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

FORM 10-QSB

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

For
the quarterly period ending June 30, 2004

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.)

500 West Cypress Creek Road-Suite 100
Ft. Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)

(954) 556-4020
 (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 [_]

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

|Class         
Common stock, par value 
$.01 per share | Outstanding as of
August 11, 2004
347,215,751
|------------------------------------------------------ | ---------------------------------------------

Transitional
Small Business Format (check one): Yes [  ] No [X]

# ENER1, INC. AND
SUBSIDIARIES Form 10-QSB for the
Quarter Ended June 30, 2003

INDEX

|                                                                 |   
|---------------------------------------------------------------- | --
|Page                                                             |   
|Part I. FINANCIAL INFORMATION                                   
|                                                                
|Item 1.   Financial Statements                                  
|                                                                
|Condensed Consolidated Balance Sheet (unaudited) as of          
|June 30, 2004                                                    | 3 
|                                                                
|Condensed Consolidated Statements of Operations (unaudited)     
|for the three and six months ended June 30, 2004 and 2003        | 4 
|                                                                
|Condensed Consolidated Statements of Cash Flows (unaudited)     
|for the six months ended June 30, 2004 and 2003                  | 5 
|                                                                
|Notes to Condensed Consolidated Financial Statements (unaudited) | 6 
|                                                                
|Item 2.   Management's Discussion and Analysis of Financial     
|Condition and Results of Operations                              | 14
|                                                                
|Item 3.   Controls and Procedures                                | 16
|                                                                
|Part II. OTHER INFORMATION                                      
|                                                                
|Item 1.   Legal Proceedings                                      | 16
|                                                                
|Item 6.   Exhibits and Reports on Form 8-K                       | 17
|                                                                
|Signatures                                                       | 18

2

# Part I. FINANCIAL
INFORMATION

Item
1.  Financial Statements

# ENER1, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)(In thousands except
share and debenture data)

|                                                           | June 30, 2004
|---------------------------------------------------------- | -------------
|ASSETS                                                     |              
|Current assets                                             |              
|Cash and equivalents                                       |              
|Prepaid expenses and other current assets                  |              
|Assets held for disposal (Note 3)                          |              
|Due from related parties                                   |              
|                                                           |              
|Total current assets                                       |              
|Property and Equipment, net                                |              
|Investment in EnerStruct (Note 10)                         |              
|Other Assets                                               |              
|                                                           |              
|Total assets                                               |              
|                                                           |              
|LIABILITIES AND STOCKHOLDERS' EQUITY                       |              
|Current liabilities                                        |              
|Accounts payable                                           |              
|Accrued expenses and other current liabilities (Note 6)    |              
|Liabilities related to assets held for disposal (Note 3)   |              
|Current portion of bank installment loan (Note 8)          |              
|                                                           |              
|Total current liabilities                                  |              
|                                                           |              
|Long-term liabilities                                      |              
|Installment loan payable to bank (Note 8)                  |              
|$20,000,000 senior secured 5% convertible debenture, net   |              
|of discount attributable to debt issue costs, warrants,    |              
|and beneficial conversion features of $20,000,000 (Note 9) |              
|                                                           |              
|Total liabilities                                          |              
|Commitments and contingencies (Note 12)                    |              
|Stockholders' equity                                       |              
|Preferred stock, par value $.01 per share, 5,000,000       |              
|shares authorized, none issued and outstanding             |              
|Common stock, par value $.01 per share, 500,000,000        |              
|shares authorized, 347,182,114 issued and outstanding      |              
|Additional paid-in capital                                 |              
|Accumulated deficit                                        |              
|                                                           |              
|Total stockholders' equity                                 |              
|                                                           |              
|Total liabilities and stockholders' equity                 |              
|                                                           |              

See
notes to condensed consolidated financial statements.3

# ENER1, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands except
per share data)

|                                                   | Three Months Ended
June 30 | Six Months Ended
June 30 |   |        
|-------------------------------------------------- | -------------------------- | ------------------------ | - | -------
|
|Net sales                                          |                            |                          | $ | 11     
|Cost of goods sold                                 |                            |                          |   | --     
|                                                   |                            |                          |   |        
|Gross profit                                       |                            |                          |   | 11     
|Operating expenses:                                |                            |                         
|Manufacturing pre-production costs                 |                            |                          |   | 516    
|Research and development                           |                            |                          |   | 667    
|Selling, general and administrative                |                            |                          |   | 1,706  
|Interest Expense                                   |                            |                          |   | 254    
|                                                   |                            |                          |   |        
|Total operating expenses                           |                            |                          |   | 3,143  
|                                                   |                            |                          |   |        
|Loss from operations                               |                            |                          |   | (3,132 
|Other income (expense), net                        |                            |                          |   | 50     
|Equity in loss on investment in                    |                            |                         
|EnerStruct  (Note 10)                              |                            |                          |   | (131   
|                                                   |                            |                          |   |        
|Loss from continuing operations                    |                            |                          |   | (3,213 
|Loss from discontinued                             |                            |                         
|operations (Note 3)                                |                            |                          |   | --     
|                                                   |                            |                          |   |        
|Net Loss                                           |                            |                          | $ | (3,213 
|                                                   |                            |                          |   |        
|Loss per share from continuing operations (basic   |                            |                         
|and diluted)                                       |                            |                          | $ | (0.01  
|                                                   |                            |                          |   |        
|                                                   |                            |                          |   |        
|Loss per share from discontinued operations (basic |                            |                          | $ | --     
|and diluted)                                       |                            |                         
|Net loss per share - basic and diluted             |                            |                          | $ | (0.01  
|Weighted average shares                            |                            |                         
|Outstanding                                        |                            |                          |   | 347,173
|                                                   |                            |                          |   |        

