UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-Q





QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934





For
      the
      quarterly period ended **June
      30, 2008**





Commission
      File Number **0-21138**




**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)





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





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


Yes x No o





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


Large
                  accelerated filer o
              
              Accelerated
                  filer oNon-accelerated
                  filer o
              
              Smaller
                  reporting company x




Indicate
      by check mark whether registrant is a shell company (as defined in Rule 12b-2
      of
      the Exchange Act)


Yes o No x





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
      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 7, 2008**Common
                Stock, par value $0.01 per share
            
            104,813,016










**ENER1,
      INC.**




**Form
      10-Q for the Quarter Ended June 30, 2008**




INDEX


Part
                  I. FINANCIAL INFORMATION
              
              PageItem
                  1.  Financial StatementsUnaudited
                  Consolidated Balance Sheets as of June 30, 2008 and December 31,
                  2007
              
              
              3Unaudited
                  Consolidated Statements of Operations for the three and six months
                  ended
                  June 30, 2008 and 2007
              
              
              4Unaudited
                  Consolidated Statement of Stockholders’ Equity (Deficit) and Comprehensive
                  Income (Loss) for the six months ended June 30, 2008
              
              
              5Unaudited
                  Consolidated Statements of Cash Flows for the six months ended
                  June 30,
                  2008 and 2007
              
              
              6Notes
                  to Unaudited Consolidated Financial Statements
              
              
              8Item
                  2.  Management's Discussion and Analysis of Financial Condition and
                  Results of Operations
              
              
              24Item
                  3.  Quantitative and Qualitative Disclosures About Market
                  Risk
              
              
              29Item
                  4.  Controls and Procedures
              
              
              30Part
                  II. OTHER INFORMATIONItem
                  1.  Legal Proceedings
              
              
              31Item
                  6.  Exhibits
              
              
              32Signatures
              
              
              39




2




ENER1,
      INC.


CONSOLIDATED
      BALANCE SHEETS


(Unaudited)


(In
      thousands, except share data)




**June
                30,**
            
            **December
                31,****2008**
            
            **2007****ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            34,020
            
            $
            24,826Accounts
                receivable
            
            
            1,097
            
            
            102Prepaid
                expenses and other current assets
            
            
            2,009
            
            
            608Due
                from related parties
            
            
            -
            
            
            94Total
                current assets
            
            
            37,126
            
            
            25,630Property
                and equipment, net
            
            
            5,152
            
            
            4,287Equipment
                deposits and restricted cash
            
            
            6,760
            
            
            -Deferred
                debenture and note costsnet
                of amortization of $0 and $5,596, respectively
            
            
            -
            
            
            835Other
            
            
            968
            
            
            549Total
                assets
            
            $
            50,006
            
            $
            31,301**LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)**Current
                liabilitiesNotes
                payable - short-term
            
            $
            -
            
            $
            315Accounts
                payable and accrued expenses
            
            
            4,710
            
            
            3,798Due
                to related parties
            
            
            108
            
            
            -Derivative
                liabilities
            
            
            -
            
            
            10,144Total
                current liabilities
            
            
            4,818
            
            
            14,257Convertible
                notes, advances and accrued interest due to related party,net
                of discounts of $0 and $5,250, respectively
            
            
            -
            
            
            8,3152004
                senior convertible debentures, net of discount of $0 and $3,597,
                respectively
            
            
            -
            
            
            6,0372005
                senior convertible debentures, net of discount of $0 and $940,
                respectively
            
            
            -
            
            
            1,141Total
                liabilities
            
            
            4,818
            
            
            29,750Redeemable
                preferred stockEnerDel,
                Inc. Series A Preferred, $0.01 par value, 500,000 shares
                authorized,8,000
                shares issued and outstanding; liquidation preference
                $8,000
            
            
            9,773
            
            
            8,577Minority
                interest
            
            
            -
            
            
            -Commitments
                and contingencies**STOCKHOLDERS'
                EQUITY (DEFICIT)**Common
                stock, $0.01 par value, 150,714,286 shares authorized,104,710,626
                and 92,597,892 issued and outstanding, respectively (1)
            
            
            1,047
            
            
            925Paid
                in capital
            
            
            296,398
            
            
            233,702Accumulated
                deficit
            
            
            (262,007
            )
            
            (241,653
            )Accumulated
                other comprehensive income (loss)
            
            
            (23
            )
            
            -Total
                stockholders' equity (deficit)
            
            
            35,415
            
            
            (7,026
            )Total
                liabilities and stockholders' equity (deficit)
            
            $
            50,006
            
            $
            31,301




(1)
              The
                  shares of common stock authorized, issued and outstanding have
                  been
                  adjusted to reflect a 1 for 7 reverse stock
                  split effective April 24,
                  2008.





See
      notes
      to unaudited consolidated financial statements.




3


ENER1,
      INC.


CONSOLIDATED
      STATEMENTS OF OPERATIONS


(Unaudited)


(In
      thousands except per share data)





**Three
                Months Ended June 30,**
            
            **Six
                Months Ended June 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Net
                sales
            
            $
            437
            
            $
            79
            
            $
            534
            
            $
            118Cost
                of sales
            
            
            -
            
            
            -
            
            
            -
            
            
            -Gross
                profit
            
            
            437
            
            
            79
            
            
            534
            
            
            118Operating
                expenses:General
                and administrative
            
            
            2,179
            
            
            2,260
            
            
            4,761
            
            
            4,144Research
                and development, net
            
            
            5,384
            
            
            2,231
            
            
            8,449
            
            
            4,687Warrant
                modification expense
            
            
            -
            
            
            583
            
            
            -
            
            
            583Depreciation
                and amortization
            
            
            191
            
            
            121
            
            
            298
            
            
            231Total
                operating expenses
            
            
            7,754
            
            
            5,195
            
            
            13,508
            
            
            9,645Loss
                from operations
            
            
            (7,317
            )
            
            (5,116
            )
            
            (12,974
            )
            
            (9,527
            )Other
                income (expense):Interest
                expense
            
            
            -
            
            
            (3,809
            )
            
            (11,625
            )
            
            (7,161
            )Interest
                income
            
            
            125
            
            
            -
            
            
            248
            
            
            1Equity
                in loss of EnerStruct, Inc.
            
            
            -
            
            
            -
            
            
            -
            
            
            (40
            )Other
            
            
            (14
            )
            
            -
            
            
            61
            
            
            (36
            )Gain
                on derivative liabilities
            
            
            -
            
            
            924
            
            
            3,936
            
            
            1,503Total
                other income (expense)
            
            
            111
            
            
            (2,885
            )
            
            (7,380
            )
            
            (5,733
            )Loss
                before income taxes
            
            
            (7,206
            )
            
            (8,001
            )
            
            (20,354
            )
            
            (15,260
            )Income
                taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                loss before minority interest
            
            
            (7,206
            )
            
            (8,001
            )
            
            (20,354
            )
            
            (15,260
            )Minority
                interest
            
            
            (616
            )
            
            (485
            )
            
            (1,196
            )
            
            (943
            )Net
                loss
            
            
            (7,822
            )
            
            (8,486
            )
            
            (21,550
            )
            
            (16,203
            )Preferred
                stock dividends
            
            
            -
            
            
            (528
            )
            
            -
            
            
            (1,044
            )Net
                  loss attributable to common shareholders
            
            $
            (7,822
            )
            $
            (9,014
            )
            $
            (21,550
            )
            $
            (17,247
            )Net
                loss per share:basic
                and diluted
            
            $
            (0.08
            )
            $
            (0.14
            )
            $
            (0.22
            )
            $
            (0.27
            )Weighted
                average shares outstanding: (1)basic
                and diluted
            
            
            101,930
            
            
            64,346
            
            
            97,651
            
            
            63,278




(1)
              Share
                  and per share data for the three and six months ended June 30,
                  2007 have
                  been adjusted toreflect
                  a 1 for 7 reverse stock split effective April 24,
                  2008.


See
      notes
      to unaudited consolidated financial statements.




4


ENER1,
      INC.


CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)


and


COMPREHENSIVE
      INCOME (LOSS)


(Unaudited)


(In
      thousands except share data)




AccumulatedOther
            
            TotalComprehensive
            
            Stockholders'Common
                Stock
            
            Paid
                In
            
            Accumulated
            
            Income
            
            EquityShares
                (1)
            
            Amount
            
            Capital
            
            Deficit
            
            (Loss)
            
            (Deficit)Balance
                December 31, 2007
            
            
            92,597,892
            
            $
            925
            
            $
            233,702
            
            $
            (241,653
            )
            $
            -
            
            $
            (7,026
            )Comprehensive
                loss:Net
                  loss (including preferred dividends payable to minority interest
                  owner
                  charged to paid in capital)
            
            
            -
            
            
            -
            
            
            (1,196
            )
            
            (20,354
            )
            
            -
            
            
            (21,550
            )Effects
                of exchange rates on consolidation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (23
            )
            
            (23
            )Total
                comprehensive loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (21,573
            )Shares
                issued for exercise of warrants
            
            
            5,657,149
            
            
            57
            
            
            29,643
            
            
            -
            
            
            -
            
            
            29,700Shares
                issued for exercise of employee stock options
            
            
            224,651
            
            
            2
            
            
            390
            
            
            -
            
            
            -
            
            
            392Shares
                issued for debt origination costs
            
            
            17,559
            
            
            -
            
            
            105
            
            
            -
            
            
            -
            
            
            105Shares
                issued for conversions of senior debentures
            
            
            2,257,741
            
            
            23
            
            
            12,068
            
            
            -
            
            
            -
            
            
            12,091Shares
                  issued for conversions of Ener1 Group convertible
                  notes
            
            
            3,955,634
            
            
            40
            
            
            13,805
            
            
            -
            
            
            -
            
            
            13,845Reduction
                  in derivative liability related to conversion of senior
                  debentures
            
            
            -
            
            
            -
            
            
            6,208
            
            
            -
            
            
            -
            
            
            6,208Acceleration
                  of discount related to conversion of senior
                  debentures
            
            
            -
            
            
            -
            
            
            (3,974
            )
            
            -
            
            
            -
            
            
            (3,974
            )Intrinsic
                  value of beneficial conversion feature for Ener1 Group convertible
                  notes
            
            
            -
            
            
            -
            
            
            3,608
            
            
            -
            
            
            -
            
            
            3,608Warrants
                  issued to related party in connection with inducement to convert
                  debt
            
            
            -
            
            
            -
            
            
            550
            
            
            -
            
            
            -
            
            
            550Stock-based
                compensation expense
            
            
            -
            
            
            -
            
            
            1,489
            
            
            -
            
            
            -
            
            
            1,489Balance
                June 30, 2008
            
            
            104,710,626
            
            $
            1,047
            
            $
            296,398
            
            $
            (262,007
            )
            $
            (23
            )
            $
            35,415




(1)
              The
                  shares of common stock issued and outstanding as of December 31,
                  2007 has
                  been adjusted to reflect a 1 for 7 reverse stock spliteffective
                  April 24, 2008.




