UNITED STATES SECURITIES 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 quarter ended
March 31, 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 ofMay  5, 2004
347,182,114
|--------------------------------------------------------- | -----------------------------------------

Transitional Small
Business Format (check one):

Yes [  ] No [X]

1

ENER1, INC. AND
SUBSIDIARIES

Form 10-QSB for the
Quarter Ended March 31, 2004

INDEX

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------
|Part I. FINANCIAL INFORMATION
      Item 1.   Financial Statements
                         Condensed Consolidated Balance Sheet
                           (unaudited) as of March 31, 2004       
                         Condensed Consolidated Statements of
                           Operations (unaudited) for the three
                           months ended March 31, 2004 and 2003   
..
                         Condensed Consolidated Statements of
                           Cash Flows (unaudited) for the three
                           months ended March 31, 2004 and 2003   
                         Notes to Condensed Consolidated
                           Financial Statements (unaudited)       
      Item 2.   Management's Discussion and Analysis of
                          Financial Condition and Results of
                           Operations                             
      Item 3.   Controls and Procedures                           
Part II.        OTHER INFORMATION
      Item 1.            Legal Proceedings                        
      Item 2.            Changes in Securities and Use of Proceeds
      Item 3.            Defaults Upon Securities                 
      Item 4.            Submission of Matters to a Vote of
                           Security Holders                       
      Item 5.            Other Information                        
      Item 6.            Exhibits and Reports on Form 8-K         
      Signatures | Page
     3
     4
     5
     6
     12
     13
     14
     14
     14
     14
     14
     14
     15

2

ENER1, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
BALANCE SHEET (Unaudited) (In thousands except
share and debt data)

|                                                                                                                                                                           | March 31,
2004
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------
|ASSETS                                                                                                                                                                     |               
|Current assets                                                                                                                                                             |               
|Cash and equivalents                                                                                                                                                       |               
|Trade receivables, net                                                                                                                                                     |               
|Prepaid expenses and other current assets                                                                                                                                  |               
|Assets held for disposal (Note 3)                                                                                                                                          |               
|                                                                                                                                                                           |               
|Total current assets                                                                                                                                                       |               
|                                                                                                                                                                           |               
|Property and equipment, net                                                                                                                                                |               
|Investment in EnerStruct  (Notes 4, 10)                                                                                                                                    |               
|Other assets                                                                                                                                                               |               
|                                                                                                                                                                           |               
|Total assets                                                                                                                                                               |               
|                                                                                                                                                                           |               
|                                                                                                                                                                           |               
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                       |               
|Current liabilities                                                                                                                                                        |               
|Accounts payable                                                                                                                                                           |               
|Accrued expenses and other current liabilities (Note 6                                                                                                                     |               
|Current portion of loan payable (Note 8)                                                                                                                                   |               
|Liabilities related to assets held for disposal (Note 3)                                                                                                                   |               
|                                                                                                                                                                           |               
|Total current liabilities                                                                                                                                                  |               
|                                                                                                                                                                           |               
|Loan payable (Note 8)                                                                                                                                                      |               
|$20,000,000 Senior secured 5% convertible debentures net of discount attributable to debt issue costs, warrants and beneficial conversion feature of  $20,000,000 (Note 9) |               
|Commitments and contingencies (Note 13)                                                                                                                                    |               
|                                                                                                                                                                           |               
|Total Liabilities                                                                                                                                                          |               
|                                                                                                                                                                           |               
|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, 347,145,751 issued and outstanding                                                                                                                      |               
|Additional paid-in capital                                                                                                                                                 |               
|Accumulated deficit                                                                                                                                                        |               
|                                                                                                                                                                           |               
|Total stockholders' equity                                                                                                                                                 |               
|                                                                                                                                                                           |               
|Total liabilities and stockholders' equity                                                                                                                                 |               
|                                                                                                                                                                           |               
|                                                                                                                                                                           |               

See
notes to condensed consolidated financial statements. The notes are an integral part of these condensed consolidated financial statements and the financial statements must be read only in conjunction with the notes.