See
notes to condensed consolidated financial statements.4

# ENER1, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)(In thousands)

|                                                          | Six months ended
June 30,
|--------------------------------------------------------- | -------------------------
|
|Cash provided by (used in):                               |                          
|Operating activities:                                     |                          
|Net loss                                                  |                          
|Depreciation and amortization                             |                          
|Equity from loss in investment in EnerStruct (Note 10)    |                          
|Changes in assets and liabilities                         |                          
|Changes in assets and liabilities held for                |                          
|disposal (Note 3)                                         |                          
|Compensation expense for stock options                    |                          
|issued for services                                       |                          
|                                                          |                          
|Net cash used in operating activities                     |                          
|Investing activities:                                     |                          
|Capital expenditures                                      |                          
|Minority interest in net proceeds from issuance of common |                          
|stock of subsidiary                                       |                          
|                                                          |                          
|Net cash used in investing activities                     |                          
|Financing activities:                                     |                          
|Cash Overdraft                                            |                          
|Repayment of related party notes                          |                          
|Repayment of short term note payable                      |                          
|Repayment of guaranteed related party debt (note 8)       |                          
|Repayment of mortgage note payable (note 8)               |                          
|Repayment of bank loan (Note 8)                           |                          
|Repayment of bank installment loan (Note 8)               |                          
|Proceeds from advances from stockholder                   |                          
|Proceeds from exercised employee stock options            |                          
|Proceeds from exercise of warrants (Note 8)               |                          
|Proceeds from issuance of 5% senior secured               |                          
|convertible debentures net of costs (note 9)              |                          
|Proceeds from minority investment in                      |                          
|subsidiary                                                |                          
|                                                          |                          
|Net cash provided by financing activities                 |                          
|                                                          |                          
|Net increase (decrease) in cash and equivalents           |                          
|Cash and equivalents, balance at January 1                |                          
|                                                          |                          
|Cash and equivalents, balance at June 30                  |                          
|                                                          |                          

See
notes to condensed consolidated financial statements.5

# ENER1, INC. AND
SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    
          BASIS OF PRESENTATION

The accompanying unaudited condensed
consolidated financial statements for Ener1, Inc. (Ener1 or the
Company) have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information and with the
instructions to Form 10-QSB for quarterly reports under Section 13 or 15 (d) of the
Securities Exchange Act of 1934. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included and such adjustments are
of a normal recurring nature. Operating results for the three and six months ended June
30, 2004 are not necessarily indicative of the results that may be expected for the year
ending December 31, 2004. The audited financial statements at December 31, 2003, which are
included in the Companys Annual Report on Form 10-KSB, should be read in conjunction
with these condensed consolidated financial statements.

2.    
          GOING CONCERN

The accompanying condensed
consolidated financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in the normal
course of business. The Company has experienced net operating losses since 1997 and
negative cash flows from operations since 1999, and had an
accumulated deficit of $66.7 million as of June 30, 2004. It is likely that the
Companys operations will continue to incur negative cash flows through June 30,
2005. Additional financing will be required to fund the Companys planned operations
through June 30, 2005, and the Company intends to seek additional debt or equity financing
by the first quarter of 2005. If additional financing is not obtained, such a condition,
among others, will give rise to substantial doubt about the Companys ability to
continue as a going concern for a reasonable period of time. The condensed consolidated
financial statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classifications of liabilities
that might be necessary should the Company be unable to continue as a going concern.

3.    
          NATURE OF BUSINESS AND DISCONTINUED OPERATIONS

Nature of Business

Ener1s primary lines of
business consist of development and marketing of lithium batteries and certain
battery components such as electrodes; fuel cells, fuel cell systems and components; and
nanotechnology-related manufacturing processes and materials.

Ener1 is a Florida corporation
founded in 1985. Ener1 was formerly named Inprimis, Inc. and before that it was named Boca
Research, Inc. During 2002 and 2003, the Company manufactured set-top boxes and other
digital entertainment products through subcontractors and marketed those products to the
hospitality and healthcare markets through its 49% owned subsidiary EnerLook Healthcare
Solutions, Inc. (EnerLook), and to other markets through its former Digital
Media Technologies Division. In 2003, the majority of the assets in the Digital Media
Technologies Division were transferred to EnerLook (see Discontinued Operations and
Sale of Assets of EnerLook below).

In January 2002, Ener1 Group, Inc.
(Ener1 Group) acquired a majority interest in the Company and as a result of
subsequent transactions, owned approximately 88% of the
outstanding common stock of the Company at June 30, 2004. Ener1 Group is a privately held
company based in Ft. Lauderdale, Florida that provides financial and management resources to its
portfolio of incubator technology companies.

One of Ener1 Groups
subsidiaries, Ener1 Battery Company (Ener1 Battery or the Battery
Company), became a wholly owned subsidiary of the Company on September 6, 2002 when
the Company acquired 100% of its outstanding capital stock from Ener1 Group. Ener1 Battery
is in the business of developing and marketing lithium ion and other lithium technology
batteries for use in military, industrial and consumer applications. The Battery Company
is a development stage company that has recorded nominal revenue since its formation.

Concurrent with the acquisition of
the Battery Company in 2002, the Company began to transition its business away from the
set-top box and engineering services businesses of its Digital Media Technologies Division
and EnerLook and focus instead on the businesses of the Battery Company. In addition, the
Company began developing fuel cells and systems and components for fuel cells, and the
Company has continued to expand its fuel cell operations during 2004.

6

In January 2002, the Company began to
develop products for neutralizing the harmful effects of electromagnetic radiation in
electric power transmission lines and equipment through its wholly owned subsidiary, Ener1
Technologies, Inc. (Technologies). Technologies is also a development stage
company and it has not recorded any revenue since its formation.

In August 2003, the Company formed a
joint venture company, named EnerStruct, Inc., with ITOCHU Corporation of Japan to pursue
technology development and marketing opportunities for lithium batteries in Japan. The
Company and ITOCHU have each licensed to EnerStruct some of their respective battery
technologies for use exclusively in Japanese markets.

On September 12, 2003, the Battery
Company finalized the acquisition of Ener1s research and development partner company
in Ukraine, Ener1 Ukraine, Inc. (Ener1 Ukraine). Ener1 Ukraine conducts
research and development activities for the Company at facilities in Ukraine. Ener1
Ukraine has several battery-related patents and patent applications resulting from its
research and development activities.

The Company formed NanoEner, Inc.
(NanoEner) on April 2, 2004, to develop new markets and applications for
Ener1s proprietary technologies to manufacture nanomaterials. Ener1 currently uses
its nanomaterials manufacturing technologies in the development of nanomaterials for
lithium batteries and other high energy storage devices.

