UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB/A


Amendment
      No. 1





QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934





For
      the
      quarterly period ended **March 31, 2005**





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 o





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




Class
            
            Outstanding
                as ofCommon
                stock, par value
            
            May
                12, 2005$.01
                per share
            
            347,455,751








Transitional
      Small Business Format (check one): Yes o No x





1


ENER1,
      INC. AND SUBSIDIARIES





Form
      10-QSB for the Quarter Ended March 31, 2005





INDEX


PagePart
                I
            FINANCIAL
                INFORMATIONItem
                1
            Financial
                StatementsCondensed
                Consolidated Balance Sheet(unaudited)
                as of March 31, 2005
            4Condensed
                Consolidated Statements ofOperations
                (unaudited) for the threemonths
                ended March 31, 2005 and 2004
            5Condensed
                Consolidated Statements ofCash
                Flows (unaudited) for the threemonths
                ended March 31, 2005 and 2004
            6Notes
                to Condensed ConsolidatedFinancial
                Statements (unaudited)
            7Item
                2
            Management's
                Discussion and Analysis ofFinancial
                Condition and Results ofOperations
            27Item
                3
            Controls
                and Procedures
            29Part
                II
            OTHER
                INFORMATIONItem
                1
            Legal
                Proceedings
            30Item
                2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            30Item
                6
            Exhibits
            31Signatures
            .
            33





2


**Explanatory
      Note**





The
      consolidated financial statements for the three months ended March 31, 2004
      and
      2005 and related disclosures included in this Amendment No. 1 to Quarterly
      Report on Form 10-QSB have been restated.





During
      the fourth quarter of 2005, Ener1 determined that it was necessary to restate
      its previously issued financial statements for the three months ended March
      31,
      2004 and 2005 to reflect additional gains and losses related to the
      classification of and accounting for: (1) the conversion features of Ener1's
      senior secured convertible debentures due 2009 and the associated warrants,
      (2)
      the amortization expense associated with the discount recorded with respect
      to
      Ener1's senior secured convertible debentures due 2009 and financing costs
      incurred in connection with the issuance of this debt, (3) the  conversion
      features associated with the preferred stock issued by Ener1's subsidiary and
      the associated warrants and (4) warrants issued by Ener1 including the
      warrants issued to Ener1 Group, Inc. in September 2002 and warrants associated
      with Ener1's preferred stock. In March 2006, Ener1 determined that it was also
      necessary to restate its previously issued financial statements for the three
      months ended March 31, 2004 and 2005 to reflect additional gains and losses
      related to the classification of and accounting for options to purchase Ener1's
      common stock issued to a business partner in July 2003 and warrants to purchase
      Ener1's common stock issued to Ener1's majority stockholder in November 2003,
      and to reflect additional interest expense related to the classification of
      and
      accounting for warrants issued to the placement agent for Ener1's senior secured
      convertible debentures due 2009 issued in January 2004.





On
      December 21, 2005, Ener1 filed a Current Report on Form 8-K with the Securities
      and Exchange Commission announcing its determination that its previously issued
      financial statements contained in its Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 2004 and its Quarterly Reports on Form 10-QSB
      for
      the interim periods ended March 31 and June 30, 2005 will be restated. The
      financial statements and other financial information included in this Amendment
      No. 1 to the March 31, 2005 10-QSB have been restated accordingly.





In
      order
      to preserve the nature and character of the disclosures set forth in this
      Quarterly Report as originally filed, no attempt has been made in this amendment
      to modify or update the disclosures in the original Quarterly Report except
      Ener1 has included the foregoing restatements in Part I, Item 1, Ener1 has
      made
      conforming changes to Management's Discussion and Analysis of Results of
      Operations and Financial Condition in Part 1, Item 2 to reflect these
      restatements and Ener1 has updated the disclosure in Part 1, Item 3 in order
      to
      reflect the impact the need for these restatements has had on its evaluation
      of
      the effectiveness of its disclosure controls and procedures as of March 31,
      2005.





3





ENER1,
      INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED BALANCE SHEET


(Unaudited)


(In
      thousands except share data)





**March
                  31,****2005****(Restated)****ASSETS**Current
                  assetsCash
                  and equivalents
              
              $
              20,978Prepaid
                  expenses and other current assets
              
              
              219Due
                  from related parties
              
              
              148Total
                  current assets
              
              
              21,345Property
                  and equipment, net
              
              
              13,213Investment
                  in EnerStruct, Inc.
              
              
              1,016Deferred
                  debenture costs, net of amortizationof
                  $1,159
              
              
              4,672Other
              
              
              237Total
                  assets
              
              $
              40,483**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**Current
                  liabilitiesCurrent
                  portion of installment loan
              
              $
              23Accounts
                  payable and accrued expenses
              
              
              1,979Liabilities
                  of discontinued operations
              
              
              307Derivative
                  liability
              
              
              88,640Total
                  current liabilities
              
              
              90,949Long-term
                  portion of installment loan
              
              
              85$19,700
                  convertible debentures, net of discount of $14,772
              
              
              4,928$14,225
                  convertible debentures, net of discount of $11,608
              
              
              2,617Redeemable
                  convertible preferred stock:EnerDel,
                  Inc. Series A Preferred, $.01 par value, 500,000 shares
                  authorized,8,000
                  shares issued and outstanding; liquidation preference
                  $8,000
              
              
              3,186Series
                  B Preferred, $.01 par value, 180,000 shares
                  authorized,152,500
                  shares issued and outstanding; liquidation preference
                  $15,250
              
              
              11,003Total
                  liabilities
              
              
              112,768Minority
                  interest
              
              
              3,227Commitments
                  and contingencies**STOCKHOLDERS'
                  DEFICIT**Common
                  Stock, $.01 par value, 750,000,000 shares authorized347,455,751
                  issued and outstanding
              
              
              3,475Paid
                  in capital
              
              
              75,307Accumulated
                  deficit
              
              
              (154,294
              )Total
                  stockholders' deficit
              
              
              (75,512
              )Total
                  liabilities and stockholders' deficit
              
              $
              40,483





See
      notes
      to condensed consolidated financial statements.


4


ENER1,
      INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)


(In
      thousands except share data)





**Three
                  Months Ended****March
                  31,****2005**
              
              **2004****(Restated)**
              
              **(Restated)**Net
                  sales
              
              $
              21
              
              $
              30Cost
                  of sales
              
              
              -
              
              
              10Gross
                  profit
              
              
              21
              
              
              20Operating
                  expensesManufacturing
                  pre-production costs
              
              
              793
              
              
              -General
                  and administrative
              
              
              2,768
              
              
              2,307Research
                  and development
              
              
              2,254
              
              
              510Total
                  operating expenses
              
              
              5,815
              
              
              2,817Net
                  Loss from operations
              
              
              (5,794
              )
              
              (2,797
              )Other
                  income and (expense)Interest
              
              
              (2,257
              )
              
              (1,602
              )Equity
                  in loss of EnerStruct, Inc.
              
              
              (169
              )
              
              (156
              )Other
              
              
              52
              
              
              23Gain
                  on derivative liability
              
              
              34,588
              
              
              63,239Total
                  other income (expense)
              
              
              32,214
              
              
              61,504Income
                  before income taxes
              
              
              26,420
              
              
              58,707Income
                  taxes
              
              
              -
              
              
              -Net
                  income before minority interestand
                  discontinued operations
              
              
              26,420
              
              
              58,707Minority
                  interest
              
              
              643
              
              
              -Net
                  income from continuing operations
              
              
              27,063
              
              
              58,707Loss
                  from discontinued operations
              
              
              -
              
              
              (2
              )Net
                  income
              
              
              27,063
              
              
              58,705Preferred
                  stock dividends
              
              
              (1,210
              )
              
              -Net
                  income attributableto
                  common shareholders
              
              $
              25,853
              
              $
              58,705Net
                  income per share, basicContinuing
                  operations
              
              $
              0.07
              
              $
              0.17Discontinued
                  operations
              
              $
              -
              
              $
              -Net
                  income per share, dilutedContinuing
                  operations
              
              $
              0.06
              
              $
              0.14Discontinued
                  operations
              
              $
              -
              
              $
              -Weighted
                  average shares outstanding:Weighted
                  average shares outstanding - Basic
              
              
              347,456
              
              
              346,446Weighted
                  average shares outstanding - Diluted
              
              
              417,907
              
              
              420,083





See
      notes
      to condensed consolidated financial statements.




