UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q/A








þ     QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For
the quarterly period ended June 30, 2009





oTRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from ____________ to ____________





Commission
File Number 001-34050





Ener1,
Inc.


(Exact
name of registrant as specified in its charter)


FLORIDA
              59-2479377(State
      or other jurisdiction
                of
      incorporation or organization)
              (I.R.S.
      Employer
                Identification
      No.)


1540
Broadway, Suite 25C


New
York, New York 10036


(Address
of principal executive offices) (Zip code)


(212)
920-3500


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90
days.


Yes R Noo





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files).                                                                                                                                                            
          Yes R No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large
      accelerated filer  ̈
                
                Accelerated
      filer RNon-accelerated
      filer    ̈ (Do not check if
      a smaller reporting company)
                
                Smaller
      reporting company  ̈




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).   Yes o No R





APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:


Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or  15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.


Yes o No o





APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





Class
                        
                        Outstanding as of August 6, 2009Common
      Stock, par value $0.01 per share
                        
                        116,825,133







Explanatory
Note
 
 The
consolidated financial statements for the three and six months ended June 30,
2008 and 2009 and related disclosures in this Amendment No. 1 to our Quarterly
Report on Form 10-Q have been restated in accordance with the changes described
below.
 
 In
January 2010, Enerl concluded that it was necessary to amend this Quarterly
Report in order to restate its financial statements for the periods ended June
30, 2008 and 2009 to (1) reflect the corrected accounting for unamortized debt
discount upon conversion of our 2004 Debentures and 2005 Debentures as interest
expense, (2) reflect the corrected calculation for amortization of deferred
financing costs and debt discount for our 2004 Debentures, 2005 Debentures and
Series A Preferred Stock and (3) reflect the inclusion of gain on derivative
liability in the calculation of diluted loss per share.
 
 The
financial statements and other financial information included in this Amendment
No. 1 to the Quarterly Report on Form 10-Q have been restated accordingly.
Enerl’s shareholders should no longer rely on Enerl’s previously filed financial
statements for the three and six months ended June 30, 2008 and the six
months ended June 30, 2009.
 
 In
order to preserve the nature and character of the disclosures set forth in
this Quartely Report as originally filed, no attempt has been made in this
Amendment No. 1 to modify or update the disclosures in the original Quarterly
Report except that Enerl has included the foregoing restatements in Part I, Item
1 and has made conforming changes to Management’s Discussion and Analysis of
Financial Condition and Results of Operations in Part I, Item 2 to reflect these
restatements.









ENER1,
INC.




Form
10-Q for the Quarter Ended June 30, 2009




INDEX





PagePart I. FINANCIAL
    INFORMATIONItem
      1.  Financial StatementsUnaudited
      Consolidated Balance Sheets as of June 30, 2009 and December 31,
      2008
                                                                2Unaudited
      Consolidated Statements of Operations for the three and six months ended
      June 30, 2009 and 2008
                                                                3Unaudited
      Consolidated Statement of Stockholders’ Equity and Comprehensive Income
      (Loss) for the six months ended June 30, 2009
                                                                4Unaudited
      Consolidated Statements of Cash Flows for the six months ended June 30,
      2009 and 2008
                                                                5Notes
      to Unaudited Consolidated Financial Statements
                                                                7Item
      2.  Management's Discussion and Analysis of Financial Condition and
      Results of Operations
                                                                33Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                                                                44Item
      4.  Controls and Procedures
                                                                44Part II. OTHER INFORMATIONItem
      1.  Legal Proceedings
                                                                45Item
      1A. Risk Factors
                                                                45Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                                                                46Item
      5. Other Information
                                                                46Item
      6.  Exhibits
                                                                47Signatures
                                                                54







ENER1,
INC.


CONSOLIDATED
BALANCE SHEETS


(unaudited,
in thousands, except share data)





June 30,
                        
                        
                        December 31,2009
                        
                        
                        2008(Restated)
                        
                        
                        (Restated)ASSETSCurrent
      assetsCash
      and cash equivalents
                        
                        $
                        5,996
                        
                        
                        $
                        11,229Restricted
      cash
                        
                        
                        2,260
                        
                        
                        
                        2,976Accounts
      receivable, net of allowance of $983 and $915
                        
                        
                        4,685
                        
                        
                        
                        7,006Inventory,
      net of allowance for obsolescence of $1,020 and $483
                        
                        
                        8,689
                        
                        
                        
                        10,202Prepaid
      expenses and other current assets
                        
                        
                        1,116
                        
                        
                        
                        1,199Total
      current assets
                        
                        
                        22,746
                        
                        
                        
                        32,612Property
      and equipment, net of accumulated depreciation of $6,878 and
      $2,728
                        
                        
                        45,243
                        
                        
                        
                        39,513Deferred
      financing costs, net of amortization of $1,696 and $0
                        
                        
                        3,393
                        
                        
                        
                        5,088Intangible
      assets, net of accumulated amortization of $1,649 and
    $568
                        
                        
                        14,121
                        
                        
                        
                        15,246Goodwill
                        
                        
                        48,031
                        
                        
                        
                        48,674Other
                        
                        
                        606
                        
                        
                        
                        598Total
      assets
                        
                        $
                        134,140
                        
                        
                        $
                        141,731LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued expenses
                        
                        $
                        9,747
                        
                        
                        $
                        16,322Accrued
      income taxes payable
                        
                        
                        299
                        
                        
                        
                        318Short
      term borrowings
                        
                        
                        9,981
                        
                        
                        
                        9,414Short
      term borrowings, related party
                        
                        
                        1,500
                        
                        
                        
                        -Capital
      lease obligations, current portion
                        
                        
                        2,177
                        
                        
                        
                        2,003Total
      current liabilities
                        
                        
                        23,704
                        
                        
                        
                        28,057Other
      long-term payables
                        
                        
                        1,267
                        
                        
                        
                        1,093Derivative
      liabilities
                        
                        
                        6,549
                        
                        
                        
                        -Long
      term borrowings
                        
                        
                        3,892
                        
                        
                        
                        795Long
      term borrowings, related party
                        
                        
                        9,693
                        
                        
                        
                        -Deferred
      income tax liabilities
                        
                        
                        313
                        
                        
                        
                        397Convertible
      bonds
                        
                        
                        363
                        
                        
                        
                        396Capital
      lease obligations, less current portion
                        
                        
                        3,624
                        
                        
                        
                        4,580Total
      liabilities
                        
                        
                        49,405
                        
                        
                        
                        35,318Commitments
      and contingenciesStockholders'
      Equity:Common
      stock, $0.01 par value, 175,714,286 shares authorized, 114,716,864 and
      113,074,478 issued and outstanding
                        
                        
                        1,149
                        
                        
                        
                        1,132Paid
      in capital
                        
                        
                        391,889
                        
                        
                        
                        397,080Accumulated
      other comprehensive income
                        
                        
                        354
                        
                        
                        
                        1,510Accumulated
      deficit
                        
                        
                        (310,670
                        )
                        
                        
                        (296,826
                        )Total
      Ener1, Inc. stockholders' equity
                        
                        
                        82,722
                        
                        
                        
                        102,896Noncontrolling
      interest
                        
                        
                        2,013
                        
                        
                        
                        3,517Total
      stockholders' equity
                        
                        
                        84,735
                        
                        
                        
                        106,413Total
      liabilities and stockholders' equity
                        
                        $
                        134,140
                        
                        
                        $
                        141,731





See
accompanying notes to these unaudited consolidated financial
statements.




- 2
-




ENER1,
INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


(unaudited,
in thousands except per share data)





Three Months
                            
                            
                            Six MonthsEnded June 30,
                            
                            
                            Ended June 30,2009
                            
                            
                            2008
                              (Restated)
                            
                            
                            2009
                              (Restated)
                            
                            
                            2008
                              (Restated)Net
      sales
                            
                            $
                            7,537
                            
                            
                            $
                            437
                            
                            
                            $
                            15,729
                            
                            
                            $
                            534Cost
      of sales
                            
                            
                            6,360
                            
                            
                            
                            -
                            
                            
                            
                            13,163
                            
                            
                            
                            -Gross
      profit
                            
                            
                            1,177
                            
                            
                            
                            437
                            
                            
                            
                            2,566
                            
                            
                            
                            534Operating
      expenses:General
      and administrative
                            
                            
                            3,741
                            
                            
                            
                            2,179
                            
                            
                            
                            8,358
                            
                            
                            
                            4,761Research
      and development, net
                            
                            
                            7,452
                            
                            
                            
                            5,384
                            
                            
                            
                            13,714
                            
                            
                            
                            8,449Depreciation
      and amortization
                            
                            
                            1,354
                            
                            
                            
                            191
                            
                            
                            
                            2,462
                            
                            
                            
                            298Total
      operating expenses
                            
                            
                            12,547
                            
                            
                            
                            7,754
                            
                            
                            
                            24,534
                            
                            
                            
                            13,508Loss
      from operations
                            
                            
                            (11,370
                            )
                            
                            
                            (7,317
                            )
                            
                            
                            (21,968
                            )
                            
                            
                            (12,974
                            )Other
      income (expense):Interest
      expense
                            
                            
                            (1,419
                            )
                            
                            
                            -
                            
                            
                            
                            (2,736
                            )
                            
                            
                            (21,377
                            )Interest
      income
                            
                            
                            40
                            
                            
                            
                            125
                            
                            
                            
                            77
                            
                            
                            
                            248Other
                            
                            
                            22
                            
                            
                            
                            (14
                            )
                            
                            
                            85
                            
                            
                            
                            61Gain
      on derivative liabilities
                            
                            
                            5
                            
                            
                            
                            -
                            
                            
                            
                            3,917
                            
                            
                            
                            3,936(Loss)
      gain on foreign currency transactions
                            
                            
                            (303
                            )
                            
                            
                            -
                            
                            
                            
                            368
                            
                            
                            
                            -Total
      other income (expense)
                            
                            
                            (1,655
                            )
                            
                            
                            111
                            
                            
                            
                            1,711
                            
                            
                            
                            (17,132
                            )Loss
      before income taxes
                            
                            
                            (13,025
                            )
                            
                            
                            (7,206
                            )
                            
                            
                            (20,257
                            )
                            
                            
                            (30,106
                            )Income
      tax (benefit) expense
                            
                            
                            (35
                            )
                            
                            
                            -
                            
                            
                            
                            2
                            
                            
                            
                            -Net
      loss
                            
                            
                            (12,990
                            )
                            
                            
                            (7,206
                            )
                            
                            
                            (20,259
                            )
                            
                            
                            (30,106
                            )Less:
      Net (loss) income attributable to noncontrolling
      interest
                            
                            
                            (129
                            )
                            
                            
                            616
                            
                            
                            
                            (90
                            )
                            
                            
                            832Net
      loss attributable to Ener1, Inc.
                            
                            $
                            (12,861
                            )
                            
                            $
                            (7,822
                            )
                            
                            $
                            (20,169
                            )
                            
                            $
                            (30,938
                            )Net
      loss per share attributable to Ener1, Inc.:Basic
                            
                            $
                            (0.11
                            )
                            
                            $
                            (0.08
                            )
                            
                            $
                            (0.18
                            )
                            
                            $
                            (0.32
                            )Diluted
                            
                            $
                            (0.11
                            )
                            
                            $
                            (0.08
                            )
                            
                            $
                            (0.20
                            )
                            
                            $
                            (0.32
                            )Weighted
      average shares outstanding for Ener1, Inc.:Basic
                            
                            
                            113,803
                            
                            
                            
                            101,930
                            
                            
                            
                            113,637
                            
                            
                            
                            97,651Diluted
                            
                            
                            113,803
                            
                            
                            
                            101,930
                            
                            
                            
                            113,644
                            
                            
                            
                            97,651





See
accompanying notes to these unaudited consolidated financial
statements.




- 3
-




ENER1,
INC.


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


(unaudited,
in thousands, except share data)





AccumulatedOther
                  
                  
                  
                  
                  
                  
                  
                  
                  TotalCommon Stock
                  
                  
                  Paid in
                  
                  
                  Comprehensive
                  
                  
                  Accumulated
                  
                  
                  Noncontrolling
                  
                  
                  Stockholders'Shares
                  
                  
                  Amount
                  
                  
                  Capital
                  
                  
                  Income (Loss)
                  
                  
                  Deficit
                  
                  
                  Interest
                  
                  
                  EquityBalance
      December 31, 2008 (Restated)
                  
                  
                  113,074,478
                  
                  
                  $
                  1,132
                  
                  
                  $
                  397,080
                  
                  
                  $
                  1,510
                  
                  
                  $
                  (296,826
                  )
                  
                  $
                  3,517
                  
                  
                  $
                  106,413Comprehensive
      loss:Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (20,169
                  )
                  
                  
                  (90
                  )
                  
                  
                  (20,259
                  )Translation
      adjustment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,242
                  )
                  
                  
                  -
                  
                  
                  
                  (98
                  )
                  
                  
                  (1,340
                  )Total
      comprehensive loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (21,599
                  )Shares
      sold for cash, net of costs
                  
                  
                  962,415
                  
                  
                  
                  10
                  
                  
                  
                  5,852
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  5,862Shares
      issued for exercise of options and warrants
                  
                  
                  292,798
                  
                  
                  
                  3
                  
                  
                  
                  590
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  593Shares
      issued for additional noncontrolling interest
                  
                  
                  385,936
                  
                  
                  
                  4
                  
                  
                  
                  1,264
                  
                  
                  
                  86
                  
                  
                  
                  -
                  
                  
                  
                  (1,354
                  )
                  
                  
                  -Shares
      issued for debt origination costs
                  
                  
                  1,237
                  
                  
                  
                  -
                  
                  
                  
                  8
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  8Cumulative
      effect of change in accounting principle
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (19,521
                  )
                  
                  
                  -
                  
                  
                  
                  6,325
                  
                  
                  
                  38
                  
                  
                  
                  (13,158
                  )Reduction
      in derivative liability
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,746
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,746Warrants
      issued to related party as borrowing fees under a line of credit
      agreement
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,031
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,031Stock-based
      compensation expense
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,839
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2,839Balance
      June 30, 2009 (Restated)
                  
                  
                  114,716,864
                  
                  
                  $
                  1,149
                  
                  
                  $
                  391,889
                  
                  
                  $
                  354
                  
                  
                  $
                  (310,670
                  )
                  
                  $
                  2,013
                  
                  
                  $
                  84,735





See
accompanying notes to these unaudited consolidated financial
statements.




- 4
-




ENER1,
INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(unaudited,
in thousands)





Six Months Ended June 30,2009
                    
                    
                    2008
                      (Restated)Operating
      activities:Net
      loss
                    
                    $
                    (20,259
                    )
                    
                    $
                    (30,106
                    )Adjustments
      to reconcile net loss to cash used in operating
      activities:Gain
      on derivative liabilities
                    
                    
                    (3,917
                    )
                    
                    
                    (3,936
                    )Non-cash
      accretion of discounts on debentures and notes
                    
                    
                    -
                    
                    
                    
                    17,728Non-cash
      interest expense related to financing costs
                    
                    
                    1,988
                    
                    
                    
                    2,279Non-cash
      interest expense on related party debt
                    
                    
                    -
                    
                    
                    
                    279Non-cash
      inducement for debt conversions and equity investments
                    
                    
                    -
                    
                    
                    
                    753Depreciation
      and amortization
                    
                    
                    3,593
                    
                    
                    
                    298Stock-based
      compensation expense
                    
                    
                    2,839
                    
                    
                    
                    1,489Gain
      on foreign currency transactions, net
                    
                    
                    (368
                    )
                    
                    
                    -Gain
      on disposal of equipment, net
                    
                    
                    (5
                    )
                    
                    
                    -Other
      non-cash expenses
                    
                    
                    908
                    
                    
                    
                    -Changes
      in certain operating assets and liabilities:Restricted
      cash
                    
                    
                    660
                    
                    
                    
                    (3,593
                    )Accounts
      receivable
                    
                    
                    2,105
                    
                    
                    
                    (995
                    )Inventory
                    
                    
                    779
                    
                    
                    
                    -Accounts
      payable and accrued expenses
                    
                    
                    (5,815
                    )
                    
                    
                    1,085Changes
      in current assets, liabilities and other, net
                    
                    
                    (559
                    )
                    
                    
                    (1,512
                    )Net
      cash used in operating activities
                    
                    
                    (18,051
                    )
                    
                    
                    (16,231
                    )Investing
      activities:Capital
      expenditures and equipment deposits
                    
                    
                    (7,407
                    )
                    
                    
                    (4,316
                    )Other
                    
                    
                    19
                    
                    
                    
                    -Net
      cash used in investing activities
                    
                    
                    (7,388
                    )
                    
                    
                    (4,316
                    )Financing
      activities:Proceeds
      from borrowings, net of costs
                    
                    
                    3,576
                    
                    
                    
                    -Proceeds
      from borrowings, related party, net of costs
                    
                    
                    12,086
                    
                    
                    
                    -Proceeds
      from exercise of options and warrants
                    
                    
                    593
                    
                    
                    
                    30,092Proceeds
      from sale of stock, net of costs
                    
                    
                    5,862
                    
                    
                    
                    -Repayment
      of capital leases
                    
                    
                    (996
                    )
                    
                    
                    -Repayment
      of borrowings, related party
                    
                    
                    (1,081
                    )
                    
                    
                    (315
                    )Net
      cash provided by financing activities
                    
                    
                    20,040
                    
                    
                    
                    29,777Effect
      of exchange rate changes on cash and cash equivalents
                    
                    
                    166
                    
                    
                    
                    (36
                    )Net
      (decrease) increase in cash and cash equivalents
                    
                    
                    (5,233
                    )
                    
                    
                    9,194Cash
      and cash equivalents - beginning balance
                    
                    
                    11,229
                    
                    
                    
                    24,826Cash
      and cash equivalents - ending balance
                    
                    $
                    5,996
                    
                    
                    $
                    34,020Cash
      paid during the year for:Interest
                    
                    $
                    539
                    
                    
                    $
                    164Income
      taxes
                    
                    
                    126
                    
                    
                    
                    -





See
accompanying notes to these unaudited consolidated financial
statements.


- 5
-





Supplemental
      Disclosure of Non-Cash Investing and Financing
    ActivitiesNon-cash
      investing and financing activities:Cumulative
      effect of change in accounting principle on accumulated
      deficit
                    
                    $
                    6,325
                    
                    
                    $
                    -Cumulative
      effect of change in accounting principle on paid in
      capital
                    
                    
                    19,521
                    
                    
                    
                    -Shares
      issued for conversion of senior debentures
                    
                    
                    -
                    
                    
                    
                    11,715Shares
      issued for conversion of senior debentures interest
                    
                    
                    -
                    
                    
                    
                    174Shares
      issued for inducement to convert senior debentures
                    
                    
                    -
                    
                    
                    
                    203Reduction
      in derivative liability
                    
                    
                    2,746
                    
                    
                    
                    6,208Warrants
      issued in connection with advances of related party
    debt
                    
                    
                    1,031
                    
                    
                    
                    -Shares
      issued for conversion of convertible notes
                    
                    
                    -
                    
                    
                    
                    11,960Warrants
      issued in connection with the conversion of convertible
      notes
                    
                    
                    -
                    
                    
                    
                    680Shares
      issued for conversion of convertible notes interest
                    
                    
                    -
                    
                    
                    
                    1,885Beneficial
      conversion value related to conversion of convertible
      notes
                    
                    
                    -
                    
                    
                    
                    3,608Shares
      issued for the purchase of subsidiary shares from noncontrolling
      interest
                    
                    
                    1,354
                    
                    
                    
                    -Borrowings
      pursuant to capital lease obligations
                    
                    
                    175
                    
                    
                    
                    -Shares
      issued for capital lease obligations
                    
                    
                    8
                    
                    
                    
                    105Short
      term borrowings pursuant to equipment purchases
                    
                    
                    1,112
                    
                    
                    
                    -Note
      receivable in connection with sale of property
                    
                    
                    4
                    
                    
                    
                    -





See
accompanying notes to these unaudited consolidated financial
statements.




- 6
-


ENER1,
INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)





Note
1 – Business Overview





Nature
of the Business


Ener1,
Inc. (“Ener1”), a Florida corporation, was founded in 1985 and is headquartered
in New York.  In January 2002, Ener1 Group, Inc. (“Ener1 Group”)
acquired a majority interest in Ener1 and as of June 30, 2009 owns approximately
56% of the outstanding common stock of Ener1.





Ener1
(including our subsidiaries, referred to collectively in these unaudited
consolidated financial statements as “Ener1,” “we,” “our” and “us”) operates
primarily in the business of designing, developing and manufacturing
high-performance, rechargeable lithium-ion batteries and battery systems for
energy storage.  End markets include transportation, stationary power
(energy storage for utilities and renewable energy such as wind and solar power
in addition to battery backup systems for residential use), military
applications and small cell markets.  In the transportation markets,
we are developing systems to power the next generation of hybrid, plug-in hybrid
and electric vehicles (HEVs, PHEVs and EVs).  This technology is also
being developed for other transportation markets including buses and trucks as
well as alternative transportation vehicles.  We also conduct research
on and develop fuel cells and nano coating processes.  In addition,
our Enertech subsidiary specializes in “small cell” technology and manufactures
electrodes for other battery manufacturers, commercial battery packs, prismatic
cells and lithium polymer batteries as well as manufactures large format cells
for automotive applications.





Basis
of Presentation


In the
opinion of management, the accompanying unaudited consolidated financial
statements include all adjustments, consisting of only normal recurring
accruals, necessary for a fair statement of financial position, results of
operations, and cash flows. The information included in this quarterly report on
Form 10-Q should be read in conjunction with the consolidated financial
statements and the accompanying notes included in our Annual Report on Form 10-K
for the year ended December 31, 2008. The accounting policies are described in
the “Notes to Consolidated Financial Statements” in the 2008 Annual Report on
Form 10-K and updated, as necessary, in this Form 10-Q. The year end
consolidated balance sheet data presented for comparative purposes was derived
from audited financial statements, but does not include all disclosures required
by accounting principles generally accepted in the United States. The results of
operations for the six months ended June 30, 2009 are not necessarily indicative
of the operating results for the full year or for any other subsequent interim
period.