Discontinued Operations
and Sale of Assets of EnerLook

On December 15, 2003, the Company,
EnerLook, Ener1 Group and TVR entered into an arrangement pursuant to which (1) TVR agreed
to manage EnerLooks business for up to six months in return for any profits earned
by EnerLook, (2) EnerLook was granted the option, exercisable at any time on or before
June 15, 2004, to acquire 100% of TVRs outstanding stock for $16,000,000 in cash,
plus 4,000,000 shares of the Companys stock held by Ener1 Group; and (3) TVR was
granted the option to acquire substantially all of the assets of EnerLook in exchange for
5% of TVR Communications, LLC, a limited liability company that would own all the respective assets of TVR and
EnerLook, such option to become exercisable if EnerLook did not exercise the option
described in clause (2) above. On June 15, 2004, TVR notified EnerLook of TVRs
intent to exercise its option to acquire substantially all of the assets of EnerLook, and
the EnerLook employees became employees of TVR Communications, LLC. The Company,
EnerLook, Ener1 Group and TVR Communications, LLC entered into an Asset Purchase Agreement
dated as of June 30, 2004, providing for the sale of substantially all of EnerLooks
assets to TVR Communications, LLC, in exchange for a 5% membership interest in TVR
Communications, LLC. The asset sale is expected to close in August 2004, subject to
satisfaction of certain conditions.

TVR paid EnerLook approximately
$550,000 to fund EnerLooks losses from operations from December 15, 2003 through June 15, 2004.

As of December 15, 2003, the Companys Digital
Media/EnerLook segment was deemed by the Company to be held-for-sale, and certain of the
revenues, expenses, assets and liabilities of this segment were classified as discontinued
operations. Management believes that substantially all remaining resources of the Company
will be redirected for use in the Companys continuing operations, and the Company
will continue to incur corporate and overhead costs; accordingly, these costs and related
liabilities are included in continuing operations.

4.    
          SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The
accompanying condensed consolidated financial statements include Ener1, Inc. and its
wholly owned subsidiaries: the Battery Company, NanoEner, Ener1 Ukraine; Technologies,
EnerNow Technologies, Inc. Boca Research International, Inc., Boca Research Holland B.V.,
Boca Research (UK) Limited, Boca Research International Holdings Ltd., Boca Global, Inc.,
Boca Research of Delaware, Inc. and AppsCom, Inc. It also includes as discontinued the
operations of EnerLook. Intercompany accounts and transactions have been eliminated in
consolidation. The Battery Company, NanoEner and Ener1 Ukraine have ongoing operations.
Ener1 Technologies has also conducted operations, but is not currently active.

Use of Estimates: The preparation of
consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ
materially from those estimates.

Investment in EnerStruct: The
Companys 49% investment in EnerStruct is accounted for using the equity method (Note
7).

Research and Development Costs:
Research and development costs are expensed as incurred.

7

Income Taxes: The Company provides
for income taxes in accordance with the liability method. Deferred income tax assets and
liabilities are the differences between the financial statement carrying values and the
tax bases of assets and liabilities and carry-forwards that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the amount more
likely than not to be realized. Income tax expense or benefit is the tax payable or
refundable for the period plus or minus the change during the period in deferred tax
assets and liabilities.

Reclassifications: Certain prior year
amounts, most notably amounts relating to discontinued operations and research and
development, have been reclassified to conform to the fiscal 2004 presentation.

Loss per share: Basic loss per share
is computed by dividing the loss attributable to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted loss per
share reflects the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the Company. Diluted loss per
share is computed by dividing loss available to common shareholders by the sum of the
weighted average number of common shares outstanding for the period plus common shares
issuable under common stock equivalents (all related to outstanding stock options and
warrants), unless consideration of such common shares would result in anti-dilution.
Common stock equivalents were not considered in the calculation of diluted loss per share
as their effect would have been anti-dilutive for the periods ended June 30, 2004 and
2003.

Stock compensation: Options granted
to employees under the Companys stock option plans are accounted for using the
intrinsic method under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25). In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), which defines
the fair value base method of accounting for stock options. Certain aspects of the
accounting standards prescribed by SFAS 123 are optional and therefore, the Company has
continued to account for stock options under the intrinsic value method specified in APB
25. The Company has adopted the disclosure-only provisions of SFAS No. 123. Accordingly,
compensation cost has been recognized for the stock options plans only when the exercise
prices of employee stock options are less than the market prices of the underlying stock
on the date of grant. If compensation cost had been determined based on the fair value at
the grant date for all option awards consistent with the provisions of SFAS 123, the
Companys net loss and loss per share would have been as indicated below for the
periods ended June 30, 2004 and 2003:

|                                | Three months
ended June 30 | Six months
ended June 30
|------------------------------- | -------------------------- | ------------------------
|
|
|
|Net Loss as Reported            |                            |                         
|Plus:                           |                            |                         
|Compensation recorded for stock |                            |                         
|options issued                  |                            |                         
|Less:                           |                            |                         
|Pro forma stock based employee  |                            |                         
|compensation, net of tax        |                            |                         
|                                |                            |                         
|                                |                            |                         
|Loss per share:                 |                            |                         
|Basic and diluted, as reported  |                            |                         
|Basic and diluted, pro forma    |                            |                         

5.    
          SEGMENT REPORTING The Company is organized based upon the following segments:
          Digital Media Division / EnerLook (which is classified as discontinued
          operations), the Battery Company, Fuel Cell Division, Nanotechnology Division,
          and Technologies. The accounting policies of the segments are the same as those
          described in Note 4. The Company evaluates the performance of its segments and
          allocates resources to them based on anticipated future contribution.

8

|                        | Three months
ended June 30 | Six months
ended June 30
|----------------------- | -------------------------- | ------------------------
|
|
|
|Sales                   |                            |                         
|Discontinued operations |                            |                         
|Battery                 |                            |                         
|                        |                            |                         
|Net sales               |                            |                         
|Net Loss                |                            |                         
|Discontinued operations |                            |                         
|Corporate               |                            |                         
|Battery                 |                            |                         
|Ener1 Technologies      |                            |                         
|Fuel cell               |                            |                         
|Nanotechnology          |                            |                         
|                        |                            |                         
|Net Loss                |                            |                         
|Assets                  |                            |                         
|Discontinued operations |                            |                         
|Corporate               |                            |                         
|Ener1 Technologies      |                            |                         
|Battery                 |                            |                         
|                        |                            |                         
|Total Assets            |                            |                         

6.    
          ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities
          principally consist of accrued salaries, bonuses and related benefits and
          accrued professional fees.