5


ENER1,
      INC. AND SUBSIDIARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


(In
      thousands except share data)





**Three
                  Months Ended****March
                  31,****2005**
              
              **2004****(Restated)**
              
              **(Restated)**Net
                  income
              
              $
              27,063
              
              $
              58,705Adjustments
                  to reconcile net loss to cash used by operating
                  activities:Gain
                  on derivative liability
              
              
              (34,588
              )
              
              (63,239
              )Minority
                  interest
              
              
              (643
              )
              
              -Accretion
                  of discount on debentures
              
              
              1,156
              
              
              1,000Non
                  cash interest expense related to financing costs
              
              
              245
              
              
              226Depreciation
              
              
              302
              
              
              41Compensation
                  expense for stock options
              
              
              282
              
              
              457Equity
                  in loss from investment in Enerstruct
              
              
              169
              
              
              156Changes
                  in current assets and liabilities
              
              
              (324
              )
              
              (1,229
              )Changes
                  in assets and liabilities held for disposal
              
              
              -
              
              
              (105
              )Net
                  cash used in operating activities
              
              
              (6,338
              )
              
              (3,988
              )Investing
                  Activities:Capital
                  expenditures
              
              
              (153
              )
              
              (327
              )Net
                  cash used in investing activities
              
              
              (153
              )
              
              (327
              )Financing
                  Activities:Proceeds
                  from issuance of senior secured debenture, net of costs
              
              
              13,134
              
              
              18,527Proceeds
                  from sale of preferred stock
              
              
              250
              
              
              -Repayment
                  of related party notes
              
              
              -
              
              
              (1,041
              )Repayment
                  of guaranteed related party debt
              
              
              -
              
              
              (2,200
              )Repayment
                  of mortgage note payable
              
              
              -
              
              
              (704
              )Repayment
                  of bank loan
              
              
              -
              
              
              (1,600
              )Repayment
                  of bank installment loan
              
              
              (6
              )
              
              -Proceeds
                  from employee stock options exercised
              
              
              -
              
              
              18Proceeds
                  from exercise of warrants
              
              
              -
              
              
              1,050Net
                  cash provided by financing activities
              
              
              13,378
              
              
              14,050Net
                  increase in cash and equivalents
              
              
              6,887
              
              
              9,735Cash
                  and cash equivalents beginning balance
              
              
              14,091
              
              
              200Cash
                  and cash equivalents ending balance
              
              $
              20,978
              
              $
              9,935


See
      notes
      to condensed consolidated financial statements.




6


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, 2005 are not necessarily indicative of the results that
      may be expected for the year ending December 31, 2005. The audited financial
      statements at December 31, 2004, which are included in the Company’s Annual
      Report on Form 10-KSB for the year ended December 31, 2005, 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, 2005, and has an accumulated deficit
      of
      $154 million as of March 31, 2005. It is likely that the Company’s operations
      will continue to incur negative cash flows through March 31, 2006, and
      additional financing will be required to fund the Company’s planned operations.
      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 the development and marketing of advanced
      lithium batteries and certain battery components such as electrodes, fuel cell
      components, fuel cell testing apparatus and nanotechnology-related manufacturing
      processes and materials. The Company’s current business focus is the result of
      changes over the past several years arising from new investments in the Company,
      changes in research and development activities and the acquisition of a battery
      business from its majority shareholder in 2002.





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 related network communications products
      through subcontractors and marketed those products to the hospitality and
      healthcare markets through its 49% owned subsidiary EnerLook Solutions, Inc.
      (f/k/a EnerLook Health Care Solutions, Inc. and now known as Ener EL Holdings,
      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 as of March 31,
      2005.





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’s business of developing and marketing lithium ion
      and other lithium technology batteries is now operated by the Company’s EnerDel
      subsidiary (see below).





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 to focus
      instead on the clean energy business and lithium batteries in particular. In
      addition, in 2003 the Company began developing fuel cell components and systems.
      The Company has also developed a fuel cell testing fixture using technologies
      contained in one of its pending patent applications.


7





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 has a license to use a patent held by Vector
      Energy Corporation (a subsidiary of Ener1 Group) in connection with development
      of such products. Technologies is a development stage company and it has not
      recorded any revenue since its formation. Technologies suspended activities
      in
      2003 and has no ongoing activities at this time. The Company has not determined
      if or when it may resume activities in Technologies.





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
      in
      Japanese markets.





On
      September 12, 2003, the Battery Company finalized the acquisition of Ener1‘s
      research and development partner company in Ukraine, known as Ener1 Ukraine
      (“Ener1 Ukraine”). Ener1 Ukraine conducts research and development activities
      for the Company at facilities in Ukraine. Ener1 Ukraine’s battery-related
      patents and rights in patent applications were assigned to EnerDel in October
      2004.





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 these technologies in the development of
      nanomaterials for lithium batteries and other high-energy storage
      devices.





On
      October 20, 2004, the Company and a unit of Delphi Corporation each contributed
      lithium battery related assets to EnerDel, Inc., which was formed on October
      18,
      2004 in connection with that transaction. The Company owns 80.5% of the
      outstanding stock of EnerDel, and Delphi owns 19.5%. All of the Company’s
      lithium battery business has been conducted through EnerDel since its
      formation.





The
      Company formed a new subsidiary, EnerFuel, Inc., on October 29, 2004 through
      which the Company conducts its fuel cell related operations.





Discontinued
      Operations





Effective
      December 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.
      Substantially all remaining resources were redirected to the Company’s
      continuing operations; accordingly, these costs are included in continuing
      operations.





On
      December 15, 2003, the Company, EnerLook, Ener1 Group and T.& V. Rental Co.,
      Inc. (“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 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. EnerLook
      did
      not exercise the option described in clause (2) and 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 shortly thereafter the EnerLook
      employees were transferred to, and became the employees of, TVR Communications,
      LLC, a limited liability company formed by TVR to hold all of TVR’s assets and
      EnerLook’s assets. The Company, EnerLook, Ener1 Group and TVR Communications,
      LLC entered into an Asset Purchase Agreement dated as of September 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 to TVR closed on December 7,
      2004.





TVR
      paid
      EnerLook approximately $550,000 to fund EnerLook’s operations from December 15,
      2003 through June 15, 2004 and the 5% membership interest acquired by the
      Company as part of the December 7, 2004 asset sale to TVR was valued at
      $115,000.


8





4.    
      SIGNIFICANT ACCOUNTING POLICIES





Principles
      of Consolidation: The accompanying consolidated financial statements include
      Ener1, Inc. and its wholly owned subsidiaries: Ener1 Battery Company; 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.; Ener1 Ukraine; EnerDel, Inc. (80.5% owned); NanoEner, Inc.;
      and
      EnerFuel, Inc. It also includes as discontinued operations the Company’s 49%
      owned subsidiary, EnerLook Solutions, Inc. Intercompany accounts and
      transactions have been eliminated in consolidation. EnerDel, NanoEner, EnerFuel,
      and Ener1 Ukraine (see above) have ongoing operations. The Battery Company
      operations are limited as of October 20, 2004 to holding real estate, the use
      of
      which is made available to EnerDel under certain agreements. 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.





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 stock that then shared in the earnings of the entity. Diluted
      loss per share is computed by dividing income or loss available to common
      stockholders by the sum of the weighted average number of common shares
      outstanding for the period and dilutive potential common shares outstanding
      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 per share as their effect would have been anti-dilutive for
      the
      three month periods ended March 31, 2005 and 2004.





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.
      Accordingly, compensation cost has been recognized for grants under the stock
      option plans only when the exercise prices of employee stock options are less
      than the market prices or fair values 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
      three month periods ended March 31, 2005 and 2004:


9




**Three
                    Months Ended****March
                    31,****2005**
                
                **2004****(Restated)**
                
                **(Restated)**Net
                    income as reported
                
                $
                27,063
                
                $
                58,705Plus
                    stock-based compensationdetermined
                    under intrinsic value-based method
                
                
                265
                
                
                271Less
                    stock-based compensationdetermined
                    under fair value-based method
                
                
                (931
                )
                
                (637
                )Net
                    income pro forma
                
                
                26,397
                
                
                58,339Preferred
                    stock dividends
                
                
                (1,210
                )
                
                -Net
                    income attributableto
                    common shareholders pro forma
                
                $
                25,187
                
                $
                58,339Net
                    income per share, pro forma basic
                
                $
                0.07
                
                $
                0.17Net
                    income per share, pro forma diluted
                
                $
                0.06
                
                $
                0.14
  Investment
        in EnerStruct: The Company’s 49% investment in EnerStruct is accounted for in
        accordance with the equity method (See Note 10).
 
 Research
        and Development: Research and Development Costs, including the cost of equipment
        and other assets used in research and development activities that do not
        have
        alternative future use, 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 computed for 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.





Recently
      Issued Accounting Pronouncements and Interpretations:





In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of
      ARB No. 43”. SFAS No.151 amends the guidance in ARB No. 43, “Inventory Pricing,”
for abnormal amounts of idle facility expense, freight, handling costs, and
      wasted material (spoilage) requiring that those items be recognized as
      current-period expenses regardless of whether they meet the criterion of “so
      abnormal.” This statement also requires that allocation of fixed production
      overheads to the costs of conversion be based on the normal capacity of the
      production facilities. The statement is effective for inventory costs incurred
      during the fiscal years beginning after June 15, 2005. Management does not
      expect this statement to have a material impact on the Company’s consolidated
      financial position or results of operations.





In
      December 2004, the FASB issued SFAS No. 153, which is effective for fiscal
      periods beginning after June 15, 2005. In the past, the net book value of the
      assets relinquished in a non-monetary transaction was used to measure the value
      of the assets exchanged. Under SFAS No. 153, assets exchanged in a non-monetary
      transaction will be valued at fair value instead of the net book value of the
      asset relinquished, as long as the transaction has commercial substance and
      the
      fair value of the assets exchanged is determinable within reasonable limits.
      The
      adoption of SFAS No. 153 is not anticipated to have a material effect on the
      Company’s financial statements.





