and as declared by, the Board of Directors.
         No dividends have been declared on the Series A preferred stock.

         Substantially  all of the stock notes  receivable  stem from a Board of
         Directors  plan for the sale of shares of Series A  preferred  stock in
         1993 to certain officers and directors (Participants).  In general, the
         Participants  could  purchase the preferred  stock for a combination of
         cash,  promissory notes payable to the Company,  and conversion of debt
         and deferred  compensation due to the  Participants.  All shares issued
         under this plan were  pledged to the Company as security for the notes.
         The notes provided for interest at 8% per annum payable annually,  with
         the full  principal  amount and any unpaid  interest due on January 31,
         1997.  The notes remain  outstanding.  The likelihood of collecting the
         interest on these notes is remote; therefore,  accrued interest has not
         been recorded since the fiscal year ended July 31, 1997.




                                      F-21



                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------


NOTE 9 - STOCKHOLDERS EQUITY (Continued)

         Series B Preferred Stock
         ------------------------
         Series B preferred  stock is currently  unregistered  and each share is
         convertible  into shares of common stock on a two-for-one  basis at the
         election of the holder or automatically  upon the occurrence of certain
         events including:  sale of stock in an underwritten public offering, if
         the offering results in net proceeds of $10,000,000,  and the per share
         price of common stock is at least $2.00; and the merger, consolidation,
         or sale of common stock or sale of  substantially  all of the Company's
         assets in which gross proceeds received are at least $10,000,000.

         The Series B  preferred  stock has  certain  liquidation  and  dividend
         rights  prior and in  preference  to the rights of the common stock and
         Series A preferred  stock.  The stock has a  liquidation  preference of
         $2.00 per share together with an amount equal to, generally,  $0.14 per
         share compounded annually at 7% per year from the filing date, less any
         dividends  paid.   Dividends  on  the  Series  B  preferred  stock  are
         non-cumulative  and  payable at the annual  rate of $0.14 per share if,
         when,  and as declared by, the Board of  Directors.  No dividends  have
         been declared on the Series B preferred stock.

         Common Stock
         ------------
         The Company settled an outstanding lawsuit in 2001 by agreeing to issue
         6,000,000 shares of common stock,  with a fair market value on the date
         of issuance of  $900,000.  Delays in issuing the stock  resulted in the
         Company issuing an additional 300,000 shares of stock in 2002. The fair
         market value of these additional shares was $45,000.

         Stock Options and Warrants
         --------------------------
         The 1993  Employee  and  Consultant  Stock Plan expired in 2003 and all
         outstanding stock options were forfeited.

         The  Company  grants  other  non-statutory  stock  options.  Under  the
         Director Stock Option Plan, the Company  reserved  1,500,000  shares of
         common  stock  for   non-statutory   stock  options  for   non-employee
         directors.  Options  under this Plan are fully vested upon the granting
         of the  options  and  expire  ten years  from the date of grant  unless
         terminated  sooner or upon  termination of the  optionee's  status as a
         director.  Options that expire or are canceled may become available for
         future   grants  under  the  Director   Option  Plan.  No  options  are
         outstanding under this Plan.

         The 1996 Stock Option Plan reserves 45,000,000 shares for incentive and
         non-statutory  stock  options  during  the  period of the  Plan,  which
         expires in 2006.  Options  under the 1996 Plan expire over a period not
         to exceed ten years.


                                      F-22


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------



NOTE 9 - STOCKHOLDERS EQUITY (Continued)

         Stock Options and Warrants (Continued)
         --------------------------
         The following summarizes common stock option activity:




                                        1996 Plan                          1993 Plan                                 Other
                               ---------------------------        --------------------------            --------------------------
                                               Weighted-                            Weighted-                            Weighted-
                                                Average                              Average                              Average
                                                Exercise                             Exercise                            Exercise
                                Shares           Price               Shares            Price             Shares            Price
                              ----------       -----------        -----------       -----------         ----------     -------------
                                                                                                     
 Outstanding,
   December
   31, 2000                   20,465,000       $ 0.10-0.30          9,654,000       $ 0.10-0.60         1,495,000      $ 0.60 -2.80
 Granted                       7,472,000       $ 0.11-0.18               --         $       --               --        $        --
 Exercised                    (1,805,000)      $ 0.06-0.11               --         $       --               --        $        --
 Forfeited                    (5,266,000)      $ 0.11-0.30               --         $       --               --        $        --
                              ----------                          -----------                           ----------
 Outstanding,
   December
   31, 2001                   20,866,000       $ 0.10-0.30          9,654,000       $ 0.10-0.60         1,495,000      $ 0.60 -2.80
 Granted                         900,000       $      0.10               --         $       --               --        $        --
 Exercised                          --                  --            (35,000)      $       0.10             --        $        --
 Forfeited                      (439,000)      $ 0.11-0.18         (2,565,000)      $       0.10             --        $        --
                              ----------                          -----------                           ----------
 Outstanding,
   December
   31, 2002                   21,327,000       $ 0.10-0.30          7,054,000       $ 0.10-0.60         1,495,000      $0.60-2.80
 Granted                       9,998,000       $      0.05               --         $       --               --        $        --
 Exercised                    (8,638,000)      $ 0.05-0.11               --         $       --               --        $        --
 Forfeited                      (1556000)      $ 0.11-0.18         (7,054,000)      $ 0.10-0.60         1,495,000      $0.60-2.80
                              ----------                          -----------                           ----------
Outstanding,
  December
  31, 2003                     21,131,00       $      0.14               --         $       --               --        $        --
                              ==========                          ===========                           ==========
Exercisable,
  December
  31, 2003                    20,898,000       $      0.14               --         $       --               --        $        --
                              ==========                          ===========                           ==========



         The  weighted-average   remaining   contractual  life  of  the  options
         outstanding at December 31, 2003 was 1.8 years.  The exercise prices of
         the  options  outstanding  at  December  31,  2003 ranged from $0.05 to
         $0.30. Options exercisable were 20,898,000,  28,304,228, and 26,293,358
         at December 31, 2003, 2002 and 2001.

         The Company has adopted only the disclosure provisions of SFAS No. 123.
         It applies APB Opinion No. 25 and related interpretations in accounting
         for its  plans  and does not  recognize  compensation  expense  for its
         stock-based  compensation  plans  other than for  restricted  stock and
         options issued to outside third parties.