7.         CONSOLIDATION OF 49% SUBSIDIARY (ENERLOOK SOLUTIONS, INC.)

When formed in February 2002,
EnerLook was a 51% subsidiary of the Company. In early 2003, EnerLook issued (i) 333,333
shares of common stock to Solution Investment Group, LLC in exchange for $250,000 and (ii)
125,000 shares of common stock to an EnerLook employee, reducing the Companys
ownership to approximately 49%. Ener1 Group owns approximately 42% of the outstanding
common stock of EnerLook. Since EnerLook was formed, the Company has consolidated
EnerLooks results of operations and its balance sheet as part of the Companys
consolidated financial statements. Ownership of a subsidiary below 51% is typically
recorded under the equity method of accounting, rather than consolidating the
subsidiarys results of operations with a parent company owning less than 51% of the
subsidiary, as it is presumed that the parent company does not control the subsidiary. The
Company has elected to continue consolidating this subsidiary as part of its financial
statements because the Company and Ener1 Group are related parties that exercise
substantial control over the activities of EnerLook and own an aggregate of approximately
91% of EnerLooks outstanding common stock. Management believes that the reduction in
its ownership percentage of EnerLooks common stock from 51% to approximately 49%
does not materially reduce the control the Company exercises over EnerLooks
operations.

In the second quarter of 2003, the
Company transferred certain assets of its Digital Media Division to EnerLook in order to
consolidate the Companys set top box business, which delivers interactive
information and entertainment systems and services to customers in vertical markets such
as hospitality and healthcare. As part of this restructuring, the Company transferred net
assets in the amount of approximately $1.0 million to EnerLook, resulting in an
intercompany receivable from EnerLook in the amount of $1.0 million.

Effective December 15, 2003,
EnerLooks operations were deemed to be discontinued operations (Note 3), and on that
date management conveyed operating control of this segment to TVR, a third party (Note 3).

8.    
          DEBT AND DEBT GUARANTEES

At December 31, 2003, the Battery
Company was the mortgagor under a mortgage note payable to Interbay Funding, LLC in the
amount of $703,896. The mortgage note was collateralized by the land and building owned by
the Battery Company.

9

Also at December 31, 2003, the
Battery Company was indebted under two loan agreements with Saint Petersburg Joint Stock
Bank Tavricheskiy, in the amounts of $1,200,000 and $400,000, respectively. The
obligations under the $1,200,000 note were secured by a pledge of a patent owned by Ener1
Ukraine, which is a 100% subsidiary of Ener1 Battery. The $400,000 note was unsecured. The
combined principal balances on both notes as of December 31, 2003 totaled $1,600,000.

The majority of the Companys
equipment had certain liens against it as of December 31, 2003, as described below. As of
December 31, 2003, Ener1 s.r.l., an Italian company related to the Company by common
ownership (the Italian Company), had a loan outstanding to Meliorbanca Gallo
S.p.A.(the Italian Bank) in the amount of EURO 1,877,685. Ener1, Ener1 Group,
the Battery Company and two individuals who were directors of all three companies, were
guarantors of this loan. The Italian Companys obligations to the Italian Bank in the
amount of EURO 5,000,000 were secured by a pledge of specified battery production
equipment of the Battery Company, which had been transferred from the Italian Company to
the Battery Company in a series of transactions prior to the Companys acquisition of
the Battery Company. The U.S. dollar value of this collateral was approximately $6,200,000
at December 31, 2003.

In January 2004, the Company issued
$20,000,000 in aggregate principal amount of 5% senior secured convertible debentures due
2009, and warrants to purchase up to 16,000,000 shares of common stock, in a private
placement (Note 9). In connection with the issuance of the debentures, the Company was
required to have all security interests in the land, building, patents, and production
equipment owned by the Battery Company released. In order to effect this release, in
January 2004, the Company paid $2.2 million to the Italian Bank to satisfy the Italian
Companys obligations, and paid all of the outstanding balances due to Interbay
Funding and to Petersburg Joint Stock Bank Tavricheskiy.

In March 2004, the Battery Company
obtained a loan secured by a vehicle. The total amount due under the loan is $125,000 plus
interest payable over 5 years in equal monthly payments of approximately $2,600.

9.    
          5% SENIOR SECURED CONVERTIBLE DEBENTURES DUE 2009

In January 2004, the Company issued
$20,000,000 in aggregate principal amount of 5% senior secured convertible debentures due
2009. The Companys obligations under the debentures are collateralized by the land and
building owned by the Battery Company, as well as by certain battery production equipment
owned by the Battery Company. The debentures are convertible into common stock of Ener1 at
an initial conversion price of $1.25 per share. As part of the transaction, the Company
issued warrants with a ten-year term to purchase a total of 16,000,000 common shares at an
initial price of $2.51 per share. Proceeds from the sale were used to pay expenses of the
sale and repay debt, including $1,040,817 owed to related parties. Direct costs associated
with the debentures of approximately $1,473,000, including $1,200,000 of investment
banking fees, were incurred.

Accounting Principles Board Opinion
No. 14, entitled Accounting for Convertible Debt Issued with Stock Purchase
Warrants, provides that the portion of the proceeds from debt securities issued with
detachable stock purchase warrants that is allocable to the warrants should be accounted
for as paid-in capital. The allocation should be based on the relative fair values of the
two securities at time of issuance. Any resulting discount or premium on the debt
securities should be accounted for as such. In addition, Emerging Issues Task Force
Release Nos. 98-5 and 00-27 state that any embedded beneficial conversion features present
in convertible securities should be valued separately at issuance. The embedded beneficial
conversion feature should be recognized and measured by allocating a portion of the
proceeds equal to the intrinsic value of that feature to additional paid-in capital. That
amount should be calculated at the commitment date as the difference between the effective
conversion price and the fair value of the common stock or other securities into which the
security is convertible, multiplied by the number of shares into which the security is
convertible. The Emerging Issues Task Force observed that in certain circumstances, the
intrinsic value of the beneficial conversion feature may be greater than the proceeds
allocated to the convertible instrument. In those situations, the amount of the discount
assigned to the beneficial conversion feature is limited to the amount of the proceeds
allocated to the convertible instrument. For convertible instruments that have a stated
redemption date (such as debt and mandatorily redeemable preferred stock) the discount
resulting from recording a beneficial conversion option should be accreted from the date
of issuance to the stated redemption date of the convertible instrument. In the event of
early conversion or default, the remaining discount would be recognized as interest
expense during the period in which such early conversion or default occurs.