Effective
January 1, 2009, we implemented Statement of Financial Accounting Standards
(“SFAS”) No. 160, Noncontrolling Interests in
Consolidated Financial Statements,an amendment to ARB No. 51, (“SFAS
160”). This standard changed the accounting for and reporting of minority
interest (now called noncontrolling interest) in the consolidated financial
statements. The adoption of SFAS 160 has resulted in the reclassification of
amounts previously attributable to noncontrolling interest to a separate
component of stockholders’ equity on the accompanying unaudited consolidated
balance sheets. Additionally, net loss attributable to noncontrolling interest
is shown separately from net loss in the unaudited consolidated statements of
operations.





Certain
prior period amounts have been reclassified to conform to the current period
financial statement presentation.  These reclassifications have no
effect on the previously reported financial position or results of
operations.





Principles
of Consolidation


The
accompanying consolidated financial statements include the accounts of
Ener1 and its wholly-owned and majority-owned
subsidiaries.  Amounts pertaining to the noncontrolling interests held
by third parties in the operating results and financial position of our
majority-owned subsidiaries are reported as a component of stockholders’ equity
separate from Ener1’s equity.  All significant intercompany
transactions and balances have been eliminated in
consolidation.


- 7
-


Foreign
Currencies


Subsidiaries
located outside the United States use the local currency as the functional
currency. Accordingly, assets and liabilities denominated in foreign currencies
are translated using exchange rates in effect at the balance sheet date and
equity accounts at the historical exchange rates.  Revenues and
expenses are translated using the average exchange rates during the
year.  Any translation adjustments resulting from this process are
shown separately as a component of accumulated other comprehensive income (loss)
within stockholders’ equity in the unaudited consolidated balance
sheets.  Foreign currency transaction gains and losses are reported
net in other income (expense) in the unaudited consolidated statements of
operations.





Use
of Estimates


The
preparation of consolidated financial statements in accordance with accounting
principles generally accepted in the United States requires management to make
estimates and judgments that may affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate these estimates, including
those related to revenue recognition and related allowances, derivatives,
inventory, impairments of long-lived assets including intangible assets,
impairments of goodwill, income taxes including the valuation allowance for
deferred tax assets, valuation of long-lived assets, research and development,
contingencies and litigation, as well as share-based payments. These estimates
are based on our historical experience and on various other assumptions that are
believed to be reasonable, the results of which form the basis for making
judgments about the carrying values of assets and liabilities. Actual results
may differ from these estimates under different assumptions or
conditions.




Subsequent
Events
 Effective
this quarter, we implemented SFAS No. 165, Subsequent Events (“SFAS 165”). This
standard establishes general standards of accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued. The adoption of SFAS 165 did not impact our financial position or
results of operations. We evaluated all events or transactions that occurred
after June 30, 2009 up through August 6, 2009, the date we issued these
financial statements. During this period we did not have any material
recognizable subsequent events. However, we did have nonrecognizable subsequent
events related to the sales of Ener1 common stock and the award of a grant for
$118,500,000. Refer to Note 14, Sales of Common Stock and Note 15, Subsequent
Events, for additional information.


Note 2 – Restatement and Reclassifications of Previously Issued
Financial Statements





Summary
of Restatement Items





The
consolidated financial statements for the three and six months ended June 30,
2008 and the six months ended June 30, 2009 and related disclosures in
this Amendment No. 1 to the Quarterly Report on Form 10-Q have been restated in
accordance with the changes described below.





The
balance sheet as of June 30, 2009 included in the Quarterly Report at the time
of the initial filing on August 6, 2009 has been restated to adjust the opening
retained earnings by $13,713,000 as a result of the restatement of the December
31, 2008 balance sheet.  The December 31, 2008 balance sheet was
adjust to (1) reflect the corrected accounting for unamortized debt discount
upon conversion of our 2004 Debentures and 2005 Debentures as interest expense,
(2) reflect the corrected calculation for amortization of deferred
financing costs and debt discount for our 2004 Debentures, 2005 Debentures and
Series A Preferred Stock and (3) reflect the inclusion of gain on derivative
liability in the calculation of diluted loss per share.





The
Company originally recorded the unamortized discount, upon conversion,
associated with the 2004 Debentures and 2005 Debentures as additional paid in
capital.  The 2007 and 2008 financial statements have been
restated to reclassify the unamortized discount to interest expense. In
addition, the Company used an effective interest rate that resulted in an
overstatement of amortization of the deferred financing costs and debt discount
for the 2004 Debentures, 2005 Debentures and Series A Preferred Stock. The 2007
and 2008 financial statements have been restated to reflect the correct interest
expense and net income attributable to minority
interest.




The
impact of the adjustments related to the accounting for the unamortized debt
discount, deferred financing costs and discount accretion are summarized below
(the following tables compare specific line items from the financial statements
for the six months ended June 30, 2008 with the same line items from the
financial statements for the corresponding six months ended June 30, 2008,
as previously reported by the Company on August 6, 2009):





- 8
-





Consolidated
Statement of Operations Impact (in thousands except per share
data)




ENER1 INC AND
SUBS


CONSOLIDATED INCOME
STATEMENTS





Three Months Ended June 30,
      2008As previouslyreported
                    
                    
                    Adjustments
                    
                    
                    As
      restatedNet
      sales
                    
                    $
                    437
                    
                    
                    
                    
                    
                    $
                    437Cost of
      sales
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    -Gross
      profit
                    
                    
                    437
                    
                    
                    
                    
                    
                    
                    437Operating
      expenses:General and
      administrative
                    
                    
                    2,179
                    
                    
                    
                    
                    
                    
                    2,179Research and development,
      net
                    
                    
                    5,384
                    
                    
                    
                    
                    
                    
                    5,384Depreciation and
      amortization
                    
                    
                    191
                    
                    
                    
                    
                    
                    
                    191Total operating
      expenses
                    
                    
                    7,754
                    
                    
                    
                    
                    
                    
                    7,754Loss from
      operations
                    
                    
                    (7,317
                    )
                    
                    
                    
                    
                    
                    (7,317
                    )Other income
      (expense):Interest
      expense
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    -Interest
      income
                    
                    
                    125
                    
                    
                    
                    
                    
                    
                    125Other
                    
                    
                    (14
                    )
                    
                    
                    
                    
                    
                    (14
                    )Gain on derivative
      liabilities
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    -(Loss) gain on foreign currency
      transactions
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    -Total other income
      (expense)
                    
                    
                    111
                    
                    
                    
                    -
                    
                    
                    
                    111Loss before income
      taxes
                    
                    
                    (7,206
                    )
                    
                    
                    -
                    
                    
                    
                    (7,206
                    )Income tax (benefit)
      expense
                    
                    
                    -
                    
                    
                    
                    
                    
                    
                    
                    -Net
    loss
                    
                    
                    (7,206
                    )
                    
                    
                    -
                    
                    
                    
                    (7,206
                    )Less: Net (loss) income
      attributable to noncontrolling interest
                    
                    
                    616
                    
                    
                    
                    216
                    (a)
                    
                    
                    832Net loss attributable to Ener1,
      Inc.
                    
                    $
                    (7,822
                    )
                    
                    $
                    (216
                    )
                    
                    $
                    (8,038
                    )Net loss per share attributable
      to Ener1, Inc.:basic and
      diluted
                    
                    $
                    (0.08
                    )
                    
                    
                    
                    
                    
                    $
                    (0.08
                    )Weighted average shares
      outstanding for Ener1, Inc.:basic and
      diluted
                    
                    
                    101,930
                    
                    
                    
                    
                    
                    
                    
                    101,930




(a)
            Adjustment to accretion
      discount on Series A Preferred Stock previously calculated
      incorrectly.








Six MonthsEnded
                                  
                                  
                                  Six Months Ended June 30,
      2008June 30,  2009
                                    (Restated)
                                  
                                  
                                  As
      previously
                                    reported
                                  
                                  
                                  Adjustments
                                  
                                  
                                  As restatedNet
      sales
                                  
                                  $
                                  15,729
                                  
                                  
                                  $
                                  534
                                  
                                  
                                  
                                  
                                  
                                  $
                                  534Cost
      of sales
                                  
                                  
                                  13,163
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  -Gross
      profit
                                  
                                  
                                  2,566
                                  
                                  
                                  
                                  534
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  534Operating
      expenses:General
      and administrative
                                  
                                  
                                  8,358
                                  
                                  
                                  
                                  4,761
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  4,761Research
      and development, net
                                  
                                  
                                  13,714
                                  
                                  
                                  
                                  8,449
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  8,449Warrant
      modification expense
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  -Depreciation
      and amortization
                                  
                                  
                                  2,462
                                  
                                  
                                  
                                  298
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  298Total
      operating expenses
                                  
                                  
                                  24,534
                                  
                                  
                                  
                                  13,508
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  13,508Loss
      from operations
                                  
                                  
                                  (21,968
                                  )
                                  
                                  
                                  (12,974
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (12,974
                                  )Other
      income (expense):Interest
      expense
                                  
                                  
                                  (2,736
                                  )
                                  
                                  
                                  (11,625
                                  )
                                  
                                  
                                  (9,752
                                  ) (a)
                                  
                                  
                                  (21,377
                                  )Interest
      income
                                  
                                  
                                  77
                                  
                                  
                                  
                                  248
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  248Other
                                  
                                  
                                  85
                                  
                                  
                                  
                                  61
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  61Gain
      on derivative liabilities
                                  
                                  
                                  3,917
                                  
                                  
                                  
                                  3,936
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  3,936(Loss)
      gain on foreign currency transactions
                                  
                                  
                                  368
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  -Total
      other income (expense)
                                  
                                  
                                  1,711
                                  
                                  
                                  
                                  (7,380
                                  )
                                  
                                  
                                  (9,752
                                  )
                                  
                                  
                                  (17,132
                                  )Loss
      before income taxes
                                  
                                  
                                  (20,257
                                  )
                                  
                                  
                                  (20,354
                                  )
                                  
                                  
                                  (9,752
                                  )
                                  
                                  
                                  (30,106
                                  )Income
      tax (benefit) expense
                                  
                                  
                                  2
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  -Net
      loss
                                  
                                  
                                  (20,259
                                  )
                                  
                                  
                                  (20,354
                                  )
                                  
                                  
                                  (9,752
                                  )
                                  
                                  
                                  (30,106
                                  )Less:
      Net (loss) income attributable to noncontrolling
    interest
                                  
                                  
                                  (90
                                  )
                                  
                                  
                                  1,196
                                  
                                  
                                  
                                  (364
                                  ) (c)
                                  
                                  
                                  832Net
      loss attributable to Ener1, Inc.
                                  
                                  $
                                  (20,169
                                  )
                                  
                                  $
                                  (21,550
                                  )
                                  
                                  $
                                  (9,388
                                  )
                                  
                                  $
                                  (30,938
                                  )Net
      loss per share attributable to Ener1, Inc.:Basic
                                  
                                  $
                                  (0.18
                                  )
                                  
                                  $
                                  (0.22
                                  )
                                  
                                  
                                  
                                  
                                  
                                  $
                                  (0.32
                                  )Diluted
                                  
                                  $
                                  (0.20
                                  )(b)
                                  
                                  $
                                  (0.22
                                  )
                                  
                                  
                                  
                                  
                                  
                                  $
                                  (0.32
                                  )Weighted
      average shares outstanding for Ener1, Inc.:Basic
                                  
                                  
                                  113,637
                                  
                                  
                                  
                                  97,651
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  97,651Diluted
                                  
                                  
                                  113,644
                                  
                                  
                                  
                                  97,651
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  97,651





(a)
            To
      record interest expense of $8,308,000 for the 2004 Debentures and 2005
      Debentures unamortized discount previously calculated incorrectly and
      improperly recorded to additional paid in
  capital.


To
record interest expense of $1,444,000 to correct the amortization of deferred
financing costs.





(b)
            To
      reflect the inclusion of gain on derivative liability in calculation of
      diluted loss per share. For the six months ended June 30, 2009, diluted
      earnings per share were reported as
$(0.18)





(c)
            Adjustment
      to accretion discount on Series A Preferred Stock previously calculated
      incorrectly.





- 9
-





Balance
Sheet Impact




In
addition to the effects on Ener1's consolidated statement of operations for the
six months ended June 30, 2008 as discussed above, the restatement impacted
Ener1's opening consolidated balance sheet as of January 1, 2009.  The
following table sets forth the effects of the restatement adjustments on Ener1’s
consolidated balance sheet as of June 30, 2009 as compared to the consolidated
balance sheet as of June 30, 2009 as previously reported on August 6,
2009:





(dollars
in thousands)


June 30, 2009
                            
                            
                            December
      31,As previously
                            
                            
                            
                            
                            
                            
                            
                            
                            2008reported
                            
                            
                            Adjustments
                            
                            
                            As restated
                            
                            
                            RestatedASSETSCurrent
      assetsCash
      and cash equivalents
                            
                            $
                            5,996
                            
                            
                            
                            
                            
                            $
                            5,996
                            
                            
                            $
                            11,229Restricted
      cash
                            
                            
                            2,260
                            
                            
                            
                            
                            
                            
                            2,260
                            
                            
                            
                            2,976Accounts
      receivable, net of allowance of $983 and $915
                            
                            
                            4,685
                            
                            
                            
                            
                            
                            
                            4,685
                            
                            
                            
                            7,006Inventory,
      net of allowance for obsolescence of $1,020 and $483
                            
                            
                            8,689
                            
                            
                            
                            
                            
                            
                            8,689
                            
                            
                            
                            10,202Prepaid
      expenses and other current assets
                            
                            
                            1,116
                            
                            
                            
                            
                            
                            
                            1,116
                            
                            
                            
                            1,199Total
      current assets
                            
                            
                            22,746
                            
                            
                            
                            -
                            
                            
                            
                            22,746
                            
                            
                            
                            32,612Property
      and equipment, net of accumulated depreciation of $6,878 and
      $2,728
                            
                            
                            45,243
                            
                            
                            
                            
                            
                            
                            
                            45,243
                            
                            
                            
                            39,513Deferred
      financing costs, net of amortization of $1,696 and $0
                            
                            
                            3,393
                            
                            
                            
                            -
                            
                            
                            
                            3,393
                            
                            
                            
                            5,088Intangible
      assets, net of accumulated amortization of $1,649 and
    $568
                            
                            
                            14,121
                            
                            
                            
                            
                            
                            
                            
                            14,121
                            
                            
                            
                            15,246Goodwill
                            
                            
                            48,031
                            
                            
                            
                            
                            
                            
                            
                            48,031
                            
                            
                            
                            48,674Other
                            
                            
                            606
                            
                            
                            
                            
                            
                            
                            
                            606
                            
                            
                            
                            598Total
      assets
                            
                            $
                            134,140
                            
                            
                            $
                            -
                            
                            
                            $
                            134,140
                            
                            
                            $
                            141,731LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and accrued expenses
                            
                            $
                            9,747
                            
                            
                            
                            
                            
                            
                            $
                            9,747
                            
                            
                            $
                            16,322Accrued
      income taxes payable
                            
                            
                            299
                            
                            
                            
                            
                            
                            
                            
                            299
                            
                            
                            
                            318Short
      term borrowings
                            
                            
                            9,981
                            
                            
                            
                            
                            
                            
                            
                            9,981
                            
                            
                            
                            9,414Short
      term borrowings, related party
                            
                            
                            1,500
                            
                            
                            
                            
                            
                            
                            
                            1,500
                            
                            
                            
                            -Capital
      lease obligations, current portion
                            
                            
                            2,177
                            
                            
                            
                            
                            
                            
                            
                            2,177
                            
                            
                            
                            2,003Total
      current liabilities
                            
                            
                            23,704
                            
                            
                            
                            -
                            
                            
                            
                            23,704
                            
                            
                            
                            28,057Other
      long-term payables
                            
                            
                            1,267
                            
                            
                            
                            
                            
                            
                            
                            1,267
                            
                            
                            
                            1,093Derivative
      liabilities
                            
                            
                            6,549
                            
                            
                            
                            
                            
                            
                            
                            6,549
                            
                            
                            
                            -Long
      term borrowings
                            
                            
                            3,892
                            
                            
                            
                            
                            
                            
                            
                            3,892
                            
                            
                            
                            795Long
      term borrowings, related party
                            
                            
                            9,693
                            
                            
                            
                            
                            
                            
                            
                            9,693
                            
                            
                            
                            -Deferred
      income tax liabilities
                            
                            
                            313
                            
                            
                            
                            
                            
                            
                            
                            313
                            
                            
                            
                            397Convertible
      bonds
                            
                            
                            363
                            
                            
                            
                            
                            
                            
                            
                            363
                            
                            
                            
                            396Capital
      lease obligations, less current portion
                            
                            
                            3,624
                            
                            
                            
                            
                            
                            
                            
                            3,624
                            
                            
                            
                            4,580Total
      liabilities
                            
                            
                            49,405
                            
                            
                            
                            -
                            
                            
                            
                            49,405
                            
                            
                            
                            35,318Commitments
      and contingenciesStockholders'
      Equity:Common
      stock, $0.01 par value, 175,714,286 shares authorized, 114,716,864 and
      113,074,478 issued and outstanding
                            
                            
                            1,149
                            
                            
                            
                            
                            
                            
                            
                            1,149
                            
                            
                            
                            1,132Paid
      in capital
                            
                            
                            378,176
                            
                            
                            
                            13,713
                            (a)
                            
                            
                            391,889
                            
                            
                            
                            397,080Investment
      from Ener1
                            
                            
                            -
                            
                            
                            
                            
                            
                            
                            
                            -
                            
                            
                            
                            -Accumulated
      other comprehensive income
                            
                            
                            354
                            
                            
                            
                            
                            
                            
                            
                            354
                            
                            
                            
                            1,510Accumulated
      deficit
                            
                            
                            (296,957
                            )
                            
                            
                            (13,713
                            )(b)
                            
                            
                            (310,670
                            )
                            
                            
                            (296,826
                            )Total
      Ener1, Inc. stockholders' equity
                            
                            
                            82,722
                            
                            
                            
                            -
                            
                            
                            
                            82,722
                            
                            
                            
                            102,896Noncontrolling
      interest
                            
                            
                            2,013
                            
                            
                            
                            
                            
                            
                            
                            2,013
                            
                            
                            
                            3,517Total
      stockholders' equity
                            
                            
                            84,735
                            
                            
                            
                            -
                            
                            
                            
                            84,735
                            
                            
                            
                            106,413Total
      liabilities and stockholders' equity
                            
                            $
                            134,140
                            
                            
                            $
                            -
                            
                            
                            $
                            134,140
                            
                            
                            $
                            141,731





(a)
            To
      correct the accounting for conversions of 2004 Debentures and 2005
      Debentures.


(b)
              To
      adjust opening retained earnings for $3,961,000 and to reflect aggregate
      effect of income statement adjustments of $9,752,000 for the six months
      ended June 30, 2008.





- 10
-




Note 3
– New Accounting Pronouncements





Recently
Adopted Accounting Pronouncements


Effective
January 1, 2009, we implemented SFAS No. 141(R), Business Combination,(“SFAS
141(R)”). This standard requires an acquiring company to measure all assets
acquired and liabilities assumed, including contingent considerations and all
contractual contingencies, at fair value as of the acquisition date. In
addition, an acquiring company is required to capitalize in-process research and
development and either amortize it over the life of the product, or write it off
if the project is abandoned or impaired.  Due to the fact that SFAS
141(R) is applicable to future acquisitions completed after January 1, 2009 and
we have not had any business combinations since such date, the adoption of SFAS
141(R) has not had an impact on the consolidated financial
statements.





On
January 1, 2009, we adopted EITF No. 07-05, Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own Stock (“EITF
07-05”).  EITF 07-05 provides that an entity should use a two-step
approach to evaluate whether an equity-linked financial instrument (or embedded
feature) is indexed to its own stock, including evaluating the instrument’s
contingent exercise and settlement provisions.   The adoption of EITF
07-05 has affected the accounting for (i) certain freestanding warrants that
contain exercise price adjustment features (“down round provisions”) and (ii)
convertible bonds issued by our foreign subsidiary with a strike price
denominated in a foreign currency.  Our warrants with down round
provisions are no longer deemed to be indexed to Ener1’s common stock and
are no longer classified in equity.  Instead, these warrants were
reclassified as a derivative liability on January 1, 2009 resulting in a
cumulative adjustment to accumulated deficit of approximately
$6,325,000.  The conversion feature of the convertible bonds
denominated in a foreign currency was bifurcated and recorded as a derivative
liability resulting in a cumulative adjustment of approximately $38,000 which
was recorded to noncontrolling interest on January 1, 2009.  See Note
6, Derivative Instruments and Fair Value of Financial
Instruments.


- 11
-


We
implemented SFAS 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No.
133 (“SFAS 161”) effective January 1, 2009.  SFAS 161 amends
and expands the disclosure requirements of SFAS 133 with the objective of
providing users of financial statements with an enhanced understanding of the
purpose and nature of an entity’s derivatives activity, the accounting treatment
applied to derivative instruments, and the effect of derivative instrument
activity on an entity’s reported performance and cash flows.  The
adoption of this standard did not have a material impact on our financial
statements.





On
January 1, 2009, we adopted SFAS No. 157, Fair Value of Financial
Instruments, (“SFAS 157”) as delayed by FSP 157-2-2 for all non-financial
assets and non-financial liabilities.  SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
This statement does not require any new fair value measurements, but provides
guidance on how to measure fair value by providing a fair value hierarchy used
to classify the source of the information.  The adoption of this
standard did not have a material impact on our financial
statements.





FASB
Staff Position APB 14-1, Accounting for Convertible Debt
Instruments that may be Settled in Cash upon Conversion (Including Partial Cash
Settlement)(“FSP APB 14-1”) applies to convertible debt securities that,
upon conversion, may be settled by the issuer fully or partially in
cash.  We examined our convertible debt instruments and preferred
stock for applicability under this FSP.  FSP APB 14-1 was
adopted on January 1, 2009 and there was no impact to our financial statements
as our convertible debt and preferred stock were not within the scope of the
FSP.





In June
2009, the Securities and Exchange Commission (“SEC”) issued Staff Accounting
Bulletin No. 112, which updates the SEC’s rules and regulations to be
consistent with the accounting principles and standards established in
SFAS 141(R) and SFAS 160. This bulletin did not impact our financial
position or results of operations.





On June
30, 2009, we adopted the following new accounting standards:





·
            FASB
      Staff Position FAS 157-4, Determining Whether a Market
      Is Not Active and a Transaction Is Not Distressed, (“FSP FAS
      157-4”) provides guidelines for making fair value measurements more
      consistent with the principles presented in SFAS 157.  FSP FAS
      157-4 provides additional authoritative guidance in determining whether a
      market is active or inactive and whether a transaction is distressed. It
      is applicable to all financial and non-financial assets and
      liabilities.