                                      F-23


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 9 - STOCKHOLDERS EQUITY (Continued)

         Stock Options and Warrants (Continued)
         --------------------------

         If the Company had elected to recognize compensation expense based upon
         the fair value at the grant date for awards under this plan  consistent
         with the methodology  prescribed by SFAS No. 123, the Companys net loss
         and loss per share would be reduced to the pro forma amounts  indicated
         below for the years ended December 31, 2003, 2002, and 2001:



                                                    2003             2002             2001
                                               -------------    -------------    -------------
                                                                        
         Net loss
          As reported                          $  (3,186,000)   $  (3,598,000)   $  (3,428,000)
          Pro forma                            $  (3,501,000)   $  (3,795,000)   $  (4,204,500)
         Basic and diluted loss per
          common share
             As reported                       $       (0.01)   $       (0.01)   $       (0.01)
             Pro  forma                        $       (0.01)   $       (0.01)   $       (0.01)


         For purposes of computing  the pro forma  disclosures  required by SFAS
         No.  123,  the fair  value of each  option  granted  to  employees  and
         directors is estimated using the BlackScholes option-pricing model with
         the following weighted-average assumptions for the years ended December
         31,  2003,  2002,  and  2001:  dividend  yields  of  0%,  0%,  and  0%,
         respectively;  expected volatility of 88%, 83%, and 125%, respectively;
         risk-free interest rates of 4%, 4%, and 5%, respectively;  and expected
         lives   of   three,   five,   and   five   years,   respectively.   The
         weighted-average  fair value of options  granted  during the year ended
         December 31, 2003 for which the exercise  price equals the market price
         on the grant date was $0, and the  weighted-average  exercise price was
         $0.051.

         The  Black-Scholes  option  valuation  model was  developed  for use in
         estimating the fair value of traded options,  which do not have vesting
         restrictions and are fully transferable.  In addition, option valuation
         models require the input of highly  subjective  assumptions,  including
         the expected  stock price  volatility.  Because the Company's  employee
         stock options have characteristics  significantly  different from those
         of  traded  options,  and  because  changes  in  the  subjective  input
         assumptions  can  materially   affect  the  fair  value  estimate,   in
         managements  opinion,  the existing models do not necessarily provide a
         reliable  single  measure  of the  fair  value  of its  employee  stock
         options.

         The  agreement  with Ford Motor  Company (see Note 4) included  issuing
         warrants to Ford to purchase 4.6% of the fully diluted  common stock of
         Enova  Systems  over a 66 month  period.  The  number  of  shares to be
         acquired  will be  adjusted  from  time to time  for  increases  in the
         Company's fully diluted common stock.  The vesting of these warrants is
         dependent upon Ford meeting specific purchase requirements.  Initially,
         the  exercise  price of the warrants is equal to the price of the stock
         on the date of issuance,  with the  exercise  price  adjusted  when the
         aggregate number of shares is adjusted.




                                      F-24


                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 9 - STOCKHOLDERS EQUITY (Continued)

         Stock Options and Warrants (Continued)
         --------------------------

         The fair value of warrants  granted were estimated on the date of grant
         using  the  Black-Scholes  option-pricing   model  with  the  following
         assumptions:  dividend  yield  of  0%,  expected  volatility  of  102%,
         risk-free  interest  rate of 4.76% and an expected life of the warrants
         of 66 months.  Warrants issued and vested under this agreement  totaled
         2,500,000 at an exercise price of $0.29 per share during the year ended
         December 31, 2001.  No warrants  were vested under this program  during
         2002 and 2003.


NOTE 10 - INCOME TAXES

         Significant  components  of  the  Company's  deferred  tax  assets  and
         liabilities  for federal and state income taxes as of December 31, 2003
         and 2002 consisted of the following:

                                                2003          2002
                                             -----------   -----------
        Deferred tax assets
            Federal tax loss carry-forward   $31,286,000   $30,513,000
            State tax loss carry-forward         712,000       404,000
            Basis difference                   1,610,000     1,610,000
            Other, net                           555,000       433,000
                                             -----------   -----------
                                              34,163,000    32,960,000
        Less valuation allowance              34,163.000    32,960,000
                                             -----------   -----------

                Net deferred tax assets      $       --    $       --
                                             ===========   ===========

         As of December  31,  2003,  the Company  had net  operating  loss carry
         forwards  for federal and state  income tax  purposes of  approximately
         $92,867,000 and $8,589,000,  respectively. The net operating loss carry
         forwards began expiring in 2003.


NOTE 11 - RELATED PARTY TRANSACTIONS

         During  2003,   the  Company   purchased   approximately   $599,000  in
         components,  materials and services from HHI. The  outstanding  balance
         owed to HHI at December 31, 2003 was approximately $395,000.

         During  2003,  the  Company  paid a total  of  $33,000  to three of its
         directors in consulting fees.



                                      F-25

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------


NOTE 12 - EMPLOYEE BENEFIT PLAN

         The Company has a 401(k)  profit  sharing plan  covering  substantially
         all employees.  Eligible employees may elect to contribute a percentage
         of their annual compensation,  as defined, to the plan. The Company may
         also elect to make  discretionary  contributions.  For the years  ended
         December  31,  2003,  2002,  and  2001  the  Company  did not  make any
         contributions to the plan.


NOTE 13 - GEOGRAPHIC AREA DATA

         The Company  operates  as a single  reportable  segment and  attributes
         revenues to countries based upon the location of the entity originating
         the sale. Revenues by geographic area are as follows:

                                    2003         2002         2001
                                ----------   ----------   ----------
          United States         $2,672,000   $2,478,000   $2,854,000
          Italy                    213,000    1,040,000      359,000
          Korea                    297,000      726,000      483,000
          Japan                    146,000       87,000          --
          Malaysia                 184,000       65,000          --
          Ireland                     --         59,000          --
          Canada                   738,000         --            --
          England                   60,000         --         84,000
                                ----------   ----------   ----------
            Total               $4,310,000   $4,455,000   $3,780,000
                                ==========   ==========   ==========

NOTE 14 - EXTRAORDINARY ITEM

         During  the year  ended  December  31,  2000,  the  Company  negotiated
         repayment  of  long-term  trade  payables  for less  than  the  amounts
         originally  recorded.  The  gain  from  these  negotiated  payments  is
         reflected as an extraordinary item.