3

ENER1, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)(In thousands except
share data)

|                                                        | Three Months Ended March 31,
|------------------------------------------------------- | ----------------------------
|
|Net sales                                               |                             
|Cost of goods sold                                      |                             
|                                                        |                             
|Gross profit (loss)                                     |                             
|                                                        |                             
|Operating expenses:                                     |                             
|Research and development                                |                             
|Selling, general and administrative                     |                             
|Interest expense                                        |                             
|                                                        |                             
|Total operating expenses                                |                             
|                                                        |                             
|Loss from operations                                    |                             
|                                                        |                             
|Non-operating income (expense)                          |                             
|Other income (expense), net                             |                             
|Equity in loss on investment in EnerStruct (Notes 4,10) |                             
|                                                        |                             
|Total non-operating income (expense)                    |                             
|                                                        |                             
|Loss from continuing operations                         |                             
|Loss from discontinued operations (Note 3)              |                             
|                                                        |                             
|Loss before income taxes                                |                             
|Income taxes                                            |                             
|                                                        |                             
|Net Loss                                                |                             
|                                                        |                             
|Weighted average shares outstanding                     |                             
|Loss from continuing operations - basic and diluted     |                             
|Loss from discontinued operations - basic and diluted   |                             
|Net loss per share - basic and diluted                  |                             

See
notes to condensed consolidated financial statements. The notes are an integral part of these condensed consolidated financial statements and the financial statements must be read only in conjunction with the notes.

4

ENER1, INC. AND
SUBSIDIARIES  CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands except share data)

|                                                                    | Three Months Ended March 31,
|------------------------------------------------------------------- | ----------------------------
|
|Cash provided by (used in):                                         |                             
|                                                                    |                             
|Operating activities:                                               |                             
|Net loss                                                            |                             
|Depreciation and amortization                                       |                             
|Equity in loss from investment in EnerStruct                        |                             
|Changes in assets and liabilities                                   |                             
|Changes in assets and liabilities of assets held for                |                             
|disposal (Note 3)                                                   |                             
|Compensation expense for stock and options issued for               |                             
|services                                                            |                             
|                                                                    |                             
|Net cash used in operating activities                               |                             
|                                                                    |                             
|Investing activities:                                               |                             
|Purchases of machinery and equipment                                |                             
|                                                                    |                             
|Net cash used in investing activities                               |                             
|                                                                    |                             
|Financing activities:                                               |                             
|Repayment of related party notes                                    |                             
|Repayment of short term note payable                                |                             
|Payment of guaranteed related party debt (Note 8)                   |                             
|Repayment of mortgage note payable (Note 8)                         |                             
|Repayment of bank loan (Note 8)                                     |                             
|Proceeds from advances from stockholder                             |                             
|Proceeds from issuance of 5% senior secured debenture, net of costs |                             
|(Note 9)                                                            |                             
|Proceeds from exercise of employee stock options                    |                             
|Proceeds from exercise of warrants (Note 10)                        |                             
|                                                                    |                             
|Net cash provided by financing activities                           |                             
|                                                                    |                             
|Net increase (decrease) in cash and equivalents                     |                             
|Beginning balance as of January 1,                                  |                             
|                                                                    |                             
|Ending balance as of March 31,                                      |                             
|                                                                    |                             

See
notes to condensed consolidated financial statements. The notes are an integral part of these condensed consolidated financial statements and the financial statements must be read only in conjunction with the notes.

5

ENER1, INC. AND
SUBSIDIARIES NOTES 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 months ended March 31, 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 through March 31,
2004, and has an accumulated deficit of $63 million as of March 31, 2004. It is likely
that the Companys operations will continue to incur negative cash flows through March 31, 2005.
Additional financing will be required to fund the Companys
planned operations through March 31, 2005, and the Company plans to obtain 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

A Florida
corporation founded in 1985, Ener1, Inc. 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 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
below).