In
      December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment
      (Statement 123(R)), which is a revision of FASB Statement No. 123, Accounting
      for Stock-Based Compensation (Statement 123). Statement 123(R) supersedes APB
      Opinion No 25, Accounting for Stock Issued to Employees, and amends FASB
      Statement No. 95, Statement of Cash Flows. Statement 123 (R) requires all
      share-based payments to employees, including grants of employee stock options,
      to be recognized at the date of grant in the income statement based on their
      fair values. Pro forma disclosure is no longer an alternative. Statement 123(R)
      is effective at the beginning of the first interim or annual period beginning
      after December 15, 2005. The impact of adoption of Statement 123(R) cannot
      be
      accurately predicted at this time because it will depend on levels of
      share-based payments in the future. However, had the Company adopted Statement
      123(R) in prior periods, the impact of the standard would have approximated
      the
      impact of Statement 123 as described in the disclosure of pro forma net income
      and earnings per share in the note above. Statement 123(R) also requires the
      benefits of tax deductions in excess of recognized compensation cost to be
      reported as a financing cash flow, rather than as an operating cash flow as
      required under current literature. This requirement will reduce net operating
      cash flows and increase financing cash flows in periods after adoption. The
      Company cannot estimate what those amounts will be in the future because they
      depend on, among other things, when employees exercise stock options. The
      Company expects to adopt Statement 123(R) on January 1, 2006.





10


5.    
      SEGMENT REPORTING





As
      of
      March 31, 2005, the Company is organized based upon the following segments:
      Digital Media Division / EnerLook (which is classified as discontinued
      operations), EnerDel, Inc., EnerFuel, Inc., NanoEner, Inc., Ener1 Battery
      Company, and, Ener1 Technologies, Inc. EnerDel, Inc. develops and markets
      advanced lithium batteries. EnerFuel, Inc. develops and markets fuel cells
      and
      fuel cell systems. NanoEner, Inc. is developing nanotechnology related
      manufacturing processes and materials. Ener1 Battery Company provides facilities
      to EnerDel, Inc. Ener1 Technologies, Inc. had no activities during either of
      the
      three month periods ended March 31, 2004 and 2005.





The
      accounting policies of the segments are the same as those described in the
      “Summary of Significant Accounting Policies.” Transactions between segments,
      consisting principally of product sales and purchases, are recorded at the
      consummated sales price. The Company evaluates the performance of its segments
      and allocates resources to them based on anticipated future
      contribution.





**Three
                  Months Ended****March
                  31,****2005**
              
              **2004****(Restated)**
              
              **(Restated)****Net
                  sales**EnerFuel,
                  Inc.
              
              $
              15
              
              $
              -EnerDel,
                  Inc.
              
              
              6
              
              
              -Ener1
                  Battery
              
              
              -
              
              
              30Total
                  Net Sales
              
              $
              21
              
              $
              30**Net
                  income (loss)**Corporate
              
              
              30,244
              
              
              59,420Discontinued
                  segments
              
              
              -
              
              
              (2
              )EnerDel,
                  Inc.
              
              
              (3,215
              )
              
              -Ener1
                  Battery
              
              
              (51
              )
              
              (438
              )EnerFuel
              
              
              (270
              )
              
              (275
              )NanoEner
              
              
              (288
              )
              
              -Minority
                  interest
              
              
              643
              
              
              -Net
                  income (loss)
              
              $
              27,063
              
              $
              58,705**Assets**Corporate
              
              
              17,612
              
              
              16,430Discontinued
                  segments
              
              
              -
              
              
              123EnerDel,
                  Inc.
              
              
              21,487
              
              
              -Ener1
                  Battery
              
              
              1,370
              
              
              22,337Ener1
                  Technologies Inc.
              
              
              -
              
              
              10EnerFuel
              
              
              8
              
              
              -NanoEner
              
              
              6
              
              
              -Total
                  assets
              
              $
              40,483
              
              $
              38,900





11


6.    
      ACCRUED EXPENSES





Accrued
      expenses principally consists of accrued salaries, and related benefits and
      accrued professional fees, which are included in accounts payable and accrued
      expenses on the accompanying condensed consolidated balance sheet.





7.    
      CONSOLIDATION OF 49% SUBSIDIARY (ENERLOOK)





When
      formed in February 2002, EnerLook Health Care Solutions, Inc. was formed as
      a
      51% subsidiary of the Company. EnerLook’s name was changed to EnerLook
      Solutions, Inc. in May 2003 and then to Ener EL Holdings, Inc. in December
      2004.
      In early 2003, EnerLook issued 333,333 shares of common stock to Solution
      Investment Group, LLC in exchange for $250,000 and 125,000 shares to an
      employee, reducing the Company’s ownership to approximately 49%. Ener1 Group
      owns approximately 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. Effective December 15, 2003, EnerLook’s operations were
      deemed to be discontinued 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 delivered 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. In December 2003, management
      decided to discontinue the operations of this segment and conveyed operating
      control of this operating segment to T. & V. Rental Co., Inc. (TVR) a third
      party. In December, 2004 the Company sold substantially all of the assets of
      EnerLook to TVR.





8.    
      DEBT AND DEBT GUARANTEES:





In
      January 2004, the Company issued $20,000,000 in aggregate principal amount
      of
      senior secured convertible debentures due January 2009, and warrants to purchase
      up to 16,000,000 shares of common stock, in a private placement. (See 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: $2,200,000 to Meliorbanca Gallo
      S.P.A. to satisfy certain obligations of Ener1 S.R.L. an Italian company related
      to the Company by common ownership; $704,000, representing all of the
      outstanding balances due to Interbay Funding on a mortgage note collateralized
      by the land and building owned by the Battery Company; and $1,600,000 to Saint
      Petersburg Joint Stock Bank Tavrichesky to satisfy two notes which were secured
      by a pledge of a patent owned by Ener1 Ukraine, which is a 100% subsidiary
      of
      Ener1 Battery.





In
      March
      2004, the Battery Company obtained a loan secured by a vehicle. The total amount
      due under the loan as of March 31, 2005 is $108,767 plus interest payable over
      5
      years in equal monthly payments of approximately $2,600.





On
      March
      11, 2005, the Company issued $14,225,000 in aggregate principal amount of senior
      secured convertible debentures due March 2009 and warrants to purchase up to
      7,112,500 shares of common stock, in a private placement (See Note
      15).





9. $19,700,000
      CONVERTIBLE DEBENTURES





On
      January 20, 2004, Ener1 issued $20,000,000 in aggregate principal amount of
      senior secured convertible debentures due January 2009 (the "2004 Debentures")
      and warrants to purchase 16,000,000 shares of Ener1's common stock. The net
      proceeds of the issuance totaled $18,527,000 after direct placement costs of
      $1,473,000.




The
      2004
      Debentures mature on January 20, 2009. Ener1's obligations under the 2004
      Debentures are secured by collateral including land, building and battery
      production equipment owned by Ener1 Battery and used by EnerDel.




12


At
      the
      issuance date, the 2004 Debentures were convertible by the holder at any time
      into common shares at a price of $1.25 per share subject to adjustment upon
      certain events such as the sale of equity securities by Ener1 at a price below
      the then current conversion price of the debenture. As of March 31, 2005, the
      conversion price was $1.23.





Ener1
      may
      require that a specified amount of the principal of the 2004 Debentures be
      converted if certain conditions are satisfied for a period of 22 consecutive
      trading days.





During
      2004, a holder of the 2004 Debentures converted $300,000 of principal into
      common shares. The conversion was accounted for by debiting the principal amount
      of the 2004 Debentures and crediting common stock and additional paid in capital
      by this amount. Ener1 also adjusted the conversion option derivative
      to its fair value immediately prior to conversion through adjustments to gain
      (loss) on derivative liability and then reduced the derivative liability by
      the
      proportionate amount of principal converted by crediting paid in
      capital.





Interest
      is due quarterly. The initial rate was 5%, but was subject to increases if
      Ener1
      did not achieve specific milestones by certain dates. Ener1 did not achieve
      all
      of these milestones, and the rate was increased to 7.5% as of July 19, 2004
      and
      the rate increased again to 15% as of January 30, 2005. All or a portion of
      the
      accrued and unpaid interest may be converted at the option of the debenture
      holder at any time under the same conversion terms as the principal. To date,
      interest of $1,856,000 has been paid, $0.00 interest was accrued at March 31,
      2005 and $261,506 interest has been converted.




From
      January 20, 2007 to January 20, 2008, Ener1 may prepay some or the entire
      principal at a price of 103% of unpaid principal plus accrued interest. From
      January 21, 2008 to January 20, 2009, Ener1 may prepay some or the entire
      principal at 101% of unpaid principal plus accrued interest.





The
      2004
      Debentures are senior to Ener1's existing and future indebtedness and pari
      passu
      with the 2005 Convertible Debentures (see Note 10).




In
      the
      event of any default or fundamental change as defined under the 2004 Debentures,
      the holder will be entitled to require Ener1 to redeem the 2004 Debentures
      at a
      price equal to 101% of the unpaid principal and accrued
      interest.





Ener1
      is required
      under the terms of the 2004 Debentures agreements to register the resale of
      the
      common stock underlying the debentures and associated warrants. If the
      registration statements are not available for use, Ener1 is required to make
      certain payments to the purchasers of the 2004 Debentures (the "registration
      delay payments"). Payments
      would accrue at the rate of 1.5% of principal or approximately $295,000 per
      month until January 20, 2006, at which time the obligation to maintain the
      effectiveness of the resale registration statement for the common stock
      underlying the 2004 Debentures ends.





The
      warrants issued in connection with the issuance of the 2004 Debentures had
      an
      exercise price of $2.51 at the issuance date, subject to adjustment upon certain
      events such as the sale of equity securities by Ener1 at a price below the
      then
      current exercise price. As of March 31, 2005, the exercise price was $2.37
      per
      share. The warrants are exercisable at any time through January 20,
      2010.