         In consultation with legal counsel,  certain payables were extinguished
         under a provision of the  California  Code of Civil  Procedure in which
         the  statute of  limitations  precluded  the  ability of a creditor  to
         commence  an action to recover  stale  account  balances.  The  Company
         determined that  conditions  surrounding the application of the statute
         of  limitations   had  been  met;   accordingly,   the  2001  and  2000
         extraordinary item includes the gain from these extinguishments.


NOTE 15 - SUBSEQUENT EVENT (unaudited)

         As of March 20, 2004, the Company has obtained several commitments from
         investors to purchase  approximately  15,000,000 shares of common stock
         at  $0.12  per  share  for  a  total  cash  purchase  of  approximately
         $1,800,000.



                                      F-26




                          SUPPLEMENTAL INFORMATION






                                      S-1



SLGG
                      SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
           Certified Public Accountants and Management Consultants
           www.slgg.com   Los Angeles    Orange County     Ontario


                           INDEPENDENT AUDITORS REPORT


Board of Directors and Stockholders
Enova Systems, Inc.


Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The supplemental schedule II for the year
ended  December  31,  2003 is  presented  for  purposes  of  complying  with the
Securities  and  Exchange  Commission's  rules  and is not a part  of the  basic
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures  applied in the audits of the basic financial  statements and, in our
opinion,  is fairly  stated in all  material  respects  in relation to the basic
financial statements taken as a whole.


/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
------------------------------------------
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 25, 2004

                                      S-2


                                                             ENOVA SYSTEMS, INC.
                                VALUATION AND QUALIFYING ACCOUNTS -- SCHEDULE II
                                                      For the Years December 31,
--------------------------------------------------------------------------------



                                  Balance,       Additions       Deductions       Balance,
                                Beginning        Charged to        from            End
                                 of Year         Operations       Reserve         of Year
                                ----------      ----------       -----------     -----------
                                                                     
Allowance for doubtful
  accounts

    December 31, 2001           $   --          $ 595,000        $    --         $  595,000
                                ==========      =========        ==========      ==========
    December 31, 2002           $   --          $     --         $    --         $     --
                                ==========      =========        ==========      ==========
    December 31, 2001           $   --          $     --         $    --         $     --
                                ==========      =========        ==========      ==========


Reserve for obsolete
  inventories

    December 31, 2003           $  80,000       $    --          $   --          $ 80,000
                                ==========      =========        ==========      ==========
    December 31, 2002           $  80,000       $    --          $   --          $ 80,000
                                ==========      =========        ==========      ==========
    December 31, 2001           $  80,000       $    --          $   --          $ 80,000
                                ==========      =========        ==========      ==========




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

                                     S-3


PART 1. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS



ENOVA SYSTEMS, INC.
BALANCE SHEETS
(In thousands, except for share and per share data)
---------------------------------------------------------------------------------------
                                                                  As of       As of
                                                               March 31,   December 31,
                                                                  2004        2003
                                                                --------    --------
                                                                      
ASSETS
CURRENT ASSETS
  Cash                                                          $    587    $    530
  Accounts receivable, net of allowance of $595,000 each             958         803
  Inventory                                                        1,529       1,606
  Stockholder receivable                                               8           8
  Prepaids and other current assets                                   66          78
                                                                --------    --------
    Total Current Assets                                           3,148       3,025

PROPERTY, PLANT AND EQUIPMENT - NET                                  424         481
INVESTMENTS in JOINT VENTURE                                         916         960
OTHER ASSETS                                                         376         404
                                                                --------    --------
TOTAL ASSETS                                                    $  4,864    $  4,870
                                                                ========    ========

LIABILITIES AND SHAREHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
  Accounts payable                                              $    674    $    768
  Line of credit                                                     117         120
  Accrued payroll and related expenses                               122         120
  Other accrued expenses                                              90          98
  Current portion of notes payable
     and capital lease obligations                                   143         154
                                                                --------    --------
    Total Current Liabilities                                      1,146       1,260

ACCRUED INTEREST PAYABLE                                           1,184       1,122
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION                      0           5
NOTES PAYABLE, NET OF CURRENT PORTION                              3,355       3,347
                                                                --------    --------
TOTAL LIABILITIES                                               $  5,685       5,734
                                                                --------    --------

COMMITMENTS AND CONTINGENCIES                                          0           0

SHAREHOLDERS' DEFICIT
  Series A convertible preferred stock - No par value;
    30,000,000 shares authorized;
    2,800,000 and 2,804,000 shares issued and
    outstanding at 3/31/04 and 12/31/03 liquidating
    preference at $0.60 per share aggregating
    $1,680,000 and $1,682,400                                      1,812       1,837
  Series B convertible preferred stock - No par value
    5,000,000 shares authorized;
    1,217,000 shares issued and outstanding
    at 3/31/04 and 12/31/03 liquidating
    preference at $2.00 per share aggregating
    $2,434,000                                                      2,434       2,434
  Common Stock -- No par value
    500,000,000 shares authorized;
    380,144,000 and 378,591,000 shares issued and
    outstanding at 3/31/04 and 12/31/03                           86,167      86,054
  Common stock subscribed                                            176          60
  Stock notes receivable                                          (1,203)     (1,203)
  Additional paid-in capital                                       7,031       7,031
  Accumulated deficit                                            (97,238)    (97,077)
                                                                --------    --------
      Total Shareholders' equity                                    (821)       (864)
                                                                --------    --------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                     $  4,864    $  4,870
                                                                ========    ========


Note:  The balance  sheet at December 31, 2003 has been derived from the audited
financial statements at that date.
See notes to financial statements.