In
January 2002, Ener1 Group, Inc. acquired a majority interest in the Company and as a
result of subsequent transactions, owned approximately 90% of the outstanding common stock
of the Company at March 31, 2004. Ener1 Group is a privately held company 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 Company is in the business of
developing and marketing lithium ion and other lithium technology batteries for
use in military, industrial and consumer applications.

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.

The
Battery Company is a development stage company that has recorded nominal revenue since its
formation.

In
January 2002, the Company began to develop and market 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 Company finalized, through its Ener1 Battery Company
subsidiary, the acquisition of its R&D partner company in 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 relating to its research and developement activities.

6

The Company formed NanoEner1, Inc. 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

On
December 15, 2003, the Company entered into an arrangement with T. & V. Rental Co.,
Inc. (TVR), a New York company, pursuant to which (1) TVR will manage
EnerLooks business for up to six months in return for any profits earned by
EnerLook, (2) EnerLook will have 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 currently held by Ener1 Group; and (3) if
EnerLook does not exercise the option, TVR will have the option to acquire all of the
assets of EnerLook Solutions in exchange for 5% of TVRs then-outstanding common
stock. If TVR fails to exercise its option to purchase EnerLook, it will nevertheless be
required to transfer 5% of its then-outstanding common stock to EnerLook. TVR has paid approximately $280,159
to fund EnerLook's operations since December 15, 2003. On May 4, 2004, the Company, EnerLook and Ener1 Group signed
an Option Agreement, a Management Agreement, a Documentary Escrow Agreement and an Asset Purchase Agreement
to memorialize this arrangement.

The
Companys Digital Media/EnerLook segment is deemed to be held-for-sale and certain of its revenues,
expenses, assets and liabilities are classified as discontinued operations. Management believes
substantially all remaining resources of the Company will be redirected to 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: Ener1 Battery Company; NanoEner,
Inc.; Ener1 Technologies, Inc; EnerNow Technologies, Inc.; Boca Research of Delaware,
Inc.; Boca Research International, Inc.; Boca Research Holland B.V.; Boca Research (UK)
Limited; Boca Research International Holdings Ltd.; Boca Global, Inc.; AppsCom, Inc.; and
Ener1 Ukraine. It also includes as discontinued operations the Companys 49% owned
subsidiary, EnerLook Solutions, Inc. Intercompany accounts and transactions have been
eliminated in consolidation. The Battery Company and Ener1 Ukraine have ongoing
operations. Ener1 Technologies also has had operations, but is currently not 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 (See Note 10).

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

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 carryforwards 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 excludes dilution and 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 stockthat then shared in
the earnings of the Company. Diluted loss per share is computed by dividing income or loss
available to common shareholders by the weighted average number of common shares
outstanding for the period and dilutive potential common shares outstanding (all related
to outstanding stock options and warrants) unless consideration of such dilutive potential
common shares would result in anti-dilution. Common stock equivalents were not considered
in the calculation of diluted loss pershare as their effect would have been anti-dilutive
for the periods ended March 31, 2004 and 2003.

7

Stock
compensation: Options granted to employees under the Companys Stock Option Plans are
accounted for by using the intrinsic method under APB Opinion 25. Accounting for Stock
Issued to Employees (APB 25). In October 1995, the Financial Accounting Standards Board
issued Statement No. 123, Accounting for Stock-Based Compensation (SFAS 123), which
defines a 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,
Accounting for Stock-Based Compensation (SFAS 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 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 March 31, 2004 and 2003:

|                                                                     | Three months ended March 31,
|-------------------------------------------------------------------- | ----------------------------
|
|Net loss as reported                                                 |                             
|Plus: compensation recorded for stock options issued                 |                             
|Less: proforma stock based employee compensation, net of related tax |                             
|                                                                     |                             
|                                                                     |                             
|Loss per share:                                                      |                             
|Basic and diluted as reported                                        |                             
|Basic and diluted proforma                                           |                             

5.     SEGMENT REPORTING

The
 Company is organized based upon the following segments: Digital Media Division /
EnerLook (which is classified as discontinued operations), Ener1 Battery Company and Ener1
Technologies, Inc. Beginning in 2004, Ener1 Battery Company is further divided into two
segments: Battery and Fuel Cells.