See
      notes
      to unaudited consolidated financial statements.




5




ENER1,
      INC.


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


(Unaudited)


(In
      thousands)





**Six
                Months Ended June 30,****2008**
            
            **2007**Operating
                activities:Net
                loss
            
            $
            (21,550
            )
            $
            (16,203
            )Adjustments
                to reconcile net loss to cash used in operating
                activities:Gain
                on derivative liabilities
            
            
            (3,936
            )
            
            (1,503
            )Minority
                interest in losses and preferred dividends of consolidated
                subsidiary
            
            
            1,196
            
            
            943Accretion
                of discounts on debentures and notes
            
            
            9,420
            
            
            3,315Non-cash
                interest expense related to financing costs
            
            
            835
            
            
            703Non-cash
                interest expense related to convertible notes and advancesfrom
                related party
            
            
            279
            
            
            582Non-cash
                inducements for debt conversions and equity investments
            
            
            753
            
            
            583Depreciation
            
            
            298
            
            
            231Stock-based
                compensation expense
            
            
            1,489
            
            
            910Stock
                for EnerStruct
            
            
            -
            
            
            40Loss
                on disposal of equipment
            
            
            -
            
            
            38Changes
                in certain operating assets and liablities:(Increase)
                decrease in accounts receivable
            
            
            (995
            )
            
            60Increase
                in prepaid expenses and other current assets
            
            
            (1,401
            )
            
            (375
            )Increase
                in other assets
            
            
            (344
            )
            
            (108
            )Increase
                (decrease) in accounts payable and accrued expenses
            
            
            1,085
            
            
            (1,371
            )Changes
                in current assets, liabilities and other, net
            
            
            233
            
            
            (140
            )Net
                cash used in operating activities
            
            
            (12,638
            )
            
            (12,295
            )Investing
                activities:Capital
                expenditures
            
            
            (1,154
            )
            
            (92
            )Equipment
                deposits and restricted cash
            
            
            (6,755
            )
            
            -Cash
                proceeds from sale of assets
            
            
            -
            
            
            55Net
                cash used in investing activities
            
            
            (7,909
            )
            
            (37
            )Financing
                activities:Proceeds
                from convertible notes and advances from related party, net of
                costs
            
            
            -
            
            
            5,195Proceeds
                from exercise of warrants
            
            
            29,700
            
            
            5,206Proceeds
                from exercise of options
            
            
            392
            
            
            -Proceeds
                from sale of stock, net of costs
            
            
            -
            
            
            3,862Repayment
                of notes payable and bank installment loan
            
            
            (315
            )
            
            (204
            )Net
                cash provided by financing activities
            
            
            29,777
            
            
            14,059Effect
                of exchange rate changes on cash and cash equivalents
            
            
            (36
            )
            
            -Net
                increase in cash and equivalents
            
            
            9,194
            
            
            1,727Cash
                and cash equivalents - beginning balance
            
            
            24,826
            
            
            291Cash
                and cash equivalents - ending balance
            
            $
            34,020
            
            $
            2,018




See
      notes
      to unaudited consolidated financial statements.




6




**Supplemental
                Disclosure of Noncash Investing and Financing
                Activities**




Cash
                paid during the year for:Interest
            
            $
            164
            
            $
            2,576Income
                taxes
            
            
            -
            
            
            -Non-cash
                investing and financing activities:Shares
                issued for conversion of senior debentures
            
            $
            11,715
            
            
            -Shares
                issued for conversion of convertible notes
            
            
            11,960
            
            
            -Shares
                issued for conversion of senior debentures interest
            
            
            174
            
            
            -Shares
                issued for conversion of convertible notes interest
            
            
            1,885
            
            
            -Shares
                issued for inducement to convert senior debentures
            
            
            203
            
            
            -Shares
                issued for debt origination
            
            
            105Reduction
                in derivative liability related to conversion of senior
                debentures
            
            
            6,208
            
            
            -Acceleration
                of discount related to conversion of senior debentures
            
            
            (3,974
            )
            
            -Beneficial
                conversion value recognized in connection with convertible
                notes
            
            
            3,608
            
            
            -Warrants
                issued in connection with the conversion of convertible
                notes
            
            
            550
            
            
            3,236Cashless
                exercise of options and warrants
            
            
            -
            
            
            1Reduction
                of advances for exercise of warrants
            
            
            -
            
            
            4,700Accrued
                dividends on Series B Preferred stock
            
            
            -
            
            
            534Accretion
                of discounts on Series B Preferred stock
            
            
            -
            
            
            510Reduction
                of accounts payable for stock and notes payable
            
            
            -
            
            
            399




See
        notes
        to unaudited consolidated financial statements.




7





ENER1,
      INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


(UNAUDITED)




**Note
        1 - Basis of Presentation**




In
        the
        opinion of management, the accompanying unaudited consolidated financial
        statements for Ener1, Inc. ("Ener1" or the "Company") include all adjustments,
        consisting of normal recurring items, necessary for their fair presentation
        in
        conformity with accounting principles generally accepted in the United States
        of
        America. Preparing financial statements requires management to make estimates
        and assumptions that affect the reported amounts of assets, liabilities,
        revenues and expenses, and related disclosures of contingent assets and
        liabilities. Actual results and outcomes may differ from management’s estimates
        and assumptions.
 
 On
        April
        24, 2008, Ener1effected a 1 for 7 reverse stock split of its common stock.
        All
        share related information for prior periods has been adjusted throughout
        this
        Form 10-Q on a retroactive basis to reflect the effects of the reverse stock
        split.
 
 Interim
        results are not necessarily indicative of results for a full year. The
        information included in this Form 10-Q should be read in conjunction with
        information included in the Ener1, Inc. Annual Report on Form 10-KSB. Certain
        amounts in the prior periods have been reclassified to conform to the current
        period presentation.
 
 ***Recently
        Issued Accounting Standards***
 
 ***Adopted
        Accounting Standards***
 In
        September 2006, the Financial Accounting Standards Board (“FASB”) issued
        Statement of Financial Accounting Standard (“SFAS”) No. 157, *Fair
        Value Measurements* (“SFAS
        No. 157”). This standard defines fair value, establishes a framework for
        measuring fair value in generally accepted accounting principles in the United
        States, and expands disclosures about fair value measurements. This standard
        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. SFAS No. 157 is effective for fiscal years beginning
        after November 15, 2007, and all interim periods within those fiscal years.
        In
        February 2008, the FASB issued FASB Staff Position (FSP) FSP 157-2, *Effective
        Date of FASB Statement No. 157* (“FSP
        157-2”). FSP 157-2 delays the effective date of SFAS No. 157 for all
        non-financial assets and non-financial liabilities, except for items that
        are
        recognized or disclosed at fair value in the financial statements on a recurring
        basis (at least annually), to fiscal years beginning after November 15, 2008 and
        interim periods for those fiscal years. The Company is currently evaluating
        the
        impact that SFAS No. 157 will have on the consolidated financial statements
        when it is applied to non-financial assets and non-financial liabilities
        that
        are not measured at fair value on a recurring basis beginning in the first
        quarter of 2009.
 
 In
        February 2007, the FASB issued SFAS No. 159, *The
        Fair Value Option for Financial Assets and Financial Liabilities Including
        an
        Amendment of FASB Statement No. 115* (“SFAS No. 159”). This standard permits entities to choose to measure
        financial instruments and certain other items at fair value and is effective
        for
        fiscal year beginning after November 15, 2007. SFAS No. 159 must
        be applied prospectively, and the effect of the first re-measurement to fair
        value, if any, should be reported as a cumulative effect adjustment to the
        opening balance of retained earnings. The Company adopted SFAS No. 159
        on January 1, 2008 and no election was made since the Company does not
        maintain any financial assets or financial liabilities at such
        time.


8




In
        December 2007, the Securities and Exchange Commission (SEC) issued Staff
        Accounting Bulletin 110, *Share-Based
        Payment* (“SAB
        110”). SAB 110 amends SAB 107 and allows for the continued use, under certain
        circumstances, of the “simplified method” in developing an estimate of the
        expected term on stock options accounted for under SFAS No. 123R. SAB 110
        is
        effective for stock options granted on or after January 1, 2008. The Company
        will continue to use the simplified method until there is sufficient historical
        data necessary to provide reasonable estimates of expected lives in accordance
        with SAB 107, as amended by SAB 110.
 
 ***Future
        Adoption of Accounting Standards***
 In
        March 2008, the FASB issued SFAS No. 161, *Disclosures
        about Derivative Instruments and Hedging Activities—an amendment of FASB
        Statement No. 133* (“SFAS
        No. 161”). This standard requires additional quantitative disclosures
        (provided in tabular form) and qualitative disclosures for derivative
        instruments. The required disclosures include how derivative instruments
        and
        related hedged items affect an entity’s financial position, financial
        performance, and cash flows; relative volume of derivative activity; the
        objectives and strategies for using derivative instruments; the accounting
        treatment for those derivative instruments formally designated as the hedging
        instrument in a hedge relationship; and the existence and nature of
        credit-related contingent features for derivatives. SFAS No. 161 does not
        change the accounting treatment for derivative instruments. SFAS 161 is
        effective for fiscal years and interim periods beginning after November 15,
        2008, with early adoption permitted. The Company is currently evaluating
        the
        potential impact, if any, the adoption of SFAS 161 will have on its consolidated
        financial statements.
 
 **Note
        2 - Nature of the Business**
  Ener1
        is
        a Florida corporation, founded in 1985. In January 2002, Ener1 Group, Inc.
        (“Ener1 Group”) acquired a majority interest in the Company and owns
        approximately 62% of the outstanding common stock of the Company as of June
        30,
        2008.
 
 The
        Company operates in three primary lines of business conducted through three
        operating subsidiaries: (i) EnerDel, an 80.5% owned subsidiary which is 19.5%
        owned by Delphi Corporation, (“Delphi”) develops lithium-ion (“Li-ion”)
        batteries for automotive, military and other industrial uses, (ii) EnerFuel,
        a
        wholly-owned subsidiary, develops fuel cell products and services and (iii)
        NanoEner, also a wholly-owned subsidiary, develops technologies, materials
        and
        equipment for nano-manufacturing. On July 11, 2008, Ener1 and Delphi entered
        into a Restructuring and Exchange Agreement (the “Agreement”) under which Ener1
        and Delphi will restructure their respective equity participations in EnerDel.
        See Note 17 - Subsequent Events.
 
 **Note
        3 - Accounts Receivable**
 
 At
        June
        30, 2008, the accounts receivable balance was comprised of $1,036,000 relating
        to cost-sharing arrangements and $61,000 relating to the sale of engineering
        services. At December 31, 2007, the accounts receivable balance was comprised
        of
        $102,000 relating only to the sale of engineering services.
 