                                        Q-1



ENOVA SYSTEMS, INC.
INCOME and EXPENSE STATEMENTS
(Unaudited)
(In thousands, except for share and per share data)
--------------------------------------------------------------------------------
                                                      Three Months Ended
                                                          March 31,
                                               ---------------------------------
                                                   2004               2003
                                               -------------      -------------
NET REVENUES
  Research and development contracts           $         436      $         323
  Production                                   $         672      $       1,016
                                               -------------      -------------
                                               $       1,108      $       1,339
                                               -------------      -------------



COST OF REVENUES
  Research and development contracts                     305                212
  Production                                             353                765
                                               -------------      -------------
                                                         658                977
                                               -------------      -------------


GROSS MARGIN                                             450                362
                                               -------------      -------------

OPERATING EXPENSES:
  Research and development                                32                208
  Engineering                                             96                280
  Selling, general and administrative                    353                485
  Depreciation & amortization                             85                 82
                                               -------------      -------------
    Total operating expenses                             566              1,055
                                               -------------      -------------

NET OPERATING LOSS                                      (116)              (693)
                                               -------------      -------------

OTHER COSTS AND EXPENSES:
  Interest and financing fees                             64                 55
  Other (income)/expense                                 (19)                 0
  Interest income                                          0                 (5)
                                               -------------      -------------
     Total other costs and expenses                       45                 50
                                               -------------      -------------

NET LOSS                                       $        (161)     $        (743)
                                               -------------      -------------

BASIC AND DILUTED NET LOSS
  PER COMMON SHARE:                            $       (0.01)     $       (0.01)
                                               =============      =============

WEIGHTED AVERAGE SHARES OUTSTANDING              374,644,000        345,394,000


                                       Q-2

ENOVA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
--------------------------------------------------------------------------------

                                                            Three Months Ended
                                                                  March 31,
                                                            --------------------
                                                              2004        2003
                                                            -------     -------

OPERATIONS
Net loss                                                    $  (161)    $  (743)
Adjustments to reconcile net loss to
  net cash used by operating activities:
Change in allowance of uncollectible receivables                  0           0
Depreciation and amortization                                    85          82
Equity in losses                                                 44           0
Stock and stock options issued for services                      16           0
Change in operating assets and liabilities:
  Accounts receivable                                          (155)       (298)
  Inventory                                                      77          44
  Stockholder receivable                                          0           0
  Prepaids and other assets                                      12           3
  Accounts payable and accrued expenses                         (38)        (30)
                                                            -------     -------
      Net cash used by operating activities                    (120)       (942)
                                                            -------     -------

INVESTING:
Purchases of property, plant and equipment,
  net of disposals                                                0         (23)
                                                            -------     -------
      Net cash used by investing activities                       0         (23)
                                                            -------     -------

FINANCING:
Borrowing (repayments) on leases and notes payable               (8)         (9)
Borrowing on line of credit                                      (3)          0
Proceeds for issuance of common stock and
  exercise of stock options                                     188           0
                                                            -------     -------
      Net cash provided (used) by
         financing activities                                   177          (9)
                                                            -------     -------

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS                  57        (974)

CASH AND EQUIVALENTS:

Beginning of period                                             530       1,868
                                                            -------     -------

End of period                                               $   587     $   894
                                                            =======     =======


                                       Q-3

ENOVA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL CASH FLOW INFORMATION
(UNAUDITED)
(In thousands)
--------------------------------------------------------------------------------

                                                            Three Months Ended
                                                                  March 31,
                                                            --------------------
                                                              2004        2003
                                                            -------     -------

NONCASH INVESTING AND FINANCING ACTIVITIES:
  Issuance of common stock for services                     $    16     $    12
  Conversion of Series A preferred stock to
    common stock                                            $    25     $    --







                                       Q-4


                              ENOVA SYSTEMS, INC.
                              -------------------

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
               For the Three Months Ended March 31, 2004 and 2003


NOTE 1 - Basis of Presentation

The  accompanying  unaudited  financial  statements  have been prepared from the
records of our company  without audit and have been prepared in accordance  with
accounting  principles  generally  accepted  in the United  States  for  interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation S-X.  Accordingly,  they do not contain all the information and notes
required by accounting  principles  generally  accepted in the United States for
complete  financial  statements.  In the opinion of management,  all adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation of the financial position at March 31, 2004 and the interim results
of operations and cash flows for the three months ended March 31, 2004 have been
included.  The balance sheet at December 31, 2003,  presented  herein,  has been
prepared from the audited financial  statements of our company for the year then
ended.

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United  States  requires  us to make  estimates  and
assumptions affecting the reported amounts of assets, liabilities,  revenues and
expenses, and the disclosure of contingent assets and liabilities. The March 31,
2004 and December 31, 2003 inventories are reported at market value. Inventories
have been valued on the basis that they would be used, converted and sold in the
normal course of business. Certain reclassifications have been made to the prior
periods financial  statements to conform with the current periods  presentation.
The  amounts  estimated  for the  above,  in  addition  to other  estimates  not
specifically  addressed,  could differ from actual  results;  and the difference
could have a significant impact on the financial statements.

Accounting  policies  followed  by us are  described  in  Note 1 to the  audited
financial  statements  for the fiscal  year ended  December  31,  2003.  Certain
information and footnote  disclosures  normally included in financial statements
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States  have been  condensed  or omitted  for  purposes  of the  interim
financial  statements.  The financial  statements  should be read in conjunction
with the audited financial statements, including the notes thereto, for the year
ended  December  31,  2003,  which are  included in our Form 10-K Annual  Report
Pursuant to Section 13 or 15(d) of the Securities  Exchange Act of 1934 as filed
with the Securities and Exchange Commission.

Basic and  diluted  net loss per common  share is  computed  using the  weighted
average  number  of common  shares  outstanding.  Since a loss  from  operations
exists, diluted earnings per share number is not presented because the inclusion
of common  stock  equivalents,  consisting  of Series A and B  preferred  stock,
unexercised stock options and warrants, would be anti-dilutive.

The results of  operations  for the three months ended March 31, 2004  presented
herein are not necessarily indicative of the results to be expected for the full
year.