·
            FASB
      Staff Positions FAS 115-2, FAS 124-2, and EITF 99-20-2, Recognition and Presentation
      of Other-Than-Temporary Impairments, (“FSP FAS 115-2, FAS 124-2,
      and EITF 99-20-2”) provides additional guidance to provide greater clarity
      about the credit and noncredit component of an other-than-temporary
      impairment event and to more effectively communicate when an
      other-than-temporary impairment event has occurred. This FSP applies to
      debt securities.





·
            FASB
      Staff Position FAS 107-1 and APB 28-1, Interim Disclosures about Fair
      Value of Financial Instruments, (“FSP FAS 107-1 and APB 28-1”)
      amends FASB Statement No. 107, Disclosures about Fair Value
      of Financial Instruments, to require disclosures about fair value
      of financial instruments in interim as well as in annual financial
      statements.





The
adoption of these standards did not have a material impact on our financial
statements.





Recently
Issued Accounting Standards


On
June 3, 2009, the FASB approved the FASB Accounting Standards Codification
(“the Codification”), as the single source of authoritative nongovernmental
Generally Accepted Accounting Principles (“GAAP”), in the United States. The
Codification will be effective for interim and annual periods ending after
September 15, 2009, which means July 1, 2009 for Ener1. Upon the
effective date, the Codification will be the single source of authoritative
accounting principles to be applied by all nongovernmental United States
entities. All other accounting literature not included in the Codification will
be non-authoritative. We do not expect the adoption of the Codification to have
an impact on our financial position or results of operations.


- 12
-





Note 4
– Supplemental Financial Information





Restricted
Cash


Restricted
cash represents amounts maintained with foreign banks that are pledged to
guarantee performance pursuant to both short term and long term
borrowings.





Inventory


Inventories
are stated at the lower of cost or market, with cost determined under the
first-in, first-out method, except for inventory at foreign subsidiaries which
are determined using the weighted average method.  Included in
inventory are raw materials and finished goods used in the production of
prototypes, which are charged to research and development expense when
consumed.  The following table presents the components of inventory
(in thousands):





June
      30,
                    
                    
                    December
      31,2009
                    
                    
                    2008Raw
      materials and supplies
                    
                    $
                    4,504
                    
                    
                    $
                    4,750Work
      in process
                    
                    
                    642
                    
                    
                    
                    783Finished
      goods
                    
                    
                    4,563
                    
                    
                    
                    5,1529,709
                    
                    
                    
                    10,685Less
      valuation allowance
                    
                    
                    (1,020
                    )
                    
                    
                    (483
                    )$
                    8,689
                    
                    
                    $
                    10,202





We
regularly review inventory on hand and, when necessary, record a provision for
excess or obsolete inventories based on an assessment of future
demand.  Inventories are presented net of a reserve for obsolescence
of $1,020,000 and $483,000 at June 30, 2009 and December 31, 2008,
respectively.





Property
and Equipment


The
following table presents details of property and equipment (in
thousands):





Useful
      life
                    
                    
                    June
      30,
                    
                    
                    December
      31,(in years)
                    
                    
                    2009
                    
                    
                    2008Land
                    
                    
                    
                    
                    $
                    1,934
                    
                    
                    $
                    1,966Building
      and building improvements
                    
                    30
      - 39
                    
                    
                    
                    5,292
                    
                    
                    
                    5,381Machinery
      and equipment
                    
                    5 -
      10
                    
                    
                    
                    26,538
                    
                    
                    
                    19,314Office
      equipment, furniture and other
                    
                    3 -
      7
                    
                    
                    
                    2,425
                    
                    
                    
                    2,137Leasehold
      improvements
                    
                    1 -
      10
                    
                    
                    
                    9,644
                    
                    
                    
                    7,966Construction
      in progress
                    
                    n/a
                    
                    
                    
                    6,288
                    
                    
                    
                    5,47752,121
                    
                    
                    
                    42,241Less
      accumulated depreciation
                    
                    
                    
                    
                    
                    (6,878
                    )
                    
                    
                    (2,728
                    )$
                    45,243
                    
                    
                    $
                    39,513





Construction
in progress includes deposits for equipment being constructed by third parties
specifically for our use.  Depreciation on these assets will commence
when we place the assets in service.





Depreciation
expense for the six months ended June 30, 2009 and 2008 was approximately
$2,522,000 and $298,000, respectively.  Assets recorded under capital
leases were approximately $7,384,000 and $7,209,000 at June 30, 2009 and
December 31, 2008, respectively.




- 13
-




Deferred
Financing Costs


Deferred
financing costs represent the $5,088,000 in fair value of the 1,250,000 warrants
issued to Ener1 Group as a commitment fee pursuant to a $30,000,000 Line of
Credit Agreement (the “LOC Agreement”) effective December 29,
2008.  These costs are being amortized to interest expense over the 18
month term of the LOC Agreement and totaled $1,696,000 during the six months
ended June 30, 2009.





The
estimated future straight line amortization of existing deferred financing costs
is $1,696,000 in 2009 and $1,696,000 during 2010.  If we issue equity
instruments related to financing transactions in the future, our interest
expense will be increased by the amortization of those costs.





Intangible
Assets and Goodwill


Intangible
assets, net of accumulated amortization, and goodwill, are as follows (in
thousands):





Useful
                      
                      
                      As of June 30, 2009
                      
                      
                      As of December 31, 2008life
                      
                      
                      Carrying
                      
                      
                      Accumulated
                      
                      
                      
                      
                      
                      Carrying
                      
                      
                      Accumulated(in yrs)
                      
                      
                      Amount
                      
                      
                      Amortization
                      
                      
                      Net
                      
                      
                      Amount
                      
                      
                      Amortization
                      
                      
                      NetPatented
      and unpatented technology
                      
                      10
                      
                      
                      $
                      13,896
                      
                      
                      $
                      (1,226
                      )
                      
                      $
                      12,670
                      
                      
                      $
                      13,900
                      
                      
                      $
                      (460
                      )
                      
                      $
                      13,440Electric
      vehicle battery technology
                      
                      4.2
                      
                      
                      
                      1,034
                      
                      
                      
                      (165
                      )
                      
                      
                      869
                      
                      
                      
                      1,056
                      
                      
                      
                      (42
                      )
                      
                      
                      1,014Customer
      relationships
                      
                      2.2
                      
                      
                      
                      840
                      
                      
                      
                      (258
                      )
                      
                      
                      582
                      
                      
                      
                      858
                      
                      
                      
                      (66
                      )
                      
                      
                      792$
                      15,770
                      
                      
                      $
                      (1,649
                      )
                      
                      $
                      14,121
                      
                      
                      $
                      15,814
                      
                      
                      $
                      (568
                      )
                      
                      $
                      15,246Goodwill
                      
                      Indefinite
                      
                      
                      $
                      48,031
                      
                      
                      $
                      -
                      
                      
                      $
                      48,031
                      
                      
                      $
                      48,674
                      
                      
                      $
                      -
                      
                      
                      $
                      48,674




Intangible
Assets


The
useful lives of our assets are primarily based on the legal or contractual life
of the underlying patent or contract, which does not include additional years
for the extension or renewal of the contract or patent. Our amortization policy
for intangible assets follows the principles in SFAS No. 142, Goodwill and Other Intangible
Assets (“SFAS 142”), which requires that the amortization of
intangible assets reflect the pattern that the economic benefits of the
intangible assets are consumed.





Certain
intangible assets are subject to foreign currency translation and the
translation adjustment is recorded as a component of accumulated other
comprehensive income (loss) within stockholders’ equity in the unaudited
consolidated balance sheets.  During the six months ended June 30, 2009,
the carrying amounts of certain intangible assets were adjusted as a result of
foreign currency translations totaling approximately $42,000 due to fluctuations
in the Korean Won, the local currency of Enertech.





Effective
January 1, 2009, we implemented FASB Staff Position (“FSP”) FAS 142-3,
Determination of the Useful
Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS 142-3
amends SFAS 142 and provides guidance for determining the useful life of a
recognized intangible asset and requires enhanced disclosures so that users of
financial statements are able to assess the extent to which the expected future
cash flows associated with the asset are affected by our intent and ability to
renew or extend the arrangement. The adoption of this FSP did not impact our
financial position or results of operations, since this standard was required to
be implemented prospectively; however, this standard may impact us in subsequent
periods.




- 14
-




We
account for long-lived assets, including other purchased intangible assets, in
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (“SFAS 144”), which requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment, such as reductions in demand or significant economic slowdowns in
industry, are present. Reviews are performed to determine whether the carrying
value of an asset is impaired, based on comparisons to undiscounted expected
future cash flows. If this comparison indicates that there is impairment, the
impaired asset is written down to fair value, which is typically calculated
using: (i) quoted market prices or (ii) discounted expected future cash flows
utilizing a discount rate consistent with the guidance provided in FASB Concepts
Statement No. 7, Using Cash
Flow Information and Present Value in Accounting Measurements. Impairment
is based on the excess of the carrying amount over the fair value of those
assets.   We will continue to evaluate whether events and
circumstances have occurred that indicate that our long-lived assets may have
been impaired.  Such evaluations for impairment are significantly
impacted by estimates of future revenues, costs and expenses as well as other
factors.  A significant change in these estimates could result in an
impairment of our long-lived assets.





Amortization
expense was $586,000 and $1,071,000 for the three months and six months ended
June 30, 2009, respectively.  There was no amortization expense
for the three and six month periods ended June 30, 2008 since the intangible
assets were first acquired during the third quarter of 2008.





The
following table reflects the estimated amortization expense for the next five
years related to intangible assets as of June 30, 2009 (in
thousands):





Year
      Ended December 31,2010
                  
                  $
                  1,9942011
                  
                  
                  1,6252012
                  
                  
                  1,6252013
                  
                  
                  1,3892014
                  
                  
                  1,389




Goodwill


Goodwill
is recorded as the difference, if any, between the aggregate consideration paid
for an acquisition and the fair value of the net tangible and intangible assets
acquired. In accordance with SFAS No. 142, we test goodwill for impairment at
the reporting unit level (operating segment or one level below an operating
segment) on an annual basis, on October 1st, the
first day of the fourth quarter of each year, commencing October 1, 2009, unless
an event occurs that would cause us to believe the value is impaired at an
interim date.





The
performance of the test involves a two-step process. The first step of the
impairment test involves comparing the fair values of the applicable reporting
units with their aggregate carrying values, including goodwill. We generally
determine the fair value of our reporting units using the income approach
methodology of valuation that includes the discounted cash flow
method.  If the carrying amount of a reporting unit exceeds the
reporting unit’s fair value, we perform the second step of the goodwill
impairment test to determine the amount of impairment loss. The second step of
the goodwill impairment test involves comparing the implied fair value of the
affected reporting unit’s goodwill with the carrying value of that
goodwill.





We will
continue to evaluate whether events and circumstances have occurred that
indicate the balance of goodwill may not be recoverable.  Such
evaluations for impairment are significantly impacted by estimates of future
revenues, costs and expenses as well as other factors.  A significant
change in these estimates could result in an impairment of
goodwill.





Certain
components of goodwill are subject to foreign currency translation and the
translation adjustment is recorded as a component of accumulated other
comprehensive income (loss) within stockholders’ equity in the unaudited
consolidated balance sheets.  During the six months ended June 30, 2009,
goodwill was adjusted as a result of foreign currency translations totaling
approximately $645,000 due to fluctuations in the Korean Won, the local currency
of Enertech.




- 15
-




Accounts
Payable and Accrued Expenses


The
following table presents details of accounts payable and accrued expenses (in
thousands):





June
      30,
                  
                  
                  December
      31,2009
                  
                  
                  2008Accounts
      payable
                  
                  $
                  7,292
                  
                  
                  $
                  12,825Accrued
      compensation and benefits
                  
                  
                  862
                  
                  
                  
                  1,194Accrued
      professional fees
                  
                  
                  105
                  
                  
                  
                  573Customer
      advances
                  
                  
                  523
                  
                  
                  
                  561Accrued
      other
                  
                  
                  965
                  
                  
                  
                  1,169$
                  9,747
                  
                  
                  $
                  16,322





Other
Long-Term Payables


The
following table presents details of other long term payables (in
thousands):





June
      30,
                  
                  
                  December
      31,2009
                  
                  
                  2008Refundable
      government grants (Enertech)
                  
                  $
                  201
                  
                  
                  $
                  161Severance
      benefits (Enertech)
                  
                  
                  1,066
                  
                  
                  
                  932$
                  1,267
                  
                  
                  $
                  1,093




Convertible
Bonds


On
January 25, 2008, our Enertech subsidiary issued a $9,173,000 convertible bond
maturing January 25, 2013 which is convertible into shares of Enertech common
stock at a conversion price of 750 Korean Won per share. The conversion ratio is
fixed to 11,564,092 shares if fully converted.  The bonds have a
conversion period from April 2008 through December 2012. The convertible bonds
accrue interest at 8.5% per annum which is payable at maturity if the bonds are
not converted prior to their maturity.





We own
approximately 96% of the outstanding balance of the convertible bonds at June
30, 2009 and as a result have eliminated the principal and related interest, in
consolidation.  The amount of the remaining outstanding convertible
bonds as of June 30, 2009 is $363,000.





We
have evaluated the application of SFAS 133, Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”), and EITF Issue 07-05,
Determining Whether an
Instrument (or Embedded Feature) Is Indexed to anEntity's Own Stock (“EITF
07-05”), to the convertible bonds with a strike price denominated in a foreign
currency.  Based on the guidance in SFAS 133 and EITF 07-05, we have
concluded that the conversion feature of the convertible bonds is required to be
bifurcated and accounted for separately as a derivative liability effective
January 1, 2009.  See Note 6, Derivative Instruments and Fair Value of
Financial Instruments.




- 16
-




Capital
Leases


The
following table summarizes the activity on our capital leases (in
thousands):





June
      30,
                  
                  
                  December
      31,2009
                  
                  
                  2008Beginning
      balance
                  
                  $
                  6,583
                  
                  
                  $
                  -Borrowings
                  
                  
                  175
                  
                  
                  
                  7,209Repayments
                  
                  
                  (996
                  )
                  
                  
                  (355
                  )Debt
      issuance costs
                  
                  
                  (8
                  )
                  
                  
                  (281
                  )Amortization
      of debt issuance costs
                  
                  
                  47
                  
                  
                  
                  10Ending
      balance
                  
                  
                  5,801
                  
                  
                  
                  6,583less:
      current portion
                  
                  
                  (2,177
                  )
                  
                  
                  (2,003
                  )Long
      term capital lease obligation
                  
                  $
                  3,624
                  
                  
                  $
                  4,580




The total
monthly payment for capital lease obligations is approximately
$218,000.





Revenue
Recognition


Revenue
is recognized when persuasive evidence of a sales arrangement exists, the price
is fixed or determinable, title and risk of loss are transferred, collectibility
is reasonably assured, product returns are reasonably estimable and there are no
remaining significant obligations or customer acceptance
requirements.  Revenue from product sales is recognized at the time of
shipment when title transfers and risk of loss occurs.  Ener1 offers
customers a right of return and reserves for such returns are estimated using
historical information.





During
the six months ended June 30, 2009, our net sales consist primarily of
battery related sales from our Enertech operations and a small amount of battery
prototype sales from our EnerDel subsidiary.  At Enertech, sales are
recorded when title passes to the customer which is the delivery point for
domestic sales and the receipt point of bill of lading for export
sales.  Currently, Enertech does not provide discounts, rebates,
product guarantees or warranties.  We expect, in the future, that
EnerDel will be providing a limited warranty on sales of battery packs for
electric and hybrid electric vehicles.  The terms of such warranties
and other post-shipment obligations may be negotiated on a customer by customer
basis and we will establish the appropriate policies and accounting treatment
based on such negotiations and final agreements.  We also expect that
our customers will test a significant number of battery packs prior to
acceptance.





With the
acquisition of Enertech during the fourth quarter of 2008, there are several
large customers who account for 10% or more of net sales.  During the
six months ended June 30, 2009, these customers were as follows (in
thousands):





Six Months Ended
                        June 30, 2009Li-Tec
      Battery
                      
                      $
                      1,925
                      
                      
                      12
                      %Symbol
      Technologies, Inc. (Motorola)
                      
                      
                      2,714
                      
                      
                      17
                      %Honeywell
      Security
                      
                      
                      1,572
                      
                      
                      10
                      %$
                      6,211




- 17
-




Note 5
– Acquisitions





Enertech
International, Inc.


We
acquired Enertech on October 24, 2008 and as consideration in the acquisition,
we paid $600,000 in cash and issued 5,000,000 shares of Ener1 common stock and
warrants to purchase up to 2,560,000 shares of Ener1 common stock at an exercise
price of $7.50 per share.  The warrants are immediately exercisable,
contain a cashless exercise provision and expire in October 2010.  In
addition, we incurred approximately $1,202,000 of third party transaction costs
for a total purchase consideration of $47,408,000.





The
following table presents the components of the estimated purchase consideration
(in thousands):





Estimated
      Purchase Consideration:Cash
                          
                          $
                          600Common
      stock
                          
                          
                          36,825Warrants
      to purchase common stock
                          
                          
                          8,781Transaction
      costs
                          
                          
                          1,202Total
      Estimated Purchase Consideration
                          
                          $
                          47,408





The
purchase price attributable to the 5,000,000 shares of Ener1 common stock was
estimated by management based on the average closing price of Ener1’s common
stock, as reported on the American Stock Exchange, for the five day period
before and after October 16, 2008, the date that the terms of the acquisition
were announced.  Based on the average closing stock price of $7.365,
approximately $36,825,000 of the purchase price was attributable to the common
stock.





The
purchase price attributable to the warrants to purchase up to 2,560,000 shares
of Ener1 common stock was estimated by management, on October 24, 2008, the date
of grant, using a Black-Scholes option valuation model.  Based on the
fair value of the warrants of $3.43 per share, approximately $8,781,000 of the
purchase price was attributable to the warrants.  The fair value of
the warrants was estimated with the following key assumptions:





Stock
      Price
                    
                    $7.00
      per shareStrike
      Price
                    
                    $7.50
      per shareExpiration
      date
                    
                    October
      24, 2010Risk
      free interest rate
                    
                    
                    1.57%Expected
      volatility
                    
                    
                    95.24%Expected
      dividend yield
                    
                    
                    0.00%


Supplemental
Pro Forma Data (Unaudited)


The
following “unaudited pro forma condensed combined statements of operations”
gives effect to the Enertech acquisition that was completed in 2008 as if it had
occurred at the beginning of 2008.  This pro forma data is presented
for informational purposes only and does not purport to be indicative of the
results of future operations or of the results that would have occurred had the
acquisition taken place at the beginning of 2008.




- 18
-




Ener1,
Inc.


Unaudited
Pro Forma Condensed Combined Statements of Operations


For
the Three Months Ended June 30, 2008


(In
thousands, except per share data)





Historical
                      Ener1
                      Three Months
                      Ended
                      June 30, 2008
                      (Restated)
                    
                    
                    Historical
                      Enertech
                      Three Months
                      Ended
                      June 30, 2008
                    
                    
                    Pro
    FormaAdjustments
                    
                    
                    
                    Pro Forma
                      Condensed
                      Combined
                      (Restated)Net
      sales
                    
                    $
                    437
                    
                    
                    $
                    10,983
                    
                    
                    $
                    (464
                    )
                    (a)
                    
                    $
                    10,956Cost
      of sales
                    
                    
                    -
                    
                    
                    
                    9,737
                    
                    
                    
                    (306
                    )
                    (a)
                    
                    
                    9,431Gross
      profit
                    
                    
                    437
                    
                    
                    
                    1,246
                    
                    
                    
                    (158
                    )
                    
                    
                    
                    1,525Operating
      expense
                    
                    
                    7,754
                    
                    
                    
                    1,463
                    
                    
                    
                    (312
                    )
                    (a),
      (b)
                    
                    
                    8,905Total
      other (income) expense
                    
                    
                    111
                    
                    
                    
                    (638
                    )
                    
                    
                    433
                    
                    (c
      ), (d)
                    
                    
                    (94
                    )Income
      tax expense
                    
                    
                    -
                    
                    
                    
                    142
                    
                    
                    
                    
                    
                    
                    
                    
                    142Net
      loss
                    
                    
                    (7,206
                    )
                    
                    
                    (997
                    )
                    
                    
                    587
                    
                    
                    
                    
                    (7,616
                    )Net
      loss attributable to noncontrolling interest
                    
                    
                    832
                    
                    
                    
                    -
                    
                    
                    
                    174
                    
                    (e)
                    
                    
                    658Net
      loss attributable to Ener1, Inc.
                    
                    $
                    (8,038
                    )
                    
                    $
                    (997
                    )
                    
                    $
                    761
                    
                    
                    
                    $
                    (8,274
                    )Weighted
      average shares outstanding
                    
                    
                    101,930
                    
                    
                    
                    
                    
                    
                    
                    5,000
                    
                    (f)
                    
                    
                    106,930Net
      loss per share-basic and diluted
                    
                    $
                    (0.08
                    )
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    $
                    (0.08
                    )





Ener1,
Inc.


Unaudited
Pro Forma Condensed Combined Statements of Operations


For
the Six Months Ended June 30, 2008


(In
thousands, except per share data)





Historical
                            Ener1
                            Six Months
                            Ended
                            June 30, 2008
                            (Restated)
                          
                          
                          Historical
                            Enertech Six
                            Months Ended
                            June 30, 2008
                          
                          
                          Pro Forma
                            Adjustments
                          
                          
                          
                          Pro Forma
                            Condensed
                            Combined
                            (Restated)Net
      sales
                          
                          $
                          534
                          
                          
                          $
                          20,661
                          
                          
                          $
                          (632
                          )
                          (a)
                          
                          $
                          20,563Cost
      of sales
                          
                          
                          -
                          
                          
                          
                          18,096
                          
                          
                          
                          (417
                          )
                          (a)
                          
                          
                          17,679Gross
      profit
                          
                          
                          534
                          
                          
                          
                          2,565
                          
                          
                          
                          (215
                          )
                          
                          
                          
                          2,884Operating
      expense
                          
                          
                          13,508
                          
                          
                          
                          3,039
                          
                          
                          
                          (328
                          )
                          (a),
      (b)
                          
                          
                          16,219Total
      other (income) expenses
                          
                          
                          (17,132
                          )
                          
                          
                          (1,122
                          )
                          
                          
                          833
                          
                          (c
      ), (d)
                          
                          
                          (17,421
                          )Income
      tax expense
                          
                          
                          -
                          
                          
                          
                          211
                          
                          
                          
                          
                          
                          
                          
                          
                          211Net
      loss
                          
                          
                          (30,106
                          )
                          
                          
                          (1,807
                          )
                          
                          
                          946
                          
                          
                          
                          
                          (30,967
                          )Net
      loss attributable to noncontrolling interest
                          
                          
                          832
                          
                          
                          
                          -
                          
                          
                          
                          324
                          
                          (e)
                          
                          
                          508Net
      loss attributable to Ener1, Inc.
                          