Ener1
      issued warrants to purchase 1,920,000 shares of common stock with an exercise
      price of $2.51 to the placement agent for the 2004 Debentures
      issuance. Ener1 also incurred $1,200,000 in placement fees.





As
      discussed in Note 12, Ener1 is accounting for the conversion option in the
      2004
      Debentures and the associated warrants as derivative liabilities in accordance
      with SFAS 133 “Accounting for Derivative Instruments and Hedging Activities”
("SFAS 133") and EITF 00-19 "Accounting for Derivative Financial Instruments
      Indexed to and Potentially Settled in a Company's Own Stock ("EITF
      00-19").





10. $14,225,000
      CONVERTIBLE DEBENTURES





On
      March
      14, 2005, Ener1 issued $14,225,000 in aggregate principal amount of senior
      secured convertible debentures due March 2009 (the "2005 Debentures") and
      warrants to purchase 7,112,500 shares of Ener1's common stock. The net proceeds
      of the issuance totaled $13,134,000 after direct placement costs of $1,091,000.
      Proceeds from the sale were used to pay expenses of the sale and for working
      capital.




The
      2005
      Debentures mature on March 14, 2009. If certain events occur, including a
      default on the 2005 Debentures, Ener1 will pledge certain collateral to secure
      its obligations under the 2005 Debentures.





13


Ener1
      is
      required under the terms of the 2005 Debentures agreements to register the
      resale of the common stock underlying the debentures and associated warrants.
      If
      the registration statements are not available for use or Ener1 fails to maintain
      the listing of its common stock, Ener1 is required to make certain payments
      to
      the purchasers of the 2005 Debentures (the "registration delay payments"). Registration
      delay payments would accrue at a fixed rate of $213,375 per month until the
      2005
      Debenture holders are able to use the resale registration statement and until
      Ener1’s common stock is quoted on the OTC Bulletin Board or other exchange.




At
      the
      issuance date, the 2005 Debentures are convertible by the holder at any time
      into common shares at a price of $1.00 per share subject to adjustment upon
      certain events such as the sale of equity securities by Ener1 at a price below
      the then current conversion price of the debenture. As of March 31, 2005, the
      conversion price was $1.00.




Ener1
      may
      require that a specified amount of the principal of the 2005 Debentures be
      converted if certain conditions are satisfied for a period of 22 consecutive
      trading days.




Interest
      is due quarterly. The current interest rate is 7.5% and will increase to 15%
      per
      year if Ener1 fails to meet certain milestones as of the first anniversary
      of
      the date of issuance of the 2005 Debentures. All or a portion of the accrued
      and
      unpaid interest may be converted at the option of the debenture holder at any
      time under the same conversion terms as the principal. To date, interest of
      $53,000 has been paid, no interest was accrued at March 31, 2005 and no interest
      has been converted.





At
      any
      time on or after March 14, 2008, Ener1 may prepay some or the entire principal
      of the 2005 Debentures at 103% of the principal, plus accrued
      interest.





The
      2005
      Debentures are senior to Ener1's existing and future indebtedness and pari
      passu
      with the 2004 Debentures (see Note 9).




In
      the
      event of any default as defined under the 2005 Debentures, the holder will
      be
      entitled to require Ener1 to redeem the 2005 Debentures at a price equal to
      (1)
      the greater of 105% of the unpaid principal and accrued interest or (2)
      the product of the number of shares the principal and accrued interest
      could be converted into at the time of default multiplied by the then current
      market price. In the event of any fundamental change as defined under the 2005
      Debentures, the holder will be entitled to require Ener1 to redeem the 2005
      Debentures at a price equal to 120% of the unpaid principal and accrued interest
      if the fundamental change occurs before the first anniversary of the issuance
      date, 115% of the unpaid principal and accrued interest if the fundamental
      change occurs between the first anniversary of the issuance date and the second
      anniversary of the issuance date, and 110% of the unpaid principal and accrued
      interest if the fundamental change occurs after the second anniversary of the
      issuance date.





The
      warrants issued in connection with the issuance of the 2005 Debentures were
      divided into Series A and Series B. Each Series A warrant entitles the holder
      to
      purchase a number of shares of common stock equal to 30% of the number of shares
      of common stock that would be issuable upon conversion of the original principal
      amount of the 2005 Debenture divided by the conversion price for an exercise
      price of $1.15 per share. Each Series B warrant entitles the holder to purchase
      a number of shares of common stock equal to 20% of the number of shares of
      common stock that would be issuable upon conversion of the original principal
      amount of the 2005 Debenture divided by the conversion price for an exercise
      price of $1.25 per share. Both Series A and Series B warrants are subject to
      adjustment upon certain events such as the sale of equity securities by Ener1
      at
      a price below the exercise price. The warrants are exercisable, in whole or
      in
      part, at any time on or before March 14, 2010. The number of common shares
      issuable under the Series A and Series B warrants issued in connection with
      the
      2005 Debentures are 4,267,500 and 2,845,000, respectively.





Ener1
      issued warrants to purchase up to 426,750 shares of common stock with an
      exercise price of $1.00 to the placement agent for the 2005 Debentures issuance.
      The fair market value of these warrants was $213,000 and was allocated to
      deferred debenture costs. Ener1 also incurred $1,091,000 in placement
      fees.





As
      discussed in Note 12, Ener1 is accounting for the conversion option in the
      2005
      Debentures and the associated warrants as derivative liabilities in accordance
      with SFAS 133 and EITF 00-19.





11.    
      REDEEMABLE PREFERRED STOCK





Ener1,
      Inc. Series B Convertible Preferred Stock





14


In
      October 2004, Ener1 sold 150,000 shares of Series B Convertible Preferred Stock
      ("Series B Preferred Stock"), plus warrants to purchase 4,166,666 shares of
      common stock at an exercise price of $1.25 and warrants to purchase 4,166,666
      shares of common stock at an exercise price of $1.50 per share, for an aggregate
      purchase price of $15,000,000.





The
      proceeds were allocated between the Series B Preferred Stock and the warrants
      using the with-and-without method in accordance with SFAS 133. The proceeds
      were
      allocated $5,417,000 to the fair value of the warrants and the remaining
      $9,583,000 was allocated to the Series B Preferred Stock.





In
      February 2005, Ener1 sold 2,500 shares of Series B Preferred Stock, plus
      warrants to purchase 69,445 shares of common stock at an exercise price of
      $1.25
      and warrants to purchase 69,445 shares of common stock at an exercise price
      of
      $1.50 per share, for an aggregate purchase price of $250,000.





The
      proceeds were allocated between the Series B Preferred Stock and the warrants
      using the with-and-without method in accordance with SFAS 133. The proceeds
      were allocated $97,000 to the fair value of the warrants, and
      the remaining $153,000 was allocated to the Series B Preferred
      Stock.




The
      conversion feature for the Series B Preferred Stock is contingent upon Ener1
      filing a registration statement with the Securities and Exchange Commission
      to
      register an underwritten offering of common stock. The holders of Series B
      Preferred Stock will have the right to convert up to one-half of their shares
      of
      Series B Preferred Stock into common stock for sale pursuant to the registration
      statement, subject to the discretion of the underwriters of the offering. The
      conversion ratio shall be established by dividing the liquidation value per
      share of the Series B Preferred Stock by the price for the common stock sold
      in
      the registered offering. Because of this contingency, the conversion option
      is
      not within the scope of SFAS 133 and EITF 00-19. If the contingency is triggered
      in the future and the holder receives the ability to convert, Ener1 will need
      to
      reassess whether the conversion feature meets the definition of a derivative
      under SFAS 133.




The
      Series B Preferred Stock is redeemable at the option of Ener1 at any time,
      in
      part or whole, at 100% of the liquidation value, plus accrued and unpaid
      dividends. The Series B Preferred Stock is redeemable at the option of the
      holder when none of the 2004 Debentures are outstanding. The 2004 Debentures
      mature on January 20, 2009. Due to the mandatory redemption feature, the Series
      B Preferred Stock is reported as a liability consistent with SFAS 150,
“Accounting for Certain Financial Instruments with Characteristics of Both
      Liabilities and Equity” (“SFAS 150”).




In
      connection with the issuances of its Series B Preferred Stock, Ener1 issued
      warrants to purchase up to 4,236,111 shares of common stock at an exercise
      price
      of $1.25 per share and warrants to purchase up to 4,236,111 shares of common
      stock at an exercise price of $1.50 per share. These warrants have a ten year
      term. Ener1 is not required to register the resale of the warrants or of the
      common stock issuable upon exercise of the warrants. The fair value was
      determined utilizing the Black-Scholes stock option valuation model. The
      significant assumptions used in the valuation are: the exercise prices as noted
      above; the market value of Ener1's common stock on the date of issuance, $0.65
      and $0.80 for October 2004 and February 2005, respectively; expected volatility
      of 207%; risk free interest rate of approximately 1.79% and 2.50% for October
      2004 and February 2005, respectively; and a term of ten years.








EnerDel
      Series A Convertible Preferred Stock




In
      October 2004, Delphi Corporation purchased 8,000 shares of Non-Voting,
      Cumulative and Redeemable Series
      A
      Convertible Preferred Stock issued by EnerDel (“Series A Preferred Stock”) plus
      warrants to purchase Ener1 common stock for an aggregate purchase price of
      $8,000,000. The Series A Preferred Stock was convertible into 6,956,522 shares
      of Ener1 common stock until January 2005. No shares were converted.