                                       Q-5


NOTE 2 - Notes Payable, Long-Term Debt and Other Financing

Notes payable and long-term debt is comprised of the following (in thousands):


                                                    March 31,       December 31,
                                                      2004             2003
                                                  -----------       ------------
                                                  (unaudited)


Secured subordinated  promissory note -- CMAC
as   exclusive   agent   for    Non-Qualified
Creditors;  interest at 3%  through 2001,  6%
in 2002 and 2003,  and then at prime  plus 3%
thereafter  through  the  date  of  maturity;
interest  payments  are made upon  payment of
principal, with principal and interest due no
later than April 2016;  with an interest in a
sinking fund escrow with a zero balance as of
December  31,  2003 and March 31,  2004.  The
sinking  fund escrow  requires the Company to
fund the  account  with 10% of future  equity
financing,    including    convertible   debt
converted to equity,  based upon  approval of
the new  investors per the terms of the note.
No  additions  were made to the sinking  fund
with  respect to the equity  investment  from
the  accredited  investors at the  investors'
option                                                    3,332          3,332

Unsecured note payable                                      120            120

Secured note payable                                         23             26
                                                         ------         ------
                                                          3,475          3,478

Less current maturities                                     120            131
                                                         ------         ------

Total                                                    $3,355         $3,347
                                                         ======         ======


                                        Q-6





You should rely only on the  information  contained  in
this  prospectus.  We have  not  authorized  anyone  to
provide  you  with  information   different  from  that
contained in this prospectus.  The selling  shareholder
is offering to sell, and seeking offers to buy,  shares   16,250,001 Shares
of common stock only in jurisdictions  where offers and
sales are permitted.  The information contained in this   ENOVA SYSTEMS, INC.
prospectus  is  accurate  only  as  the  date  of  this
prospectus,  regardless of the time of delivery of this   COMMON STOCK
prospectus or of any sale of our common stock.

---------------------------


TABLE OF CONTENTS


                                                  Page


Prospectus Summary.................................  4
Risk Factors.......................................  6
Cautionary Note on Forward-Looking
Statements......................................... 10
Use of Proceeds.................................... 11
Price Range of Common Stock........................ 11
Dividend Policy.................................... 12
Capitalization..................................... 12
Selected Financial Data............................ 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations...... 14
Business........................................... 25
Management......................................... 36   -----------------------
Certain Relationships and Related                        PROSPECTUS
Transactions....................................... 43   -----------------------
Principal Shareholders............................. 43
Selling Shareholders............................... 44
Plan of Distribution............................... 46
Description of Capital Stock....................... 47   August 5, 2004
Shares Eligible for Future Sale.................... 50
Legal Matters...................................... 51
Experts............................................ 51
Where you can get more Information................. 51
Index to Financial Statements...................... 52




Until  November  8,  2004,  all  dealers  that  effect   transactions  in  these
securities,  whether or not  participating in this offering,  may be required to
deliver a prospectus.  This is in addition to the dealers' obligation to deliver
a  prospectus  when  acting as  underwriters  and with  respect to their  unsold
allotments or subscriptions.





PART II


Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure


On November 21, 2003, Enova Systems,  Inc. ("Company")  dismissed Moss Adams LLP
("Moss Adams") as its independent auditors and engaged Singer, Lewak,  Greenbaum
&  Goldstein  ("SLGG")  as its  independent  auditors  to  audit  its  financial
statements for its year ending  December 31, 2003. The Board of Directors of the
Company approved this decision.  Prior to such  engagement,  the Company did not
consult with SLGG  regarding  the  application  of  accounting  principles  to a
specific,  completed or contemplated  transaction,  or the type of audit opinion
that might be rendered on the Company's financial statements.


During the fiscal  years ended  December 31, 2001 and 2002,  and the  subsequent
interim  period  through the date of Moss Adams  dismissal,  November  21, 2003,
there have been no  disagreements  on any  matter of  accounting  principles  or
practices,  financial statement disclosure or auditing scope or procedure, which
disagreements,  if not resolved to the  satisfaction  of Moss Adams,  would have
caused  it to make  reference  to the  subject  matter of the  disagreements  in
connection with its reports, except the following:

In connection with the audit of the Company's financial  statements for the year
ended December 31, 2002, Moss Adams had a disagreement with the Company over the
valuation of inventory.

In connection  with the review of the  Company's  financial  statements  for the
quarter ended September 30, 2003, Moss Adams had a disagreement with the Company
over the allowance for uncollectible receivables.

The audit  committee of the Board of Directors and the management of the Company
discussed each of these  disagreements  with Moss Adams and resolved the matters
to each party's  satisfaction prior to the filing of the Company's Form 10-K for
the year ended  December 31, 2002 and Form 10-Q for the quarter ended  September
30, 2003,  respectively.  The Company has authorized Moss Adams to respond fully
to inquiries from SLGG concerning the matters described in this section.


Item 13. Other Expenses of Issuance and Distribution.

The following table indicates the expenses to be incurred in connection with the
offering described in this Registration Statement,  all of which will be paid by
us. All amounts are estimates, other than the SEC registration fee.


SEC Registration fees:                                      $309
                                                    -------------

Accounting fees and expenses:                            $15,000
                                                    -------------

Legal fees and expenses:                                 $35,000
                                                    -------------

Printing expenses:                                        $2,500
                                                    -------------

Blue Sky fees and expenses:                               $1,000
                                                    -------------

Miscellaneous fees and expenses:                          $2,000
                                                    -------------

                                     TOTAL:              $55,809
                                                    =============

Item 14. Indemnification of Directors and Officers.

Section 317 of the California General Corporation Law (the "CGCL") provides that
a  subject  corporation  shall  have the  power to  indemnify  any  agent of the
corporation  (including our directors and officers) who was or is a party to any
proceeding or threatened  proceeding (other than an action by or in the right of
the  corporation)  against  expenses,  judgments,  fines,  settlements and other
amounts  incurred if that person acted in good faith and in a manner  reasonably
believed to be in the best  interests of the  corporation,  and in the case of a
criminal  proceeding,  had no  reasonable  cause to believe  the conduct of such
person was  unlawful.  Section 317 of the CGCL further  provides  that a subject
corporation  shall have the power to indemnify any agent of the  corporation who
was or is a party to any proceeding or threatened  proceeding by or in the right
of the corporation  against expenses  incurred in connection with the defense or
settlement  of the  proceeding if the person acted in good faith and in a manner
the person  believed  to be in the best  interests  of the  corporation  and our
shareholders.

Under  Section  317 of the  CGCL,  to the  extent  that an  agent  of a  subject
corporation  is  successful  on the  merits in the  defense  of an  action,  the
corporation  must  indemnify  such  person for his or her actual and  reasonable
expenses  incurred in  connection  with such  defense.  Under Section 317 of the
CGCL, a subject  corporation may advance expenses of an indemnifiable  person in
defending an action; provided that such advancement of expenses may be made only
if the person  provides an  undertaking  to reimburse the  corporation  if it is
ultimately  determined that the person is not entitled to be indemnified against
such expenses.