The
 accounting policies of the segments are the same as those described in the
Summary of Significant Accounting Policies. The Company evaluates the
performance of its segments and allocates resources to them based on anticipated future
contribution.

|                         | Three months ended March 31,
|------------------------ | ----------------------------
|
|                         |                             
|Sales                    |                             
|Discontinued operations  |                             
|Battery                  |                             
|Net Sales                |                             
|                         |                             
|Net Loss                 |                             
|Corporate                |                             
|Discontinued operations  |                             
|Battery                  |                             
|Ener1 Technologies, Inc. |                             
|Fuel Cells               |                             
|Net Loss                 |                             
|                         |                             
|Assets                   |                             
|Corporate                |                             
|Discontinued operations  |                             
|Battery                  |                             
|Ener1 Technologies, Inc. |                             
|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.

8

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 employee, reducing the
Companys ownership to 49%. Ener1 Group owns 43% 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 most often recorded under the equity
method of accounting, rather than consolidating the subsidiarys results of
operations with the less than 51% parent company, as it is presumed that the less than 51%
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 which exercise substantial control over the activities of
EnerLook and own an aggregate of 92% of EnerLooks outstanding common stock.
Management believes that the reduction in its ownership percentage of EnerLooks
common stock from 51% to 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, and on that date management conveyed operating control of this operating
segment to a third party (see Notes 3 and 12).

8.    
          DEBT AND DEBT GUARANTEES

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

Also
at December 31, 2003, the Battery Company was indebted under two loan agreements with
Saint Petersburg Joint Stock Bank Tavricheskiy (Open Joint Stock Company), 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 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, Inc.,
Ener1 Group, Ener1 Battery and two individuals who were directors of all three companies
were guarantors of this loan. The Italian Companys obligations to Meliorbanca in the
amount of EURO 5,000,000 were secured by a pledge of specified battery production
equipment of Ener1 Battery, which had been transferred from the Italian Company to Ener1
Battery in a series of transactions prior to the Companys acquisition of Ener1
Battery. The U.S. dollar value of this collateral coverage 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 Ener1 Battery released. In order to effect this
release, in January 2004, the Company paid $2.2 million to Meliorbanca 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 Ener1 Battery Company entered into a loan payable collatereralized by a
vehicle. The total amount due under the loan is $128,000 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 in 2009. The debentures are collateralized by the land
and building owned by Ener1 Battery as well as by certain battery production equipment
owned by Ener1 Battery. The debentures are convertible into common stock of Ener1, Inc. 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.

9

Accounting Principles Board Opinion
No. 14, entitled Accounting for Convertible Debt Issued with Stock Purchase
Warrants, provides that the portion of the proceeds of debt securities issued with
detachable stock purchase warrants, which 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
Releases 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 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 quarter ended March 31, 2004 was approximately $208,000. Interest expense recorded
related to the accretion of the discount was $0 for the quarter ended March 31, 2004.

Interest expense related to the
accretion of the discount for the calendar years ending subsequent to December 31, 2003
are 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 March 31, 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 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 March 31, 2004 the
Companys original investment in EnerStruct was reduced by approximately $383,000,
which represents the Companys share of EnerStructs losses through that date.

In
connection with the foregoing activities, the Company and Ener1 Battery 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 Ener1 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 information of EnerStruct
is as follows as of March 31, 2004 and for the period from inception through March 31,
2004:

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

10

11.    
          RELATED PARTY TRANSACTIONS:

During
the three months ended March 31, 2003, the Company leased a portion of its office
facilities from Ener1 Group, I.C. Inc. The Company also shared common facilities, personnel and
other resources with Ener1, Group, Inc. Allocation of expenses has been made between these
parties utilizing systematic methods. The net expense allocated to the Company for the
three months ended March 31, 2003 aggregated approximately $211,580. There was no expense
allocated during to the Company for shared resources the three months ended March 31, 2004 as the Company
leased its own office space in January 2004 and no longer shares personnel and other resources with Ener1 Group.