                          $
                          (30,938
                          )
                          
                          $
                          (1,807
                          )
                          
                          $
                          1,270
                          
                          
                          
                          $
                          (31,745
                          )Weighted
      average shares outstanding
                          
                          
                          97,651
                          
                          
                          
                          
                          
                          
                          
                          5,000
                          
                          (f)
                          
                          
                          102,651Net
      loss per share-basic and diluted
                          
                          $
                          (0.32
                          )
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          $
                          (0.31
                          )








- 19
-




(a)
            Reduction
      of net sales and operating expenses for intercompany transactions relating
      to purchases by Ener1 of products from
Enertech.


(b)
            Increase
      to depreciation and amortization from the fair value of certain tangible
      and identifiable intangible assets.


(c)
            Reduction
      of interest and discount expense for intercompany transactions relating to
      convertible bonds and bonds with
warrants.


(d)
            Reduction
      of gain on derivative liability for intercompany transactions relating to
      bonds with warrants.


(e)
            Noncontrolling
      interest reflects an adjustment to the allocable portion of pro forma
      income before controlling interest in
Enertech.


(f)
            Adjustment
      to record the weighted impact of 5,000,000 shares of Ener1 common stock
      issued in connection with the acquisition of
  Enertech.





Certain
components of goodwill are subject to foreign currency translation and the
translation adjustment is recorded as a component of accumulated other
comprehensive income (loss) within stockholders’ equity in the unaudited
consolidated balance sheets.  During the six months ended June 30, 2009,
goodwill was decreased as a result of foreign currency translations totaling
approximately $645,000 due to fluctuations in the Korean Won, the local currency
of Enertech.





On
January 7, 2009, we filed a registration statement to register the resale of the
shares issued to the Sellers, as well as the shares issuable upon the exercise
of the warrants and the registration statement became effective on February 5,
2009.  In addition, through January 24, 2009, we could have been
obligated to make a cash payment to the Sellers if common shares had been issued
at a price less than $7.20 per share.  Such clause has expired and no
such cash payment was made.





In
January 2009, we purchased an additional ownership interest in Enertech by
issuing 385,936 shares of Ener1 common stock valued at approximately $2,597,000
based on the closing stock price of $6.73 on the effective date of the
closing.   As a result, the ownership interest in Enertech
increased from 83% to 89%, on a fully diluted basis.  The additional
ownership interest has been accounted for as an equity transaction in accordance
with SFAS 160.  See Note 9,
Noncontrolling Interest.





Note 6
- Derivative Instruments and Fair Value of Financial
Instruments





Derivative
Instruments


We have
evaluated the application of SFAS 133 and EITF No. 07-05 to (i) certain
freestanding warrants that contain exercise price adjustment features known as
down round provisions and (ii) convertible bonds with a strike price denominated
in a foreign currency.  Based on the guidance in SFAS 133 and EITF
07-05, we have concluded these instruments are required to be accounted for as
derivatives effective January 1, 2009.





We have
recorded the fair value of the warrants and convertible bonds that are
classified as derivative liabilities in our balance sheet at fair value with
changes in the value of these derivatives reflected in the consolidated
statements of operations as gain or loss on derivative
liabilities.  These derivative instruments are not designated as
hedging instruments under SFAS 133.





Certain
freestanding warrants that contain down round provisions were issued in
conjunction with our capital raises during 2004 and 2005.  Prior to
the adoption of EITF 07-05, these warrants were classified in
equity.  After evaluating the application of SFAS 133 and EITF 07-05,
these warrants were no longer deemed to be indexed to Ener1's
common stock and on January 1, 2009 were reclassified as a derivative
liability.  Any time we issue securities that are deemed to be
dilutive to the warrants containing down round provisions, the number of shares
of Ener1 stock required to be issued upon the exercise of these warrants will
increase.





The
convertible bonds, originally issued in January 2008, which have a strike price
denominated in a foreign currency, were acquired in connection with the Enertech
acquisition during the fourth quarter of 2008.  As foreign currency
rates fluctuate, the number of shares of Enertech stock to be issued upon
conversion could increase.




- 20
-




Lattice Valuation
Model


We have
valued the freestanding warrants that contain down round provisions using a
lattice model, with the assistance of a valuation consultant, for which
management understands the methodologies. This model incorporates transaction
details such as Ener1’s stock price, contractual terms, maturity, risk free
interest rates, as well as assumptions about future financings, volatility, and
warrant holder behavior as of January 1, 2009, January 24, 2009, March 31,
2009, June 4, 2009 and June 30, 2009.





The
primary assumptions include projected annual volatility of 103% and holder
exercise targets at 150% of the exercise price for the warrants expiring in 2010
and 200% of the exercise price for the warrants expiring in 2014, decreasing as
the warrants approach maturity.  Based on these assumptions, the fair
value of the warrant derivatives as of January 1, 2009 was estimated by
management to be $13,196,000.  Amounts previously recorded to paid in
capital associated with these warrants of approximately $19,521,000 were
reversed and the remaining $6,325,000 was recorded as a cumulative adjustment to
accumulated deficit.





On
January 24, 2009, the down round provision contained in certain warrants expired
and these warrants were no longer treated as derivative
liabilities.  The fair value of the derivative liability associated
with these warrants was marked to market on this date and a gain on derivative
liability of approximately $1,587,000 was recorded.  The balance of
the derivative liability of $2,679,000 was then recorded as a contribution to
paid in capital on the same date.





On June
4, 2009, certain warrants containing down round provisions were
exercised.  The fair value of the derivative liability associated with
these warrants was marked to market on this date and a loss on derivative
liability of approximately $6,000 was recorded.  The balance of the
derivative liability associated with these exercised warrants of $67,000 was
then recorded as a contribution to paid in capital on the same
date.





The fair
value of the remaining warrant derivatives as of June 30, 2009 was estimated by
management to be $6,509,000.





The
foregoing assumptions are reviewed quarterly and are subject to change based
primarily on management’s assessment of the probability of the events described
occurring.  Accordingly, changes to these assessments could materially
affect the valuation.





Black-Scholes Valuation
Model


We used a
Black-Scholes pricing model to determine the fair value of the convertible
bonds.  This model uses market sourced inputs such as interest rates,
stock price and volatility, the selection of which requires management’s
judgment.  The convertible bond is convertible into shares of common
stock of our Enertech subsidiary, not shares of Ener1 common
stock.  As a result, stock prices were estimated using the average
stock price of four comparable Korean companies, which operate in the same
industry and are similar in size to Enertech, with a 30% liquidity discount and
volatility was estimated using the average volatility of the same four
comparable Korean companies.  Interest rates represent the Korean
government bond rate for securities with a maturity that approximates the
estimated expected life of the derivative.





The fair
value of the convertible bonds as of January 25, 2008 (the date of issuance),
January 1, 2009, March 31, 2009 and June 30, 2009 was estimated using the
following assumptions of management:





Volatility
                      
                      
                      Interest
                        Rate
                      
                      
                      StockPrice
                      
                      
                      Term in
                        YearsJanuary
      25, 2008
                      
                      
                      53.2
                      %
                      
                      
                      5.3
                      %
                      
                      
                      $0.54
                      
                      
                      
                      5.0January
      1, 2009
                      
                      
                      56.6
                      %
                      
                      
                      3.8
                      %
                      
                      
                      $0.30
                      
                      
                      
                      4.1March
      31, 2009
                      
                      
                      58.3
                      %
                      
                      
                      4.7
                      %
                      
                      
                      $0.47
                      
                      
                      
                      3.8June
      30, 2009
                      
                      
                      59.2
                      %
                      
                      
                      4.6
                      %
                      
                      
                      $0.51
                      
                      
                      
                      3.6


- 21
-




We own
approximately 96% of the outstanding balance of the convertible bonds and as a
result have eliminated 96% of the derivative liability and loss on derivative
liability in consolidation and recorded a $38,000 cumulative effect for the
adoption of EITF 07-05 to noncontrolling interest.  Based on these
assumptions, the remaining derivative liability, as of June 30, 2009 is $40,000
and the loss on derivative liability for the six months ended June 30, 2009 was
approximately $24,000.





The
foregoing assumptions are reviewed quarterly and are subject to change based
primarily on management’s assessment of the probability of the events described
occurring.  Accordingly, changes to these assessments could materially
affect the valuation.





Fair
Value of Financial Instruments


SFAS 157
defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. SFAS 157 also establishes a
fair value hierarchy which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
SFAS 157 describes three levels of inputs that may be used to measure fair
value:




Level 1 – Quoted prices
in active markets for identical assets or liabilities.




Level 2 – Observable
inputs other than Level 1 prices, such as quoted prices for similar assets
or liabilities; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or
liabilities.




Level 3 – Unobservable
inputs that are supported by little or no market activity and that are financial
instruments whose values are determined using pricing models, discounted cash
flow methodologies, or similar techniques, as well as instruments for which the
determination of fair value requires significant judgment or estimation. Our
Level 3 liabilities consist of the derivative liabilities associated with
certain freestanding warrants that contain down round provisions and convertible
bonds with a strike price denominated in a foreign currency.





If the
inputs used to measure the financial assets and liabilities fall within more
than one level described above, the categorization is based on the lowest level
input that is significant to the fair value measurement of the
instrument.





Financial Assets and
Liabilities Measured at Fair Value on a Recurring Basis


The
following table summarizes the financial assets and liabilities measured at fair
value during the six months ended June 30, 2009 (in thousands):





Carrying
                
                
                Fair Value Measurements
    UsingValue
                
                
                Level 1
                
                
                Level 2
                
                
                Level 3
                
                
                TotalWarrant
      derivative
                
                $
                6,509
                
                
                $
                -
                
                
                $
                -
                
                
                $
                6,509
                
                
                $
                6,509Convertible
      bond derivative
                
                
                40
                
                
                
                -
                
                
                
                -
                
                
                
                40
                
                
                
                40Total
      Derivative Liabilities
                
                
                
                
                
                $
                -
                
                
                $
                -
                
                
                $
                6,549
                
                
                $
                6,549





Level 3
Valuation Techniques


Financial
assets are considered Level 3 when their fair values are determined using
pricing models, discounted cash flow methodologies or similar techniques and at
least one significant model assumption or input is unobservable.  Our
Level 3 liabilities consist of the derivative liabilities associated with
certain freestanding warrants that contain down round provisions and convertible
bonds with a strike price denominated in a foreign currency.




- 22
-




The
following table provides a summary of the changes in fair value, including net
transfers in and/or out, of all financial assets measured at fair value on a
recurring basis using significant unobservable inputs during the six months
ended June 30, 2009 (in thousands):





Convertible
                      
                      
                      DerivativeWarrants
                      
                      
                      Bonds
                      
                      
                      LiabilitiesBalance,
      January 1, 2009
                      
                      $
                      13,196
                      
                      
                      $
                      16
                      
                      
                      $
                      13,212Total
      realized/unrealized (gains) or losses:Included
      in other income (expense)
                      
                      
                      (3,941
                      )
                      
                      
                      24
                      
                      
                      
                      (3,917
                      )Included
      in stockholders' equity
                      
                      
                      (2,746
                      )
                      
                      
                      -
                      
                      
                      
                      (2,746
                      )Purchases,
      issuances and settlements
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Transfers
      in and/or out of Level 3
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Balance,
      June 30, 2009
                      
                      $
                      6,509
                      
                      
                      $
                      40
                      
                      
                      $
                      6,549




The
carrying value of short term financial instruments, including cash and cash
equivalents, accounts receivable, inventory, accounts payable and accrued
expenses, short term borrowings and capital lease obligations approximate fair
value due to the relatively short period to maturity for these
instruments.  The long term borrowings approximate fair value since
the related rates of interest approximate current market rates.





Note 7
– Short Term and Long Term Borrowings





Short
term borrowings


Short
term borrowings as of June 30, 2009 and December 31, 2008 consist of the
following (in thousands):





June
      30,
                          
                          
                          December
      31,Interest rate
                          
                          2009
                          
                          
                          2008Equipment
      loan
                          
                          3.50%
                          
                          $
                          367
                          
                          
                          $
                          -Letters
      of credit
                          
                          3.35%
      ~ 4.86%
                          
                          
                          680
                          
                          
                          
                          1,716Trade
      financing
                          
                          6.24%
      ~ 6.98%
                          
                          
                          8,234
                          
                          
                          
                          7,298Line
      of credit
                          
                          7.85%
                          
                          
                          700
                          
                          
                          
                          400$
                          9,981
                          
                          
                          $
                          9,414





The
equipment loan is for purchased machinery and equipment which has been
customized specifically for Ener1’s use.  The loan is scheduled to
mature in August 2009 and has a monthly payment of approximately
$183,000.





The
letters of credit and trade financing agreements are denominated in Korean Won
and the total amount available at June 30, 2009 was approximately $12,576,000 of
which $8,914,000 was outstanding.  The amounts are scheduled for
repayment at various times throughout 2009.





The line
of credit is denominated in United States Dollars and the total amount available
at June 30, 2009 was $1,000,000 of which $700,000 was
outstanding.  The loan is scheduled to mature on April 27,
2010.





Certain
bank deposits, land, buildings and equipment are pledged as collateral for the
above loans.




- 23
-




Long
term borrowings


Long term
borrowings as of June 30, 2009 and December 31, 2008 consist of the following
(in thousands):





June
      30,
                    
                    
                    December
      31,Interest rate
                    
                    
                    2009
                    
                    
                    2008Equipment
      loan
                    
                    
                    7.85%
                    
                    
                    $
                    3,892
                    
                    
                    $
                    795$
                    3,892
                    
                    
                    $
                    795





The
equipment loan is denominated in Korean Won and matures in October
2011.  Certain bank deposits, land and buildings are pledged as
collateral to guarantee the payment of this debt.





Note 8
– Earnings per Share





Earnings
per Share


Net
loss per share basic is calculated by dividing net loss by the weighted average
number of common shares outstanding during the period. Net loss per share
diluted is calculated by adjusting outstanding shares, assuming any dilutive
effects of common stock equivalents using the treasury stock method. For the six
months ended June 30, 2009, the gain on derivative liability in the amount of
$2,330,000 was added to the net loss in computing diluted loss per share and
7,000 shares were added to the diluted weighted average shares.





Common
stock equivalents consist of shares issuable upon the exercise of warrants,
stock options and the completion of vesting periods for restricted
stock.  These common stock equivalents have been excluded from the
computation of earnings per share due to their anti-dilutive effect as we have
reflected a net loss for the three and six months ended June 30, 2009 and 2008,
respectively.





The
following potential common shares have been excluded from the computation of
diluted net loss per share for the periods presented because the effect of
including them would have been anti-dilutive:





Three
      Months Ended
                        
                        
                        Six
      Months EndedJune
      30,
                        
                        
                        June
      30,2009
                        
                        
                        2008
                        
                        
                        2009
                        
                        
                        2008Stock
      options that were not in the money
                        
                        
                        824,283
                        
                        
                        
                        92,860
                        
                        
                        
                        908,357
                        
                        
                        
                        492,141Stock
      options excluded because effect was anti-dilutive
                        
                        
                        2,475,391
                        
                        
                        
                        3,057,307
                        
                        
                        
                        1,810,121
                        
                        
                        
                        2,878,078Warrants
      that were not in the money
                        
                        
                        7,223,605
                        
                        
                        
                        3,651,105
                        
                        
                        
                        7,730,750
                        
                        
                        
                        3,651,105Warrants
      excluded because effect was anti-dilutive
                        
                        
                        12,062,516
                        
                        
                        
                        12,999,135
                        
                        
                        
                        10,684,577
                        
                        
                        
                        12,370,030Restricted
      stock excluded because effect was anti-dilutive
                        
                        
                        10,000
                        
                        
                        
                        -
                        
                        
                        
                        10,000
                        
                        
                        
                        -Total
      potential common sharesexcluded
      from weighted average shares
                        
                        
                        22,595,795
                        
                        
                        
                        19,800,407
                        
                        
                        
                        21,143,805
                        
                        
                        
                        19,391,354




- 24
-




Note 9
– Noncontrolling Interest





The
following table reconciles equity attributable to noncontrolling interest (in
thousands):





NoncontrollingInterestBalance,
      January 1, 2009
                  
                  $
                  3,517Net loss
      attributable to noncontrolling interest
                  
                  
                  (90
                  )Cumulative
      effect of change in accounting principle
                  
                  
                  38Translation
      adjustments
                  
                  
                  (98
                  )Reduction
      in noncontrolling interest
                  
                  
                  (1,354
                  )Balance,
      June 30, 2009
                  
                  $
                  2,013




The
reduction in noncontrolling interest of approximately $1,354,000 represents the
decrease in Ener1’s paid in capital for the purchase of 1,625,000 shares of
Enertech common stock on January 6, 2009.  Enertech has a share-based
compensation plan in which stock options are granted to Enertech’s directors and
employees who have contributed to Enertech’s operations.  These stock
options are exercisable into shares of common stock of
Enertech.  During the six months ended June 30, 2009, approximately
$10,000 was expensed under this plan.  As of June 30, 2009, there are
914,500 stock options outstanding which represent approximately 3%, on a fully
diluted basis, of the outstanding ownership of Enertech.





Note
10 – Related Party Transactions





Short
term borrowings


In May
2009, we borrowed $1,500,000 from Bzinfin, S.A., a British Virgin Island company
(“Bzinfin”) as a working capital advance.  The advance is scheduled
for repayment on December 31, 2009 and bears interest at a rate of 8% per
annum.  Bzinfin owns approximately 2% of the outstanding shares of
Ener1 common stock and is a 68.5% shareholder of Ener1 Group. Boris Zingarevich
is an indirect beneficial owner of Bzinfin.  Dispositive and voting power
over the shares of Ener1 common stock that are held by Ener1 Group is exercised
by the board of directors of Ener1 Group.





Long
term borrowings


Effective
December 29, 2008, we entered into the LOC Agreement with Ener1 Group to
establish a line of credit in the aggregate principal amount of $30,000,000 for
a period of 18 months or until we complete a public equity offering, whichever
occurs earlier. All amounts borrowed under the LOC Agreement bear interest at 8%
per annum. We issued warrants to Ener1 Group for the purchase of up to 1,250,000
shares of Ener1 common stock as a commitment fee and recorded the fair value of
the warrants as deferred financing costs.  We are further obligated to
issue to Ener1 Group warrants to purchase shares of Ener1 common stock each time
an advance is made under the LOC Agreement equal to the amount of the advance
divided by $20, with an exercise price equal to $8.25 per share.  All
warrants are immediately exercisable and expire two years after
issuance.




- 25
-




The
components of the line of credit balance as of June 30, 2009 are as follows (in
thousands, except warrants):





Line of CreditProceeds
      from advances
                        
                        $
                        10,250Unamortized
      discount relatedto
      fair value of warrants
                        
                        
                        (805
                        )Accrued
      interest payable at maturity
                        
                        
                        248Balance,
      June 30, 2009
                        
                        $
                        9,693Warrants
      issued
                        
                        
                        512,500Fair
      value of warrants
                        
                        $
                        1,031





Using a
Black-Scholes pricing model to value the warrants, the fair value of $1,031,000
has been recorded as a reduction in proceeds and is amortized to interest
expense over the remaining term of the LOC Agreement.  During the six
months ended June 30, 2009, interest expense totaled $226,000.  The
estimated future straight line amortization of unamortized discount is $402,000
in 2009 and $403,000 during 2010.





In May
2009, we agreed, subject to negotiation and execution of documents, to enter
into an Amended and Restated Line of Credit Agreement (the “Amended LOC
Agreement”) with Ener1 Group which provides for the election, by Ener1 Group, to
convert the outstanding principal and accrued interest thereon at one or more
conversion prices which may trigger a beneficial conversion
feature.  The impact of a beneficial conversion feature, if any, may
have a material affect on the financial statements if and when this transaction
is consummated.





Bridge
Financing


On
January 12, 2009, Ener1 Group became one of a number of lenders who provided
interim financing to Think Global AS (“Think”) of Oslo, Norway, a customer for
our electric vehicle lithium-ion battery, to allow them to focus their efforts
towards the next stages of the restructuring process, which includes raising
permanent equity capital and returning to volume production.  As of
June 30, 2009, Ener1 Group has provided approximately $1,995,000 in bridge
financing to Think.





Note
11 – Stock-Based Compensation





At June
30, 2009, we had seven active stock-based compensation plans which provide for
the granting of incentive and non-incentive stock options, restricted stock and
bonuses to officers, directors, employees and consultants.  The
Compensation Committee of the Board of Directors administers the plans and has
the authority to determine the recipients to whom awards will be made, the
terms of the vesting and forfeiture, the amounts of the awards and other
terms.  Under the terms of the plans, the option price approved by the
Compensation Committee shall not be less than the fair market value of Ener1
common stock at the date of grant.





Restricted
Stock


On
February 17, 2009, we granted 10,000 shares of restricted common stock to
certain employees pursuant to the terms of our plans.  The shares were
valued at a price of $4.05 per share based on the closing price of our common
stock on that date. The shares vest on the first anniversary of the grant date
and we are amortizing the related stock-based compensation of approximately
$41,000 over the one year period.




- 26
-




Stock
Options


During
the six months ended June 30, 2009, we granted performance based options to
employees to purchase up to 702,500 shares of common stock with an exercise
price of $4.05 per share.  These options are subject to specifically
identified performance criteria and are subject to forfeiture if such
performance criteria are not met.  Upon achievement of the performance
criteria, the options will become earned and will vest one-third per year over a
three year period.  The fair value of these options on the date of
grant was computed as $2,150,000 and in accordance with SFAS 123R will be
expensed over the vesting period.





We
granted incentive based options to employees to purchase up to 55,000 shares of
common stock with an exercise price of $4.05 per share.  These options
are scheduled to vest one-third per year over a three year
period.  The fair value of these options on the date of grant was
computed as $119,000 and in accordance with SFAS 123R, will be expensed over the
vesting period.