 Ener1
        generally recognizes revenue from cost-sharing arrangements with federal
        government agencies as a reduction of research and development expenses and
        revenue from cost-sharing arrangements with commercial entities using the
        percentage of completion method. To date, these cost-sharing arrangements
        have
        been for the development and sale of a customer specified prototype and the
        costs incurred are classified as research and development expenses, as opposed
        to cost of sales.


9


**Note
        4 - Equipment Deposits and Restricted Cash**


As
        of
        June 30, 2008, equipment deposits were $3,167,000 and restricted cash was
        $3,593,000.
 
 The
        restricted cash is in the form of letters of credit issued by a financial
        institution. The restricted cash is held in interest bearing accounts and
        will
        automatically renew in 90 day increments unless the terms are otherwise changed
        by Ener1. The letters of credit will expire at various times throughout 2008
        and
        guarantee Ener1’s performance obligations to purchase certain equipment to be
        used by EnerDel, including, but not limited to a master equipment lease
        agreement.
 
 **Note
        5 - Equipment Lease Agreement**
 
 In
        May
        2008, Ener1 entered into a $7 million master equipment lease agreement, with
        an
        unrelated third party, for an initial term of one year, renewable upon mutual
        consent. Under the terms of the agreement, Ener1 may lease newly acquired
        equipment to be used in connection with the manufacturing of lithium-ion
        batteries. Installation, construction and other non-equipment costs are excluded
        from this financing agreement. Ener1 has an option to purchase the equipment
        at
        the end of the lease at the lower of fair market value or 10% of the original
        cost.
 
 The
        lease
        has a term of three years and a stated interest rate of 10%. In accordance
        with
        the master equipment lease agreement, upon approval of the initial draw Ener1
        issued 17,559 shares of common stock valued at $105,000. The value of the
        shares
        has been recorded to debt origination costs and will be amortized to interest
        expense over the life of the initial lease draw of three years.
 
 Pursuant
        to the master equipment lease agreement, Ener1 is committed to issue $42,857
        of
        Ener1 common stock for each additional $1 million drawn under the master
        equipment lease agreement up to a maximum aggregate of $300,000 of Ener1
        common
        stock.
 
 Ener1
        anticipates recording the obligation under the initial draw as a capital
        lease.
        The obligation will become effective when the equipment is delivered. At
        such
        time, the equipment deposits and restricted cash will: (i) partially reduce
        the
        liability associated with the capital lease, (ii) be refunded to Ener1 and
        restricted cash released or (iii) a combination of both.
 
 **Note
        6 - Derivatives**
 
 As
        discussed in the following paragraphs, Ener1’s derivative liabilities ceased to
        exist due to the conversion of the 2004 Debentures and 2005 Debentures during
        the three months ended March 31, 2008.
 
 Ener1’s
        obligations relating to the 2004 Debentures and 2005 Debentures were settled
        at
        various dates throughout the three months ended March 31, 2008 (the “Conversion
        Dates”) when the holders of the debentures converted the outstanding principal
        and accrued interest into shares of Ener1’s common stock. On the Conversion
        Dates, the 2004 Debentures and the 2005 Debentures were no longer treated
        as
        derivative liabilities. The fair value of each derivative was marked to market
        on the date they no longer were accounted for as derivatives and derivative
        gain
        or loss was recorded. The balance of the derivative liability and the remaining
        unamortized discount was then recorded as a contribution to paid in capital
        on
        March 31, 2008.
 
 In
        connection with the settlement of Ener1’s obligations under the 2005 Debentures,
        Ener1 re-evaluated the derivative treatment for the 2005 Debenture Warrants
        and
        concluded that the warrants no longer met the definition of a derivative
        liability. The fair value of the derivative was marked to market on March
        26,
        2008, the last conversion date for the 2005 Debentures and a gain on derivative
        liabilities was recorded. The balance of the derivative liability was then
        recorded as a contribution to paid in capital on the same date.


10


A
        summary
        of the changes in the balance of the derivative liability as of March 31,
        2008
        is as follows (in thousands):


**Adjustments****March
                31,**
            
            **December
                31,**
            
            **for**
            
            **(Gain)****2008**
            
            **2007**
            
            **Conversion**
            
            **Loss**2004
                Debentures compound derivative
            
            
            -
            
            
            4,973
            
            
            (1,836
            )
            
            (3,137)
            (a)2005
                Debentures compound derivative
            
            
            -
            
            
            1,188
            
            
            (725
            )
            
            (463)
            (a)2005
                Debenture Warrants
            
            
            -
            
            
            3,983
            
            
            (3,647
            )
            
            (336)
            (b)$
            -
            
            $
            10,144
            
            $
            (6,208
            )
            $
            (3,936
            )




(a)
              Ener1’s
                  obligations relating to the 2004 Debentures and 2005 Debentures
                  were
                  settled when the debentures were converted into shares of Ener1’s common
                  stock. As a result, the 2004 Debentures and 2005 Debentures are
                  no longer
                  deemed to be derivatives under SFAS 133 and EITF 00-19. The debenture
                  conversions were recorded at various dates during the three months
                  ended
                  March 31, 2008. Each debenture conversion was valued at fair value
                  on the
                  date of conversion and a corresponding derivative gain or loss
                  was
                  recorded. The remaining derivative liability was recorded as a
                  contribution to paid in capital on such
                  date.
 
 (b)
              As
                  a result of the conversion of all the outstanding 2005 Debentures,
                  these
                  warrants were deemed to no longer be derivatives under SFAS 133
                  and EITF
                  00-19. The 2005 Debenture Warrants were valued at fair value on
                  March 26,
                  2008 with a corresponding gain on derivatives. The remaining derivative
                  liability was then recorded as a contribution to paid in capital
                  on such
                  date.




Ener1
        uses a lattice valuation model to value the compound embedded derivative
        features in the 2004 Debentures and 2005 Debentures and the Black-Scholes
        pricing model for determining the fair value of its warrant
        derivatives.
 
 ***Lattice
        Valuation Model***
 
 Ener1
        has
        been valuing the compound embedded derivative features in the 2004 Debentures
        and 2005 Debentures using a lattice valuation model with the assistance of
        a
        valuation consultant.
 
 The
        primary determinants of the economic value of a compound embedded derivative
        under the lattice model are (1) the price of Ener1's common stock, (2) the
        volatility of Ener1's common stock price, (3) the likelihood that Ener1 will
        be
        required to pay registration delay expenses, (4) the likelihood that an event
        of
        default or a change in control will occur, (5) the likelihood that the
        conversion price will be adjusted, (6) the likelihood that Ener1's common
        stock
        will be listed on an exchange, (7) the likelihood that Ener1 will be able
        to
        obtain alternative financing and (8) the likelihood that Ener1 would be able
        to
        force conversion of the debentures.


11




The
        following assumptions of management were used in the lattice valuation model
        to
        calculate the fair value of the compound derivatives embedded in the 2004
        Debentures on significant conversion dates during the three months ended
        March
        31, 2008 and at December 31, 2007:


**2004
                  Debentures*****Assumptions:***
              
              **March
                  31,**
                **2008**
              
              **December
                  31,**
                **2007**The
                  price of Ener1's common stock would increase at a rate commensurate
                  with
                  the cost of equity, with a short-term volatility of:
              
              
              90
              %
              
              100
              %Percent
                  likelihood that Ener1 would not be in default of its obligations
                  under the
                  registration rights agreement relating to the 2004
                  Debentures:
              
              
              100
              %
              
              100
              %Percent
                  likelihood that an event of default or a fundamental change would
                  occur,
                  increasing over time:
              
              
              1
              %
              
              5
              %Reset
                  events projected to occur with a weighted average adjustment factor
                  of:
              
              
              0.998
              
              
              0.983Percent
                  likelihood that Ener1 would force the conversion of the 2004 Debentures
                  if
                  the stock price reached $12.25:
              
              
              95
              %
              
              95
              %The
                  holders of the 2004 Debentures would convert the 2004 Debentures
                  if the
                  registration rights agreement was effective, Ener1 was not in default
                  under the 2004 Debentures, and Ener1's common stock price
                  was:
              
              
              $6.30
              
              
              $10.50Ener1
                  would redeem the 2004 Debentures following the third anniversary
                  of the
                  issue date if Ener1's common stock price reached:
              
              
              $6.30
              
              
              $8.75Percent
                  likelihood that Ener1 would be able to obtain alternative financing
                  that
                  would enable it to redeem the 2004 Debentures:
              
              
              95
              %
              
              10
              %Percent
                  likelihood that Ener1's common stock would be listed on an exchange
                  increasing 10% quarterly to a maximum of 90%:
              
              
              30
              %
              
              20
              %


Based
        on
        the foregoing assumptions, the fair value of the embedded derivatives as
        of
        March 26, 2008, March 11, 2008, February 29, 2008, February 27, 2008 (the
        significant conversion dates) and December 31, 2007, were calculated by
        management to be $565,000, $1,376,000, $1,364,000, $1,746,000 and
        $4,973,000 respectively.
 
 The
        following assumptions of management were used in the lattice valuation model
        to
        calculate the fair value of the compound derivatives embedded in the 2005
        Debentures on significant conversion dates during the three months ended
        March
        31, 2008 and at December 31, 2007:


**2005
                    Debentures****March
                    31,**
                
                **December
                    31,*****Assumptions:***
                
                **2008**
                
                **2007**The
                    price of Ener1's common stock would increase at a rate commensurate
                    with
                    the cost of equity, with a short-term volatility of:
                
                
                90
                %
                
                100
                %Percent
                    likelihood that Ener1 would not be in default of its obligations
                    under the
                    registration rights agreement relating to the 2005
                    Debentures:
                
                
                95
                %
                
                95
                %Percent
                    likelihood that an event of default or a fundamental change would
                    occur,
                    increasing over time:
                
                
                1
                %
                
                5
                %Reset
                    events projected to occur with a weighted average adjustment
                    factor
                    of:
                
                
                0.999
                
                
                0.990Percent
                    likelihood that Ener1 would force the conversion of the 2005
                    Debentures if
                    the Ener1 common stock price reached $10.50:
                
                
                95
                %
                
                95
                %The
                    holders of the 2005 Debentures would convert the 2005 Debentures
                    if the
                    registration rights agreement was effective, Ener1 was not in
                    default
                    under the 2005 Debentures and Ener1's common stock price
                    was:
                
                
                $5.95
                
                
                $8.75Ener1
                    would redeem the 2005 Debentures following the third anniversary
                    of the
                    issue date if Ener1's common stock price reached:
                
                
                $5.95
                
                
                $7.00Percent
                    likelihood that Ener1 would be able to obtain alternative financing
                    that
                    would enable it to redeem the 2005 Debentures:
                
                
                95
                %
                
                10
                %Percent
                    likelihood that Ener1's common stock would be listed on an exchange
                    and
                    meet the volume requirements set forth in the 2005 Debentures,
                    increasing
                    quarterly 10% to a maximum of 90%:
                
                
                30
                %
                
                20
                %




12




Based
        on
        the foregoing assumptions, the fair value of the embedded derivatives as
        of
        March 26, 2008, January 14, 2008 (the significant conversion dates) and December
        31, 2007, were calculated by management to be $435,000, $999,000 and
        $1,188,000 respectively.
 