As
      discussed in Note 12, Ener1 is accounting for the warrants and conversion option
      in accordance with SFAS 133.





The
      issuance proceeds were allocated between the Series A Preferred Stock, the
      warrants and the conversion option using the with-and-without method in
      accordance with SFAS 133.  The proceeds were allocated $4,620,000 to the
      fair value of the warrants, $1,183,000 to the fair value of the conversion
      option, and the remaining $2,197,000 was allocated to the series A Preferred
      Stock.





As
      discussed in Note 12, Ener1 assessed whether the conversion feature should
      be
      accounted for as a derivative under SFAS 133. In accordance with EITF 00-19,
      Ener1 accounted for the conversion option as a derivative under SFAS 133. When
      the term of the conversion option expired in January 2005, the remaining
      liability of $1,183,000 was recorded as unrealized gain on embedded
      derivative in the first quarter of 2005.





15


If
      EnerDel has not redeemed all of the shares of Series A Preferred Stock on or
      before the 4th anniversary of the filing date of the certificate of designation
      for the Series A Preferred Stock, the holders will have the option to require
      EnerDel to redeem all of the Series A Preferred shares on 10 days notice. As
      a
      result, Ener1 has determined the preferred stock is mandatorily redeemable.
      Due
      to the mandatory redemption feature, the Series A Preferred Stock is reported
      as
      a liability consistent with SFAS 150.





In
      connection with the issuance of the Series A Preferred Stock, EnerDel issued
      warrants to purchase up to 1,750,000 shares of common stock at an exercise
      price
      of $0.70 per share and warrants to purchase up to 5,250,000 shares of common
      stock at an exercise price of $1.00 per share. These warrants have a ten year
      term. Ener1 is not required to register the resale of the warrants or of the
      common stock issuable upon exercise of the warrants. The fair value was
      determined utilizing the Black-Scholes stock option valuation model. The
      significant assumptions used in the valuation are: the exercise prices as noted
      above; the market value of Ener1's common stock on the date of issuance, $0.66;
      expected volatility of 207%; risk free interest rate of approximately 1.74%;
      and
      a term of seven years.





The
      following are the components of redeemable preferred stock as of March 31,
      2005
      (in thousands):





**EnerDel**
              
              **Ener1****Series
                  A**
              
              **Series
                  B**
              
              **Total**Face
                  value
              
              $
              8,000
              
              $
              15,250
              
              $
              23,250Less
                  fair value of embeddedderivatives
              
              
              (5,803
              )
              
              (5,514
              )
              
              (11,317
              )Accumulated
                  accretionof
                  discounts
              
              
              695
              
              
              801
              
              
              1,496Cumulative
                  dividends
              
              
              294
              
              
              466
              
              
              760Carrying
                  value
              
              $
              3,186
              
              $
              11,003
              
              $
              14,189





12. Derivatives





Ener1
      evaluated the application of SFAS 133 and EITF 00-19 for the following
      financial instruments:




·the
                2004 Debenture conversion feature;·warrants
                to purchase common stock associated with the 2004
                Debentures;·the
                2005 Debenture conversion feature;·warrants
                to purchase common stock associated with the 2005
                Debentures;·EnerDel
                Series A Preferred Stock conversion feature;·Warrants
                to purchase common stock issued to Delphi Corporation (the "Delphi
                Warrants");·Series
                B Preferred Stock conversion feature;·warrants
                to purchase common stock issued to the purchasers of the Series B
                Preferred Stock (the "Series B Warrants");·warrants
                to purchase common stock issued to Ener1 Group, Inc. in connection
                with
                the acquisition by Ener1 of Ener1 Battery Company from Ener1 Group,
                Inc.
                (“Battery Warrants”);·warrants
                to purchase common stock issued to Ener1 Group, Inc. in connection
                with
                the exchange of stock, notes and warrants in exchange for debt (the
                “Exchange Warrants”); and·options
                to purchase common stock issued to ITOCHU Corporation (“ITOCHU Options”)





16


Based
      on
      the guidance in SFAS 133 and EITF 00-19, Ener1 concluded all of these
      instruments other than the Series B Preferred Stock qualified for derivative
      accounting. SFAS 133 and EITF 00-19 require Ener1 to bifurcate and separately
      account for the conversion features of the debentures and Series A preferred
      stock as embedded derivatives. Pursuant to SFAS 133, Ener1 bifurcated the
      conversion feature from the debentures and the Series A preferred stock, because
      the economic characteristics and risks of the conversion features were
      determined to not be clearly and closely related to the economic characteristics
      and risks of the Debentures. In addition, among other reasons, because
      there was no explicit cap on the amount of shares that could be issued pursuant
      to the conversion features or the warrant and option agreements, Ener1
      determined the conversion features and the warrants and options met the
      attributes of a liability and therefore recorded the fair value of the
      conversion features and the warrants as current liabilities. Ener1 is required
      to record the fair value of the conversion features and the warrants and options
      on its balance sheet at fair value with unrealized changes in the values of
      these derivatives reflected in the consolidated statement of operations as
“Gain
      (loss) on derivative liabilities.” These derivative liabilities were not
      classified as such in Ener1's historical financial statements. In order to
      reflect the correction of these errors, Ener1 has restated its financial
      statements for the year ended December 31, 2004 and for the periods ended March
      31, 2005, June 30, 2005, and September 30, 2005 and filed amendments to its
      reports with the Commission reflecting these restatements.




The
      impact on the balance sheet as of March 31, 2005 and the statements of income
      for the three months ended March 31, 2005 and 2004 is as follows (dollars in
      thousands):





**December
                  31,**
              
              **March
                  31,**
              
              **Gain**
              
              
              
              **December
                  31,**
              
              **March
                  31,**
              
              **Gain****2004**
              
              **2005**
              
              **(Loss)**
              
              
              
              **2003**
              
              **2004**
              
              **(Loss)**2004
                  Debenture
              
              $
              11,627
              
              $
              6,246
              
              $
              5,381
              
              
              
              
              $
              -
              
              $
              10,240
              
              $
              83
              
              (a
              )2004
                  Debenture Warrants
              
              
              11,040
              
              
              4,960
              
              
              6,080
              
              
              
              
              
              -
              
              
              9,600
              
              
              77
              
              (a
              )2005
                  Debenture
              
              
              -
              
              
              6,544
              
              
              1,422
              
              (a
              )
              
              
              -
              
              
              -
              
              
              -2005
                  Debenture Warrants
              
              
              -
              
              
              4,452
              
              
              (640
              )
              (a
              )
              
              
              -
              
              
              -
              
              
              -EnerDel
                  Series A Preferred Stock
              
              
              1,183
              
              
              -
              
              
              1,183
              
              
              
              
              
              -
              
              
              -
              
              
              -Series
                  A Warrants
              
              
              5,944
              
              
              4,008
              
              
              1,936
              
              
              
              
              
              -
              
              
              -
              
              
              -Series
                  B Warrants
              
              
              7,096
              
              
              5,700
              
              
              1,396
              
              
              
              
              
              -
              
              
              -
              
              
              -Battery
                  Warrants
              
              
              57,960
              
              
              46,230
              
              
              11,730
              
              
              
              
              
              96,600
              
              
              51,750
              
              
              44,850Exchange
                  Warrants
              
              
              16,600
              
              
              10,500
              
              
              6,100
              
              
              
              
              
              19,600
              
              
              14,300
              
              
              5,300Itochu
                  Stock Options
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              13,957
              
              
              1,028
              
              
              12,929$
              111,450
              
              $
              88,640
              
              $
              34,588
              
              
              
              
              $
              130,157
              
              $
              86,918
              
              $
              63,239





(a)
      The
      original liability was recorded out of the proceeds of the debentures therefore
      the gain (loss) in the first period after issuance of the instrument is not
      equal to the balance sheet amount.





Because
      the conversion option for the Series B Preferred Stock is contingent, the Series
      B Preferred Stock is not within the scope of SFAS 133 and EITF 00-19. If the
      contingency is resolved in the future and the holder receives the ability
      to convert, Ener1 will assess whether the conversion option meets the definition
      of a derivative under SFAS 133.





13.    
      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 $3.5 million. In addition, the Company granted the following options
      to ITOCHU to increase its ownership of common stock at the following prices:
      During the six month period from July 25, 2003 through January 24, 2004, ITOCHU
      had the option to purchase up to 12,461,861 shares of common stock, for $0.70
      per share. During January 2004, ITOCHU exercised a portion of these options
      and
      purchased 1,500,000 shares for $1,050,000. During the period from January 25,
      2004 through January 31, 2005, ITOCHU had the option to purchase up to 9,346,396
      shares of common stock for $4.00 per share. These options expired unexercised
      on
      January 31, 2005.





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, 2005, the Company’s original investment in EnerStruct was reduced
      by $986,953 which represents the Company’s share of EnerStruct’s losses through
      that date.





17


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’s pending patent applications. In
      July 2004, this license became non-exclusive. In October 2004, this license
      was
      transferred to EnerDel. ITOCHU has also licensed to EnerStruct, on an exclusive
      basis, several of its patents relating to its lithium battery technologies.
      In
      April 2005, EnerDel entered into an agreement with EnerStruct, under which
      EnerDel paid EnerStruct $1 million in prepayment for engineering services
      related to optimization of EnerDel’s lithium battery production lines and
      further development of EnerStruct’s high-rate battery technology. If development
      of this technology is successfully completed, use of such technology would
      be
      licensed to EnerDel on terms set forth in the agreement and certain other terms
      to be negotiated at that time.