In applying the provisions of the
above pronouncements, the Company has recorded a discount on the convertible debentures in
the amount of $20,000,000. This discount is being accreted to interest expense using the
interest method over the life of the debentures (five years). As the effective interest
rate, which is determined by dividing the actual interest rate on the convertible
debentures by the discounted debt amount, approaches infinity, the interest expense to be
recorded approximates the future cash payments. Total interest expense on the debentures
for the three and six months ended June 30, 2004 was $253,000 and $461,000 respectively.
Interest expense recorded related to the accretion of the discount was $0 for the six
months ended June 30, 2004.

10

Interest expense related to the
accretion of the discount for the calendar years ending after December 31, 2003 is
expected to be as follows and would be accelerated upon early conversion or default of the
instrument:

|                             | 
|---------------------------- | 
|Year ended December 31, 2004 | 
|Year ended December 31, 2005 | 
|Year ended December 31, 2006 | 
|Year ended December 31, 2007 | 
|Year ended December 31, 2008 | 
|Year ended December 31, 2009 | 

Notwithstanding the financial
statement presentation required by the above pronouncements, the Company remains legally
obligated to repay the aggregate principal amount of the outstanding debentures plus all
accrued interest thereon at the rate(s) set forth in the debentures. As of June 30, 2004,
$20,000,000 in aggregate principal amount of the debentures was outstanding. The principal
amount of any debentures that are converted to common stock of the Company pursuant to the
terms of the debentures shall not be deemed outstanding immediately following such
conversion.

10.    
          ITOCHU CORPORATION INVESTMENT AND INVESTMENT IN ENERSTRUCT

On July 25, 2003, the Company entered
into a Subscription and Investment Agreement with ITOCHU Corporation, under which the
Company issued 14,000,000 shares of its common stock in a private sale to ITOCHU
Corporation at a price of $0.25 per share, for an aggregate purchase price of $3.5
million. In addition, the Company granted options to ITOCHU to increase its ownership of
common stock. In January 2004, ITOCHU exercised options to purchase 1,500,000 shares for
$1,050,000. During the period from January 25, 2004 through January 31, 2005, ITOCHU has
the option to purchase up to an additional 9,346,396 shares of common stock for $4.00 per
share.

Using the proceeds of the ITOCHU
investment, the Company invested $2,003,339 in a new Japanese company called EnerStruct,
Inc. (EnerStruct), in exchange for a 49% ownership interest in EnerStruct.
ITOCHU owns the remaining 51% of EnerStruct, for which it invested $1,100,000 plus
equipment totaling approximately $500,000. At June 30, 2004, the Companys original
investment in EnerStruct was reduced by approximately $514,000, which represents the
Companys share of EnerStructs losses through that date.

In connection with the foregoing
activities, the Company and the Battery Company have entered into a license agreement with
ITOCHU and EnerStruct and agreed to provide EnerStruct with an exclusive license (for
Japan only) to use the technologies covered by two of the Battery Companys pending
patent applications. ITOCHU has also licensed to EnerStruct, on an exclusive basis,
several of its patents relating to its lithium battery technologies.

Summarized financial information for
EnerStruct is as follows as of June 30, 2004, and for the period from inception through
June 30, 2004:

|                  | 
|----------------- | 
|Cash              | 
|Total assets      | 
|Total liabilities | 
|Net loss          | 

11.    
          RELATED PARTY TRANSACTIONS:

During the six months ended June 30,
2003, the Company leased a portion of its office facilities from Ener1 Group. The Company
also shared common facilities, personnel and other resources with Ener1 Group. Allocation
of expenses has been made between these parties utilizing systematic methods. The net
expense allocated to the Company for the six and three months ended June 30, 2003,
aggregated approximately $405,000 and $194,000. During the six and three months ended June
30, 2003 allocations and advances (including the allocations of expenses above) aggregated
approximately $2,808,000 and $1,388,000, respectively, of which approximately $909,000 was
converted to capital in 2003. There was no expense allocated to the Company for shared
resources during the six months ended June 30, 2004 as the Company leased its own office
space in January 2004 and no longer shares personnel and other resources with Ener1 Group.

Ener1 Group and its subsidiaries have
from time to time used various services and employees of the Company. The Company billed
Ener1 Group and its subsidiaries for the actual cost of these services and employees.
Similarly, the Company has from time to time used various services and employees of Ener1
Group and its subsidiaries and Ener1 Group has billed the Company for the actual cost of
these services and employees. During the six months ended June 30, 2004, Ener1 Group and
its subsidiaries billed the Company $53,000 and the Company billed Ener1 Group and its
subsidiaries $88,000, in each case for services and employees of the other party. As of
June 30, 2004, the net balance due to the Company from Ener1 Group and its subsidiaries
was $35,000.

11

The Company, its wholly owned
subsidiary, Ener1 Acquisition Corp. (Acquisition), and Splinex Technology,
Inc. (Splinex) have entered into a Merger Agreement dated as of June 9, 2004,
providing for the merger of Acquisition with and into Splinex, subject to the satisfaction
of certain conditions to closing, including, among others, the effectiveness of the
registration statement on Form S-1 filed on June 24, 2004, by Splinex with the Securities
and Exchange Commission to register the shares to be issued in the merger. Upon closing,
the Company will receive 5,000,000 shares of Splinex common stock in the merger
representing 5% of the outstanding shares and, in accordance with the Merger Agreement,
will declare a dividend to distribute these shares to the Companys shareholders.

Splinex, a Delaware corporation, is a
development-stage company formed in February 2004. It is currently a private company, and
all of its outstanding shares are held by one stockholder, Splinex, LLC. Splinex is
developing multi-dimensional graphics visualization products, including three-dimensional
graphics products, related compression and signal processing utilities and discrete
software modules that enable the user to accurately and rapidly manipulate highly complex,
visually rich, multi-dimensional digital content.