The Registrant has entered into  agreements to provide  indemnification  for our
directors and certain officers in addition to the  indemnification  provided for
in the Bylaws. These agreements,  among other things,  indemnify such parties to
the fullest extent permitted by California law for certain  expenses  (including
attorneys'  fees), and all losses,  claims,  liabilities,  judgments,  fines and
settlement amounts incurred by such persons arising out of or in connection with
such persons' service as directors or officers of the Registrant or an affiliate
of the Registrant.

The above-described  provisions relating to the indemnification of directors and
officers are sufficiently broad to permit the indemnification of such persons in
certain circumstances against liabilities  (including  reimbursement of expenses
incurred) arising under the Securities Act of 1993, as amended.


Item 15. Recent Sales of Unregistered Securities.

In March  2004,  we issued  16,250,001  shares of  common  stock to the  Selling
Shareholders under their Registration  Statement for cash at a purchase price of
$0.12 per share. We relied on Rule 506 and Section 4(2) of the Securities Act of
1933, as amended (the "Securities  Act"), for the exemption from registration of
the sale of the shares.

In September 2003, we issued  23,076,923 shares of common stock to Hyundai Heavy
Industries  Co.,  Ltd. in exchange for  $1,500,000  in cash.  $1,000,000  of the
proceeds  from this issuance was used to fund Enova's  $1,000,000  joint venture

                                      II-1

interest in the Hyundai-Enova  Innovative Technology Center as previously noted,
with the  $500,000  balance of proceeds to be used for  general  operations  and
working  capital.  We relied  upon  Regulation  D, Rule 506  promulgated  by the
Securities and Exchange  Commission as the exemption from  registration  for the
issuance of these shares.

During 2003,  we issued an  aggregate  of 754,167  shares of Common Stock to our
directors in consideration  for attendance at Board meetings and Board committee
meetings  during  fiscal 2003. We relied on Rule 506 of Regulation D and Section
4(2)  of the  Securities  Act of  1933,  as  amended,  for  the  exemption  from
registration  of the  sales  of such  shares.  See  Item  10,  "Compensation  of
Directors."

In December 2001, we issued  6,000,000 shares of common stock at $0.15 per share
for a total of $900,000 in settlement of litigation brought against us by Fontal
International, Ltd. In April 2001, in connection with this settlement, we issued
an additional  100,000  shares of common stock at $0.15 per share for a total of
$15,000.  In May 2001,  also in  connection  with this  settlement  we issued an
another  100,000  shares  of  common  stock at $0.15  per  share  for a total of
$115,000. These shares are the subject of this registration statement.

In July 2001, Anthony Rawlinson  exercised warrants to purchase 8,333,334 shares
of  common  stock at $0.06  per share  for a total of  $500,000.  Mr.  Rawlinson
represented that he was an accredited investor under the definition set forth by
the  Securities and Exchange  Commission.  We relied on Rule 506 of Regulation D
and Section 4(2) of the  Securities  Act of 1933,  as amended  (the  "Securities
Act"), for the exemption from registration of the sale of the shares.

In June 2001,  we issued  warrants to purchase  15,000,000  shares of our common
stock to a customer.  We relied on Rule 506 of  Regulation D and Section 4(2) of
the  Securities  Act for the  exemption  from  registration  of the sale of such
shares.

In May 2001, Jagen Pty, Ltd exercised warrants to purchase  41,666,666 shares of
common stock at $0.06 per share for a total of $2,500,000.  Jagen, an Australian
company and the  majority  shareholder,  represented  that they were  accredited
investors.  We  relied  on Rule  506 of  Regulation  D and  Section  4(2) of the
Securities Act for the exemption from registration of the sale of such shares.

Item 16. Exhibits and Financial Statement Schedules.

         (a)      Exhibits
                  --------

         3.1      Amended  and  Restated   Articles  of   Incorporation  of  the
                  Registrant  (filed as Exhibit 3.1 to the  Registrant's  Annual
                  Report on Form 10K for the year ended  December 31, 2000 filed
                  on March 30, 2001 and incorporated herein by reference).

         3.2      Bylaws  of   Registrant   (filed  as   Exhibit   3.12  to  the
                  Registration  Statement on Form 10 filed on November 29, 1994,
                  and incorporated herein by reference).

         4.1      Cashless  Exercise  Warrants  dated October 25, 1996 issued to
                  Fontal  International,  Ltd.  (filed  as  Exhibit  4.1  to the
                  Registrant's  Annual  Report on Form  10-K for the year  ended
                  July 31, 1996, as filed on November 12, 1996, and incorporated
                  herein by reference).

         5.1**    Opinion  of  Reed  Smith,  LLP  as  to  the  legality  of  the
                  securities being registered.

         10.1     Form  of  Stock  Option  Agreement  under  1993  Employee  and
                  Consultant   Stock  Plan  (filed  as  Exhibit   10.15  to  the
                  Registration  Statement on Form 10 filed on November 29, 1994,
                  and incorporated herein by reference).

         10.2     Form of Solar  Electric  Engineering,  Inc.  1993 Employee and
                  Consultant   Stock  Plan  (filed  as  Exhibit   10.16  to  the
                  Registration  Statement on Form 10 filed on November 29, 1994,
                  and incorporated herein by reference).

         10.3     Form of  Confidential  Private  Placement  Memorandum and Debt
                  Restructuring  Disclosure Statement of U.S. Electricar,  Inc.,
                  dated  January 2, 1996,  delivered  by Enova to certain of its
                  unsecured  trade  creditors,   including  exhibits  (filed  as
                  Exhibit  10.91 to the  Registrant's  Quarterly  Report on Form
                  10-Q for the quarter ended January 31, 1996, as filed on March
                  18, 1996, and incorporated herein by reference).

                                      II-2


         10.4     Form of Stock Purchase, Note and Debt Exchange Agreement dated
                  January 2, 1996  between  Enova and  certain  unsecured  trade
                  creditors   (filed  as  Exhibit  10.92  to  the   Registrant's
                  Quarterly  Report on Form 10-Q for the quarter  ended  January
                  31, 1996, as filed on March 18, 1996, and incorporated  herein
                  by reference).