Summarized
      information of EnerStruct is as follows as of March 31, 2005 and for the three
      month period then ended:





Cash
            
            $
            985,697Total
                assets
            
            
            1,423,332Total
                liabilities
            
            
            37,340Net
                loss
            
            $
            (344,999
            )





18





14.    
      RELATED PARTY TRANSACTIONS:





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 Ener1Group and its
      subsidiaries, and Ener1 Group has billed the Company for the actual cost of
      these services and employees. As of March 31, 2005, the net balance due to
      the
      Company from Ener1 Group and its subsidiaries was $89,824.





Ener1,
      Ener1's wholly owned subsidiary, Ener1 Acquisition Corp. (“Acquisition”), and
      Splinex Technology, Inc. (“Splinex”) a related party, entered into a Merger
      Agreement dated as of June 9, 2004, providing for the merger of Acquisition
      into
      Splinex. Upon closing in January 2005, Ener1 received 5,000,000 shares of
      Splinex common stock. Ener1 declared a dividend to distribute these 5,000,000
      shares of Splinex common stock to its shareholders of record on January 17,
      2005. In exchange for the 5,000,000 shares, Ener1 paid $150,000 of the expenses
      incurred in connection with the registration under the Securities Act of the
      distribution of these shares to Ener1's shareholders. The terms of the merger
      were negotiated on an arm's-length basis by an independent committee of Ener1's
      Board of Directors. The independent committee engaged a financial adviser,
      Capitalink, L.C., to assist the committee in connection with its evaluation
      of
      the transaction. Capitalink delivered a fairness opinion to the independent
      committee indicating that the merger consideration was fair, from a financial
      point of view, to Ener1's non-affiliated stockholders. Based on the foregoing,
      Ener1 concluded that $150,000 represented the fair value of the 5,000,000 shares
      of Splinex common stock that Ener1 received in the merger. Ener1 recorded a
      dividend of $150,000, which amount represented the value of the Splinex common
      stock on the date the dividend was declared.








Ener1's
      primary business purpose in approving the Splinex merger was to provide its
      shareholders with the opportunity to participate in the future value of Splinex,
      which Ener1's Board of Directors believed had the potential to become a leading
      three-dimensional graphics software company.





Two
      of
      the Company’s directors, Dr. Peter Novak and Mike Zoi, collectively beneficially
      own 75% of the outstanding common stock of Ener1 Group, Inc., which owns
      approximately 88% of the outstanding common stock of the Company. Novak and
      Zoi
      also beneficially own an aggregate of 25% of the voting membership interests
      (and an aggregate of 25.5% of the economic membership interests) of Splinex,
      LLC, which holds approximately 95% of the outstanding common stock of Splinex.
      The remaining membership interests of Splinex, LLC are held by Mikhail
      Zingarevich (a director of Splinex and the brother of Boris Zingarevich, a
      25%
      shareholder of Ener1 Group), 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 was also the President of Splinex from its inception
      February 7, 2004 to August 31, 2004.





15.    
      ENERDEL FORMATION





On
      October 26, 2004, the Company and each of Delphi Automotive Systems, LLC and
      Delphi Technologies, Inc. (collectively, “Delphi”) contributed their lithium
      battery assets to a newly organized Delaware corporation, EnerDel, Inc.
      (“EnerDel”). The Company completed the transactions pursuant to, among other
      documents, a Formation, Subscription and Stockholders’ Agreement (the “Formation
      Agreement”) by and between the Company and Delphi, dated as of October 20, 2004.
      Pursuant to the Formation Agreement, the Company received 80.5% of EnerDel’s
      issued and outstanding shares of common stock in consideration for the
      contribution by the Company and its subsidiaries of $15 million in cash, the
      right to use a building and certain lithium battery equipment owned by the
      Battery Company with an option to purchase such equipment for $1, and ownership
      of certain intellectual property, subject to exclusive, perpetual and
      royalty-free licenses granting Ener1 the right to use such intellectual property
      in areas not related to lithium batteries.


19





Also,
      pursuant to the Formation Agreement, Delphi received 19.5% of EnerDel's issued
      and outstanding shares of common stock, 8,000 shares of EnerDel’s Series A
      Preferred Stock (see Note 18); immediately exercisable warrants with a seven
      year term to purchase up to 1.75 million shares of the Company's common stock
      for $0.70 per share; and immediately exercisable warrants with a seven year
      term
      to purchase up to 5.25 million shares of the Company’s common stock for $1.00
      per share. In consideration of the foregoing, Delphi contributed to EnerDel
      its
      lithium battery-related equipment valued at $8,517,600 and its lithium
      battery-related patent portfolio valued at $5,100,000, which is licensed back
      to
      Delphi for non-lithium battery uses under an exclusive, perpetual and
      royalty-free license. In addition, Delphi entered into an agreement with EnerDel
      pursuant to which EnerDel subleased those portions of Delphi’s Indianapolis
      facilities that contain lithium battery operations.





The
      Company recorded a charge to additional paid in capital of approximately $1
      million as a result of its contribution of assets to EnerDel in excess of its
      proportionate ownership of EnerDel.




Some
      of
      the assets transferred by Delphi and Ener1 to EnerDel were considered to be
      assets to be used in Research and Development ("R&D") activities because the
      assets were being used in product development and prototyping efforts at the
      time of the contribution and none of the products under development were
      considered to be technologically or economically feasible. Although EnerDel
      expects to use the transferred assets in R&D activities on future product
      development and prototyping projects or for production of lithium batteries,
      because such uses are contingent upon the successful completion of current
      R&D projects, this equipment was expensed to R&D upon acquisition in
      accordance with Statement of Financial Accounting Standards No. 2, "Accounting
      for Research and Development Costs” ("SFAS No. 2"), which requires that assets
      to be used in R&D activities are to be immediately charged to income unless
      an “alternative future use” for the asset exists.




Consequently,
      due to the inability to meet the requirements for “alternative future uses” set
      forth in SFAS No. 2, the Company recorded the value of these assets as a charge
      to R&D expense. The schedule below sets forth the components of this charge
      to R&D expense:





Value
                of machinery and equipment transferred from Ener1 Battery Company
                to be
                used in research and development activities
            
            $
            1,162,000Value
                of intellectual property transferred from Delphi
            
            
            5,100,000Value
                of machinery and equipment transferred from Delphi
            
            
            8,518,000R
                & D materials acquired from Delphi
            
            
            143,000Total
                charges to R&D expense for transferred assets
            
            $
            14,923,000




20


An
      independent valuation expert employed by the Company used the income approach
      to
      value the lithium battery related equipment and intellectual property
      contributed by Delphi to EnerDel. In developing a value for the developed and
      in-process technology, the valuation expert considered all available valuation
      methods and employed a form of the Income Approach known as the Multi-Period
      Excess Earnings Model. This model attempts to quantify the magnitude of earnings
      generated by the specific asset being examined and then discounts that flow
      of
      cash to present value using a discount rate reflective of the relevant level
      of
      associated risk.





The
      primary assumption used in the application of the Multi-Period Excess Earnings
      Model is the discount rate used to calculate present value. The discount rate
      employed in the valuation of the assets contributed by Delphi to EnerDel was
      26.3%





16.    
      ENER1 GROUP FINANCING





Effective
      as of October 15, 2004, the Company entered into an agreement with Ener1 Group
      under which Ener1 Group agreed to purchase, from time to time, at the Company’s
      request, up to 30,000 shares of the Series B Preferred Stock at a purchase
      price
      of $100.00 per share (or an aggregate purchase price of $3,000,000), and
      warrants to purchase up to 833,334 shares of its common stock at an exercise
      price of $1.25 per share, and warrants to purchase up to 833,334 shares of
      its
      common stock at an exercise price of $1.50 per share. Under the agreement,
      if
      the Company requires Ener1 Group to purchase any of the Series B Preferred
      Stock
      and warrants pursuant to this agreement, the Company is required to pay Ener1
      Group a fee equal to one third of the aggregate purchase price for the
      securities purchased by Ener1 Group in return for Ener1 Group’s assistance in
      arranging a prior sales of Series B Preferred Stock. In March 2005, at the
      Company’s request, Ener1 Group purchased 2,500 of the Company’s Series B
      Preferred stock and warrants to purchase 13,889 shares of the Company’s common
      stock, for an aggregate purchase price of $250,000, and Ener1 paid Ener1 Group
      a
      fee of $83,333.