We also
issued fully vested options to purchase up to 200,000 shares of common stock to
our Chief Executive Officer at an exercise price of $4.05 per
share.  We estimated the fair value of such options totaled
approximately $652,000 based on the Black-Scholes option pricing model with the
following assumptions: expected term of five years, a 1.65% risk free interest
rate, expected volatility of 114.03% and zero dividends.





We also
granted performance based options to purchase up to 200,000 shares of common
stock to our Chief Executive Officer at an exercise price of $6.55 per
share.  These options are subject to specifically identified
performance criteria and are subject to forfeiture if such performance criteria
are not met.  Upon achievement of the performance criteria, the
options will become earned and will vest one-third per year over a three year
period.  The fair value of these options on the date of grant was
computed as approximately $716,000 based on the Black-Scholes option pricing
model with the following assumptions: expected term of four years, a 2.12% risk
free interest rate, expected volatility of 117.44% and zero
dividends.





Current
and former employees have exercised 283,176 options with exercise prices ranging
from $1.61 to $2.17 per share.  The total intrinsic value of these
options on the dates of exercise was $1,214,000.  Options to purchase
up to 14,624 shares of common stock that were issued to various employees and
former employees were forfeited because vesting requirements were not met or the
options expired in accordance with their terms.





During
the six months ended June 30, 2009, options to purchase 369,500 shares of common
stock were cancelled and were not accompanied by a concurrent grant (or offer to
grant) a replacement award.  In accordance with SFAS 123R, the
previously unrecognized compensation cost of approximately $947,000 was
recognized into expense on the cancellation date.





Valuation and Expense Information
under SFAS 123R


We
recorded share-based compensation costs related to stock-based employee plans of
$2,829,000 and $831,000 for the six months in the period ended June 30, 2009 and
2008, respectively.  As required by SFAS 123R, we estimate expected
future forfeitures of employee stock options and recognize compensation cost
only for the portion of those awards expected to vest.





Forfeiture
rate estimates for each plan are based on historical experience through December
31, 2008 and are adjusted annually to reflect actual forfeiture experience as
needed.  Included in the stock-based compensation cost of $2,829,000
is $285,000 in adjustments to reflect our actual forfeiture rate for vested
awards.





The fair
value of the stock option grants awarded during the six months ended June 30,
2009 were estimated as of the date of grant using a Black-Scholes option
valuation model with the following key assumptions:





Expected
      term
                        
                        4 -
      5 yrsRisk
      free interest rate
                        
                        1.22%
      - 2.12%Expected
      volatility
                        
                        114%
      - 117%Expected
      dividend yield
                        
                        0%




- 27
-


Summary
of Stock Options
 A summary
of the changes in the stock options outstanding under all of our stock option
plans described above as of June 30, 2009 is as follows:
  Options
                                                    
                                                    Number of
                                                      options
                                                    
                                                    
                                                    Weighted
                                                      average
                                                      exercise price
                                                    
                                                    Average
                                                      remaining
                                                      contractual
                                                      term,in years
                                                    
                                                    Intrinsic valueOutstanding,
      December 31, 2008
                                                    
                                                    
                                                    3,957,621
                                                    
                                                    
                                                    
                                                    $3.34
                                                    
                                                    4.5
                                                    
                                                    $
                                                    14,713,862Granted
                                                    
                                                    
                                                    1,157,500
                                                    
                                                    
                                                    
                                                    $4.48Exercised
                                                    
                                                    
                                                    (283,176
                                                    )
                                                    
                                                    
                                                    $2.10Forfeited
      or expired
                                                    
                                                    
                                                    (14,624
                                                    )
                                                    
                                                    
                                                    $4.98Cancelled
                                                    
                                                    
                                                    (369,500
                                                    )
                                                    
                                                    
                                                    $4.05Outstanding,
      June 30, 2009
                                                    
                                                    
                                                    4,447,821
                                                    
                                                    
                                                    
                                                    $3.71
                                                    
                                                    4.4
                                                    
                                                    $
                                                    9,009,520Exercisable,
      June 30, 2009
                                                    
                                                    
                                                    2,727,230
                                                    
                                                    
                                                    
                                                    $3.33
                                                    
                                                    4.4
                                                    
                                                    $
                                                    6,467,176
 
 The
following summarizes the outstanding and exercisable options and the respective
exercise prices at June 30, 2009:
 
 Range of
                        exercise price
                      
                      No. of options
                        outstanding
                      
                      
                      Weighted
                        average
                        exercise price
                      
                      
                      No. of options
                        exercisable
                      
                      
                      Weighted
                        average
                        exercise price$0.49
      - $1.61
                      
                      
                      894,716
                      
                      
                      
                      $1.60
                      
                      
                      
                      624,244
                      
                      
                      
                      $1.59$2.10
      - $4.20
                      
                      
                      2,020,261
                      
                      
                      
                      $2.88
                      
                      
                      
                      1,318,924
                      
                      
                      
                      $2.51$4.83
      - $4.90
                      
                      
                      558,199
                      
                      
                      
                      $4.90
                      
                      
                      
                      272,279
                      
                      
                      
                      $4.90$5.18
      - $6.79
                      
                      
                      759,643
                      
                      
                      
                      $6.49
                      
                      
                      
                      449,639
                      
                      
                      
                      $6.64$7.15
      - $7.63
                      
                      
                      215,002
                      
                      
                      
                      $7.34
                      
                      
                      
                      62,144
                      
                      
                      
                      $7.56Totals
                      
                      
                      4,447,821
                      
                      
                      
                      $3.71
                      
                      
                      
                      2,727,230
                      
                      
                      
                      $3.33
 
 The
following table summarizes the changes in our non-vested stock options since
January 1, 2009:
 
 WeightedaverageNo.
      of options
                        
                        
                        fair valueNon-vested,
      January 1, 2009
                        
                        
                        1,192,324
                        
                        
                        
                        $3.31Granted
                        
                        
                        1,157,500
                        
                        
                        
                        $3.44Vested
                        
                        
                        (245,109
                        )
                        
                        
                        $3.39Forfeited
                        
                        
                        (14,624
                        )
                        
                        
                        $3.99Cancelled
                        
                        
                        (369,500
                        )
                        
                        
                        $3.17Non-vested,
      June 30, 2009
                        
                        
                        1,720,591
                        
                        
                        
                        $3.41
  - 28
-
  Unearned
Stock-Based Compensation
 The
following table presents details of unearned stock-based compensation currently
estimated to be expensed in the remainder of 2009 through 2012 related to the
unvested share based payment awards (in thousands):
 
 2009
                  
                  
                  2010
                  
                  
                  2011
                  
                  
                  2012
                  
                  
                  TotalUnearned
      stock-based compensation
                  
                  $
                  1,024
                  
                  
                  $
                  1,714
                  
                  
                  $
                  825
                  
                  
                  $
                  132
                  
                  
                  $
                  3,695
 
 If there
are any modifications or cancellations of the underlying unvested awards, we may
be required to accelerate, increase or cancel any remaining unearned stock-based
compensation expense. Future stock-based compensation expense and unearned
stock-based compensation will increase to the extent that additional equity
awards are granted.
 
 Note
12 - Warrants
 
 During
the six months ended June 30, 2009, we issued to Ener1 Group warrants to
purchase up to 512,500 shares of Ener1 common stock at an exercise price of
$8.25 per share in connection with the LOC Agreement.  The warrants
are immediately exercisable and expire two years after the date of
grant.  We used a Black-Scholes pricing model to value the warrants
and the fair value of $1,031,000 has been recorded as debt discount and will be
amortized to expense over the remaining term of the LOC Agreement.
 
 The fair
value of the warrant grants awarded during the six months ended June 30, 2009
were estimated as of the date of grant using a Black-Scholes option valuation
model with the following key assumptions:
 
 Expected
      term
                          
                          2
      yearsRisk
      free interest rate
                          
                          
                          0.81% - 0.98%Expected
      volatility
                          
                          
                          94%
      - 100%Expected
      dividend yield
                          
                          
                          0%
 
 A summary
of the changes in warrants outstanding as of June 30, 2009 is as
follows:
 
 Warrants
                              
                              Number of
                                warrants
                              
                              
                              Weighted
                                average exercise
                                price
                              
                              
                              Average
                                remaining
                                contractual term,
                                in years
                              
                              
                              Intrinsic valueOutstanding
      and exercisable, December 31, 2008
                              
                              
                              27,758,424
                              
                              
                              
                              $4.10
                              
                              
                              
                              3.2
                              
                              
                              $
                              95,607,859Granted
                              
                              
                              512,500
                              
                              
                              
                              $8.25Exercised
                              
                              
                              (51,787
                              )
                              
                              
                              $5.39Outstanding
      and exercisable, June 30, 2009
                              
                              
                              28,219,137
                              
                              
                              
                              $4.17
                              
                              
                              
                              2.7
                              
                              
                              $
                              60,155,266
 
 The
following summarizes the outstanding and exercisable warrants and the respective
exercise prices at June 30, 2009:
  No. of
                        
                        
                        WeightedRange of
                        
                        warrants
                        
                        
                        averageexercise price
                        
                        outstanding
                        
                        
                        exercise price$2.10
      - $2.80
                        
                        
                        18,880,998
                        
                        
                        
                        $2.30$4.83
      - $5.95
                        
                        
                        2,114,534
                        
                        
                        
                        $5.30$7.50
      - $8.88
                        
                        
                        6,608,217
                        
                        
                        
                        $8.17$10.50
      - $17.57
                        
                        
                        615,388
                        
                        
                        
                        $14.6228,219,137
                        
                        
                        
                        $4.17
  - 29
-
  Note
13 - Segments
 
 We have
identified three business and reporting segments: battery, fuel cell and
nanotechnology.  The battery business develops and markets advanced
lithium-ion batteries. The fuel cell business develops and markets fuel cells
and fuel cell systems. The nanotechnology business is developing nanotechnology
related manufacturing processes and materials.  Transactions between
segments, consisting principally of product sales and purchases, are recorded at
the consummated sales price.
 
 The
following table provides segment financial information (in
thousands):
 
 Three
      Months Ended
                                
                                
                                Six
      Months EndedJune
      30,
                                
                                
                                June
      30,2009
                                
                                
                                2008
                                  (Restated)
                                
                                
                                2009
                                
                                
                                2008
                                  (Restated)Net
      sales:Corporate
                                
                                $
                                55
                                
                                
                                $
                                -
                                
                                
                                $
                                110
                                
                                
                                $
                                -Battery
                                
                                
                                7,479
                                
                                
                                
                                429
                                
                                
                                
                                15,626
                                
                                
                                
                                512Fuel
      Cell
                                
                                
                                3
                                
                                
                                
                                8
                                
                                
                                
                                (7
                                )
                                
                                
                                22Total
      Net Sales
                                
                                $
                                7,537
                                
                                
                                $
                                437
                                
                                
                                $
                                15,729
                                
                                
                                $
                                534Corporate
      allocations:Corporate
                                
                                $
                                (2,491
                                )
                                
                                $
                                (2,180
                                )
                                
                                $
                                (5,535
                                )
                                
                                $
                                (6,881
                                )Battery
                                
                                
                                2,179
                                
                                
                                
                                1,630
                                
                                
                                
                                4,832
                                
                                
                                
                                4,595Fuel
      Cell
                                
                                
                                244
                                
                                
                                
                                428
                                
                                
                                
                                526
                                
                                
                                
                                1,895Nanotechnology
                                
                                
                                68
                                
                                
                                
                                122
                                
                                
                                
                                177
                                
                                
                                
                                391$
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -Net
      income (loss) attributable to Ener1, Inc.Corporate
                                
                                $
                                (1,196
                                )
                                
                                $
                                (689
                                )
                                
                                $
                                1,861
                                
                                
                                $
                                (15,740
                                )Battery
                                
                                
                                (10,304
                                )
                                
                                
                                (5,417
                                )
                                
                                
                                (19,346
                                )
                                
                                
                                (10,282
                                )Fuel
      Cell
                                
                                
                                (1,049
                                )
                                
                                
                                (1,494
                                )
                                
                                
                                (1,981
                                )
                                
                                
                                (4,014
                                )Nanotechnology
                                
                                
                                (312
                                )
                                
                                
                                (438
                                )
                                
                                
                                (703
                                )
                                
                                
                                (902
                                )Net
      loss attributable to Ener1, Inc.
                                
                                $
                                (12,861
                                )
                                
                                $
                                (8,038
                                )
                                
                                $
                                (20,169
                                )
                                
                                $
                                (30,938
                                )June
      30,
                                
                                
                                December
      31,2009
                                  (Restated)
                                
                                
                                2008
                                  (Restated)Assets:Corporate
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                $
                                5,554
                                
                                
                                $
                                10,910Battery
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                127,991
                                
                                
                                
                                130,169Fuel
      Cell
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                451
                                
                                
                                
                                488Nanotechnology
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                144
                                
                                
                                
                                164Total
      assets
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                $
                                134,140
                                
                                
                                $
                                141,731
 
 We record
proceeds from cost-sharing grants as a reduction of research and development
expenses.  Proceeds from grants were $869,000 and $1,030,000 for the
three months ended June 30, 2009 and 2008 and $2,056,000 and $2,327,000 for the
six months ended June 30, 2009 and 2008, respectively.
  - 30
-
  Based on
Enertech’s foreign and domestic operations during the six months ended June 30,
2009 additional reportable segments have been created based on geographic
location.  We did not have foreign operations during the six months
ended June 30, 2008.
 
 The
following table provides geographic segment financial information (in
thousands):
 
 Three
                              
                              
                              SixMonths
                              
                              
                              MonthsEnded
                              
                              
                              EndedJune
      30, 2009Net
      sales:U.S.
                              
                              $
                              4,795
                              
                              
                              $
                              10,023South
      Korea
                              
                              
                              5,038
                              
                              
                              
                              12,662Intersegment
      transfers
                              
                              
                              (2,296
                              )
                              
                              
                              (6,956
                              )Total
      net sales
                              
                              $
                              7,537
                              
                              
                              $
                              15,729Net
      income (loss) attributable to Ener1, Inc.U.S.
                              
                              $
                              (11,851
                              )
                              
                              $
                              (19,267
                              )South
      Korea
                              
                              
                              (1,064
                              )
                              
                              
                              (778
                              )Intersegment
      transfers
                              
                              
                              54
                              
                              
                              
                              (124
                              )Net
      loss attributable to Ener1, Inc.
                              
                              $
                              (12,861
                              )
                              
                              $
                              (20,169
                              )June
      30,
                              
                              
                              December
      31,2009
                              
                              
                              2008Assets:U.S.
                              
                              $
                              73,887
                              
                              
                              $
                              77,115South
      Korea
                              
                              
                              60,253
                              
                              
                              
                              64,616Total
      assets
                              
                              $
                              134,140
                              
                              
                              $
                              141,731
 
 Note
14 – Commitments and Contingencies
 
 Litigation
 Ener1 may
receive communications from time to time alleging various claims. These claims
may include, but are not limited to, employment matters, collections of accounts
payable, and allegations that certain of our products infringe the patent rights
of other third parties.  Ener1 cannot predict when such claims may be
made, the outcome of any such claims or the effect of any such claims on our
operating results, financial condition, or cash flows.  As of June 30,
2009, there were no material pending legal proceedings.
  - 31
-
  Note
15 – Sales of Common Stock
 
 Open
Market Sale Agreement
 On May
22, 2009, we entered into an Open Market Sale Agreement (the “Open Market Sale
Agreement”) with Jefferies & Company, Inc. (“Jefferies”), pursuant to which
Ener1 may offer and sell, from time to time, shares of Ener1’s common stock with
an aggregate sales price of up to $40,000,000.  Sales of the shares
are being executed by means of ordinary brokers’ transactions on the NASDAQ
Global Market at market prices, privately negotiated transactions, crosses or
block transactions.  Under the terms of the Open Market Sale
Agreement, we may also sell shares to Jefferies as a principal for its own
account at a price agreed upon at the time of sale.  Unless we and
Jefferies agree to a lesser amount with respect to certain persons or classes of
persons, the compensation to Jefferies for sales of common stock sold pursuant
to the Open Market Sale Agreement will be 5.0% of the gross proceeds of the
sales price per share for the first $13,500,000 of shares sold and 3.0% of the
gross proceeds of the sales price per share in excess of
$13,500,000.
 
 We began
selling shares pursuant to the Open Market Sale Agreement in May 2009 and
through June 30, 2009 we sold 962,415 shares for an aggregate of $6,265,000, at
an average price of $6.51 per share.  After deducting fees and
expenses of $403,000, we received net proceeds of $5,862,000 from the sale of
these shares.
 
 To date,
we have sold a total of 3,070,684 shares for an aggregate of $19,613,000, at an
average price of $6.38 per share.  After deducting fees and expense of
$948,000, we received net proceeds of $18,665,000 from the sale of these
shares.
  Note
16 – Subsequent Events
  - 32
-
  Item
2.   Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
 
 The
following Management’s Discussion and Analysis of Financial Condition and
Results of Operations contains ”forward-looking statements” within the meaning
of Section 27A of the Securities Act, and Section 21E of the Securities Exchange
Act of 1934, as amended, including statements about our beliefs and
expectations. There are many risks and uncertainties that could cause actual
results to differ materially from those discussed in forward-looking statements.
Potential factors that could cause actual results to differ materially from
those discussed in any forward-looking statements include, but are not limited
to, those stated below under the headings “Cautionary Statement Concerning
Forward-Looking Statements” and “Risk Factors” as well as those described from
time to time in our filings with the Securities and Exchange
Commission.
 
 All forward-looking statements are
based on information available to us on the date of this filing, and we assume
no obligation to update such statements. The following discussion should be read
in conjunction with our filings with the Securities and Exchange Commission and
the consolidated financial statements and the related notes included in thisForm
10-Q.
 
 Cautionary
Statement Concerning Forward Looking Statements
 
 We have
made forward-looking statements in this Form 10-Q including, without limitation,
statements concerning our financial outlook for 2009 and beyond, estimates and
projections, statements relating to our business plans, objectives and expected
operating results, and the assumptions upon which those statements are based,
all of which are “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of
1933 and Section 21E of the Securities Act of 1934.
 
 Any
statements contained in this report that are not statements of historical fact
may be deemed forward-looking statements. Our forward-looking statements may be
identified by words such as “believes,” “expects,” “thinks,” “anticipates,”
“intends,” “estimates” or similar expressions. You should understand that these
forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties, which may cause actual results to
differ materially from those expressed or implied in the forward-looking
statements.
 
 We
undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
 
 The
factors discussed in “Risk Factors” and in our filings with the Securities and
Exchange Commission from time to time, and other unforeseen events or
circumstances, could affect our future results and could cause those results or
other outcomes to differ materially from those expressed or implied in our
forward-looking statements. Accordingly, you should not place undue reliance on
forward-looking statements, which speak only as of the date of this Quarterly
Report.
 
 Business
Overview and 2009 Developments
 
 We are
primarily in the business of designing, developing and manufacturing
high-performance, rechargeable lithium-ion batteries and battery systems for
energy storage.  End markets include transportation, stationary power
(energy storage for utilities and renewable energy such as wind and solar power
in addition to battery backup systems for residential use), military
applications and small cell markets.  In the transportation markets,
we are developing systems to power the next generation of hybrid, plug-in hybrid
and electric vehicles (HEVs, PHEVs and EVs).  This technology is also
being developed for other transportation markets including buses and trucks as
well as alternative transportation vehicles.  We also conduct research
and development of fuel cells and nano coating processes. In addition, our
Enertech subsidiary specializes in “small cell” technology and manufactures
electrodes for other battery manufacturers, commercial battery packs, prismatic
cells and lithium polymer batteries as well as manufactures large format cells
for automotive applications.
  - 33
-
  Our goal
is to become the leading United States-based developer and manufacturer of
advanced, safe, high-performance lithium-ion battery systems for EVs, HEVs, and
PHEVs, and for related non-automotive, stationary power and military
markets.  Our intention is to supply our products to the
transportation and stationary power market segments in North America, Europe and
Asia and the military markets in the United States.  We initially plan
to manufacture and assemble our batteries in our United States-based
Indianapolis and Korea-based plants, and to increase EnerDel’s global production
capacity of cells as required.  Ultimately, we envision a
hub-and-spoke model for manufacturing and distribution, basing cell
manufacturing in our Indianapolis and Korean facilities and locating pack
assembly closer to our customers to reduce transportation expense.
 
 On
January 1, 2009, we adopted EITF No. 07-05, Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own Stock (“EITF
07-05”).   The adoption of EITF 07-05 has affected the accounting for
(i) certain freestanding warrants that contain exercise price adjustment
features (“down round provisions”) and (ii) convertible bonds issued by our
foreign subsidiary with a strike price denominated in a foreign
currency.  Our warrants with such provisions are no longer deemed to
be indexed to Ener1’s common stock and are no longer classified in
equity.  Instead, these warrants were reclassified as a derivative
liability on January 1, 2009 resulting in a cumulative adjustment to accumulated
deficit of approximately $6,325,000.  The conversion feature of the
convertible bonds denominated in a foreign currency was bifurcated and recorded
as a derivative liability resulting in a cumulative adjustment of approximately
$38,000 which was recorded to noncontrolling interest on January 1,
2009.
 
 In
January 2009, we purchased an additional ownership interest in Enertech by
issuing 385,936 shares of our common stock valued at approximately $2,597,000
based on the closing stock price of $6.73 on the effective date of the
closing.  As a result, our interest in Enertech increased from 83% to
89%, on a fully diluted basis.  The additional ownership interest has
been accounted for as an equity transaction in accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 160, Noncontrolling Interests in
Consolidated Financial Statements.
 
 On
January 7, 2009, we filed a registration statement on Form S-3 to register the
resale of the shares issued in connection with the Enertech acquisition, as well
as the shares issuable upon the exercise of the warrants and to register
securities up to $100 million for future issuance in our capital raising
activities.  The registration statement became effective on February
5, 2009.
 
 On May
22, 2009, we entered into the Open Market Sale Agreement with Jefferies,
pursuant to which Ener1 may offer and sell, from time to time, shares of Ener1’s
common stock with an aggregate sales price of up to
$40,000,000.  Sales of the shares are being executed by means of
ordinary brokers’ transactions on the NASDAQ Global Market at market prices,
privately negotiated transactions, crosses or block
transactions.  Under the terms of the Open Market Sale Agreement, we
may also sell shares to Jefferies as a principal for its own account at a price
agreed upon at the time of sale.  Unless we and Jefferies agree to a
lesser amount with respect to certain persons or classes or persons, the
compensation to Jefferies for sales of common stock sold pursuant to the Open
Market Sale Agreement will be 5.0% of the gross proceeds of the sales price per
share for the first $13,500,000 of shares sold and 3.0% of the gross proceeds of
the sales price per share in excess of $13,500,000.
 