Three of the Companys
directors, Dr. Peter Novak and Messrs. Mike Zoi and Boris Zingarevich collectively
beneficially own all of the outstanding common stock of Ener1 Group, Inc. which owns
approximately 88% of the outstanding common stock of the Company. They also beneficially
own an aggregate of 37.5% of the voting membership interests (and an aggregate of 38.25%
of the economic membership interests) of Splinex, LLC, which currently holds all of the
outstanding common stock of Splinex and will hold 95% of the outstanding common stock of
Splinex following the merger. The remaining membership interests of Splinex, LLC are held
by Mikhail Zingarevich (a director of Splinex and the brother of Boris Zingarevich), who
beneficially owns 12.75% of the economic membership interests (and 12.5% of the voting
membership interests) of Splinex, LLC and Alexander Malovik, who beneficially owns 50% of
the voting membership interests (and 49% of the economic membership interests) of Splinex,
LLC.

Two of the Companys directors,
Kevin P. Fitzgerald and Peter Novak, are also directors of Splinex. Dr. Novak is also the
President of Splinex.

12.    
          COMMITMENTS AND CONTINGENCIES

Litigation

The Company receives communications
from time to time alleging various claims. These claims include, but are not limited to,
allegations that certain of the Companys products infringe the proprietary rights of
third parties. The Company cannot predict the outcome of any such claims or the
effect of any such claims on its operating results, financial condition, or cash flows.
The Company was named as a co-defendant in an action brought in the United States District
Court for the District of Massachusetts on September 24, 1999 by NEC Technologies, Inc.
(NEC). The suit alleges that the Company supplied modem hardware to NEC, which
was combined by NEC with software supplied by another co-defendant, Ring Zero Systems,
Inc. (Ring Zero).

NEC was subsequently sued for patent
infringement by PhoneTel Communications, Inc. (PhoneTel), allegedly as a
result of NECs combination of modem hardware and software supplied by the vendors of
its personal computer products. NEC alleges that the Company and Ring Zero are obligated
to indemnify NEC for $327,000, representing NECs costs of defense and settlement of
the PhoneTel suit. This action was dismissed without prejudice on April 25, 2000; however,
the reason for the dismissal was procedural. While it is possible that NEC might attempt
to refile this action in an appropriate jurisdiction in the future, NEC has not taken any
such action against the Company to date. The Company cannot predict at this time whether
any future claim brought by NEC would have a material adverse effect on its operating
results, financial condition, or cash flows.

The Company and its Boca Global, Inc.
subsidiary (Boca Global) were named as co-defendants in an action brought in
the United States District Court for the District of South Dakota by Gateway, Inc.
(Gateway). Global Village, Inc. had contracted to supply its FaxWorks software
to be bundled with Gateway personal computers. Gateways complaint against us and
Boca Global alleged that either or both of the Company and Boca Global assumed the
liabilities of Global Village, Inc. with respect to the FaxWorks product. Gateway sought
indemnification for payment in the amount of approximately $5 million, which it claims to
have paid to settle patent infringement litigation brought by PhoneTel with respect to
FaxWorks. In addition to the Company and Boca Global, another unrelated co-defendant was
named as a party to the action. On January 19, 2001, a motion to dismiss was granted with
respect to the Company. On March 20, 2004, the Court dismissed, without prejudice, the
action against Boca Global and the other co-defendant, for Gateways failure to
prosecute. Gateway subsequently refiled its complaint against Boca Global and the Company
and, in addition to the claims described above, alleged in the alternative that the
Company was in breach of a settlement agreement under which the Company had agreed to pay
Gateway $50,000, only $5,000 of which had been paid. On May 13, 2004, the Company and
Gateway settled all claims against the Company and Boca Global for payment of $45,000 by
the Company to Gateway.

12

Lease Commitments

In January 2004, the Company entered
into a six-year operating lease for office facilities. The lease requires the Company to
pay monthly rent of approximately $9,000 in the first year, increasing to approximately
$14,000 in the sixth year, plus the Companys proportionate share of operating costs.

Other Commitments

The Battery Company has entered into
a Cooperative Research and Development Agreement (CRADA) with Battelle, as the
operator of Pacific Northwest National Laboratories under a contract with the U.S.
Department of Energy, for research and development work involving lithium batteries. The
CRADA requires the Battery Company to expend a total $399,000 each year in furtherance of the research
and development activities, a substantial portion of which will be in the form of in-kind
contributions such as labor and use of equipment.  The CRADA could have a term of up to two years.

13.    
          STOCK AND OPTION ISSUANCES DURING THE SIX MONTHS ENDED JUNE 30, 2004

In January 2004, ITOCHU exercised its
options to purchase 1,500,000 shares of the Company's common stock for $1,050,000. On January
25th, 2004, options held by ITOCHU to purchase 10,961,861 shares expired. During the period
from January 25th, 2004 through January 31, 2005, ITOCHU has the option to
purchase up to 9,346,396 shares of common stock for $4.00 per share.

Effective as of January 1, 2004,
pursuant to a consulting agreement with Capital Investment Services, Inc., the Company issued
60,000 shares of common stock at a price of $0.10 per share. The Company recorded
$84,000 of compensation expense related to this transaction.

Effective as of January
8th, 2004, pursuant to an Investment Banking Agreement with Thornhill Group,
Inc., the Company issued a warrant to Thornhill Group to purchase up to 200,000 shares of
common stock at an exercise price of $.10 per share. The Company recorded compensation
expense of $324,400 related to these warrants.

Effective May 20, 2004 the Company
issued 100,000 options with an exercise price of $0.57 to Karl Gruns, as compensation for
his services as director, including his Audit Committee services. Mr. Gruns will also
receive an additional 50,000 options to be granted on each date he is re-elected
to the Board of Directors.

Effective May 18th, 2004,
in consideration for services to EnerStruct, Inc. the Company awarded options to purchase
150,000 shares of  common stock at an exercise price of $0.50 per share to Mr. Tatsuo
Shimizu, for his services as Chief Technical Officer of Enerstruct, and 150,000 shares of
common stock at an exercise price of $0.50 share to Mr. Zenzo Hashimoto, for his
services as Chief Research Officer of EnerStruct, Inc.

During the six months ended June 30,
2004 options to purchase 3,965,000 shares of common stock were granted under the
Companys 2002 Stock Option Plan, no options were terminated, and 371,363 options
were exercised.