 ***Black-Scholes
        Pricing Model***
 
 Ener1
        used the Black-Scholes pricing model to determine the fair values of the
        2005
        Debenture Warrants. The model uses market sourced inputs such as interest
        rates,
        stock prices, and option volatilities, the selection of which requires
        management’s judgment, and which may impact net income or loss.
 
 Ener1
        uses volatility rates based upon the closing stock price of its common
        stock since January 2002, when Ener1 underwent a change in control. Ener1
        determined that share prices prior to this period do not reflect the ongoing
        business valuation of its current operations. Ener1 uses a risk free
        interest rate which is the U.S. Treasury bill rate for securities with a
        maturity that approximates the estimated expected life of a derivative or
        security. Ener1 uses the closing market price of the common stock on the
        date of
        issuance of a derivative or at the end of a quarter when a derivative is
        valued
        at fair value. The volatility factor used in the Black-Scholes pricing model
        has
        a significant effect on the resulting valuation of the derivative
        liabilities on the balance sheet. The volatility has ranged from 296% to
        128%
        during the last four years.
 
 The
        following table shows the volatility, risk free interest rate and market
        price
        used in the calculation of the Black-Scholes call value for each derivative
        at
        issuance date and at March 31, 2008:


**Issue
                Date**
            
            **Volatility**
            
            **Risk-Free**
              **Interest**
              **Rate**
            
            **Market
                Price**
            
            **Term
                in Years****Valuation
                inputs at issuance date for:**2005
                Debenture Warrants
            
            
            3/11/2005
            
            
            135
            %
            
            3.5
            %
            $
            5.25
            
            
            5**Valuation
                inputs at:**March
                26, 2008
            
            
            
            
            
            128
            %
            
            1.8
            %
            $
            5.60
            
            
            2




**Note
        7 - Debt**
 
 The
        following share and per share data have been adjusted to reflect a 1 for
        7
        reverse stock split effective April 24, 2008.
 
 ***2004
        Senior Secured Convertible Debentures***
 
 In
        January 2004, Ener1 issued $20,000,000 in aggregate principal amount of the
        2004
        Debentures and warrants to purchase 2,285,715 shares of Ener1’s common stock.
        The net proceeds of the issuances were $18,527,000.
 
 On
        February 22, 2008, in accordance with the terms of the debentures, Ener1
        sent a
        notice to holders of the 2004 Debentures of its intention to prepay the entire
        remaining principal amount of the 2004 Debentures in cash at an amount equal
        to
        101% of the face value plus interest. The prepayment was scheduled to occur
        on
        March 24, 2008 unless the holders converted their debentures into common
        stock
        before that date.
 
 On
        March
        11, 2008, $4,000,000 of principal was converted into 761,905 shares of common
        stock of Ener1 at a per share conversion price of $5.25 rather than the $5.46
        current conversion price and an expense related to the inducement to convert
        debt of $203,000 was recorded for the 29,304 additional shares received.
        On
        March 20, 2008, all $5,634,048 of remaining outstanding principle plus $119,036
        of accrued interest was converted into 1,053,678 shares of common stock of
        Ener1
        at a per share conversion price of $5.46. At the issuance date, the 2004
        Debentures were convertible at a price of $8.75 per share, which has been
        adjusted for dilutive issuances of common stock.


13




The
        warrants to purchase 2,285,715 shares of common stock had an exercise price
        of
        $17.57 per share at the issuance date, subject to adjustment. As of June
        30,
        2008, the adjusted exercise price was $8.89 per share. The warrants are
        exercisable at any time through January 21, 2014.
 
 Ener1’s
        obligations under the 2004 Debentures were partially secured by collateral,
        including land, building and battery production equipment owned by Ener1
        Battery
        and used by EnerDel. As a result of the conversion of all outstanding 2004
        Debentures, all security interests in the property of the Company securing
        the
        Company’s obligations under the 2004 Debentures were terminated.
 
 Ener1
        has
        been accounting for the conversion option in the 2004 Debentures as a derivative
        liability in accordance with SFAS 133 and EITF 00-19. The terms of the 2004
        Debentures included several features that Ener1 was required to account for
        as
        derivatives. These derivatives were bundled together as a single, compound
        embedded derivative instrument which was bifurcated and accounted for separately
        from the debenture under SFAS 133 and Derivatives Implementation Group Issue
        No.
        B15. Upon completion of conversion, the compound embedded derivative liabilities
        were treated as a contribution to paid in capital.
 
 ***2005
        Senior Secured Convertible Debentures***
 
 In
        March
        2005, Ener1 issued $14,225,000 in aggregate principal amount of the 2005
        Debentures and warrants to purchase 1,016,072 shares of Ener1’s common stock.
        The net proceeds of the issuances were $13,134,000.
 
 On
        March
        13, 2008, in accordance with the terms of the debentures, Ener1 sent a notice
        to
        holders of the 2005 Debentures of its intention to prepay the entire remaining
        principal amount of the 2005 Debentures in cash at an amount equal to 103%
        of
        the face value plus interest. The prepayment was scheduled to occur on April
        9,
        2008 unless the holders converted their debentures into common stock before
        that
        date.
 
 As
        of
        March 26, 2008, the outstanding principal amount of $2,080,933 plus $54,689
        of
        accrued interest was converted into 442,158 shares of common stock of Ener1
        at a
        per share conversion price of $4.83. At the issuance date, the 2005 Debentures
        were convertible at a price of $7.00 per share, which has been adjusted for
        dilutive issuances of common stock.
 
 The
        2005
        Debenture Warrants were divided into Series A and Series B. The Series A
        warrants to purchase 609,643 shares of common stock had an exercise price
        of
        $8.05 per share at the issuance date, subject to adjustment; as of June 30,
        2008, the adjusted exercise price was $5.25 per share. The Series B warrants
        to
        purchase 406,429 shares of common stock had an exercise price of $8.75 per
        share
        at the issuance date, subject to adjustment; as of June 30, 2008, the adjusted
        exercise price was $5.60 per share. The warrants are exercisable at any time
        through March 11, 2010.
 
 As
        a
        result of Ener1’s failure to meet certain milestone requirements in the 2005
        Debentures, the holders of the 2005 Debentures had a security interest in
        all of
        the EnerDel common stock owned by Ener1. As a result of the conversion of
        all
        outstanding 2005 Debentures, all security interests in the property of Ener1,
        including pledges of Ener1’s ownership in EnerDel common stock, securing Ener1’s
        obligations under the 2005 Debentures were terminated.
 
 Ener1
        has
        been accounting for the conversion option in the 2005 Debentures as a derivative
        liability in accordance with SFAS 133 and EITF 00-19. The terms of the 2005
        Debentures included several features that Ener1 was required to account for
        as
        derivatives. These derivatives were bundled together as a single, compound
        embedded derivative instrument which was bifurcated and accounted for separately
        from the debenture under SFAS 133 and Derivatives Implementation Group Issue
        No.
        B15. Upon completion of conversion, the compound embedded derivative liabilities
        were treated as a contribution to paid in capital.


14


**Note
        8 - Redeemable Preferred Stock**
 
 ***EnerDel
        Series A Redeemable Preferred Stock***




In
        October 2004, a subsidiary of Delphi purchased 8,000 shares of Non-Voting,
        Cumulative and Redeemable Series A Preferred Stock issued by EnerDel (“Series A
        Preferred Stock”) plus warrants to purchase Ener1 common stock for an aggregate
        purchase price of $8,000,000.
 
 The
        holders of the Series A Preferred Stock are entitled to dividends as declared
        by
        the Board of Directors at the annual rate of 8.25%, which is payable in cash
        annually on December 31 st .
        The
        dividends are cumulative. Payment of dividends had been restricted by the
        terms
        of the 2004 Debentures and 2005 Debentures, which the Series A Preferred
        Stock
        was subordinate to. As a result of the conversion of all of the 2004 and
        2005
        Debentures, payment of dividends is no longer restricted.
 
 The
        Series A Preferred Stock is classified as temporary equity in accordance
        with
        EITF Topic D-98, “Classification and Measurement of Redeemable Securities”
(“EITF D-98”), as the redemption feature is not solely within the control of
        Ener1 and is deemed to be conditional in nature. If EnerDel has not redeemed
        all
        of the shares of Series A Preferred Stock on or before October 20, 2008,
        the
        holders may require EnerDel to redeem all of the Series A Preferred shares
        on 10
        days notice. Ener1 can extend payment of the redemption price over four
        quarterly installments.
 
 In
        connection with the issuance of the Series A Preferred Stock, Ener1 issued,
        on a
        post-split basis, warrants to purchase up to 250,000 shares of common stock
        at
        an exercise price of $4.90 per share and warrants to purchase up to 750,000
        shares of common stock at an exercise price of $7.00 per share. The warrants
        are
        exercisable at any time through October 20, 2011. Ener1 is not required to
        register the resale of the warrants or of the common stock issuable upon
        exercise of the warrants.
 
 The
        fair
        value of the warrants was determined utilizing the Black-Scholes pricing
        model. The significant assumptions used in the valuation are: the exercise
        prices as noted above; the market value of Ener1’s common stock on the date of
        issuance: $4.62 per share (post split); expected volatility of 207%; a risk
        free
        interest rate of approximately 1.74%; and a term of seven years.
 
 The
        following are the components of Series A Preferred Stock as of June 30, 2008
        (in
        thousands):


**EnerDel****Series
                A**Face
                value
            
            $
            8,000Less
                initial fair value of warrant derivative
            
            
            (4,620
            )Less
                initial fair value of conversion option
            
            
            (1,183
            )Fair
                value at date of issue
            
            
            2,197Accumulated
                accretion of discounts
            
            
            5,136Cumulative
                dividends
            
            
            2,440Carrying
                value as of June 30, 2008
            
            $
            9,773




On
        July
        11, 2008, Ener1 and Delphi entered into a Restructuring and Exchange Agreement
        (the “Agreement”) under which Ener1 and Delphi will restructure their respective
        equity participations in EnerDel. See Note 17 - Subsequent Events.


15


**Note
        9 - Related Party Transactions**
 
 ***Intercompany
        Transactions with Ener1 Group***
 
 Ener1
        Group and its subsidiaries have from time to time used various services and
        employees of Ener1. Ener1 bills Ener1 Group and its subsidiaries for the
        actual
        cost of these services and employees. Similarly, Ener1 has from time to time
        used various services and employees of Ener1 Group and its subsidiaries,
        and
        Ener1 Group has billed Ener1 for the actual cost of these services and
        employees.
 