 We began
selling shares pursuant to the Open Market Sale Agreement in May 2009 and
through June 30, 2009 we sold 962,415 shares for an aggregate of $6,265,000, for
an average price of $6.51 per share.  After deducting fees and
expenses of $403,000, we received net proceeds of $5,862,000 from the sale of
these shares.  To date, we have sold a total of 3,070,684 shares
for an aggregate of $19,613,000, at an average price of $6.38 per
share.  After deducting fees and expense of $948,000, we received net
proceeds of $18,665,000 from the sale of these shares.
  - 34
-
 
 On May 8,
2009, we entered into a letter of intent for a potential long-term battery
supply program with Fisker Automotive, Inc. and Quantum Fuel Systems
Technologies Worldwide to manufacture and supply battery packs for the Karma
Plug-in Hybrid Electric vehicle program.  The program is subject to the
execution of a mutually acceptable final agreement and the delivery of
pre-production prototype battery packs that meet reliability and performance
standards.
 
 In May
2009, we entered into a contract with the Alameda-Contra Costa Transit District
(“AC Transit”) to manufacture and supply advanced battery systems for their
hybrid-electric fuel cell buses.  Our advanced battery system will be
an integral part of the zero emissions fuel cell buses capturing energy from
regenerative braking and improving fuel economy and efficiency.
 
 In June
2009, we were awarded a $3,300,000 cost-sharing research and development
contract with the Department of Energy (the “DOE”) to focus on the development
of innovative technologies which will eliminate overcharging in lithium-ion
cells to improve reliability and overall battery pack efficiency.
 
 In July
2009, we announced that we supplied our advanced battery systems to Volvo Car
Corporation (“Volvo”) to power a pair of plug-in hybrid demonstration cars
during the third quarter of 2009 as part of Volvo’s development program leading
up to the 2012 commercial launch of its production PHEV model.
 
 In July
2009, we announced that with the support of our strategic partner ITOCHU
Corporation, EnerDel provided engineering support on the delivery of the first
two postal service vehicles to Zero Sports, one of the conversion partners, for
the electric vehicle conversion program with the Japan Postal
Service.  The Japan Postal Service is currently converting 25% of its
fleet of combustion engine vehicles to electric drive as part of a government
push to accelerate market adoption and infrastructure development for electric
vehicles.
 
 In August
2009, we started a research and development program with Nissan Motor Co. of
Japan to co-fund the research of a new electrolyte, a viscous liquid that serves
as the essential conductive material between battery electrodes, conducted by
Argonne National Laboratory outside Chicago.
    - 35
-
  Results
of Operations for the Three Months ended June 30, 2009
 
 The
following information has been derived from the accompanying unaudited
consolidated financial statements for the three months in the periods ended June
30, 2009 and 2008 and is presented in thousands in all tables in this
discussion.  The three months ended June 30, 2009 includes the
operations of Enertech.  The three months ended June 30, 2008 do not
include the operations of Enertech as the acquisition was not effective, for
accounting purposes, until November 1, 2008.  Therefore, management
has presented the results of operations separately for Ener1 and Enertech for
the three months ended June 30, 2009 for proper comparison to Ener1’s results of
operations for the three months ended June 30, 2008.
 
 Net
Sales, Cost of Sales and Gross Profit
  2009
                    
                    
                    2008
                    
                    
                    Ener1
      ChangeEner1
                    
                    
                    Enertech
                    
                    
                    Totals
                    
                    
                    Ener1
                    
                    
                    $
                    
                    
                    %Net
      sales
                    
                    $
                    715
                    
                    
                    $
                    6,822
                    
                    
                    $
                    7,537
                    
                    
                    $
                    437
                    
                    
                    $
                    278
                    
                    
                    
                    64%Cost
      of sales
                    
                    
                    -
                    
                    
                    
                    6,360
                    
                    
                    
                    6,360
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Gross
      profit
                    
                    $
                    715
                    
                    
                    $
                    462
                    
                    
                    $
                    1,177
                    
                    
                    $
                    437
                    
                    
                    $
                    278
                    
                    
                    
                    64%
 
 Ener1
revenue has increased primarily from the sale of prototype EV battery packs to
European customers, which has been partially offset by a decrease in revenue
from the supply agreement with Think.
 
 Enertech’s
sales of $6,822,000 and cost of sales of $6,360,000 resulted in a gross profit
of $462,000 or 7%.  Included in cost of sales is depreciation expense
of $568,000.
 
 Enertech’s
sales have decreased approximately 35% on a pro forma basis, from $10,519,000
for the three months ended June 30, 2008 to $6,822,000 for the three months
ended June 30, 2009 resulting in a gross profit decline of approximately
$626,000 or 58%.  This revenue decline is due to an overall decline in
demand for batteries due to poor worldwide economic conditions as well as the
impact of foreign currency fluctuations.  The average foreign currency
exchange rate of the Korean Won for the three months ended June 30, 2009
declined approximately 29% when compared to the same period in
2008.
 
 Operating
Expenses
  2009
                    
                    
                    2008
                    
                    
                    Ener1
      ChangeEner1
                    
                    
                    Enertech
                    
                    
                    Totals
                    
                    
                    Ener1
                    
                    
                    $
                    
                    
                    %General
      and administrative
                    
                    $
                    2,539
                    
                    
                    $
                    1,202
                    
                    
                    $
                    3,741
                    
                    
                    $
                    2,179
                    
                    
                    $
                    360
                    
                    
                    
                    17%Research
      and development, net
                    
                    
                    7,428
                    
                    
                    
                    24
                    
                    
                    
                    7,452
                    
                    
                    
                    5,384
                    
                    
                    
                    2,044
                    
                    
                    
                    38%Depreciation
      and amortization
                    
                    
                    1,122
                    
                    
                    
                    232
                    
                    
                    
                    1,354
                    
                    
                    
                    191
                    
                    
                    
                    931
                    
                    
                    
                    487%Total
      operating expenses
                    
                    $
                    11,089
                    
                    
                    $
                    1,458
                    
                    
                    $
                    12,547
                    
                    
                    $
                    7,754
                    
                    
                    $
                    3,335
                    
                    
                    
                    43%
 
 General and
administrative:  Ener1 general and administrative expenses
increased due to an increase in salaries and benefits of $276,000 related to the
increase in our workforce and an increase in stock-based compensation of
$56,000.
 
 Of
Enertech’s total general and administrative expenses of $1,202,000, which
represents approximately 32% of the consolidated expense, $652,000 or 54% is for
salary and related expenses, $167,000 or 14% is for legal and professional fees,
$107,000 or 9% is for facilities related expenses and $64,000 or 5% is for
travel related costs.
 
 Research and
development:  Ener1 research and development expenses increased
primarily due to an increase in salaries and benefits of $1,286,000 related to
the increase in our workforce, an increase in stock-based compensation of
$848,000, an increase in facilities related expenses of $356,000, and an
increase in professional fees of $346,000 primarily related to legal fees and
costs incurred for filing, maintaining and protection of our patents and
patented technology.  These increases have been partially offset by a
decrease in material and non-capitalized equipment of $758,000.
  - 36
-
  We
present proceeds from cost sharing arrangements with federal government agencies
as a reduction of research and development expenses.  Billings under
these contracts were $869,000 and $1,030,000 for the three months ended June 30,
2009 and 2008, respectively, a decrease of $161,000 or 16%.
 
 Research
and development expenses for the three months ended June 30, 2009 included
$6,409,000 of expenses incurred in connection with our battery business, net of
$859,000 in proceeds, $788,000 of expenses incurred in connection with our fuel
cell business, net of $10,000 in proceeds and $231,000 of expenses incurred in
connection with our nano-technology business.
 
 Depreciation and
amortization: Ener1 amortization increased $417,000 related to intangible
assets capitalized after the second quarter of 2008 and depreciation, included
in operating expenses, increased $514,000 as a result of the increase in
property and equipment since June 30, 2008.
 
 Other
Income and Expenses
 2009
                    
                    
                    2008
                    
                    
                    Ener1
      ChangeEner1
                    
                    
                    Enertech
                    
                    
                    Totals
                    
                    
                    Ener1
                    
                    
                    $
                    
                    
                    %Interest
      expense
                    
                    $
                    (1,382
                    )
                    
                    $
                    (37
                    )
                    
                    $
                    (1,419
                    )
                    
                    $
                    -
                    
                    
                    $
                    (1,382
                    )
                    
                    
                    100%Interest
      income
                    
                    
                    1
                    
                    
                    
                    39
                    
                    
                    
                    40
                    
                    
                    
                    125
                    
                    
                    
                    (124
                    )
                    
                    
                    -99%Other
                    
                    
                    5
                    
                    
                    
                    17
                    
                    
                    
                    22
                    
                    
                    
                    (14
                    )
                    
                    
                    19
                    
                    
                    
                    100%Gain
      (loss) on derivative liabilities
                    
                    
                    9
                    
                    
                    
                    (4
                    )
                    
                    
                    5
                    
                    
                    
                    -
                    
                    
                    
                    9
                    
                    
                    
                    100%Loss
      on foreign currency transactions
                    
                    
                    (11
                    )
                    
                    
                    (292
                    )
                    
                    
                    (303
                    )
                    
                    
                    -
                    
                    
                    
                    (11
                    )
                    
                    
                    100%Total
      other income (expenses)
                    
                    $
                    (1,378
                    )
                    
                    $
                    (277
                    )
                    
                    $
                    (1,655
                    )
                    
                    $
                    111
                    
                    
                    $
                    (1,489
                    )
                    
                    
                    -1341%
 
 Interest
expense:  Interest expense represents a combination of both
cash and non-cash interest related to our capital lease obligations, deferred
financing and debt issuance costs as well as Enertech’s bank borrowings and
convertible bonds.  Of the $1,382,000 in Ener1 interest expense,
$1,207,000 or 87% represents the amortization of deferred financing and debt
issuance costs associated with the fair value of the warrants issued to Ener1
Group as a commitment fee and borrowing fees pursuant to the LOC
Agreement.
 
 Gain on derivative
liabilities:  Following the provisions of EITF 07-05 and SFAS
133, we concluded that our warrants containing down round provisions and the
convertible bonds issued by our Enertech subsidiary should be treated as
derivative liabilities effective January 1, 2009, which resulted in a gain on
derivative liabilities for the three months ended June 30, 2009 of $9,000 for
Ener1 and a loss on derivative liabilities of $4,000 for Enertech for the same
period.
 
 Gain on foreign currency
transactions:  Foreign currency transactions are transactions
denominated in a currency other than the entity’s functional
currency.  Foreign currency transactions may produce receivables or
payables that are fixed in terms of the amount of foreign currency that will be
received or paid.  A change in exchange rates of the functional
currency in which a transaction is denominated increases or decreases the
expected cash flow creating a foreign currency transaction gain or
loss.
  - 37
-


Results
of Operations for the Six Months ended June 30, 2009
 
 The
following information has been derived from the accompanying unaudited
consolidated financial statements for the six months in the periods ended June
30, 2009 and 2008 and is presented in thousands in all tables in this
discussion.  The six months ended June 30, 2009 includes the
operations of Enertech.  The six months ended June 30, 2008 do not
include the operations of Enertech as the acquisition was not effective, for
accounting purposes, until November 1, 2008.  Therefore, management
has presented the results of operations separately for Ener1 and Enertech for
the six months ended June 30, 2009 for proper comparison to Ener1’s results of
operations for the six months ended June 30, 2008.
 
 Net
Sales, Cost of Sales and Gross Profit
 
 2009
                    
                    
                    2008
                    
                    
                    Ener1 ChangeEner1
                    
                    
                    Enertech
                    
                    
                    Totals
                    
                    
                    Ener1
                    
                    
                    $
                    
                    
                    %Net
      sales
                    
                    $
                    1,000
                    
                    
                    $
                    14,729
                    
                    
                    $
                    15,729
                    
                    
                    $
                    534
                    
                    
                    $
                    466
                    
                    
                    
                    87%Cost
      of sales
                    
                    
                    -
                    
                    
                    
                    13,163
                    
                    
                    
                    13,163
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Gross
      profit
                    
                    $
                    1,000
                    
                    
                    $
                    1,566
                    
                    
                    $
                    2,566
                    
                    
                    $
                    534
                    
                    
                    $
                    466
                    
                    
                    
                    87%
 
 Ener1
revenue has increased primarily from the sale of prototype EV battery packs to
European customers, which has been partially offset by a decrease in revenue
from the supply agreement with Think.
 
 Enertech’s
sales of $14,729,000 and cost of sales of $13,163,000 resulted in a gross profit
of $1,566,000 or 11%.  Included in cost of sales is depreciation
expense of $1,131,000.
 
 Enertech
sales have decreased approximately 26% on a pro forma basis, from $20,029,000
for the six months ended June 30, 2008 to $14,729,000 for the six months ended
June 30, 2009 resulting in a gross profit decline of approximately $784,000 or
33%.  This revenue decline is due to an overall decline in demand for
batteries due to poor worldwide economic conditions as well as the impact of
foreign currency fluctuations.  The average foreign currency exchange
rate of the Korean Won for the six months ended June 30, 2009 declined
approximately 27% when compared to the same period in 2008.
 
 Operating
Expenses
 
 2009
                          
                          
                          2008
                          
                          
                          Ener1 ChangeEner1
                          
                          
                          Enertech
                          
                          
                          Totals
                          
                          
                          Ener1
                          
                          
                          $
                          
                          
                          %General
      and administrative
                          
                          $
                          5,758
                          
                          
                          $
                          2,600
                          
                          
                          $
                          8,358
                          
                          
                          $
                          4,761
                          
                          
                          $
                          997
                          
                          
                          
                          21%Research
      and development, net
                          
                          
                          13,644
                          
                          
                          
                          70
                          
                          
                          
                          13,714
                          
                          
                          
                          8,449
                          
                          
                          
                          5,195
                          
                          
                          
                          61%Depreciation
      and amortization
                          
                          
                          2,014
                          
                          
                          
                          448
                          
                          
                          
                          2,462
                          
                          
                          
                          298
                          
                          
                          
                          1,716
                          
                          
                          
                          576%Total
      operating expenses
                          
                          $
                          21,416
                          
                          
                          $
                          3,118
                          
                          
                          $
                          24,534
                          
                          
                          $
                          13,508
                          
                          
                          $
                          7,908
                          
                          
                          
                          59%
 
 General and
administrative:  Ener1 general and administrative expenses
increased due to an increase in legal and professional fees of $446,000, of
which $261,000 is for investor, government, media and public relations, and an
increase in stock-based compensation of $458,000.
 
 Of
Enertech’s total general and administrative expenses of $2,600,000, which
represents approximately 31% of the consolidated expense, $1,331,000 or 51% is
for salary and related expenses, $443,000 or 17% is for legal and professional
fees, $213,000 or 8% is for facilities related expenses and $159,000 or 6% is
for travel related costs.
 
 Research and
development:  Ener1 research and development expenses increased
primarily due to an increase in salaries and benefits of $2,862,000 related to
the increase in our workforce, an increase in stock-based compensation of
$882,000, an increase in facilities related expenses of $534,000 primarily due
to rent and utilities for our Noblesville facility, an increase in professional
fees of $339,000 primarily related to legal fees incurred for filing,
maintaining and protection of our patents and patented technology and an
increase in materials and non-capitalized equipment of
$672,000.
  - 38
-
  We
present proceeds from our cost sharing arrangements with federal government
agencies as a reduction of research and development
expenses.  Billings under these contracts were $2,056,000 and
$2,327,000 for the periods ended June 30, 2009 and 2008, respectively, a
decrease of $271,000 or 12%.
 
 Research
and development expenses for the period ended June 30, 2009 included $11,749,000
of expenses incurred in connection with our battery business, net of $2,014,000
in proceeds, $1,409,000 of expenses incurred in connection with our fuel cell
business, net of $42,000 in proceeds, and $486,000 of expenses incurred in
connection with our nano-technology business.
 
 Depreciation and
amortization:  Ener1 amortization increased $764,000 related to
intangible assets capitalized after the second quarter of 2008 and depreciation,
included in operating expenses, increased $952,000 as a result of the increases
in property and equipment since June 30, 2008.
 
 Other
Income and Expenses
 
 2009
                    
                    
                    2008
                    
                    
                    Ener1 ChangeEner1
                    
                    
                    Enertech
                    
                    
                    Totals
                    
                    
                    Ener1
                    
                    
                    $
                    
                    
                    %Interest
      expense (a)
                    
                    $
                    (2,505
                    )
                    
                    $
                    (231
                    )
                    
                    $
                    (2,736
                    )
                    
                    $
                    (21,377
                    )
                    
                    $
                    18,872
                    
                    
                    
                    -88%Interest
      income
                    
                    
                    4
                    
                    
                    
                    73
                    
                    
                    
                    77
                    
                    
                    
                    248
                    
                    
                    
                    (244
                    )
                    
                    
                    -98%Other
                    
                    
                    6
                    
                    
                    
                    79
                    
                    
                    
                    85
                    
                    
                    
                    61
                    
                    
                    
                    (55
                    )
                    
                    
                    100%Gain
      (loss) on derivative liabilities
                    
                    
                    3,941
                    
                    
                    
                    (24
                    )
                    
                    
                    3,917
                    
                    
                    
                    3,936
                    
                    
                    
                    5
                    
                    
                    
                    0%(Loss)
      gain on foreign currency transactions
                    
                    
                    (11
                    )
                    
                    
                    379
                    
                    
                    
                    368
                    
                    
                    
                    -
                    
                    
                    
                    (11
                    )
                    
                    
                    100%Total
      other income (expenses)
                    
                    $
                    1,435
                    
                    
                    $
                    276
                    
                    
                    $
                    1,711
                    
                    
                    $
                    (17,132
                    )
                    
                    $
                    18,567
                    
                    
                    
                    -108%
  (a)
              The interest expense
      for Ener1 for 2008 has been restated. See Item 1. Note 2 – Restatement and
      Reclassification of Previously Issued Financial Statements for
      further details.
  Interest
expense:  Interest expense represents a combination of both
cash and non-cash interest related to our capital lease obligations, deferred
financing costs and debt issuance costs as well as Enertech’s bank borrowings
and convertible bonds.  Cash paid for interest expense was $539,000
and $164,000 for the periods ended June 30, 2009 and 2008,
respectively.  Non-cash interest expense was $2,375,000 and
$21,213,000 for the periods ended June 30, 2009 and 2008,
respectively.  Cash interest expense for the period ended June 30,
2009 included $253,000 for Enertech.
 
 Of the
$2,375,000 of non-cash interest expense, $1,922,000 or 81% represents the
amortization of deferred financing and debt issuance costs associated with the
fair value of the warrants issued to Ener1 Group as commitment fee and borrowing
fees pursuant to the LOC Agreement.  The estimated future straight
line amortization of these deferred financing and debt issuances costs is
estimated to be $2,098,000 for the remainder of 2009 and $2,099,000 during
2010.
 
 The
overall decrease in interest expense of $18,872,000 is primarily due to reduced
principal and interest of convertible note and debenture instruments which were
converted into shares of Ener1 common stock during the six months ended June 30,
2008.
 
 Gain on derivative
liabilities:  Following the provisions of EITF 07-05 and SFAS
133, we concluded that our warrants containing down round provisions and the
convertible bonds issued by our Enertech subsidiary should be treated as
derivative liabilities effective January 1, 2009, which resulted in a gain on
derivative liabilities for the six months ended June 30, 2009 of $3,941,000 for
Ener1 and a loss on derivative liabilities of $24,000 for Enertech for the same
period.
 
 Gain on foreign currency
transactions:  Foreign currency transactions are transactions
denominated in a currency other than the entity’s functional
currency.  Foreign currency transactions may produce receivables or
payables that are fixed in terms of the amount of foreign currency that will be
received or paid.  A change in exchange rates of the functional
currency in which a transaction is denominated increases or decreases the
expected cash flow creating a foreign currency transaction gain or
loss.
  - 39
-
  Financial
Condition and Liquidity
 
 Cash
Flow Summary
 At June
30, 2009, we had cash and cash equivalents of $5,996,000 and restricted cash of
$2,260,000.  During the six months ended June 30, 2009, we experienced
a decrease in cash and cash equivalents of $5,233,000 which was funded primarily
through our financing activities which includes $15,662,000 in proceeds from
borrowings and $5,862,000 in proceeds from the sale of stock, net of
costs.
 
 The
following information is a summary of consolidated cash flows for Ener1 for the
six months June 30, 2009 and 2008 (in thousands):
 
 2009
                      
                      
                      2008
                        (Restated)
                      
                      
                      $
      Change
                      
                      
                      %
      ChangeNet
      loss
                      
                      $
                      (20,259
                      )
                      
                      $
                      (30,106
                      )
                      
                      
                      9,847
                      
                      
                      
                      -33%Non-cash
      items
                      
                      
                      5,038
                      
                      
                      
                      18,890
                      
                      
                      
                      (13,852
                      )
                      
                      
                      -73%Decrease
      in working capital items
                      
                      
                      (2,830
                      )
                      
                      
                      (5,015
                      )
                      
                      
                      2,185
                      
                      
                      
                      -44%Operating
      activities
                      
                      
                      (18,051
                      )
                      
                      
                      (16,231
                      )
                      
                      
                      (1,820
                      )
                      
                      
                      11%Investing
      activities
                      
                      
                      (7,388
                      )
                      
                      
                      (4,316
                      )
                      
                      
                      (3,072
                      )
                      
                      
                      71%Financing
      activities
                      
                      
                      20,040
                      
                      
                      
                      29,777
                      
                      
                      
                      (9,737
                      )
                      
                      
                      -33%Effects
      of exchange rates on cash and cash equivalents
                      
                      
                      166
                      
                      
                      
                      (36
                      )
                      
                      
                      202
                      
                      
                      
                      100%Net
      (decrease) increase in cash and cash equivalents
                      
                      $
                      (5,233
                      )
                      
                      $
                      9,194
                      
                      
                      $
                      (14,427
                      )
                      
                      
                      -157%Cash
      and cash equivalents - beginning balance
                      
                      
                      11,229
                      
                      
                      
                      24,826
                      
                      
                      
                      (13,597
                      )
                      
                      
                      -121%Cash
      and cash equivalents - ending balance
                      
                      $
                      5,996
                      
                      
                      $
                      34,020
                      
                      
                      $
                      (28,024
                      )
 
 Operating
activities
 Cash used
in operating activities is primarily driven by our net loss, adjusted for
non-cash items and changes in working capital.  During the six months
ended June 30, 2009, cash used in operations was $18,051,000, comprised of a net
loss of $20,259,000, offset by non-cash items of $5,038,000 and a net decrease
in certain operating assets and liabilities of $2,830,000.  Non-cash
items consist primarily of depreciation and amortization, stock-based
compensation and interest expense, which are partially offset by the gain on
derivative liabilities.  The decrease in certain operating assets and
liabilities is primarily due to the decrease in accounts payable and accrued
expenses, partially offset by the increase in accounts receivable.
 