         10.5     Form of  Indemnification  Agreement (filed as Exhibit 10.63 to
                  the  Registration  Statement  on Form 10 filed on November 29,
                  1994, and incorporated herein by reference).

         10.6     Form of Security  Agreement  made as of May 31, 1995,  between
                  Enova and Credit Managers  Association of California,  Trustee
                  (filed as Exhibit 10.85 to the  Registrant's  Quarterly Report
                  on Form 10-Q for the quarter ended April 30, 1996, as filed on
                  June 14, 1996, and incorporated herein by reference).

         10.7     Amended 1996 Employee and Consultant  Stock Option Plan (filed
                  as Exhibit 10.7 to the Registrant's Annual Report on Form 10-K
                  for fiscal year ended July 31,  1999,  as filed on October 29,
                  1999, and incorporated herein by reference).

         10.8     Stock  Purchase  Agreement and  Technology  License  Agreement
                  dated  February  27,  1997,  by and between  Enova and Hyundai
                  Motor  Company and Hyundai  Electronics  Industries  Co., Ltd.
                  (filed as Exhibit 10.98 to the  Registrant's  Quarterly Report
                  on Form 10-Q for fiscal  quarter  ended  January 31, 1997,  as
                  filed  on  March  14,  1997,   and   incorporated   herein  by
                  reference).

         10.9     Letter of Intent between  Registrant and a domestic  supplier,
                  dated December 9, 1999, to design, develop and manufacture low
                  voltage  electric  drive system  components  (filed as Exhibit
                  10.16  to the  Registrant's  Annual  Report  on Form  10-K for
                  fiscal year ended December 31, 2000 and incorporated herein by
                  reference).

         10.10    Put/Call  Option to sell Itochu shares between  Registrant and
                  Carl D. Perry dated  September 1, 1999 (filed as Exhibit 10.16
                  to the Registrant's Annual Report on Form 10-K for fiscal year
                  ended December 31, 2000 and incorporated herein by reference).

         10.11    Agreement  (redacted)  between the  Registrant  and a customer
                  dated June 14, 2001, to develop and produce  power  management
                  systems.  (filed as Exhibit 10.1 to the Registrant's Quarterly
                  Report on Form 10-Q for Six  Months  ended  June 30,  2001 and
                  incorporated herein by reference).

         10.12    Agreement  (redacted)  between  the  Registrant  and Eco Power
                  Technology,  dated June 12,  2001,  to produce  and sell power
                  drive  systems  (filed as Exhibit  10.19 to Amendment No. 6 to
                  the  Registrant's  Registration  Statement  on Form  S-1,  No.
                  333-85308, and incorporated herein by reference).

         10.13    Agreement   (redacted)   between  the   Registrant  and  Tomoe
                  Electro-Mechanical Engineering and Manufacturing,  Inc., dated
                  November  19,  2001,  to produce and sell power drive  systems
                  (filed as Exhibit 10.20 to Amendment No. 6 to the  Registrants
                  Registration  Statement  on  Form  S-1,  No.  333-85308,   and
                  incorporated herein by reference).

         10.14    Agreement   (redacted)   between  the  Registrant  and  Moriah
                  Corporation, dated January 22, 2002, to produce and sell power
                  drive  systems  (filed as Exhibit  10.21 to Amendment No. 6 to
                  the  Registrant's  Registration  Statement  on Form  S-1,  No.
                  333-85308, and incorporated herein by reference).

         10.15    Form of Stock  Purchase  Agreement  dated June 7, 2002 between
                  Registrant  and each of the selling  shareholders  listed in a
                  Prospectus  dated July 26,  2002  (filed as  Exhibit  10.22 to
                  Amendment No. 1 to the Registrant's  Registration Statement on
                  Form  S-1,  No.   333-96829,   and   incorporated   herein  by
                  reference).

         10.16    Form of  Registration  Rights  Agreement  dated  June 7,  2002
                  between Registrant and each of the selling shareholders listed
                  in a Prospectus dated July 26, 2002 (filed as Exhibit 10.23 to
                  Amendment No. 1 to the Registrant's  Registration Statement on
                  Form  S-1,  No.   333-96829,   and   incorporated   herein  by
                  reference).



                                      II-3


         10.17    Joint Venture  Agreement  (redacted) to form advanced research
                  and  development  corporation,  dated as of March 18, 2003, by
                  and between the  Registrant  and Hyundai Heavy  Industries Co.
                  Ltd.  (filed as Exhibit  10.24 to the  Registrant's  Quarterly
                  Report on Form 10-Q for Three  Months ended March 31, 2003 and
                  incorporated herein by reference).

         10.18    Securities  Purchase  Agreement dated as of March 18, 2003, by
                  and between the  Registrant  and Hyundai Heavy  Industries Co.
                  Ltd.  (filed as Exhibit  10.25 to the  Registrant's  Quarterly
                  Report on Form 10-Q for Three  Months ended March 31, 2003 and
                  incorporated herein by reference).

         10.19*   Form of Stock Purchase  Agreement dated March 31, 2004 between
                  Registrant  and each of the selling  shareholders  listed in a
                  Prospectus dated July 12, 2004.

         10.20*   Form of  Registration  Rights  Agreement  dated March 31, 2004
                  between Registrant and each of the selling shareholders listed
                  in a Prospectus dated July 12, 2004.


         23.1**   Consent  of  Singer   Lewak   Greenbaum  &   Goldstein,   LLP,
                  Independent Auditors

         23.2**   Consent of Moss Adams, LLP, Independent Auditors

         23.3**   Consent of Reed Smith, LLP (included in Exhibit 5.1 hereto).

         24**     Power of Attorney (included on signature page)

------------------
*    Filed previously.

**   File herewith.


(b)  Financial Statements

         Unaudited Financial Statements - Quarter ended March 31, 2004

         Audited Financial Statements - Fiscal Year ended December 31, 2003

         Audited Financial Statements - Fiscal Year ended December 31, 2002

         Audited Financial Statements - Fiscal Year ended December 31, 2001

Item 17. Undertakings.