 Two
        of
        the Company’s directors, Dr. Peter Novak and Mike Zoi, collectively beneficially
        own 31% of the outstanding common stock of Ener1 Group, which owns approximately
        62% of the outstanding common stock of the Company.
 
 Significant
        transactions with Ener1 Group are approved by the independent members of
        Ener1’s
        Board of Directors.
 
 ***Ener1
        Group Convertible Notes and Warrants***
 
 During
        2006 and 2007, Ener1 Group loaned Ener1 an aggregate principal amount of
        $11,960,000. Ener1’s obligation to repay Ener1 Group has been recorded as
        subordinated convertible debt pursuant to notes issued, the (“Group Notes”),
        which bear interest at 10% per annum.
 
 The
        following share and per share data have been adjusted to reflect a 1 for
        7
        reverse stock split effective April 24, 2008.
 
 In
        connection with the Group Notes, Ener1 issued to Ener1 Group immediately
        exercisable warrants to purchase up to 7,714,286 shares of Ener1’s common stock
        at exercise prices ranging from $2.80 to $4.20 per share, which was subsequently
        reduced to $2.10 per share in 2007. All warrants have a five-year
        term.
 
 The
        Group
        Notes were subordinated to the rights of the holders of the 2004 and 2005
        Debentures. Once Ener1's obligations under the 2004 and 2005 Debentures have
        been satisfied, the Group Notes can be converted, at Ener1 Group’s option, into
        shares of Ener1’s common stock at a conversion price of $3.50 per share.
 
 In
        connection with the satisfaction of Ener1’s obligations under the 2004 and 2005
        Debentures, Ener1 Group converted the $11,960,000 of outstanding principal
        and
        $1,884,717 in accrued interest into 3,955,634 shares of Ener1’s common stock on
        March 26, 2008.
  As
        an
        inducement for Ener1 Group’s conversion of the Group Notes, Ener1 issued 142,858
        warrants with an exercise price of $5.95 per share to Ener1 Group. The warrants
        are exercisable at any time through March 26, 2013. Ener1 used the Black-Scholes
        pricing model to value the warrants with a risk-free interest rate of 1.78%,
        the
        current stock price, at the date of issuance, of $5.60 per share, the exercise
        price of the warrants of $5.95 per share, the term of five years and volatility
        of 127.64%. The fair value of the warrants of $550,000 has been recorded
        to
        interest expense as an inducement to convert debt on March 26, 2008.
 
 Ener1
        had
        been accounting for the warrants and conversion features of the Group Notes
        as a
        beneficial conversion feature in accordance with EITF 00-27. The proceeds
        of the
        Group Notes were first allocated to the warrants at their relative fair value
        and credited to paid in capital. Ener1 used a Black-Scholes pricing model
        to
        value the warrants issued with the Group Notes. Ener1 recorded a discount
        to the
        Group Notes equal to the relative fair value of the warrants which is being
        amortized to interest expense over the life of the Group Notes.
 
 No
        entry
        was made to record the value of the conversion feature because the ability
        of
        the holder to convert was contingent upon Ener1’s repayment of the 2004 and 2005
        Debentures which was considered outside the holders’ control. As a result of the
        conversion of the outstanding principal under the 2004 and 2005 Debentures,
        effective March 26, 2008, the contingency over the conversion feature was
        resolved and the intrinsic value of the conversion feature at the date of
        issuance of $3,608,000 has been recorded as a credit to paid in capital.


16


The
        unamortized discount related to the fair value of the warrants and the
        beneficial conversion feature, as of March 26, 2008, of $5,249,997 and
        $3,608,000, respectively, was recorded to interest expense in accordance
        with
        EITF 00-27.
 
 **Note
        10 - Stock Issuances during the Six Months Ended June 30,
        2008**
 
 During
        the six months ended June 30, 2008, Ener1 issued the following shares of
        common
        stock, as adjusted to reflect a 1 for 7 reverse stock split effective April
        24,
        2008:


·
            1,815,583
                shares for the conversion of $9,753,000 in principal and accrued
                interest
                related to the 2004 Debentures,




·
            442,158
                shares for the conversion of $2,136,000 in principal and accrued
                interest
                related to the 2005 Debentures,




·
            3,955,634
                shares for the conversion of $13,845,000 in principal and accrued
                interest
                related to the Group Notes,




·
            5,657,149
                shares for the exercise of warrants at $5.25 per share related to
                the
                November 2007 equity placement,




·
            224,651
                shares for the exercise of 228,641 employee stock options with exercise
                prices ranging from $1.61 to $2.10 per
                share,




·
            17,559
                shares issued to an unrelated third party for debt issuance related
                to the
                Equipment Lease Agreement, valued at
                $105,000.




**Note
        11 - Comprehensive Income or Loss and Foreign Currency
        Translation**
 
 In
        accordance with SFAS No. 130, *Reporting
        Comprehensive Income* ,
        Ener1
        is required to report its comprehensive income. Other comprehensive income
        refers to revenue, expenses, gains and losses that under generally accepted
        accounting principles are included in comprehensive income but are excluded
        from
        net income, as these amounts are recorded directly as an adjustment to
        stockholders’ equity. A consolidated statement of changes in stockholders’
equity and comprehensive income has been presented as Ener1 has components
        of
        other comprehensive income, such as foreign currency translation adjustments.
 
 The
        functional currency for EnerDel (Japan), Inc. is the Japanese yen. Accordingly,
        assets and liabilities are translated at the rates of exchange at the balance
        sheet date and equity accounts at historical exchange rates. Income and expense
        items of this subsidiary are translated at average monthly rates of exchange.
        The resulting translation gains or losses are included in comprehensive income
        as a component of stockholders’ equity as “effects of exchange rates on
        consolidation” and totaled approximately $38,000 in losses for the three months
        ended June 30, 2008 and $23,000 in losses for the six months ended June 30,
        2008. The EnerDel (Japan) subsidiary was formed in the fourth quarter of
        2007.
        As a result, there is no gain or loss from effects of exchange rates on
        consolidation prior to January 1, 2008.
 
 **Note
        12 - Stock-Based Compensation**
 
 At
        June
        30, 2008, Ener1 had eight stock-based employee, executive, director, advisory
        board and consultant compensation plans.
 
 ***Valuation
        and Expense Information under SFAS 123R***
 
 Ener1
        recorded share-based compensation costs of $1,489,000 and $512,000 for the
        six
        months ended June 30, 2008 and 2007, respectively.


17


As
        required by SFAS 123R, Ener1 estimates forfeitures of employee stock options
        and
        recognizes compensation cost only for the portion of those awards expected
        to
        vest. Forfeiture rate estimates for each plan are based on actual experience
        through December 31, 2007 and are adjusted annually to reflect actual forfeiture
        experience as needed. Included in the stock-based compensation cost of
        $1,489,000 is $330,000 in adjustments to reflect Ener1’s actual forfeiture rates
        and experience.
 
 In
        connection with the adoption of SFAS 123R, Ener1 estimates the fair value
        of
        each stock option on the date of grant using a Black-Scholes pricing model,
        applying the following assumptions, and amortizes the estimated fair value
        to
        expense over the option’s vesting period using the straight-line attribution
        approach.
 
 *Expected
        Term*
 The
        expected term represents the period over which the share-based awards are
        expected to be outstanding. It has been determined using the “shortcut method”
described in SAB Topic 14.D.2, which is based on a calculation that determines
        the midpoint between the vesting date and the end of the contractual
        term.
 
 *Risk-Free
        Interest Rate*
 Ener1
        based the risk-free interest rate used in its assumptions on the implied
        yield
        currently available on U.S. Treasury issues with a remaining term equivalent
        to
        the stock option award’s expected term. The weighted-average risk-free interest
        rate used through June 30, 2008 was 4.0%.
 
 *Expected
        Volatility*
 Ener1
        uses volatility rates based upon the weekly closing stock price of Ener1’s
        common stock since January 2002, when Ener1 underwent a change in control.
        Ener1
        determined that share prices prior to January 2002 do not reflect the ongoing
        business valuation of Ener1’s operations. The weighted-average expected
        volatility used during the period options were granted was 122.6%.
 
 *Expected
        Dividend Yield*
 Ener1
        does not intend to pay dividends in the foreseeable future on its common
        stock.
        Accordingly, Ener1 uses a dividend yield of zero in its
        assumptions.
  ***Stock
        Options***
 
 The
        number of options and the weighted average option price noted below have
        been
        adjusted to reflect a 1 for 7 reverse stock split effective April 24, 2008.
        A
        summary of the changes in the stock options outstanding under all of the
        Company’s stock option plans described above as of June 30, 2008 is as
        follows:


**Options**
            
            **Number
                of**
              **Options**
            
            **Weighted**
              **Average**
              **Price**
            
            **Average**
              **Remaining**
              **Contractual**
              **Term
                in**
              **Years**
            
            **Intrinsic**
              **Value**Outstanding
                at December 31, 2007
            
            
            4,658,644
            
            $
            2.94
            
            
            5.8
            
            $
            13,289,766Granted
            
            
            281,795
            
            $
            4.97Exercised
            
            
            (228,641
            )
            $
            1.82Forfeited
                or expired
            
            
            (279,719
            )
            $
            2.62Cancelled
            
            
            (71,429
            )
            $
            2.17Outstanding
                at June 30, 2008
            
            
            4,360,650
            
            $
            3.16
            
            
            5.5
            
            $
            18,598,627Exercisable
                at June 30, 2008
            
            
            2,596,725
            
            $
            3.14
            
            
            5.7
            
            $
            11,119,251





18


On
        January 15, 2008, in connection with his election to the Board of Directors
        of
        Ener1, a new director received options to purchase 42,858 shares of common
        stock
        at an exercise price of $5.18 per share. These options will vest one-third
        per
        year over three years. The fair value of these options on the date of grant
        using Black-Scholes was computed as $142,710 and, in accordance with SFAS
        123R,
        will be expensed over the vesting period of three years.
 
 On
        February 18, 2008, Ener1 granted options to an employee to purchase 42,858
        shares of common stock at an exercise price of $7.49 per share. These options
        vest 21,428 on the date of grant and 21,429 in February 2009. The fair value
        of
        these options on the date of grant using Black-Scholes was computed as $170,400
        and in accordance with SFAS 123R, $85,200 was immediately expensed on the
        date
        of grant and $85,200 will be expensed over the remaining vesting period.
 
 In
        April
        2008, Ener1 granted options to two employees to purchase 57,144 shares of
        common
        stock at an exercise price of $6.02 per share. These options vest one-third
        per
        year over three years. The fair value of these options on the date of grant
        using Black-Scholes was computed as $197,000 and, in accordance with SFAS
        123R,
        will be expensed over the vesting period of three years.
 
 During
        the six months ended June 30, 2008, Ener1 granted performance based options
        to
        several employees to purchase 67,505 shares of common stock at exercises
        prices
        ranging from $4.83 to $6.02 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 using
        Black-Scholes was computed as $211,087, and in accordance with SFAS 123R
        will be
        expensed over the vesting period of three years.
 