 Investing
activities
 Cash used
in investing activities for the six months ended June 30, 2009 was $7,388,000,
compared to $4,316,000 for the six months ended June 30, 2008.  The
increase is primarily due to an increase in capital expenditures during 2009 as
compared to the same period in 2008.  Purchases of property, plant and
equipment are increasing as we continue to upgrade and build out our
manufacturing facilities in Indiana and Korea.
 
 Financing
activities
 Cash
provided by financing activities for the six months ended June 30, 2009 was
$20,040,000 compared to $29,777,000 for the same period ended
2008.  The variance is primarily due to proceeds from borrowings and
from sales of Ener1 common stock of $21,524,000, in comparison to proceeds from
the exercise of warrants of $30,092,000 during the six moths ended June 30,
2008.
 
 On May
22, 2009, we entered the Open Market Sale Agreement with Jefferies pursuant to
which we were able to offer and sell through Jefferies, as our sales agent, from
time to time, shares of our common stock with an aggregates sales price of up to
$40,000,000.  During the quarter ended June 30, 2009, we raised net
proceeds totaling $5,862,000 from our participation in the Open Market Sale
Agreement.
  - 40
-
  Short term
borrowings
 Short
term borrowings consist of the following:
 
 June 30,
                            
                            
                            December 31,Interest rate
                            
                            
                            2009
                            
                            
                            2008Equipment
      loan
                            
                            3.50%
                            
                            
                            $
                            367
                            
                            
                            $
                            -Letters
      of credit
                            
                            3.35% ~ 4.86%
                            
                            
                            
                            680
                            
                            
                            
                            1,716Trade
      financing
                            
                            6.24% ~ 6.98%
                            
                            
                            
                            8,234
                            
                            
                            
                            7,298Line
      of credit
                            
                            7.85%
                            
                            
                            
                            700
                            
                            
                            
                            400$
                            9,981
                            
                            
                            $
                            9,414
 
 The
equipment loan is for purchased machinery and equipment which has been
customized specifically for Ener1’s use.  The loan is scheduled to
mature in August 2009 and has a monthly payment of approximately
$183,000.
 
 The
letters of credit and trade financing agreements are denominated in Korean Won
and the total amount available at June 30, 2009 was app\roximately $12,576,000
of which $8,914,000 was outstanding.  The amounts are scheduled for
repayment at various times throughout 2009.
 
 The line
of credit is denominated in United States Dollars and the total amount available
at June 30, 2009 was $1,000,000 of which $700,000 was
outstanding.  The loan is scheduled to mature on April 27,
2010.
 
 Certain
bank deposits, land, buildings and equipment are pledged as collateral for the
above loans.
 
 Long term
borrowings
 Long term
borrowings consist of the following:
 
 June 30,
                            
                            
                            December 31,Interest rate
                            
                            
                            2009
                            
                            
                            2008Equipment
      loan
                            
                            
                            7.85%
                            
                            
                            $
                            3,892
                            
                            
                            $
                            795$
                            3,892
                            
                            
                            $
                            795
 
 The
equipment loan is denominated in Korean Won and matures in October
2011.  Certain bank deposits, land and buildings are pledged as
collateral to guarantee the payment of this debt.
 
 Related party
borrowings
 
 In May
2009, we borrowed $1,500,000, on a short term basis, from Bzinfin, S.A., a
British Virgin Island company (“Bzinfin”) as a working capital
advance.  The advance is scheduled for repayment on December 31, 2009
and bears interest at a rate of 8%.  Bzinfin owns approximately 2% of
the outstanding shares of Ener1 common stock and is a 68.5% shareholder of Ener1
Group. Boris Zingarevich is an indirect beneficial owner of Bzinfin. 
Dispositive and voting power over the shares of Ener1 common stock that are held
by Ener1 Group is exercised by the board of directors of Ener1
Group.
 
 During
the six months ended June 30, 2009, we borrowed $10,250,000, which has been
classified as a long term borrowing, under our LOC Agreement with Ener1 Group
and issued warrants to purchase up 512,500 shares of Ener1 common stock at an
exercise price of $8.25 per share.  The warrants are immediately
exercisable and expire two years after issuance.  Using a
Black-Scholes pricing model to value the warrants, the fair value was recorded
as a reduction in proceeds and is amortized to interest expense over the
remaining term of the LOC Agreement.
  - 41
-
  Amounts
borrowed under the LOC Agreement bear interest at 8.0% per annum and the balance
at June 30, 2009 is comprised of the following (in thousands, except warrant
data):
 
 Line of CreditProceeds
      from advances
                      
                      $
                      10,250Unamortized
      discount related to fair value of warrants
                      
                      
                      (805
                      )Accrued
      interest payable at maturity
                      
                      
                      248Balance,
      June 30, 2009
                      
                      $
                      9,693Warrants
      issued
                      
                      
                      512,500Fair
      value of warrants
                      
                      $
                      1,031
 
 In May
2009, we agreed, subject to negotiation and execution of documents, to enter
into an Amended and Restated Line of Credit Agreement (the “Amended LOC
Agreement”) with Ener1 Group which provides for the election, by Ener1 Group, to
convert the outstanding principal and accrued interest thereon at one or more
conversion prices which may trigger a beneficial conversion
feature.  The impact of a beneficial conversion feature, if any, may
have a material affect on the financial statements if and when this transaction
is consummated.
 
 Liquidity
 
 We
continue to manage our business to develop our products and establish our
manufacturing capacity at a level to attract customers while reserving the
expansion of our capacity and workforce until such time as we receive firm
customer orders.  In addition to our available cash on hand,
additional sources of liquidity include committed credit lines for equipment
purchases and operating expenses as well as access to the public debt and equity
markets.  We continue to balance our cash and financing uses through
investment in our planned operations, equipment purchases, acquisition activity
and redemption of certain securities.
 
 We
anticipate that United States government programs will fund a significant
increase in investment in the domestic battery business and related supplier
markets, and we will benefit from these programs due to our presence as a United
States-based manufacturer.  When we receive funds pursuant to these
government programs, these funds will be designated to increase our battery
manufacturing capacity.
   We expect
to receive $8,662,000 from our active cost-sharing arrangements with the
Department of Defense (“DOD”), DOE and the United States Advanced Battery
Consortium (“USABC”) through December 2010, which will reduce our future
research and development expense.
  Our
ability to access the public debt and equity markets and the related cost of
these activities may be affected by market conditions and our credit rating. In
recent months, the market has experienced significant price and volume
fluctuations.  To date, we have not experienced any limitations in our
ability to access these sources of liquidity, although we expect that the recent
upheaval experienced by the debt and equity markets may adversely affect our
ability to procure future financing.
  - 42
-
 
 We
continually monitor the financial institutions that hold our cash and cash
equivalents.   The emphasis is primarily on safety of principal
and secondarily on maximizing yield on those funds.  Diversifying our
cash and cash equivalents among counterparties minimizes exposure to any one of
these entities.
 
 We
believe we have sufficient capital to continue our planned operations for 12
months from our balance sheet date of June 30, 2009.  We plan to
utilize the proceeds from our Open Market Sale Agreement and our LOC Agreement
with Ener1 Group to fund operations and the purchase of certain production
equipment and manufacturing plant assets.  We continue to integrate
Enertech’s operations into our existing business and it may take time before we
realize the synergies and potential cost savings from this acquisition. 
Enertech has adequate operational funding and also has access to facilities with
several banks for short term working capital and equipment
purchases.
 
 Contractual
Obligations and Off-Balance Sheet Arrangements
 
 We do not
have any significant relationships with entities often referred to as structured
finance or special purpose entities, which would have been established for the
purpose of facilitating off-balance sheet arrangements. As such, we are not
exposed to any financing, liquidity, market or credit risk that could arise if
we had engaged in such relationships.
 
 Legal
Matters
 
 Refer
to Note 14, Commitments and
Contingencies, in “Notes to Consolidated Financial Statements,” for a
discussion of legal matters as of June 30, 2009.
 
 New
Accounting Standards
 
 Refer
to Note 3, New Accounting
Pronouncements, in “Notes to Consolidated Financial Statements,” for a
discussion regarding new accounting standards.
 
 Critical
Accounting Estimates
 
 The
discussion and analysis of our financial condition and results of operations is
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements in accordance with generally
accepted accounting principles requires us to make estimates and judgments that
may affect assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to revenue recognition and related
allowances, derivatives, inventory, impairments of long-lived assets including
intangible assets, impairments of goodwill, income taxes including the valuation
allowance for deferred tax assets, valuation of long-lived assets, research and
development, contingencies and litigation, and share-based
payments.  We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities. Actual results may differ from these estimates under different
assumptions or conditions.
 
 Refer to
Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in our Annual Report on Form 10-K for the year ended
December 31, 2008 for a discussion of our critical accounting
estimates.
  - 43
-
  Item
3.  Quantitative and Qualitative Disclosures About Market
Risk.
 
 This item
3 is not applicable to us as, pursuant to Item 305(c) of Regulation S-K, the
information is not required until after the first fiscal year end in which Item
305 is applicable.
 
 Item
4.  Controls and Procedures.
 
 Disclosure
Controls and Procedures
 
 We
have carried out an evaluation, pursuant to Rule 13a-15(b) and Rule 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the “Securities Exchange
Act”), under the supervision and the participation of our management, including
our principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act) as of June 30, 2009.  Based upon that evaluation, our
principal executive officer and principal financial officer concluded that, as
of the end of the period covered by this report, our disclosure controls and
procedures are not effective in providing reasonable assurance that (a) the
information required to be disclosed by us in the reports that we file or submit
under the Securities Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and (b) such information is accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions regarding
required disclosure. In designing and evaluating our disclosure controls and
procedures, our management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and our management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Our disclosure controls were not effective due
to the identification of incorrect accounting treatment in 2007 and 2008 of the
unamortized discount on convertible bonds when converted to common
stock.
 
 Changes
in Internal Control over Financial Reporting
 There
were no changes in our internal control over financial reporting during
the quarter ended June 30, 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
  - 44
-
  PART
II - OTHER INFORMATION
 
 Item 1.
Legal Proceedings.
 
 We may
receive communications from time to time alleging various claims. These claims
may include, but are not limited to, employment matters, collection of accounts
payable, and allegations that certain of our products infringe the patent rights
of other third parties. We cannot predict when such claims may be made, the
outcome of any such claims or the effect of any such claims on our operating
results, financial condition, or cash flows. As of June 30, 2009, there are no
material pending legal proceedings.
 
 Item
1A.  Risk Factors.
 
 Refer to
Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year
ended December 31, 2008 for a discussion of our risk factors.  In
addition, see the following risk factors which have substantially changed since
December 31, 2008.
 
 We
face several risks relating to internal control over financial
reporting.
 As
permitted by SEC rules, we and our independent registered public accountants
excluded Enertech from our management’s report on internal control over
financial reporting and their audit of our internal control over financial
reporting for the year ended December 31, 2008. Our consolidated financial
results include the operations of Enertech from November 1, 2008 through
December 31, 2008.  Enertech’s revenue represented 83% of our
consolidated net sales for the year ended December 31, 2008 and 50% of our
consolidated assets at December 31, 2008.  As a result, it is possible
that, as we continue to integrate Enertech into our business, we will identify
internal control issues relating to Enertech’s financial
reporting.  We are currently performing a risk assessment to establish
the 2009 scope to determine the extent of testing required to comply with
Sarbanes Oxley, and we expect to complete our review and testing in time to
report results for the year end December 31, 2009.  There was no
material change to our internal control over financial reporting due to the
acquisition.
 
 In
addition, we have experienced rapid growth in our head count and
operations, which has placed, and will continue to place, significant demands on
our management, operational and financial infrastructures.  In
connection with the preparation of our consolidated financial statements for the
year ended December 31, 2008, our independent registered public accountants
identified four “significant deficiencies” in our internal control over
financial reporting, none of which was considered to constitute a “material
weakness.”  We have taken, and will continue to take, steps which we
believe will remediate these deficiencies; however, we cannot be certain
that such steps will be entirely successful.
 
 If
management is not successful in maintaining a strong internal control
environment, including with respect to Enertech, and material weaknesses occur,
investors could lose confidence in our reported financial
information.  This loss of confidence could lead to a decline in our
stock price, limit our ability to access the capital markets in the future, and
require us to incur additional costs to improve our internal control systems and
procedures.
 
 We may not be able to obtain
government financing.
 We are
currently pursuing existing opportunities and we anticipate there will be new
opportunities for loans and other investments from the United States government
for companies involved in emerging battery technologies.  We cannot
assure you that we will be successful in obtaining these loans and other
investments. Even if we do obtain such financing, we may be unable to
successfully execute on our business plan, especially with respect to revenue
and profitability and the effect these metrics would have on our stock price, or
otherwise meet our current operating plans and assumptions, in which case our
actual results could differ materially from current
expectations.
  - 45
-
  Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
 All of
the following issuances were private placements of our securities in accordance
with Section 4(2) of the Securities Act of 1933, as amended and/or Regulation D
under the Securities Act.
 
 Unregistered
Shares of Equity Securities
 In
January 2009, we issued 385,936 shares of common stock, valued at approximately
$2,597,000, to Enertech shareholders in connection with the acquisition of
additional ownership in Enertech bringing our current ownership percentage, on a
fully diluted basis, to 89%.
 
 Use
of Proceeds from Registered Securities
 On
January 7, 2009, we filed a registration statement on Form S-3 to register the
resale of the shares issued in connection with the Enertech acquisition, as well
as the shares issuable upon the exercise of the warrants and to register
securities up to $100 million for future issuance in our capital raising
activities.  The registration statement became effective on February
5, 2009.  The Commission file number assigned to the registration
statement is 333-156609.
 
 On May
22, 2009, we entered into the Open Market Sale Agreement with Jefferies,
pursuant to which Ener1 may offer and sell, from time to time, shares of Ener1’s
common stock with an aggregate sales price of up to
$40,000,000.  Sales of the shares are being executed by means of
ordinary brokers’ transactions on the NASDAQ Global Market at market prices,
privately negotiated transactions, crosses or block
transactions.  Under the terms of the Open Market Sale Agreement, we
may also sell shares to Jefferies as a principal for its own account at a price
agreed upon at the time of sale.  Unless we and Jefferies agree to a
lesser amount with respect to certain persons or classes or persons, the
compensation to Jefferies for sales of common stock sold pursuant to the Open
Market Sale Agreement will be 5.0% of the gross proceeds of the sales price per
share for the first $13,500,000 of shares sold and 3.0% of the gross proceeds of
the sales price per share in excess of $13,500,000.
 
 We began
selling shares pursuant to the Open Market Sale Agreement in May 2009 and
through the date of this Report sold 3,070,684 shares for an aggregate of
$19,613,000.  After deducting commissions, payable to Jefferies, of
$858,000 and expenses of $90,000, payable to unaffiliated third parties, we
received net proceeds of $18,665,000 from the sale of these shares.
 
 Item
5. Other Information.
 Pursuant
to Ener1’s Amended and Restated 2007 Stock Incentive Plan (the “2007 Stock
Plan”), cash incentive bonuses may be awarded to executives, managers and key
employees of Ener1.  On August 5, 2009, with the approval of the Board
of Directors, we established the terms and conditions of the 2009 Annual
Incentive Program (the “2009 Program”), which is administered by the
Compensation Committee of the Board of Directors.
 
 Individuals
participating in the 2009 Program can earn a cash incentive bonus, ranging from
5% to 150% of the individual’s base salary, depending on: (i) the individual’s
position at Ener1 and (ii) the achievement of certain sales targets with respect
to Ener1’s financial results.  Our Chief Executive Officer can earn from
50% to 150% of his base salary and our two most highly compensated executive
officers can earn cash bonuses from 12.5% to 37.5% of their base
salary.
 
  - 46
-
  Item
6.  Exhibits.
 
 2.1
                Purchase
      Agreement, entered into on October 16, 2008, by and between Ener1, Inc.
      and TVG Asian Communications Fund, L.P. and Rosebud Securities Limited to
      acquire 83% ownership interest in Enertech International, Inc.,
      incorporated herein by reference to Exhibit 10.1 to Registrant’s Current
      Report on Form 8-K dated October 30,
2008.
 
 3.1
              Amended
      and Restated Articles of Incorporation of the Registrant, dated February
      12, 1993, incorporated by reference to Exhibit 3(i) to the Registrant's
      Quarterly Report on Form 10-Q for the quarter ended September 30, 2000,
      SEC File No. 000-21138.
 
 3.2
              Articles
      of Amendment to Amended and Restated Articles of Incorporation, dated
      March 11, 2002, incorporated by reference to Exhibit 3.2 of the
      Registrant's Annual Report on Form 10-K for the year ended December 31,
      2001, SEC File No. 000-21138.
 
 3.3
              Articles
      of Amendment to Amended and Restated Articles of Incorporation, dated
      October 21, 2002, incorporated by reference to Exhibit 3.1 of the
      Registrant's Current Report on Form 8-K dated October 28, 2002, SEC File
      No. 000-21138.
 
 3.4
              Articles
      of Amendment to Amended and Restated Articles of Incorporation,
      incorporated by reference to Exhibit A of the Registrant's Schedule 14C
      filed on December 6, 2004.
 
 3.5
              By-laws
      of the Registrant, incorporated by reference to Exhibit 3.4 of the
      Registrant's Registration Statement on Form SB-2 (SEC File No.
      333-112837), filed on February 13,
2004.
 
 3.6
              Certificate
      of Designations of Series B Convertible Preferred Stock, dated October 15,
      2004, incorporated by reference to Exhibit 3.6 of the Registrant’s Annual
      Report on Form 10-KSB for the year ended December 31,
  2004.
 
 3.7
                Amendment
      to By-laws of the Registrant, dated January 5, 2005, incorporated by
      reference to Exhibit
      3.2         of the
      Registrant’s Current Report on Form 8-K dated January 12,
      2005.
 
 3.8
                Articles
      of Amendment to Amended and Restated Articles of Incorporation,
      incorporated by reference to Exhibit B of the Registrant's Schedule 14C
      filed December 10, 2007.
 
 3.9
                Articles
      of Amendment to Amended and Restated Articles of Incorporation,
      incorporated by reference to Exhibit 3.8 of the Registrant’s Current
      Report on Form 8-K filed April 24,
2008.
 
 3.10
                Articles
      of Amendment to Amended and Restated Articles of Incorporation,
      incorporated by reference to Exhibit B of the Registrant’s Schedule 14C
      filed July 22, 2008.
 
 3.11
                Articles
      of Amendment to Amended and Restated Articles of Incorporation,
      incorporated by reference to Exhibit B of the Registrant’s Schedule 14C
      filed December 11, 2008.
 
 4.1
              Form
      of 5% Senior Secured Convertible Debenture incorporated by reference to
      Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated January
      21, 2004, SEC File No. 000-21138.
 
 4.2
              Form
      of Warrant to Purchase Common Stock issued pursuant to Securities Purchase
      Agreement, dated January 16, 2004, incorporated by reference to Exhibit
      4.2 to the Registrant's Current Report on Form 8-K dated January 21, 2004,
      SEC File No. 000-21138.
 
 4.3
              Registration
      Rights Agreement dated as of January 16, 2004, by and among the Registrant
      and the entities whose names appear on the signature pages thereof
      incorporated by reference to Exhibit 4.3 to the Registrant's Current
      Report on Form 8-K dated January 21, 2004, SEC File No.
      000-21138.
  - 47
-


4.4
                Warrant
      issued to Cofis Compagnie Fiduciaire S.A., dated October 15, 2004 to
      purchase from Ener1, Inc., 4,166,666 shares of Common Stock of the Company
      at a price per share of $1.25, incorporated by reference to Exhibit 4.4 of
      the Registrant’s Annual Report on Form 10-KSB for the year ended December
      31, 2004.
 
 4.5
              Warrant
      issued to Cofis Compagnie Fiduciaire S.A., dated October 15, 2004 to
      purchase from Ener1, Inc., 4,166,666 shares of Common Stock of the Company
      at a price per share of $1.50, incorporated by reference to Exhibit 4.5 of
      the Registrant’s Annual Report on Form 10-KSB for the year ended December
      31, 2004.
 
 4.6
              Warrant
      to Purchase Common Stock issued October 20, 2004 to Delphi Automotive
      Systems, LLC, to purchase up to 7,000,000 shares of Common Stock,
      incorporated by reference to Exhibit 4.6 of the Registrant’s Annual Report
      on Form 10-KSB for the year ended December 31,
  2004.
 
 4.7
              Registration
      Rights Agreement, dated as of October 20, 2004, by and between Ener1, Inc.
      and Delphi Automotive Systems LLC, incorporated by reference to Exhibit
      4.7 of the Registrant’s Annual Report on Form 10-KSB for the year ended
      December 31, 2004.
 
 4.8
              Registration
      Rights Agreement, dated as of October 20, 2004, by and between EnerDel,
      Inc., Delphi Automotive Systems, LLC and Ener1, Inc., incorporated by
      reference to Exhibit 4.8 of the Registrant’s Annual Report on Form 10-KSB
      for the year ended December 31,
2004.
 
 4.9
              Form
      of 7.5% Senior Secured Convertible Debenture issued pursuant to Securities
      Purchase Agreement dated March 5, 2005, incorporated by reference to
      Exhibit 4.1 of the Registrant’s Current Report on Form 8-K dated March 15,
      2005.
 
 4.10
              Form
      of Warrant to Purchase Common Stock of the Registrant issued pursuant to
      Securities Purchase Agreement, dated March 11, 2005 incorporated by
      reference to Exhibit 4.2 of the Registrant’s Current Report on Form
      8-K dated March 15, 2005.
 