(a)  The undersigned Registrant hereby undertakes:

(1)  To file,  during  any  period in which  offers or sales are being  made,  a
     post-effective amendment to this Registration Statement:

     (i)    To  include  any  prospectus  required  by Section  10(a)(3)  of the
            Securities Act of 1933;

      (ii)  To reflect in the  prospectus  any facts or events arising after the
            effective  date of the  Registration  Statement  (or the most recent
            post-effective  amendment  thereof)  which,  individually  or in the
            aggregate,  represent a fundamental  change in the  information  set
            forth in the Registration  Statement Notwithstanding  the foregoing,
            any  increase or decrease  in volume of  securities  offered (if the
            total dollar value of securities offered would not exceed that which
            was  registered)  and any deviation  from the low or high end of the
            estimated  maximum  offering  range may be  reflected in the form of
            prospectus filed with the Commission  pursuant to Rule 424(b) if, in
            the  aggregate,  the changes in volume and price  represent  no more
            than a 20% change in the maximum aggregate  offering price set forth
            in the  "Calculation  of  Registration  Fee" table in the  effective
            Registration Statement. and

     (iii)  To include  any  material  information  with  respect to the plan of
            distribution not previously disclosed in the Registration  Statement
            or any  material  change  to such  information  in the  Registration
            Statement;  provided, however, that (i) and (ii) do not apply if the
            Registration  Statement  is  on  Form  S-3  or  Form  S-8,  and  the
            information required to be included in a post-effective amendment by
            (i)  and  (ii)  is  contained  in  periodic  reports  filed  with or
            furnished to the Commission by the Registrant pursuant to Section 13
            or  15(d)  of  the   Securities   Exchange  Act  of  1934  that  are
            incorporated by reference in the Registration Statement.

                                      II-4


(2)  That,  for the purpose of  determining  any liability  under the Securities
     Act,  each  such  post-effective  amendment  shall  be  deemed  to be a new
     registration  statement relating to the securities offered therein, and the
     offering of such  securities at that time shall be deemed to be the initial
     bona fide offering thereof.

(3)  To remove from  registration by means of a post-effective  amendment any of
     the securities  being  registered which remain unsold at the termination of
     the offering.

(b)  Insofar as indemnification for liabilities arising under the Securities Act
     of 1933 may be permitted to directors, officers, and controlling persons of
     the  Registrant  pursuant  to the  provisions  described  in  Item  14,  or
     otherwise,  the  Registrant  has been  advised  that in the  opinion of the
     Securities and Exchange  Commission such  indemnification is against public
     policy as expressed in the Securities Act and is, therefore, unenforceable.
     In the event  that a claim for  indemnification  against  such  liabilities
     (other than the payment by the registrant of expenses incurred or paid by a
     director,   officer,  or  controlling  person  of  the  Registrant  in  the
     successful defense of any action,  suit, or proceeding) is asserted by such
     director,  officer, or controlling person in connection with the securities
     being registered, the registrant will, unless in the opinion of its counsel
     the matter has been settled by controlling precedent,  submit to a court of
     appropriate jurisdiction the question whether such indemnification by it is
     against  pubic  policy  as  expressed  in the  Securities  Act and  will be
     governed by the final adjudication of such issue.


                                      II-5

                                   SIGNATURES


Pursuant to the  requirements  of the Securities Act of 1933, the registrant has
duly  caused  this  registration  statement  to be signed  on its  behalf by the
undersigned,  thereunto  duly  authorized,  in the  City of  Torrance,  State of
California, on August 5, 2004.


                                     ENOVA SYSTEMS, INC.

                                     By:  /s/ Carl D. Perry
                                        ----------------------------------------
                                          Carl D. Perry, Chief Executive Officer



Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Torrance, State of
California, on August 5, 2004.


                                     ENOVA SYSTEMS, INC.

                                     By: /s/ Larry B. Lombard
                                        ----------------------------------------
                                         Larry B. Lombard, Acting Chief
                                         Financial Officer


We, the  undersigned  directors  and/or  officers of Enova  Systems,  Inc.  (the
"Registrant"),  hereby  severally  constitutes  and appoint Carl D. Perry and/or
Larry B. Lombard with full powers of substitution and  resubstitution,  our true
and lawful  attorney,  with full  powers to sign for us, in our names and in the
capacities  indicated below,  the Registration  Statement on Form S-1 filed with
the  Securities  and Exchange  Commission,  and any and all  amendments  to said
Registration   Statement   (including   post-effective   amendments),   and  any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended,  in connection with the registration  under the Securities Act
of 1933,  as amended,  of equity  securities of the  Registrant,  and to file or
cause to be filed with the same,  with all exhibits  thereto and other documents
in connection therewith,  with the Securities and Exchange Commission,  granting
unto said attorney, and his substitute or substitutes,  full power and authority
to do and perform  each and every act and thing  requisite  and  necessary to be
done in connection  therewith,  as fully to all intents and purposes as he might
or could do in  person,  and  hereby  ratifying  and  confirming  all that  said
attorney  or his  substitute  or  substitutes,  shall  do or cause to be done by
virtue of this Power of  Attorney.  This Power of  Attorney  may be  executed in
counterparts.

                                      S-1

Pursuant to the  requirements of the Securities Act of 1933,  this  registration
statement has been signed by the following  persons in the capacities and on the
dates indicated.



Name                                Title                                          Date
----                                -----                                          ----
                                                                             
/s/ Carl D. Perry                   Chief Executive Officer and Director
------------------------            (Principal Executive Officer)                  August 5, 2004
Carl D. Perry

/s/ Larry B. Lombard                Acting Chief Financial Officer (Principal
------------------------            Financial Officer)                             August 5, 2004
Larry B. Lombard

/s/ Anthony N. Rawlinson            Chairman                                       August 5, 2004
------------------------
Anthony N. Rawlinson

/s/ Malcolm Currie                  Director                                       August 5, 2004
------------------------
Malcolm Currie

/s/ Edwin O. Riddell                Director                                       August 5, 2004
------------------------
Edwin O. Riddell

/s/ John J. Micek, III              Director                                       August 5, 2004
------------------------
John J. Micek, III

/s/ Donald H. Dreyer                Director                                       August 5, 2004
------------------------
Donald H. Dreyer

/s/ Bjorn Ahlstrom                  Director                                       August 5, 2004
------------------------
Bjorn Ahlstrom

/s/ John R. Wallace                 Director                                       August 5, 2004
------------------------
John R. Wallace



                                      S-2