 During
        the six months ended June 30, 2008, Ener1 granted options to two employees
        to
        purchase 71,430 shares of common stock at an exercise price of $2.17 per
        share.
        These options vest in October 2009. The fair value of these options on the
        date
        of grant using Black-Scholes was computed as $241,405, and in accordance
        with
        SFAS 123R, will be expensed over the vesting period.
 
 During
        the six months ended June 30, 2008, employees exercised 228,641 “cashless”
options with exercise prices ranging from $1.61 to $2.10 per share. Ener1
        issued
        224,651 shares pursuant to such cashless exercise. The total intrinsic value
        of
        these options on the date of exercise was $1,256,000.
 
 During
        the six months ended June 30, 2008, options to purchase 279,719 shares issued
        to
        various 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, 2008, options to purchase 71,429 were cancelled
        and were not accompanied by a concurrent grant (or offer to grant) a replacement
        award held by an executive in connection with the amendment to an employment
        agreement. In accordance with SFAS 123R, the previously unrecognized
        compensation cost was recognized into expense on the cancellation
        date.
 
 As
        of
        June 30, 2008, there was $3,440,013 of total unrecognized compensation cost
        related to the stock options granted under Ener1 stock plans. That cost is
        expected to be recognized over a weighted-average period of three
        years.


19


**Note
        13 - Warrants**
 
 The
        number of warrants and the weighted average price noted below have been adjusted
        to reflect a 1 for 7 reverse stock split effective April 24, 2008. A summary
        of
        the changes in warrants outstanding as of June 30, 2008 is as
        follows:


**Warrants**
            
            **Number
                of**
              **Warrants**
            
            **Weighted**
              **Average**
              **Price**
            
            **Average**
              **Remaining**
              **Term
                in**
              **Years**
            
            **Intrinsic**
              **Value**Outstanding
                and Exercisable at December 31, 2007
            
            
            32,102,009
            
            $
            3.99
            
            
            3.3
            
            $
            67,659,235Granted
            
            
            142,858
            
            $
            5.95Exercised
            
            
            (5,657,149
            )
            $
            5.25Forfeited
                or expired
            
            
            (2,571,429
            )
            $
            5.25Surrendered
            
            
            -
            
            
            -Outstanding
                and Exercisable at June 30, 2008
            
            
            24,016,289
            
            $
            3.58
            
            
            3.9
            
            $
            100,117,300




During
        the six months ended June 30, 2008, Ener1 issued 142,858 warrants with an
        exercise price of $5.95 per share to Ener1 Group as an inducement to convert
        all
        the outstanding Group Notes. The warrants are exercisable at any time through
        March 2013. The fair value of the warrants was $550,000 and was recorded
        to
        interest expense as an inducement to convert debt.
 
 In
        connection with Ener1’s equity private placement in November 2007, 8,228,578
        warrants with an exercise price of $5.25 and an expiration date of May 19,
        2008
        were issued. Through the expiration date, 5,657,149 warrants were exercised
        resulting in cash proceeds to the Company of $29.7 million. The remaining
        2,571,429 warrants expired unexercised on May 19, 2008.
 
 **Note
        14 - Earnings per Share**
 
 Basic
        net
        loss per share is computed by dividing the net loss attributable to common
        shareholders by the weighted-average number of common shares outstanding
        during
        the period.
 
 Diluted
        net loss per share is computed using the weighted-average number of common
        shares outstanding during the period, adjusted for the dilutive effect of
        common
        stock equivalents, consisting of shares that would be issued upon exercise
        of
        common stock warrants. In calculating diluted net loss per share, the numerator
        is also adjusted to: (1) add back interest expense in the 2004 and 2005
        Debentures; and (2) subtract the derivative gains on convertible securities
        to
        the extent the effect is dilutive.
 
 Weighted-average
        common shares do not include the common stock equivalents resulting from
        common
        stock options because their inclusion would be anti-dilutive. The dilutive
        effect of outstanding stock options and warrants is reflected in diluted
        net
        income or loss per share by application of the treasury stock method. The
        dilutive effect of outstanding convertible securities is reflected in diluted
        net income or loss per share by application of the if-converted
        method.
 
 Share
        and
        per share data for the three and six months ended June 30, 2007 have been
        retroactively adjusted to reflect a 1 for 7 reverse stock split effective
        April
        24, 2008.


20




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





**Three
                Months ended June 30,**
            
            **Six
                Months ended June 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Stock
                options that were not in the money
            
            
            92,860
            
            
            4,477,143
            
            
            92,860
            
            
            4,477,143Warrants
                that were not in the money
            
            
            2,901,105
            
            
            17,216,000
            
            
            2,901,105
            
            
            17,216,000Plus
                  shares from assumed conversion of convertible
                  securities:2004
                Debentures
            
            
            -
            
            
            2,962,429
            
            
            -
            
            
            2,962,4292005
                Debentures
            
            
            -
            
            
            2,540,143
            
            
            -
            
            
            2,540,143Convertible
                Group Notes
            
            
            -
            
            
            3,417,143
            
            
            -
            
            
            3,417,143Total
                    options, warrants and convertible securities excluded from weighted
                    average shares
            
            
            2,993,965
            
            
            30,612,858
            
            
            2,993,965
            
            
            30,612,858




**Note
        15 - Segment Information**
 
 SFAS
        No.
        131, *Disclosure
        about Segments of an Enterprise and Related Information* ,
        establishes standards for reporting information about segments. This standard
        requires segmentation based on Ener1’s internal organization and reporting of
        revenue and operating income based on internal accounting methods. The segments
        are designed to allocate resources internally and provide a framework to
        determine management responsibility. Operating segments are defined as
        components of an enterprise about which separate financial information is
        available that is evaluated regularly by the chief operating decision maker
        in
        deciding how to allocate resources and in assessing performance. Our chief
        operating decision maker is our Chief Executive Officer.
 
 As
        of
        June 30, 2008, Ener1 is organized based upon the following 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.


21


The
        following table provides segment financial information (in
        thousands):


**Three
                Months Ended**
            
            **Six
                Months Ended****June
                30,**
            
            **June
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007****Net
                sales:**Battery
            
            $
            429
            
            $
            -
            
            $
            512
            
            $
            -Fuel
                Cell
            
            
            8
            
            
            79
            
            
            22
            
            
            118Total
                net sales
            
            $
            437
            
            $
            79
            
            $
            534
            
            $
            118**Net
                income (loss):**Corporate
            
            
            (473
            )
            
            (17,001
            )
            
            (6,352
            )
            
            (18,404
            )Battery
            
            
            (5,417
            )
            
            6,128
            
            
            (10,282
            )
            
            1,588Fuel
                Cell
            
            
            (1,494
            )
            
            1,644
            
            
            (4,014
            )
            
            427Nanotechnology
            
            
            (438
            )
            
            743
            
            
            (902
            )
            
            186Net
                income (loss)
            
            $
            (7,822
            )
            $
            (8,486
            )
            $
            (21,550
            )
            $
            (16,203
            )**Corporate
                allocations:**Corporate
            
            
            (2,180
            )
            
            (3,848
            )
            
            (6,881
            )
            
            (7,496
            )Battery
            
            
            1,630
            
            
            2,786
            
            
            4,595
            
            
            5,409Fuel
                Cell
            
            
            428
            
            
            750
            
            
            1,895
            
            
            1,453Nanotechnology
            
            
            122
            
            
            312
            
            
            391
            
            
            634Net
                income (loss)
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -




**June
                30,**
            
            **December
                31,****2008**
            
            **2007****Assets:**Corporate
            
            
            37,803
            
            
            26,090Battery
            
            
            11,692
            
            
            4,665Fuel
                Cell
            
            
            449
            
            
            497Nanotechnology
            
            
            62
            
            
            49Total
                assets
            
            $
            50,006
            
            $
            31,301




Ener1
        reports proceeds from grants as a reduction of research and development expense.
        Proceeds from grants were $2,327,000 and $117,000 in the six months ended
        June
        30, 2008 and 2007, respectively.
 
 **Note
        16 - Commitments and Contingencies**
 
 ***Litigation***
 
 Ener1
        receives communications from time to time alleging various claims. These
        claims
        include, but are not limited to, employment matters, collections of accounts
        payable, and allegations that certain of Ener1’s products infringe the patent
        rights of other third parties. Ener1 cannot predict the outcome of any such
        claims or the effect of any such claims on its operating results, financial
        condition, or cash flows. As of June 30, 2008, there were no material pending
        legal proceedings.




22


**Note
        17 - Subsequent Events**
 
 On
        July
        11, 2008, Ener1 and Delphi entered into a Restructuring and Exchange Agreement
        (the “Agreement”) under which Ener1 and Delphi will restructure their respective
        equity participations in EnerDel. Upon consummation Delphi will transfer
        to
        Ener1 its equity interest in EnerDel, including its EnerDel Series A Preferred
        Stock and will relinquish its right to appoint a member to the Board of
        Directors of EnerDel. In exchange, Ener1 will transfer to Delphi 2,857,413
        shares of Ener1 common stock and $8,000,000 in cash and will revise the exercise
        price for certain warrants held by Delphi exercisable into 750,000 shares
        of
        Ener1 common stock from $7.00 to $5.25 per share (the “Consideration”). In
        addition, upon payment of the Consideration to Delphi, all accrued and unpaid
        dividends on the Series A Preferred Stock will be deemed to have been paid
        in
        full.
 
 Prior
        to
        entering into the Agreement, Ener1 requested a fairness opinion with respect
        to
        the Consideration given, from a financial point of view. The fees incurred
        to
        obtain this opinion have been capitalized as of June 30, 2008 and will become
        part of the purchase price allocation when the transaction is consummated.
        On
        July 31, 2008, the Federal Bankruptcy Court overseeing Delphi’s Chapter 11 case
        approved the Agreement. Consummation of the transaction occurred on August
        12,
        2008.
 
 Ener1’s
        Board of Directors and majority shareholder unanimously approved an increase
        in
        the number of shares of authorized common stock from 135,714,286 to 150,714,286
        which become effective on August 12, 2008.


23


**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**





This
      report on Form 10-Q contains forward-looking statements within the meaning
      of
      Section 27A of the Securities Act of 1933 (“Securities Act”), and Section 23E of
      the Securities Exchange Act of 1934 (“Exchange Act”), as amended. These
      statements relate to our expectations regarding future events or future
      financial performance. Any statements contained in this report that are not
      statements of historical fact may be deemed forward-looking statements. In
      some
      cases, forward-looking statements can be identified by terminology such as
      “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,”
“estimate,” “predict,” “potential” or “continue,” or the negative of such terms
      or other comparable terminology. These statements are only predictions and
      are
      subject to a number of assumptions, risks and uncertainties that could cause
      actual results to differ materially from those expressed or implied in the
      forward-looking statements.