 4.11
              Registration
      Rights Agreement, dated as of March 14, 2005, by and among Ener1, Inc. and
      the purchasers of Ener1's 7.5% Senior Secured Convertible Debentures,
      incorporated by reference to Exhibit 4.3 of the Registrant’s Current
      Report on Form 8-K dated March 15,
2005.
 
 4.12
              Form
      of Warrant to Purchase Common Stock of Ener1, dated December 9, 2004
      issued to Merriman Curhan Ford & Co., incorporated by reference to
      Exhibit 4.10 to the Registrant’s Registration Statement on Form SB-2
      (Registration No. 333-124745), filed May 9,
  2005.
 
 4.13
              Certificate
      of Designation of Non-Voting, Cumulative and Redeemable Series A Preferred
      Stock of EnerDel, Inc., dated October 20, 2004, incorporated by reference
      to Exhibit 4.6 to Amendment No. 1 to Ener1’s Quarterly Report on Form
      10-QSB/A for the period ending September 30,
  2004.
 
 4.14
              Form
      of Convertible Note issued to Ener1 Group, Inc. on June 30, 2006 and
      August 30, 2006, for $3,250,000 incorporated by reference to Exhibit 4.16
      of Registrant's Quarterly Report on Form 10-QSB, filed August 21,
      2006.
 
 4.15
              Warrant
      issued to Ener1 Group, Inc., dated June 30, 2006 to purchase 9,000,000
      shares of Common Stock of the Registrant incorporated by reference to
      Exhibit 4.17 of Registrant's Quarterly Report on Form 10-QSB, filed August
      21, 2006.
 
 4.16
              Warrant
      issued to Ener1 Group, Inc., dated June 30, 2006 to purchase 20,000,000
      shares of Common Stock of the Registrant incorporated by reference to
      Exhibit 4.18 of Registrant's Quarterly Report on Form 10-QSB, filed August
      21, 2006.
 
 4.17
              Form
      of Warrant to Purchase Common Stock of Ener1, Inc. issued to Ener1 Group
      on August 29, 2006, incorporated by reference to Exhibit 4.17 of
      Registrant's Form SB-2/A filed September 3,
  2006.
  - 48
-
  4.18
              $3,100,000
      Convertible Promissory Note issued to Ener1 Group, Inc., dated
      September 30, 2006, incorporated by reference to Exhibit 4.19 of
      Registrant's Quarterly Report on Form 10-QSB for the period ending
      September 30, 2006.
 
 4.19
              Warrant
      issued to Ener1 Group, Inc., dated September 30, 2006 to purchase
      9,000,000 shares of Common Stock of the Registrant, incorporated by
      reference to Exhibit 4.20 of Registrant's Quarterly Report on Form
      10-QSB for the period ending September 30,
2006.
 
 4.20
              Warrant
      issued to Ener1 Group, Inc. dated September 30, 2006 to purchase 9,000,000
      shares of Common Stock of the Registrant, incorporated by reference to
      Exhibit 4.21 of Registrant's Quarterly Report on Form 10-QSB for the
      period ending September 30, 2006.
 
 4.21
              Agreement,
      dated October 3, 2006, between Ener1 Group, Inc. and Ener1, Inc. regarding
      payment of salary and other costs of Ener1, Inc. for Ajit Habbu,
      incorporated by reference to Exhibit 4.23 of Registrant's Quarterly
      Report on Form 10-QSB for the period ending September 30,
      2006.
 
 4.22
              Employment
      Agreement between Ener1, Inc. and Ajit Habbu, incorporated by reference to
      Exhibit 4.24 of Registrant's Quarterly Report on Form 10-QSB for the
      period ending September 30, 2006.
 
 4.23
              Registration
      Rights Agreement, dated January 5, 2007, by and between Ener1, Inc and
      Credit Suisse Securities (USA), LLC, incorporated by reference to Exhibit
      10.02 to the Registrant’s Current Report on Form 8-K dated January 8,
      2007.
 
 4.24
              Warrant
      issued to Credit Suisse Securities (USA), LLC, dated January 5, 2007, to
      purchase 5,000,000 shares of Common Stock of the Registrant at a
      price per share of $0.30, incorporated by reference to Exhibit 10.03 to
      the Registrant’s Current Report on Form 8-K dated January 8,
      2007.
 
 4.25
              $4,500,000
      Convertible Promissory Note issued to Ener1 Group, Inc. dated February 13,
      2007, incorporated by reference to Exhibit 4.26 to the Registrant’s
      Registration Statement on Form SB-2 filed on February 13,
      2007.
 
 4.26
              Form
      of Warrant to purchase 9,000,000 and 18,000,000 shares of Common Stock of
      the Registrant, issued to Ener1 Group, Inc. dated February 13, 2007,
      incorporated by reference to Exhibit 4.27 to the Registrant’s Registration
      Statement on Form SB-2 filed on February 13,
  2007.
 
 4.27
              Warrant
      issued to Charles Gassenheimer dated January 5, 2007 to purchase 500,000
      shares of common stock of the Registrant, incorporated by reference to
      Exhibit 4.28 to the Registrant’s Registration Statement on Form SB-2 filed
      on February 13, 2007.
 
 4.28
              Convertible
      Promissory Note for $455,000 issued to Ener1 Group, Inc., dated November
      9, 2006 incorporated by reference to Exhibit 4.29 of Registrant’s
      Quarterly Report on Form 10-QSB for the period ending March 31,
      2007.
 
 4.29
              Convertible
      Promissory Note for $655,000 issued to Ener1 Group, Inc., dated November
      9, 2006 incorporated by reference to Exhibit 4.30 of Registrant’s
      Quarterly Report on Form 10-QSB for the period ending March 31,
      2007.
 
 4.30
              Form
      of Registration Rights Agreement among Ener1, Inc., Ener1 Group, Inc. and
      Enable Growth and Enable Opportunity dated May 10, 2007 filed in the
      registration statement on Form SB-2A on September 4,
  2007.
 
 4.31
              Form
      of Securities Purchase Agreement among Ener1, Inc., Ener1 Group, Inc. and
      Enable Growth and Enable Opportunity dated May 10, 2007 filed in the
      registration statement on Form SB-2A on September 4,
  2007.
 
 4.32
              Series
      B Stock Amendment Agreement between Ener1, Inc., Ener1 Group, Inc. and
      Cofis Compagnie Fiduciaire S.A. dated October 4, 2007 incorporated by
      reference to Exhibit 4.30  to the Registrant’s Current Report on
      Form 8-K dated October 4, 2007.
  - 49
-
  4.33
              Amended
      Certificate of Designation of Series B Convertible Preferred Stock of
      Ener1, Inc., dated October 10, 2007 incorporated by reference to Exhibit
      4.30 of Registrant’s Quarterly Report on Form 10-QSB, filed on November
      14, 2007.
 
 4.34
              Form
      of Warrant to purchase 57,600,000 shares of Common Stock of the
      Registrant, issued to certain investors named therein, dated November 19,
      2007, incorporated by reference to Exhibit 10.3 to the Registrant’s
      Current Report on Form 8-K dated November 20,
  2007.
 
 4.35
              Registration
      Rights Agreement dated November 19, 2007, by and between Ener1, Inc. and
      certain investors named therein, incorporated by reference to Exhibit 10.2
      to the Registrant’s Current Report on Form 8-K dated November 20,
      2007.
 
 4.36
              Form
      of Warrant to Purchase Common Stock of the Registrant issued pursuant to
      Series B Stock Amendment Agreement between Ener1, Inc., Ener1 Group, Inc.
      and Cofis Compagnie Fiduciaire S.A., incorporated by reference to Exhibit
      4.32 of the Registrant’s Annual Report on Form 10-KSB for the period ended
      December 31, 2007, filed on March 12,
2008.
 
 4.37
              Warrant
      issued to Alpha Class Investments, Ltd., dated October 24, 2008, to
      purchase 2,560,000 shares of Common Stock of the Registrant at a price per
      share of $7.50, incorporated by reference to Exhibit 4.1 to the
      Registrant’s Current Report on Form 8-K dated October 30,
      2008.
 
 4.38
              Warrant
      to Purchase Common Stock of Ener1, Inc. under Line of Credit Agreement
      dated December 29, 2008, incorporated by reference to Exhibit 4.1 to the
      Registrant’s Current Report on Form 8-K dated December 30,
      2008.
 
 10.1
              2002
      Stock Participation Plan incorporated by reference to Exhibit C of the
      Registrant's Schedule 14A filed on April 15, 2002, SEC File No.
      000-21138.
 
 10.2
              2002
      Non-Employee Director Stock Participation Plan incorporated by reference
      to Exhibit D of the Registrant’s Schedule 14A filed on May 15, 2002, SEC
      File No. 000-21138.
 
 10.3
              License
      and Royalty Agreement by and among the Registrant, Ener1 Battery Company
      and ITOCHU Corporation, dated July 25, 2003, incorporated by reference to
      Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-QSB for the
      quarter ended September 30, 2003, SEC File No.
  000-21138.
 
 10.4
              Shareholders
      Agreement by and between ITOCHU and the Registrant, dated July 25, 2003,
      incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly
      Report on Form 10-QSB for the quarter ended September 30, 2003, SEC File
      No. 000-21138.
 
 10.5
              Amendment
      to Subscription and Investment Agreement by ITOCHU Corporation and the
      Registrant, dated January 31, 2004, incorporated by reference to Exhibit
      10.20 to the Registrant’s Annual Report on Form 10-KSB for the period
      ended December 31, 2003, SEC File No.
000-21138.
 
 10.6
              Securities
      Purchase Agreement, dated as of January 16, 2004 by and among Ener1, Inc.
      and the entities whose names appear on the signature pages thereof,
      incorporated by reference to Exhibit 10.1 to the Registrant's Current
      Report on Form 8-K dated January 21, 2004, SEC File No.
      000-21138.
 
 10.7
              Security
      Agreement dated as of January 16, 2004 by and among Ener1 Battery Company
      and the entities whose names appear on the signature pages thereof,
      incorporated by reference to Exhibit 10.2 to the Registrant's Current
      Report on Form 8-K dated January 21, 2004, SEC File No.
      000-21138.
 
 10.8
              Subsidiary
      Guaranty dated January 16, 2004 made by Ener1 Battery Company in favor of
      the Investors named therein, incorporated by reference to Exhibit 10.3 to
      the Registrant’s Current Report on Form 8-K dated January 21, 2004, SEC
      File No. 000-21138.
  - 50
-
  10.9
              Mortgage,
      Security Agreement and Assignment of Leases and Rents dated January 16,
      2004 by Ener1 Battery Registrant to Satellite Asset Management, L.P.,
      incorporated by reference to Exhibit 10.4 to the Registrant’s Current
      Report on Form 8-K dated January 21, 2004, SEC File No.
      000-21138.
 
 10.10
              Waiver
      Agreement dated January 2004 by and between the Registrant and Ener1
      Group, Inc. incorporated by reference to Exhibit 10.31 to the Registrant’s
      Annual Report on Form 10-KSB for the period ended December 31, 2003 filed
      on March 31, 2004, SEC File No.
000-21138.
 
 10.11
              EnerDel,
      Inc. Formation, Subscription and Stockholders’ Agreement entered into by
      and between Delphi Automotive Systems LLC and Ener1, Inc., dated as of
      October 20, 2004, incorporated by reference to Ener1, Inc.’s Form 8-K
      filed on October 26, 2004.
 
 10.12
                Form
      of Subscription Agreement dated as of October 15, 2004, by and between
      Ener1, Inc. and various investors for the purchase of 150,000 shares of
      Ener1, Inc.’s Series B 7% Convertible Preferred Stock, incorporated by
      reference to Exhibit 10.20 to Registrant’s Annual Report on Form 10-KSB
      for the period ending December 31,
2004.
 
 10.13
                Lease
      Agreement dated October 20, 2004 between Ener1 Battery Company and
      EnerDel, Inc, incorporated by reference to Exhibit 10.22 to Registrant’s
      Annual Report on Form 10-KSB for the period ending December 31,
      2004.
 
 10.14
              Bill
      of Sale dated October 20, 2004, by Delphi Automotive Systems LLC in favor
      of EnerDel, Inc. in favor of transactions contemplated by the Formation,
      Subscription and Shareholders’ Agreement of EnerDel, Inc. dated as of
      October 20, 2004 by and among Delphi, Ener1 Inc. and EnerDel, incorporated
      by reference to Exhibit 10.23 to Registrant’s Annual Report on Form 10-KSB
      for the period ending December 31,
2004.
 
 10.15
              Delphi
      Technologies, Inc. Assignment of Certain Inventions or Improvements dated
      October 20, 2004, incorporated by reference to Exhibit 10.24 to
      Registrant’s Annual Report on Form 10-KSB for the period ending December
      31, 2004.
 
 10.16
                License
      Agreement by and between Delphi Technologies, Inc. and EnerDel, Inc. by
      reference to Exhibit 10.25 to Registrant’s Annual Report on Form 10-KSB
      for the period ending December 31,
2004.
 
 10.17
                Ener1
      Battery Company Assignment of Intellectual Property to EnerDel, Inc, dated
      October 20, 2004, incorporated by reference to Exhibit 10.26 to
      Registrant's Annual Report on Form 10-KSB for the period ending December
      31, 2004.
 
 10.18
                License
      Agreement dated October 20, 2004 by and between Ener1, Inc. and EnerDel,
      Inc, incorporated by reference to Exhibit 10.27 to Registrant's Annual
      Report on Form 10-KSB for the period ending December 31,
    2004.
 
 10.19
                Ener1
      Daughter Enterprise with Foreign Investments of Ener1 Battery Company
      Assignment of Intellectual Property to EnerDel, Inc, incorporated by
      reference to Exhibit 10.28 to Registrant's Annual Report on Form 10-KSB
      for the period ending December 31,
2004.
 
 10.20
                Option
      to Purchase Agreement dated October 20, 2004 between EnerDel, Inc.; Ener1,
      Inc.; and Ener1 Battery Company, incorporated by reference to Exhibit
      10.29 to Registrant's Annual Report on Form 10-KSB for the period ending
      December 31, 2004.
 
 10.21
              Ener1
      Services Agreement effective October 20, 2004 by and between EnerDel, Inc.
      and Ener1, Inc, incorporated by reference to Exhibit 10.30 to Registrant’s
      Annual Report on Form 10-KSB for the period ending December 31,
      2004.
 
 10.22
                Engineering
      Services Agreement effective October 20, 2004 by and between EnerDel, Inc.
      and Delphi Automotive Systems LLC, incorporated by reference to Exhibit
      10.31 to Registrant’s Annual Report on Form 10-KSB for the period ending
      December 31, 2004.
  - 51
-
  10.23
                Transition
      Services Agreement dated as of October 20, 2004 entered into by and
      between Delphi Automotive Systems LLC and EnerDel, Inc, incorporated by
      reference to Exhibit 10.32 to Registrant’s Annual Report on Form 10-KSB
      for the period ending December 31,
2004.
 
 10.24
                Assignment/Assumption
      of License Agreement dated October 20, 2004, among Ener1, Inc., Ener1
      Battery Company and EnerDel, Inc., incorporated by reference to Exhibit
      10.34 of the Registrant’s Annual Report on Form 10-KSB for the period
      ending December 31, 2004.
 
 10.25
              Form
      of Securities Purchase Agreement, dated as of March 11, 2005 by and among
      Ener1, Inc. and the purchasers of Ener1's 7.5% Senior Secured Convertible
      Debentures and Warrants to purchase shares of common stock, incorporated
      by reference to Exhibit 10.1 of the Registrant’s current report on Form
      8-K, filed on March 15, 2005.
 
 10.26
                Form
      of Security Agreement dated as of March 14, 2005 by and among Ener1, Inc.
      and the purchasers of Ener1’s 7.5% Senior Secured Convertible Debentures,
      incorporated by reference to Exhibit 10.2 of the Registrant’s current
      report on Form 8-K, filed on March 15,
2005.
 
 10.27
                Form
      of Intercreditor Agreement dated as of March 11, 2004, among Ener1, Inc.,
      the purchasers of Ener1's 7.5% Senior Secured Convertible Debentures and
      the purchasers of Ener1, Inc.’s 7.5% Senior Secured Convertible
      Debentures, incorporated by reference to Exhibit 10.3 of the Registrant’s
      current report on Form 8-K, filed on March 15,
  2005.
 
 10.28
              Ener1,
      Inc. Form of Option Grant Agreement under Employment Agreement with Kevin
      P. Fitzgerald, incorporated by reference to Exhibit 10.39 of Registrant’s
      Registration Statement on Form SB-2 (Registration No. 333-124745), filed
      on May 9, 2005.
 
 10.29
              Agreement
      between EnerDel, Inc. and EnerStruct, Inc., entered into as of April 12,
      2005, incorporated by reference to Exhibit 10.40 of Registrant’s
      Registration Statement on Form SB-2 (Registration No. 333-124745), filed
      on May 9, 2005.
 
 10.30
              Form
      of Stock Option Agreement under the Registrant’s 2002 Non-Employee
      Director Stock Participation Plan, incorporated by reference to Exhibit
      10.41 of Registrant’s Registration Statement on Form SB-2 (Registration
      No. 333-124745), filed on May 9,
2005.
 
 10.31
              Form
      of Director Appointment Letter, incorporated by reference to Exhibit 10.42
      of Registrant’s Registration Statement on Form SB-2 (Registration No.
      333-124745), filed on May 9, 2005.
 
 10.32
              Letter
      Agreement between the Registrant and Ener1 Group, Inc., dated October 15,
      2004, regarding a financing commitment provided by Ener1 Group, Inc. to
      the Registrant, incorporated by reference to Exhibit 10.43 of Registrant’s
      Registration Statement on Form SB-2 (Registration No. 333-124745), filed
      on May 9, 2005.
 
 10.33
                Option
      Agreement between Ener1, Inc. and Ulrik Grape dated October 1, 2005,
      incorporated by reference to Exhibit 10.42 of Registrant's Annual Report
      on Form 10-KSB for the period ended December 31,
  2005.
 
 10.34
                Employment
      Agreement between EnerDel, Inc. and Ulrik Grape dated October 1, 2005,
      incorporated by reference to Exhibit 10.43 of Registrant's Annual Report
      on Form 10-KSB for the period ended December 31,
  2005.
 
 10.35
                Tax
      Allocation Agreement dated March 1, 2006 between the Registrant and Ener1
      Group, Inc. incorporated by reference to Exhibit 10.44 of Registrant's
      Annual Report on Form 10-KSB for the period ended December 31,
      2005.
 
 10.36
              Purchase
      Agreement dated January 5, 2007, by and among Ener1 Group, Inc., Ener1,
      and Credit Suisse Securities (USA) LLC incorporated herein by reference to
      Exhibit 10.01 to Registrant’s current report on Form 8-K dated January 8,
      2007.
  - 52
-
  10.37
              Warrant
      Exercise Agreement, dated as of March 30, 2006, by and between the Company
      and Ener1 Group, Inc., incorporated by reference to Exhibit 10.1 of
      Registrant's Current Report on Form 8-K dated April 5,
    2006.
 
 10.38
              Securities
      Purchase Agreement dated November 19, 2007, by and between Ener1, Inc. and
      certain investors named therein, incorporated by reference to Exhibit 10.1
      to the Registrant’s Current Report on Form 8-K dated November 20,
      2007.
 
 10.39
                Commercial
      Lease between EnerDel, Inc. and Universal Tool & Engineering Company,
      dated March 1, 2007 incorporated herein by reference to Exhibit 10.1 to
      the Registrant’s Quarterly Report on Form 10-QSB, filed on November 14,
      2007.
 
 10.40
              Purchase
      Money Financing Agreement for Additional Improvements between EnerDel,
      Inc. and Universal Tool & Engineering Company, dated March 1, 2007
      incorporated herein by referenced to Exhibit 10.2 of the Registrant’s
      Quarterly Report on Form 10-QSB, filed on November 14,
    2007.
 
 10.41
              Supply
      Agreement dated October 15, 2007, by and between EnerDel, Inc. and Think
      Global of Oslo, Norway incorporated herein by reference to Exhibit 10.50
      to Registrant’s Form 8-K dated October 15,
2007.
 
 10.42
                Line
      of Credit Agreement dated December 29, 2008, incorporated herein by
      reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K dated
      December 31, 2008.
 
 10.43
                Tax
      Allocation Agreement dated May 7, 2009 by and between Ener1, Inc. and
      certain subsidiaries named therein, incorporated herein by reference to
      Exhibit 10.44 to Registrants Form 10-Q dated May 11,
  2009.
 
 10.44
                2002
      Stock Participation Plan as amended May 7, 2009, incorporated herein by
      reference to Exhibit 10.44 to Registrants Form 10-Q dated May 11,
      2009.
 
 10.45
                2002
      Non-Employee Director Stock Participation Plan as amended May 7, 2009,
      incorporated herein by reference to Exhibit 10.44 to Registrants Form 10-Q
      dated May 11, 2009.
 
 10.46
                Ener1,
      Inc. 2007 Stock Incentive Plan as amended May 7, 2009, incorporated herein
      by reference to Exhibit 10.44 to Registrants Form 10-Q dated May 11,
      2009.
 
 10.47
                Open
      Market Sale Agreement dated May 22, 2009 by and between Ener1, Inc. and
      Jefferies & Company, Inc., incorporated herein by reference to Exhibit
      1.1 to Registrant’s Current Report on Form 8-K dated May 22,
      2009.
 
 10.48
                Reimbursement
      Agreement dated January 1, 2009 by and between Ener1 Group, Inc. and
      Ener1, Inc. for the reimbursement of annual compensation for the Chief
      Executive Officer of Ener1,
Inc.
 
 31.1
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer.*
 
 31.2
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer.*
 
 32.1
              Section
      1350 Certification of Chief Executive
Officer.*
 
 32.2
              Section
      1350 Certification of Chief Financial
Officer.*
 
 * Filed
herewith
  - 53
-
  ENER1,
INC. AND SUBSIDIARIES
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 ENER1,
      INC.Dated:
      January 15, 2010
                  
                  by:
                  /s/
      Charles GassenheimerCharles
      GassenheimerChief
      Executive Officer and Chairman of the Board(Principal
      Executive Officer)Dated:
      January 15, 2010
                  
                  by:
                  /s/
      Gerard A. HerlihyGerard
      A. HerlihyChief
      Financial Officer(Principal
      Financial Officer and
                    Principal
      Accounting
Officer)
  - 54
-