12.    
          ARRANGEMENT WITH T. & V. RENTAL CO. INC.

On
December 15, 2003, the Company entered into an arrangement with T. & V. Rental Co.,
Inc. (TVR), a New York company, pursuant to which (1) TVR will manage
EnerLooks business for up to six months in return for any profits earned by
EnerLook, (2) EnerLook will have 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 currently held by Ener1 Group; and (3) if
EnerLook does not exercise the option, TVR will have the option to acquire all of the
assets of EnerLook in exchange for 5% of TVRs then-outstanding common stock. If TVR
fails to exercise its option to purchase EnerLook, it will nevertheless be required to
transfer 5% of its then-outstanding common stock to EnerLook. TVR is responsible for
paying EnerLook Solutions on-going expenses. TVR has paid approximately $280,159 to
fund EnerLook Solutions operations since December 15, 2003. On May 4, 2004, the Company,
EnerLook and Ener1 Group signed an Option Agreement, a Management Agreement, a Documentary
Escrow Agreement and an Asset Purchase Agreement to memoralize this arrangement.

13.    COMMITMENTS AND CONTINGENCIES

Litigation

We
receive 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 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.

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. 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 NECs costs of defense
and settlement of the PhoneTel suit, in the amount of $327,000. 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 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 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 PCs. Gateways complaint against the Company and
Boca Global, Inc. alleges that either or both the Company and Boca Global assumed the
liabilities of Global Village, Inc. with respect to the FaxWorks product. Gateway seeks
indemnification for payment in the amount of approximately five million dollars, which it
claims to have paid to settle patent infringement litigation brought by PhoneTel. 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 failure of Gateway 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. The Company and Gateway have completed a settlement of all
claims against the Company and Boca Global for payment of $45,000 by the Company to
Gateway

Lease
Commitments

In
January 2004, the Company entered into a 6 year operating lease for office facilities. The
lease provides for 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.

14.    
          STOCK AND OPTION ISSUANCES DURING THE QUARTER ENDED MARCH 31, 2004.

Effective
as of January 1, 2004, pursuant to the Company's consulting agreement with Capital Investment
Services, Inc., the Company issued 60,000 shares of the Company's common stock in partial compensation for
their services.

Effective
as of January 8, 2004, pursuant to the Company's Investment Banking Agreement with Thornhill Group,
Inc., the Company issued a warrant to Thornhill Group to purchase 200,000 shares of the Company's common
stock at an exercise price of $.10 per share.

11

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;
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 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. Net sales for the period ended March 31, 2004 were billings of $30,000 under a Small Business Innovative Research
contract.  We had no other sales due to continuing operations for the three month periods ended March 31, 2004 and
March 31, 2003

Gross
Profit (Loss) We had no significant gross profit or loss from continuing operations in
either of the three month periods ended March 31, 2004 and 2003.

Research
and Development Expenses (R&D). R&D expenses increased 60% during
the three months ended March 31, 2004, or approximately $192,000, from $318,000 to
$510,000 when compared to the same period in 2003. This increase is due primarily to
increases in battery and fuel cell development activity, including increased salary
expense resulting from new personnel and costs associated with developing patent
applications which have been filed and are planned to be filed.

Selling,
General and Administrative Expenses (SG&A). SG&A increased 179%, or approximately
 $1,669,000, from $791,000 to $2,460,000 during the three
months ended March 31, 2004 when compared to the same period in 2003. This increase is due
to: an increase of $801,000 in the cost of labor, including new hiring, recruiting and immigration costs;
an increase in professional fees of $450,000 due to increased legal and consulting costs; an increase of $327,000 in expenses
for investment banking services; an increase in insurance expense of $106,000; an increase of $70,000 in
investor relations expenses; and an increase of $10,000 in depreciation expense; offset by a $74,000 decrease
in rent expenses.