The
      following important factors, in addition to those discussed 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: our ability to raise capital; general
      economic conditions; competition; our ability to control costs; changes within
      our industries; release of new and upgraded products and services by us or
      our
      competitors; EnerDel's ability to deliver prototype, production samples and
      finished product to electric vehicle customers; development of our sales
      force; employee retention; managerial execution; legal and regulatory issues;
      changes in accounting policies or practices; and successful adoption of our
      products and services.





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 Annual Report on
      Form 10-KSB for the year ended December 31, 2007, our subsequent Quarterly
      Reports on Form 10-Q and other filings with the Securities and Exchange
      Commission and the condensed consolidated financial statements and related
      notes
      included in this Quarterly Report.





***Overview***





We
      have
      three business lines which we conduct through our three operating subsidiaries.
      EnerDel, an 80.5% owned subsidiary which is 19.5% owned by Delphi Corporation,
      (“Delphi”) develops lithium-ion batteries for automotive, military and other
      industrial uses. EnerFuel, a wholly-owned subsidiary, develops fuel cell
      products and services. NanoEner, also a wholly-owned subsidiary, develops
      technologies, materials and equipment for nanomanufacturing.





In
      July
      2008, we entered into an agreement with Delphi to restructure our respective
      ownership interests in EnerDel. The terms of the Agreement include, but are
      not
      limited to, Delphi transferring its equity interest in EnerDel to Ener1,
      including its EnerDel Series A Preferred Stock. In exchange, we will transfer
      to
      Delphi 2,857,413 shares of Ener1 common stock, $8,000,000 in cash and reduce
      the
      exercise price of certain warrants held by Delphi to $5.25 per share. All
      accrued and unpaid dividends on the EnerDel Series A Preferred stock will be
      deemed paid in full upon payment of the foregoing consideration. On July 31,
      2008, the Federal Bankruptcy Court overseeing Delphi’s Chapter 11 case approved
      the Agreement. Consummation of the transaction occurred on August 12,
      2008.





Currently,
      we generate minimal revenue from sales of Ener1’s products. Substantially all of
      our planned products are still under development. We will require significant
      capital to continue our product development activities in order to commercialize
      our technology.




24


We
        have
        developed a lithium-ion battery for hybrid electric vehicles (“HEVs”) that we
        believe has significant competitive advantages because of its safety, power
        and
        other performance characteristics. In particular, our battery chemistry,
        which
        uses lithium titanate for the anode material, does not experience thermal
        problems that sometimes occur in lithium-ion batteries used in consumer
        electronics. Our HEV battery cell was developed under an ongoing program
        with
        the United States Advanced Battery Consortium (“USABC”). The USABC is a
        consortium of the three largest U.S. automobile manufacturers -- Ford, General
        Motors and Chrysler, with funding provided by the U.S. Department of Energy
        (“DOE”).
 
 We
        are
        also developing a lithium titanate battery for plug-in hybrid electric vehicles
        (“PHEVs”) under an award from the DOE which is expected to be managed by the
        USABC. In addition, we are currently delivering pre-production lithium-ion
        battery packs for an electric vehicle (“EV”) for Think Global SA (“Think”),
        which we expect to begin shipping in December 2008. The first generation
        battery
        for this electric vehicle uses a hard carbon anode which we intend to replace
        with lithium titanate when the next generation battery is developed.
 
 The
        major
        automotive companies have discussed and/or announced plans to introduce
        lithium-ion batteries in HEVs and PHEVs with varying dates. Extensive additional
        testing and evaluation by the automotive industry is required before the
        lithium-ion battery technology is adopted. Our HEV lithium-ion batteries
        are
        undergoing extensive testing, the results of which are evaluated by our
        prospective customers and the USABC.
 
 EnerFuel
        is developing what it believes will be the next generation of high-temperature
        fuel cells, intended to address the fuel cell industry's need for fuel cells
        that are smaller, less costly and less complex. EnerFuel is pursuing fuel
        cell
        related opportunities in the portable power, auxiliary power, distributed
        power
        and backup power markets.
 
 NanoEner,
        our nanotechnology subsidiary, has built prototype equipment that utilizes
        our
        proprietary vapor deposition and solidification (“VDS”) process for depositing
        materials onto battery electrodes as part of the battery cell manufacturing
        process. NanoEner is developing electrodes produced using this process for
        testing during 2008.
 
 **Results
        of Operations**
 
 While
        we
        had no significant sales or gross profit in the six months ended June 30,
        2008,
        sales increased $416,000 from $118,000 for the six months ended June 30,
        2007 to
        $534,000 for the six months ended June 30, 2008. The primary cause for the
        increase is due to EnerDel’s revenue for prototypes under the Think supply
        agreement.
 
 ***Six
        Months Ended June 30, 2008***
 
 *Net
        income (loss)* .
        We
        reported a net loss of $21,550,000 for the six months ended June 30, 2008;
        an
        increase of $5,347,000, or 33%, when compared to a net loss of $16,203,000
        for
        the six months ended June 30, 2007. The increase in net loss was due to an
        increase in interest expense of $4,464,000, an increase in net research and
        development expenses of $3,762,000, and an increase in general and
        administrative expenses of $617,000. These increases in expenses have been
        partially offset by an increase in the gain on derivative liabilities of
        $2,433,000 and a decrease in warrant modification expense of $583,000.
 
 *Losses
        from operations* .
        We
        reported losses from operations of $12,974,000 for the six months ended June
        30,
        2008, an increase of $3,447,000, or 36%, when compared to losses from operations
        of $9,527,000 for the six months ended June 30, 2007. The increase in operating
        losses was attributable to increases in general and administrative expenses
        of
        $617,000 and net research and development expenses of $3,762,000. These
        increases were partially offset by a decrease in warrant modification expense
        of
        $583,000. We had no significant sales from continuing operations during the
        six
        months ended June 30, 2008 or 2007.


25


*General
        and administrative (“G&A”) expenses.* G&A
        increased $617,000, or 15%, to $4,761,000 for the six months ended June 30,
        2008, compared to $4,144,000 for the six months ended June 30, 2007. This
        increase was due to an increase in advertising and trade show expenses of
        $281,000, an increase in facilities related expenses of $202,000, an increase
        in
        salary and employee benefits, including stock based compensation, expenses
        of
        $127,000, and an increase in licensing fees directly related to the listing
        of
        our common stock on the American Stock Exchange of $101,000. These increases
        have been partially offset by a decrease of $150,000 in legal and professional
        fees.
 
 *Research
        and development (“R&D”) expenses, net.* Our
        net
        R&D expenses were $8,449,000 and $4,687,000 for the six months ended June
        30, 2008 and 2007, respectively, an increase of $3,762,000, or 80%. The increase
        was due to an increase in salaries and related benefits of $2,243,000, an
        increase in outside services related to the production of prototypes of
        $716,000, an increase in travel expenses of $267,000, an increase in facilities
        related expenses of $177,000 and an increase in production materials of $89,000,
        net of reimbursements.
 
 We
        report
        proceeds from cost-share R&D contracts that we enter into with the USABC,
        the Office of Naval Research (“ONR”) and the Florida Hydrogen Initiative (“FHI”)
        as a reduction of research and development expenses. Billings under contracts
        were $2,327,000 and $117,000 during the six months ended June 30, 2008 and
        2007,
        respectively, an increase of $2,210,000, which partially offsets the increases
        in R&D expenses.
 
 R&D
        expenses for the six months ended June 30, 2008 included $5,896,000 of expenses
        incurred in connection with our battery business which is net of proceeds
        of
        $2,327,000, $2,088,000 of expenses incurred in connection with our fuel cell
        business, and $465,000 of expenses incurred in connection with our
        nanotechnology business. R&D expenses for the six months ended June 30, 2007
        included $3,091,000 of expenses incurred in connection with our battery business
        which is net of proceeds of $117,000, $1,184,000 of expenses incurred in
        connection with our fuel cell business, and $412,000 of expenses incurred
        in
        connection with our nanotechnology business.
 
 *Interest
        expense.* Interest
        expense was $11,625,000 and $7,161,000 for the six months ended June 30,
        2008
        and 2007, respectively, an increase of $4,464,000, or 62%. The increase was
        primarily due to the non-cash interest expenses recorded in connection with
        Ener1 Group’s conversion of the convertible notes into shares of common stock.
 
 *Gain
        on derivative liabilities.* Gain
        on
        derivative liabilities increased $2,433,000 from $1,503,000 for the six months
        ended June 30, 2007 to $3,936,000 for the six months ended June 30, 2008.
        The
        increase was associated with marking to market the value of the embedded
        derivatives on the date that the financial instruments were converted or
        changed
        in status.
 
 **Liquidity
        and Capital Resources**
 
 At
        June
        30, 2008, we had working capital of $32,308,000. Our available cash at June
        30,
        2008 was $34,020,000. We used $12,638,000 of cash for operating activities
        during the six months ended June 30, 2008, which was funded through our
        available cash.
 
 We
        currently have $14,699,000 in commitments to purchase equipment. As of June
        30,
        2008, we have expended, in cash, $7,909,000 towards this commitment comprised
        of
        $1,154,000 in capital expenditures and $6,755,000 in equipment deposits and
        restricted cash. The restricted cash is in the form of letters of credit
        issued
        by a financial institution guaranteeing our performance under the purchase
        commitment. The restricted cash is held in interest bearing accounts and
        automatically renews in 90 day increments unless we change the terms. The
        letters of credit will expire at various times throughout 2008.


26


In
        May
        2008, we executed a $7 million master equipment lease agreement, with an
        unrelated third party, to lease equipment for use in our lithium-ion battery
        production. The lease has a term of three years and a stated interest rate
        of
        10%. We have an option to purchase the equipment at the end of the lease
        at the
        lower of fair market value or 10% of the original cost. Upon approval of
        the
        initial draw we issued 17,559 shares of Ener1 common stock valued at $105,000
        to
        the unrelated third party. We are further committed to issue $42,857 of common
        stock for each additional $1 million drawn under the agreement up to a maximum
        of $300,000 of Ener1 common stock. Our obligation under the initial draw
        will
        become effective when the equipment is delivered. At such time, the equipment
        deposits and restricted cash will: (i) partially reduce the liability associated
        with the lease, (ii) be refunded to us and restricted cash released or (iii)
        a
        combination of both.
 
 We
        moved
        our corporate headquarters to New York in May 2008 in preparation for our
        listing on the American Stock Exchange, which was effective May 8, 2008,
        under
        the ticker symbol “HEV.” We entered into a sub-lease agreement for our former
        corporate offices in Fort Lauderdale, Florida for a cash savings of
        approximately $330,000 over the original lease term.
 