17. RESTATEMENT
      AND RECLASSIFICATIONS OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS





***Summary
      of Restatement Items***





The
      consolidated financial statements for the three months ended March 31, 2004
      and
      2005 and related disclosures included in this Amendment No. 1 to Quarterly
      Report on Form 10-QSB have been restated. On December 15, 2005, Ener1 concluded
      that it would be necessary to restate its financial results for the fiscal
      year
      ended December 31, 2004 and for the interim periods ended March 31 and June
      30,
      2005 to reflect additional non-operating gains and losses related to the
      classification of and accounting for: (1) the conversion feature of the 2004
      and
      2005 Debentures, the warrants to purchase common stock associated with the
      2004
      and 2005 Debentures and the amortization expense associated with the discount
      recorded with respect to the 2004 and 2005 Debentures and financing costs
      incurred in connection with the 2004 Debentures, (2) the EnerDel Inc. Series
      A
      Convertible Preferred Stock issued in November, 2004 ("Preferred Stock") and
      associated warrants and (3) the warrants to purchase common stock issued to
      Ener1 Group, Inc. in September 2002 and warrants to purchase common stock issued
      to purchasers of Ener1's Series B Preferred Stock. In March 2006, Ener1
      determined that it was also necessary to restate its previously issued financial
      statements for the three months ended March 31, 2004 and 2005 to reflect
      additional gains and losses related to the classification of and accounting
      for
      options to purchase Ener1's common stock issued to a business partner in July
      2003 and warrants to purchase Ener1's common stock issued to Ener1's majority
      stockholder in November 2003, and to reflect additional interest expense related
      to the classification of and accounting for warrants issued to the placement
      agent for the 2004 Debentures.





Ener1
      had
      previously classified the value of these conversion features and warrants and
      options to purchase common stock, when applicable, as equity. After further
      review, Ener1 has determined that these instruments should have been classified
      as derivative liabilities and therefore, the fair value of each instrument
      must
      be recorded as a derivative liability on Ener1's balance sheet. Changes in
      the
      fair values of these instruments will result in adjustments to the amount of
      the
      recorded derivative liabilities and the corresponding gain or loss will be
      recorded in Ener1's statement of operations. At the date of the respective
      conversion of the each respective instrument (or exercise of the warrants,
      or
      options as the case may be), the corresponding derivative liability will be
      reclassified as equity.





The
      financial statements and other financial information included in this is
      Amendment No. 1 to Quarterly Report on Form 10-QSB have been restated in
      accordance with the changes described above. The impact of the adjustments
      related to the classification of and accounting for the conversion features
      and
      warrants and options on Ener1's consolidated statements of operations for the
      three months ended March 31, 2004 and 2005 are summarized below:  (dollars
      and shares in thousands, other than per share information).


21





**Three
                  Months Ended****March
                  31, 2005****As
                  Previously****Reported**
              
              **Adjustment**
              
              
              
              **As
                  restated**Gross
                  profit
              
              $
              21
              
              $
              -
              
              
              
              
              $
              21Total
                  operating expenses
              
              
              5,982
              
              
              (167
              )
              (1)
              
              
              
              5,815Loss
                  from operations
              
              
              (5,961
              )
              
              167
              
              
              
              
              
              (5,794
              )Other
                  income and (expense)Interest
              
              
              (750
              )
              
              (1,507
              )
              (1)
                  (2)
              
              
              
              (2,257
              )Equity
                  in loss of EnerStruct, Inc.
              
              
              (169
              )
              
              -
              
              
              
              
              
              (169
              )Other
              
              
              52
              
              
              -
              
              
              
              
              
              52Gain
                  on derivative liability
              
              
              -
              
              
              34,588
              
              (3)
              
              
              
              34,588Total
                  other income (expense)
              
              
              (867
              )
              
              33,081
              
              
              
              
              
              32,214Net
                  income (loss) before minority interestand
                  discontinued operations
              
              
              (6,828
              )
              
              33,248
              
              
              
              
              
              26,420Minority
                  interest
              
              
              643
              
              
              -
              
              
              
              
              
              643Net
                  income (loss) from continuing operations
              
              
              (6,185
              )
              
              33,248
              
              
              
              
              
              27,063Loss
                  from discontinued operations
              
              
              -
              
              
              -
              
              
              
              
              
              -Net
                  income (loss)
              
              
              (6,185
              )
              
              33,248
              
              
              
              
              
              27,063Preferred
                  stock dividends
              
              
              (987
              )
              
              (223
              )
              
              
              
              
              (1,210
              )Net
                  income (loss) attributableto
                common shareholders
              
              $
              (7,172
              )
              $
              33,025
              
              
              
              
              $
              25,853Net
                  income (loss) per share, basicContinuing
                  operations
              
              $
              (0.02
              )
              $
              0.09
              
              
              
              
              $
              0.07Discontinued
                  operations
              
              $
              -
              
              $
              -
              
              
              
              
              $
              -Net
                  income (loss) per share, dilutedContinuing
                  operations
              
              $
              (0.02
              )
              $
              0.08
              
              
              
              
              $
              0.06Discontinued
                  operations
              
              $
              -
              
              $
              -
              
              
              
              
              $
              -Weighted
                  average shares outstanding:Weighted
                  average shares outstanding - Basic
              
              
              347,456
              
              
              
              
              
              
              
              
              347,456Weighted
                  average shares outstanding - Diluted
              
              
              347,456
              
              
              
              
              
              
              
              
              417,907





***(1)***
            ***Change
                due to correction of deferred financing cost on the 2004 Debentures
                and
                2005 Debentures and reclassification of associated amortization from
                operating expense to interest expense (see Notes 9 and
                10).******(2)***
            ***Change
                due to the recording of the debt discount related to the 2004 Debentures
                and 2005 Debentures (see Note 9 and 10)******(3)***
            ***Change
                due to the gain on the derivative liabilities not previously recorded
                (see
                Note 12)***





22





**Three
                    Months Ended****March
                    31, 2004****As
                    Previously****Reported**
                
                **Adjustment**
                
                
                
                **As
                    restated**Gross
                    profit
                
                $
                20
                
                $
                -
                
                
                
                
                $
                20Total
                    operating expenses
                
                
                2,970
                
                
                (153
                )
                
                (1
                )
                
                2,817Loss
                    from operations
                
                
                (2,950
                )
                
                (153
                )
                
                
                
                
                (2,797
                )Other
                    income and (expense)Interest
                
                
                (223
                )
                
                (1,379
                )
                
                (1)
                    (2
                )
                
                (1,602
                )Equity
                    in loss of EnerStruct, Inc.
                
                
                (156
                )
                
                -
                
                
                
                
                
                (156
                )Other
                
                
                23
                
                
                -
                
                
                
                
                
                23Gain
                    on derivative liability
                
                
                -
                
                
                63,239
                
                
                (3
                )
                
                63,239Total
                    other income (expense)
                
                
                (356
                )
                
                61,860
                
                
                
                
                
                61,504Net
                    income (loss) from continuing operations
                
                
                (3,306
                )
                
                62,013
                
                
                
                
                
                58,707Loss
                    from discontinued operations
                
                
                (2
                )
                
                -
                
                
                
                
                
                (2
                )Net
                    income (loss)
                
                $
                (3,308
                )
                $
                62,013
                
                
                
                
                $
                58,705Net
                    income (loss) per share, basicContinuing
                    operations
                
                $
                (0.01
                )
                
                0.18
                
                
                
                
                $
                0.17Discontinued
                    operations
                
                $
                -
                
                
                -Net
                    income (loss) per share, dilutedContinuing
                    operations
                
                $
                (0.01
                )
                
                0.15
                
                
                
                
                
                0.14Discontinued
                    operations
                
                $
                -
                
                
                -Weighted
                    average shares outstanding:Weighted
                    average shares outstanding - Basic
                
                
                346,446
                
                
                
                
                
                
                
                
                346,446Weighted
                    average shares outstanding - Diluted
                
                
                346,446
                
                
                
                
                
                
                
                
                420,083





***(1)***
            ***Change
                due to correction of deferred financing cost on the 2004 Debentures
                (see
                Note 10) and reclassification of associated amortization from operating
                expense to interest expense.******(2)***
            ***Change
                due to the recording of the debt discount related to the 2004 Debentures
                (see Note 10)******(3)***
            ***Change
                due to the gain on the derivative liabilities not previously recorded
                (see
                Note 12)***


23




***Balance
      Sheet Impact***





In
      addition to the effects on Ener1's 2005 and 2004 consolidated statements of
      operations discussed above, the restatement impacted Ener1's consolidated
      balance sheets as of March 31, 2005 and 2004. The following tables set forth
      the
      effects of the restatement adjustments on Ener1's 2005 and 2004 consolidated
      balance sheet (dollars in thousands):




**As
                  of March 31, 2005****As
                  Previously****Reported**
              
              **Adjustment**
              
              
              
              **As
                  restated****ASSETS**Total
                  current assets
              
              $
              21,345
              
              
              
              
              
              
              
              $
              21,345Property
                  and equipment, net
              
              
              13,213
              
              
              
              
              
              
              
              
              13,213Investment
                  in EnerStruct, Inc.
              