Liquidity and Capital
Resources

As
of December 31, 2003, we had a working capital deficit of $7.4 million. As of March 31,
2004, our working capital was $8.6 million. As of March 31, 2004 we had $9.9 million of cash and
equivalents. During the period from December 31, 2003 through March 31, 2004, our
working capital increased by $16.0 million. 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, in January 2004, of $20.0 million in aggregate principal amount of
our 5% senior secured convertible debentures due 2009. See Note 9 to the condensed consolidated financial statements
for an explanation of the accounting treatment of the debenture financing.

During
the three month period ended March 31, 2004 we expended $327,000 for capital equipment, of which:
$139,000 was for manufacturing equipment for our battery manufacturing plant; $169,000 was
for administrative equipment, primarily computing equipment; $19,000 was for research and
development equipment; and, $128,000 was for a vehicle.

We
will require additional capital support for the activities of Ener1 Battery Company through
March 31, 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 developand market
nanotechnologies, nanomaterials and manufacturing methodologies. We will seek
additional financing by the first quarter of 2005, which may take the form of equity or debt funding. There can be no
assurance that any such required capital will be available on terms acceptable to us, if at all, and, at such time or times as it is required.

12

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 our 51% subsidiary. 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 employee, reducing our ownership to 49%. Ener1 Group owns 43% of the outstanding common stock of
EnerLook. Since EnerLook was formed, we have consolidated EnerLooks results
of operations and its balance sheet as part of our consolidated financial
statements. Ownership of a subsidiary below 51% is most often recorded under the equity
method of accounting, rather than consolidating the subsidiarys results of
operations with the less than 51% parent company, as it is presumed that the less than 51%
parent company does not control the subsidiary. We have elected to continue
consolidating this subsidiary as part of our financial statements because we and
Ener1 Group are related parties which exercise substantial control over the activities of
EnerLook and own an aggregate of 92% of EnerLooks outstanding common stock.
Management believes that the reduction in its ownership percentage of EnerLooks
common stock from 51% to 49% does not materially reduce the control we exercise
over EnerLooks operations.

In
the second quarter of 2003, we transferred certain assets of the Digital Media
Division to EnerLook in order to consolidate our 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, we 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 operating
segment to a third party.

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 March 31, 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.

13

PART II.  OTHER
INFORMATION

Item 1.  Legal
Proceedings

We recieve communications from time to time alleging
various claims. These claims include, but are not limited to, allegations that certian of the Company's
products infringe to 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.
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 NECs costs of defense and
settlement of the PhoneTel suit, in the amount of $327,000. 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 were previously 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 PCs. Gateways complaint against us and
Boca Global, Inc. alleged that either or both 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 five million dollars, which it
claims to have paid to settle patent infringement litigation brought by PhoneTel. 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 failure of Gateway 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. We and Gateway have settled all claims against us and Boca Global for
payment of $45,000 by us to Gateway.

Item
6.  Exhibits and Reports on Form 8-K

(a) Exhibits

| | 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

| | 1. | Current
Report on Form 8-K dated January 21, 2004, Items 5 and 7. reporting the issuance of $20
million in aggregate principal amount of 5% Senior Secured Convertible Debentures and
Warrants to purchase 16 million shares of common stock of Ener1 in a private placement to
accredited investors under Regulation D of the Securities Act of 1933, as amended.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Current
Report on Form 8-K dated February 6, 2004, Item 5, containing a description of the common
stock of Ener1, Inc. to be incorporated by reference into the Companys Registration
Statement on Form S-8.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

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: May 20, 2004 | ENER1, INC.By:  /s/ Kevin P. Fitzgerald                 
         Kevin P. Fitzgerald
         Chief Executive Officer
         (Principal Executive Officer and Duly Authorized
         Officer)

15