 On
        April
        14, 2008, we announced a reverse stock split of Ener1’s common stock at a ratio
        of one share for every seven shares held. The reverse split was effective
        on
        April 24, 2008, at which time our existing shareholders received one share
        of
        Ener1’s common stock for every seven shares which they then held. We also
        approved a reduction of authorized shares in the same ratio as the reverse
        split. Prior to effecting the split, we had 950,000,000 authorized common
        shares
        and 695,411,696 common shares issued and outstanding. After effecting the
        reverse split, we had 135,714,286 authorized common shares and 99,344,528
        common
        shares issued and outstanding. On April 24, 2008, we filed an amendment to
        our
        Certificate of Incorporation to effect the reverse split of all of the
        outstanding shares of common stock at a ratio of one-for-seven.
 
 On
        July
        22, 2008, we mailed an information statement to our shareholders regarding
        the
        actions approved by the Board of Directors and majority shareholder. Ener1’s
        Board of Directors unanimously approved, on April 14, 2008, the proposed
        amendment to the Articles of Incorporation to increase the number of shares
        of
        authorized common stock from 135,714,286 shares to 150,714,286 shares. The
        increase in the authorized shares became effective on August 12,
        2008.
 
 The
        following share and per share data have been adjusted to reflect a 1 for
        7
        reverse stock split effective April 24, 2008.
 
 During
        the first quarter of 2008, holders of the 2004 and 2005 Debentures converted
        the
        remaining outstanding principal and accrued interest of $9,753,000 and
        $2,136,000, respectively into 2,257,741 shares of common stock at conversion
        prices ranging from $4.83 to $5.46 per share. The original principal amount
        at
        inception of the 2004 Debentures and the 2005 Debentures was $20,000,000
        and
        $14,225,000, respectively, with stated maturity dates of January 2009 and
        March
        2009, respectively.
 
 Also
        during the first quarter of 2008, Ener1 Group converted the outstanding
        principal and accrued interest of $13,845,000 into 3,955,634 shares of Ener1’s
        common stock at a conversion price of $3.50 per share. The original principal
        amount at inception was $11,960,000 with maturity in the second quarter of
        2009.
        As an inducement to convert debt, we issued 142,858 warrants to Ener1 Group
        with
        an exercise price of $5.95 per share. The warrants are exercisable at any
        time
        through March 2013. The fair value of the warrants, using a Black-Scholes
        pricing model, of $550,000 was recorded to interest expense during the three
        months ended March 31, 2008.
 
 In
        connection with our equity private placement in November 2007, we issued
        8,228,578 warrants with an exercise price of $5.25 and an expiration date
        of May
        19, 2008. Through the expiration date, 5,657,149 warrants were exercised
        resulting in cash proceeds of $29.7 million. The remaining 2,571,429 warrants
        expired unexercised on May 19, 2008.


27


We
        believe that our operating activities are fully funded for at least the next
        twelve months at our present level of spending. At June 30, 2008, our balance
        sheet has improved and is almost debt free with the exception of our redeemable
        preferred stock, which has been surrendered by Delphi in connection with
        the
        restructuring of our ownership interests in EnerDel. The security interests
        in
        our assets that were granted in favor of the 2004 and 2005 Debenture holders
        have been released as a result of settlement in the form of conversions to
        common stock. We expect to receive approximately $6 million from existing
        cost-sharing contracts which will reduce our R&D expenses in 2008. This
        frees up cash for operations which we plan to invest in our future business
        plans.
 
 ***Critical
        Accounting Policies*** ****
 
 Management’s
        discussion and analysis of our financial condition and results of operations
        are
        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 consolidated financial statements requires management
        to make estimates and judgments that affect the reported amounts of assets,
        liabilities, revenues and expenses, and related disclosures of contingent
        assets
        and liabilities. Our critical accounting policies are described in the notes
        to
        the Company’s Consolidated Financial Statements on Form 10-KSB for the year
        ended December 31, 2007. This summary of critical accounting policies is
        presented to assist in understanding the Company’s financial statements.
 
 We
        base
        our estimates on historical experience and various other assumptions that
        are
        believed to be reasonable under the circumstances, the results of which form
        the
        basis for making judgments about the carrying values of assets and liabilities
        that are not readily apparent from other sources. Certain estimates are subject
        to marketplace conditions, and are discussed below. Actual results may differ
        from these estimates under different assumptions or conditions. Management
        believes the following are its most critical accounting policies because
        they
        require more significant judgments and estimates in preparation of its
        consolidated financial statements.
 
 *Derivative
        Instruments*
 
 Following
        guidance by SFAS No. 133 and EITF 00-19, the Company determined the conversion
        feature of the 2004 Debentures and 2005 Debentures and the warrants associated
        with the 2005 Debentures should be treated as separate derivative liabilities
        on
        the balance sheet under current liabilities. Unrealized changes in the value
        of
        these derivatives are recorded in the consolidated statement of operations
        as a
        gain or loss on derivative liabilities. Fair values of the derivative liability
        associated with the conversion features are determined using market based
        lattice pricing models incorporating readily observable market data and
        management assumptions. Fair values of the derivative liabilities associated
        with the warrants are determined using a Black-Scholes Pricing Model.
  *Share-Based
        Payments*
  In
        accordance with SFAS No. 123R, the Company estimates the fair value of each
        stock option, on the date of grant, using a Black-Scholes Pricing Model and
        amortizes the estimated fair value to expense over the vesting period of
        the
        option on a straight line basis. Key assumptions used in the Black-Scholes
        model
        include estimates of (1) expected volatility, (2) an expected term, (3) discount
        rate and (4) expected dividend yield.
 
 *Revenue
        Recognition*
 
 We
        recognize revenue when an arrangement exists, prices are determinable, services
        and products are rendered or delivered and collectibility is reasonably
        assured.


28


We
        generally recognize revenue from research and development cost-sharing
        arrangements with federal government agencies as a reduction of research
        and
        development expenses. We generally recognize revenue from research and
        development cost-sharing arrangements with commercial entities using the
        percentage of completion method. To date, these contracts have been for the
        development and sale of a customer specified prototype and the costs incurred
        are classified as research and development expenses as opposed to cost of
        sales.
 
 ***Recently
        Issued Accounting Pronouncements and Interpretations***
 
 In
        March 2008, the FASB issued SFAS No. 161, *Disclosures
        about Derivative Instruments and Hedging Activities—an amendment of FASB
        Statement No. 133* (“SFAS
        No. 161”). This standard requires additional quantitative disclosures
        (provided in tabular form) and qualitative disclosures for derivative
        instruments. The required disclosures include how derivative instruments
        and
        related hedged items affect an entity’s financial position, financial
        performance, and cash flows; relative volume of derivative activity; the
        objectives and strategies for using derivative instruments; the accounting
        treatment for those derivative instruments formally designated as the hedging
        instrument in a hedge relationship; and the existence and nature of
        credit-related contingent features for derivatives. SFAS No. 161 does not
        change the accounting treatment for derivative instruments. SFAS 161 is
        effective for fiscal years and interim periods beginning after November 15,
        2008, with early adoption permitted. The Company is currently evaluating
        the
        potential impact, if any, the adoption of SFAS 161 will have on its consolidated
        financial statements.
 
 ***Off-Balance
        Sheet Arrangements***
 
 At
        June
        30, 2008, we did not have any off-balance sheet arrangements, as defined
        in Item
        303(a)(4) of Regulation S-K.
 
 **Item
        3. Quantitative and Qualitative Disclosure About Market
        Risk**
 This
          item
          3 is not applicable to us as, pursuant to Item 305(e) of Regulation S-K,
          a
          smaller reporting company is not required to provide the information required
          by
          Item 305 of Regulation S-K.


29


**Item
      4. Controls and Procedures**





As
      of
      June 30, 2008, we carried out an evaluation of the effectiveness of the design
      and operation of our disclosure controls and procedures pursuant to Exchange
      Act
      Rule 13a-15(b). This evaluation was done under the supervision and with the
      participation of our management, including our Chief Executive Officer and
      Chief
      Financial Officer. Based on their evaluation of our disclosure controls and
      procedures (as defined in Exchange Act Rule 13a-15(e)), our Chief Executive
      Officer and Chief Financial Officer have concluded that as of June 30, 2008,
      such disclosure controls and procedures were effective.





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting for the Company. Internal control over
      financial reporting is a process to provide reasonable assurance regarding
      the
      reliability of our financial reporting for external purposes in accordance
      with
      accounting principles generally accepted in the United States. Internal control
      over financial reporting includes maintaining records that, in reasonable
      detail, accurately and fairly reflect the transactions and dispositions of
      our
      assets; provide reasonable assurance that transactions are recorded as necessary
      for preparation of our financial statements; provide reasonable assurance that
      receipts and expenditures of company assets are made in accordance with
      management authorization; and provide reasonable assurance that unauthorized
      acquisition, use or disposition of Company assets that could have a material
      effect on our financial statements would be prevented or detected on a timely
      basis. Because of its inherent limitations, internal control over financial
      reporting is not intended to provide absolute assurance that a misstatement
      of
      our financial statements would be prevented or detected.





***Changes
      in Internal Control over Financial Reporting***


There
        has
        been no change in Ener1’s internal control over financial reporting that
        occurred during the quarter covered by this report that has materially affected,
        or is reasonably likely to materially affect, Ener1’s internal control over
        financial reporting.




30


**PART
        II - OTHER INFORMATION**
 
 **Item
        1. Legal Proceedings.**
 
 We
        receive communications from time to time alleging various claims. These claims
        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 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, 2008, we were not party to any material pending legal proceedings.




31


**Item
        6. Exhibits.**


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 (Registration No.
                333-112837), filed 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 Bylaws 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.





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.





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.





4.3
            Registration
                Rights Agreement dated 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.





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.




32




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
                From
                    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.





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.





33


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.





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 November 14,
                2007.





34


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 to the Registrant’s Annual Report on Form 10-KSB for the period ended
                December 31, 2007 filed on March 12,
                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.





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.





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.





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.





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.





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.





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.





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.





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.





35


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.,
                incorporated 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, among 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.





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.




36


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 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 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 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
                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
                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 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 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
                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,
                Inc., 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.





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.




37




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 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 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.





31.1
            Certification
                of Principal Executive Officer pursuant to Rule 13a-14(a) or
                15d-14(a).*





31.2
            Certification
                of Principal Financial Officer pursuant to Rule 13a-14(a) or
                15d-14(a).*





32.1
            Certification
                of Principal Executive Officer pursuant to 18 U.S.C. Sec. 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*





32.2
            Certification
                of Principal Financial Officer pursuant to 18 U.S.C. Sec. 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*





*
      Filed
      herewith




38


**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:
                August 13, 2008
            by:
            /s/
                Dr. Peter NovakDr.
                Peter NovakChief
                Executive Officer, Director
              (Principal
                  Executive Officer)




Dated:
                August 13, 2008
            by:
            /s/
                Gerard A. HerlihyGerard
                A. HerlihyChief
                Financial
                Officer
              (Principal
                  Financial Officer and
              Principal
                  Accounting Officer)





39