During the six months ended June 30,
2004, the Company recorded $728,000 compensation expense for all stock and option related
transactions.

13

# Item 2. 
Managements Discussion and Analysis of Financial Condition and Results of Operations

This
report on Form 10-QSB contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 23E of the Securities Act of
1934, as amended. These statements relate to the Companys 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: 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; development of our sales force; employee retention;
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 Reports on Form 10-KSB, Quarterly Reports on
Form 10-QSB and other filings with the Securities and Exchange Commission and the
condensed consolidated financial statements and related notes included in this Quarterly
Report.

# Results of Operations

Net Sales. Our net sales for
the three-month and six-month periods ended June 30, 2004, were $11,000 and $42,000
respectively. These sales were made pursuant to a Small Business Innovative Research
contract with the United States Missile Defense Agency. We recorded no sales from
continuing operations during the same periods in 2003.

Manufacturing Pre-production
Costs. During the three month period ended June 30, 2004, we began preparing our
battery manufacturing plant to begin production, in addition to continuing our research
and development activities. A significant portion of resources previously devoted to
battery research and development and selling, general and administrative expenses were
reallocated to implementing a new manufacturing infrastructure, including new personnel,
policies and procedures.

Research and Development Expenses
(R&D). R&D for the three month and six month periods ended June
30, 2004 increased by 48.2% to $667,000 and by 53.3% to $1,177,000, respectively, when
compared to the same periods in 2003. These increases were due primarily to: increases in
salaries, benefits and outside services related to our fuel cell segment and our recently
formed nanotechnology subsidiary.

Selling, General and
Administrative Expenses (SG&A). SG&A for the three month and six
month periods ended June 30, 2004 increased by 105.3% to $1,706,000 and 156.8% to
$4,166,000, respectively, when compared to the same periods in 2003. These increases in
SG&A were due primarily to increases in: salaries, wages and benefits; professional
fees; and, investor relations expenses. Expenses for rents, insurance, and general
administrative expenses also increased.

# Liquidity and Capital
Resources

As
of December 31, 2003 we had a working capital deficit of $7.4 million. During the six
months ended June 30, 2004, our working capital increased by $12.7 million, resulting in
positive working capital of $5.3 million as of June 30, 2004. This increase in working
capital was primarily due to an increase in cash and a decrease in current debt and
liabilities, as a result of the sale and partial use of proceeds to repay debt, in January
2004, of $20.0 million in aggregate principal amount of our 5% senior secured convertible
debentures due 2009 and the purchase by ITOCHU Corporation in January, 2004 of 1,500,000
shares of our common stock for net proceeds of $1,050,000 (See Note 9 of the Notes
to Condensed Consolidated Financial Statements for an explanation of the accounting
treatment of the debenture financing).

During
the six month period ended June 30, 2004, we expended $638,000 for capital equipment, of
which: $234,000 was for manufacturing equipment for our battery manufacturing plant;
$111,000 was for administrative equipment, primarily computing equipment; $120,000 was for
research and development equipment; and $173,000 was for a vehicle.

14

We
will require additional capital to support the activities of Ener1 Battery Company through
June 30, 2005 (including the operations of its Battery and Fuel Cell segments). Funds will
also be required for operations of our new subsidiary, NanoEner, Inc., which was formed in
April 2004 to develop and market nanotechnologies, nanomaterials and nano-manufacturing
methodologies. We intend to seek additional financing by the first quarter of 2005, which
may take the form of equity or debt. We cannot assure you that any such required capital
will be available on terms acceptable to us, if at all.

# Critical Accounting
Policies

The
preparation of financial statements and related disclosures in conformity with accounting
principles generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial statements and revenues
and expenses during the period reported. The following accounting policies involve a
critical accounting estimate because they are particularly dependent on
estimates and assumptions made by management about matters that are highly uncertain at
the time the accounting estimates are made. In addition, while we have used our best
estimates based on facts and circumstances available to us at the time, different
estimates reasonably could have been used in the current period. Changes in the accounting
estimates we used are reasonably likely to occur from period to period which may have a
material impact on the presentation of our financial condition and results of operations.
We review these estimates and assumptions periodically and reflect the effects of
revisions in the period that they are determined to be necessary.

Accounting for employee
stock options

As
permitted under Statement of Financial Accounting Standard No. 123, Accounting for
Stock-Based Compensation, we account for employee stock options in accordance with
Accounting Principles Board Opinion No. 25 (APB No. 25), Accounting for
Stock Issued to Employees. Under APB No. 25, we recognize compensation cost based on
the intrinsic value of the equity instrument awarded as determined at the measurement
date. We disclose the required pro forma information in our notes to consolidated
financial statements as if the fair value method prescribed by SFAS No. 123 had been
applied.

Consolidation of 49%
Subsidiary (EnerLook Solutions Inc.)

When formed in February 2002,
EnerLook was a 51% subsidiary of Ener1. In early 2003, EnerLook issued (i) 333,333
shares of common stock to Solution Investment Group, LLC in exchange for $250,000 and (ii)
125,000 shares of common stock to an EnerLook employee, reducing Ener1s
ownership to approximately 49%. Ener1 Group owns approximately 42% of the outstanding
common stock of EnerLook. Since EnerLook was formed, Ener1 has consolidated
EnerLooks results of operations and its balance sheet as part of Ener1s
consolidated financial statements. Ownership of a subsidiary below 51% is typically
recorded under the equity method of accounting, rather than consolidating the
subsidiarys results of operations with a parent company owning less than 51% of the
subsidiary, as it is presumed that the parent company does not control the subsidiary. Ener1
 has elected to continue consolidating this subsidiary as part of its financial
statements because Ener1 and Ener1 Group are related parties that exercise
substantial control over the activities of EnerLook and own an aggregate of approximately
91% of EnerLooks outstanding common stock. Management believes that the reduction in
its ownership percentage of EnerLooks common stock from 51% to approximately 49%
does not materially reduce the control Ener1 exercises over EnerLooks
operations.

In the second quarter of 2003, the
Company transferred certain assets of its Digital Media Division to EnerLook in order to
consolidate the Companys set top box business, which delivers interactive
information and entertainment systems and services to customers in vertical markets such
as hospitality and healthcare. As part of this restructuring, the Company transferred net
assets in the amount of approximately $1.0 million to EnerLook, resulting in an
intercompany receivable from EnerLook in the amount of $1.0 million.

Effective December 15, 2003,
EnerLooks operations were deemed to be discontinued operations, and on that date
management conveyed operating control of this segment to TVR, a third party. On June 15,
2004, TVR notified EnerLook of TVRs intent to exercise TVRs option to purchase
substantially all of the assets of EnerLook in exchange for 5% of the membership interests
in TVR Communications, LLC (a limited liability company formed by TVR to hold all of
TVRs and EnerLooks assets). EnerLook, the Company, Ener1 Group and TVR have
entered into an Asset Purchase Agreement, for which the closing is scheduled in August,
2004 (subject to satisfaction of certain conditions).

15

# Item 3.  Controls
and Procedures

We
maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the
SECs rules and forms, and that such information is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognized that any controls
and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and management is required to apply
its judgment in evaluating the cost-benefit relationship of possible controls and
procedures.

As
of June 30, 2004, we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and our Chief
Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were effective and
were operating at the reasonable assurance level.

There
have been no changes in our internal control over financial reporting during our most
recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

# 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, 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.

We were named as a co-defendant in an
action brought in the United States District Court for the District of Massachusetts on
September 24, 1999 by NEC Technologies, Inc. (NEC). The suit alleges that we
supplied modem hardware to NEC, which was combined by NEC with software supplied by
another co-defendant, Ring Zero Systems, Inc. (Ring Zero).

NEC was subsequently sued for patent
infringement by PhoneTel Communications, Inc. (PhoneTel), allegedly as a
result of NECs combination of modem hardware and software supplied by the vendors of
its personal computer products. NEC alleges that we and Ring Zero are obligated to
indemnify NEC for $327,000, representing NECs costs of defense and settlement of the PhoneTel suit.
This action was dismissed without prejudice on April 25, 2000;
however, the reason for the dismissal was procedural. While it is possible that NEC might
attempt to refile this action in an appropriate jurisdiction in the future, NEC has not
taken any such action against us to date. We cannot predict at this time whether any
future claim brought by NEC would have a material adverse effect on our operating results,
financial condition, or cash flows.

We and our Boca Global, Inc.
subsidiary (Boca Global) were named as co-defendants in an action brought in
the United States District Court for the District of South Dakota, by Gateway, Inc.
(Gateway). Global Village, Inc. had contracted to supply its FaxWorks software
to be bundled with Gateway personal computers. Gateways complaint against us and
Boca Global alleged that either or both of us and Boca Global assumed the liabilities of
Global Village, Inc. with respect to the FaxWorks product. Gateway sought indemnification
for payment in the amount of approximately $5 million, which it claims to have paid to
settle patent infringement litigation brought by PhoneTel with respect to FaxWorks. In addition to us and Boca
Global, another unrelated co-defendant was named as a party to the action. On January 19,
2001, a motion to dismiss was granted with respect to us. On March 20, 2004, the Court
dismissed, without prejudice, the action against Boca Global and the other co-defendant,
for Gateway's failure to prosecute. Gateway subsequently refiled its complaint against
Boca Global and us and, in addition to the claims described above, alleged in the
alternative that we were in breach of a settlement agreement under which we had agreed to
pay Gateway $50,000, only $5,000 of which had been paid. On May 13, 2004, we and Gateway
settled all claims against us and Boca Global for payment of $45,000 by us to Gateway.

16

Item 6.  Exhibits
and Reports on Form 8-K

(a)    Exhibits

| | 3.1 | Amended and Restated Articles of Incorporation of the Registrant, dated February 12, 1993,
incorporated by reference to Exhibit 3(i) to our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2000.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.2 | Articles of Amendment to Amended and Restated Articles of Incorporation, dated March 11,
2002, incorporated by reference to Exhibit 3.2 of our Annual Report on Form 10-K for the
year ended December 31, 2001.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.3 | Articles of Amendment to Amended and Restated Articles of Incorporation, dated October 21,
2002, incorporated by reference to Exhibit 3.1 of our current report on Form 8-K dated
October 28, 2002.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.4 | Bylaws of the Registrant, incorporated by reference to Exhibit 3.4 of our Registration
Statement on Form SB-2 filed with the Securities and the Exchange Commission on February
13, 2004 (SEC File No. 333-112837).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.1 | Form of 5% Senior Secured Convertible Debenture incorporated by reference to Exhibit 4.1
to our Current Report on Form 8-K dated January 21, 2004.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.2 | Form of Warrant to Purchase Common Stock incorporated by reference to Exhibit 4.2 to our
Current Report on Form 8-K dated January 21, 2004.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------

| | 4.3 | Registration Rights Agreement, dated as of January 16, 2004, by and among the Registrant
the entities whose names appear on the signature pages thereof incorporated by reference
to Exhibit 4.3 to our Current Report on Form 8-K dated January 21, 2004.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.1 | Agreement
and Plan of Merger, dated as of June 9, 2004 by and among Ener1, Inc., Ener1
                  Acquisition Corp. and Splinex Technology Inc. incorporated by reference
to Exhibit 2.1 to                   the registration statement on Form S-1 filed by
Splinex Technology Inc. on June 24, 2004.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.1 | Certification
of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | ---- | ------------------------------------------------------------------------------------------------------

| | 31.2 | Certification
of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | ---- | ------------------------------------------------------------------------------------------------------

| | 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
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b)    Reports
on Form 8-K

| | Current
Report on Form 8-K dated June 24, 2004, Items 5 and 7, reporting the execution of a Merger
Agreement among Ener1, Inc., Ener1 Acquisition Corp., and Splinex Technology, Inc., and
the related filing by Splinex Technology, Inc. of a registration statement on Form S-1.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

17

# 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 of the undersigned thereunto duly authorized.

|Dated: August 13, 2004
                      
                      
                      
Dated: August 13, 2004 | ENER1, INC.
By:      /s/ Kevin Fitzgerald
         Kevin Fitzgerald
         Chief Executive Officer
         (Principal Executive Officer)
By:      /s/ Randall N. Paulfus
         Randall N. Paulfus
         Chief Financial Officer
        (Principal Financial and Accounting Officer)
|------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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