              
              1,016
              
              
              
              
              
              
              
              
              1,016Deferred
                  debenture costs
              
              
              1,034
              
              
              3,638
              
              
              (1
              )
              
              4,672Other
              
              
              237
              
              
              
              
              
              
              
              
              237Total
                  assets
              
              $
              36,845
              
              $
              3,638
              
              
              
              
              $
              40,483**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**Current
                  liabilitiesDerivative
                  liability
              
              
              -
              
              
              88,640
              
              
              (2
              )
              
              88,640Other
                  current liabilities
              
              
              2,309
              
              
              -
              
              
              
              
              
              2,309Total
                  current liabilities
              
              
              2,309
              
              
              88,640
              
              
              
              
              
              2,309Long-term
                  debt
              
              
              85
              
              
              -
              
              
              
              
              
              85$19,700
                  convertible debentures
              
              
              -
              
              
              4,928
              
              
              (3
              )
              
              4,928$14,225
                  convertible debentures
              
              
              11,306
              
              
              (8,689
              )
              
              (3
              )
              
              2,617Redeemable
                  convertible preferred stock:EnerDel,
                  Inc. Series A Preferred
              
              
              4,591
              
              
              (1,405
              )
              
              (4
              )
              
              3,186Series
                  B Preferred
              
              
              11,660
              
              
              (657
              )
              
              (4
              )
              
              11,003Total
                  liabilities
              
              
              29,951
              
              
              (82,817
              )
              
              
              
              
              112,768Minority
                  interest
              
              
              3,227
              
              
              -
              
              
              
              
              
              3,227Commitments
                  and contingencies**STOCKHOLDERS'
                  DEFICIT**Total
                  stockholders' deficit
              
              
              3,667
              
              
              (79,179
              )
              
              (5
              )
              
              (75,512
              )Total
                  liabilities and stockholders' deficit
              
              $
              36,845
              
              $
              (3,638
              )
              
              
              
              $
              40,483




(1)
            Change
                due to recording of deferred financing cost on the 2004 Debentures
                and
                2005 Debentures (see Note 9 and 10)(2)
            Change
                due to the recording of a liability for warrants and conversion features
                determined to be a derivative (see Note 12)(3)
            Change
                due to recording of discount on the 2004 Debentures and 2005 Debentures
                (see Note 9 and 10)(4)
            Change
                due to the amortization of discount on preferred stock (See note
                11).(5)
            Change
                due to recording derivatives and the discount on 2004 Debentures
                and 2005
                Debentures and amortization of deferred debenture costs and discount
                on
                preferred stock


24





**As
                  of March 31, 2004****As
                  Previously****Reported**
              
              **Adjustment**
              
              **As
                  restated****ASSETS**Total
                  current assets
              
              $
              10,482
              
              
              
              
              $
              10,482Property
                  and equipment, net
              
              
              22,447
              
              
              
              
              
              22,447Investment
                  in EnerStruct, Inc.
              
              
              1,620
              
              
              
              
              
              1,620Deferred
                  debenture costs
              
              
              
              
              
              4,300
              (1)
              
              4,300Other
              
              
              51
              
              
              
              
              
              51Total
                  assets
              
              $
              34,600
              
              $
              4,300
              
              $
              38,900**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**Current
                  liabilitiesDerivative
                  liability
              
              
              -
              
              
              86,918
              (2)
              
              86,918Other
                  current liabilities
              
              
              1,893
              
              
              
              
              
              1,893Total
                  current liabilities
              
              
              1,893
              
              
              86,918
              
              
              88,811Long-term
                  debt
              
              
              107
              
              
              
              
              
              107$19,700
                  convertible debentures
              
              
              -
              
              
              1,000
              (3)
              
              1,000Total
                  liabilities
              
              
              2,000
              
              
              87,918
              
              
              89,918Commitments
                  and contingencies**STOCKHOLDERS'
                  DEFICIT**Total
                  stockholders' deficit
              
              
              32,600
              
              
              (83,618
              )
                  (4)
              
              (51,018
              )Total
                  liabilities and stockholders' deficit
              
              $
              34,600
              
              $
              4,300
              
              $
              38,900







(1)
            Change
                due to recording of deferred financing cost on the 2004 Debentures
                (see
                Note 9)(2)
            Change
                due to recording of a liability for warrants and conversion features
                determined to be a derivative (see Note 12)(3)
            Change
                due to recording of amortization of discount on the 2004 Debentures
                (see
                Note 9)(4)
            Change
                due to recording derivatives and the discount on 2004 Debentures
                and
                amortization of deferred debenture costs and discount on preferred
                stock





18.    
      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 patent rights of other third parties. The
      Company cannot predict the outcome of any such claims or the effect of any
      such
      claims on the Company’s operating results, financial condition, or cash
      flows.





Lease
      Commitments





In
      April
      2005 the Company entered into a 5 year and 2 month operating lease for office
      facilities located at 712 Fifth Avenue, New York, New York. The lease provides
      for fixed rent of $426,240 per annum through the balance of the lease
      term.


25





19.       
      STOCK AND OPTION ISSUANCES DURING QUARTER ENDED MARCH 31, 2005





Effective
      March 1, 2005, pursuant to a financing commitment agreement between the Company
      and Ener1 Group, (Note 10), the Company issued 2,500 shares of Series B
      Convertible Preferred Stock to Ener1 Group.





Effective
      March 1, 2005, as part of the financing commitment agreement between the Company
      and Ener1 Group, the Company also issued warrants to purchase 69,445 shares
      of
      the Company’s common stock at an exercise price of $1.25 per share, and warrants
      to purchase 69,445 shares of the Company’s common stock at an exercise price of
      $1.50 per share.





Effective
      March 14, 2005, pursuant to the issuance of a convertible debenture in the
      amount of $7,122,000, (Note 10), 2,136,600 shares of warrants to purchase common
      stock at an exercise price of $1.15 and 1,424,400 shares at an exercise price
      of
      $1.25 were granted to Satellite Strategic Finance Partners, Ltd.





Effective
      March 14, 2005, pursuant to the issuance of a convertible debenture in the
      amount of $2,878.000, (See Note 10), 863,400 shares of detachable warrants
      at an
      exercise price of $1.15 and 575,600 shares of detachable warrants at an exercise
      price of $1.25 were granted to Satellite Strategic Finance Associates,
      LLC.





Effective
      March 14, 2005, pursuant to the issuance of a convertible debenture in the
      amount of $2,000,000, (See Note 10), 600,000 shares of detachable warrants
      at an
      exercise price of $1.15 and 400,000 shares of detachable warrants at an exercise
      price of $1.25 were granted to Omicron Master Trust.





Effective
      March 14, 2005, pursuant to the issuance of a convertible debenture in the
      amount of $750,000, (See Note 10), 225,000 shares of Series A detachable
      warrants at an exercise price of $1.15 and 150,000 shares of Series B detachable
      warrants at an exercise price of $1.25 were granted to Castle Creek Technology
      Partners, LLC.





Effective
      March 14, 2005, pursuant to the issuance of a convertible debenture in the
      amount of $725,000, (See Note 10), 217,500 shares of detachable warrants at
      an
      exercise price of $1.15 and 145,000 shares of detachable warrants at an exercise
      price of $1.25 were granted to SG Private Banking (Suisse) S.A.





Effective
      March 14, 2005, pursuant to the issuance of a convertible debenture in the
      amount of $385,000, (See Note 10), 115,500 shares of detachable warrants at
      an
      exercise price of $1.15 and 77,000 shares of detachable warrants at an exercise
      price of $1.25 were granted to Basso Multi-Strategy Holding Fund,
      Ltd.





Effective
      March 14, 2005, pursuant to the issuance of a convertible debenture in the
      amount of $115,000, (See Note 10), 34,500 shares of detachable warrants at
      an
      exercise price of $1.15 and 23,000 shares of detachable warrants at an exercise
      price of $1.25 were granted to Basso Private Opportunity Holding Fund,
      Ltd.





Effective
      March 14, 2005, pursuant to the issuance of a convertible debenture in the
      amount of $250,000, (See Note 10), 75,000 shares of detachable warrants at
      an
      exercise price of $1.15 and 50,000 shares of detachable warrants at an exercise
      price of $1.25 were granted to Iroquois Capital LP.





26


**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 our expectations
      regarding future events or future financial performance. Any statements
      contained in this report that are not statements of historical fact may be
      deemed forward-looking statements. In some cases, forward-looking statements
      can
      be identified by terminology such as “may,” “will,” “should,” “expect,” “plan,”
“anticipate,” “intend”, “believe,” “estimate,” “predict,” “potential” or
“continue,” or the negative of such terms or other comparable terminology. These
      statements are only predictions and are subject to a number of assumptions,
      risks and uncertainties that could cause actual results to differ materially
      from those expressed or implied in the forward-looking statements. The following
      important factors, in addition to those discussed in our filings with the
      Securities and Exchange Commission from time to time, and other unforeseen
      events or circumstances, could affect our future results and could cause those
      results or other outcomes to differ materially from those expressed or implied
      in our forward-looking statements: 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 We had
      no significant sales from continuing operations in either of the three month
      periods ended March 31, 2005 and 2004.





Gross
      Profit (Loss) We had
      no significant gross profit or loss from continuing operations in either of
      the
      three month periods ended March 31, 2005 and 2004.





Research
      & Development Expenses (“R&D”) R&D
      expenses increased $1,744,000 during the three months ended March 31, 2005,
      from
      $510,000 to $2,254,000 when compared to the same period in 2004. This increase
      is primarily due to an increase of $1,248,000 in battery R&D resulting from
      the formation of EnerDel Inc; an increase of $283,000 in R&D conducted by
      NanoEner due to the purchase of VDS equipment for research and development;
      and
      an increase of $213,000 in Fuel Cell R&D to build sample fuel cell
      stacks.





General
      and Administrative Expenses (“G&A”) G&A
      expenses increased 20%, or approximately $461,000, from $2,307,000 to $2,768,000
      during the three months ended March 31, 2005, when compared to the same period
      in 2004. This increase is primarily due to an increase of 636%, or $261,000,
      in
      depreciation because of battery production lines being put into service during
      the quarter ended March 31, 2005; an increase of 71%, or $150,000, in outside
      services; an increase of 454%, or $143,000, in rent expense due to the
      acquisition of office space from Delphi; an increase of $74,000 from $0 in
      computer and IT costs to support the new engineering center in Indianapolis;
      an
      increase of 241%, or $56,000, in travel and travel related expenses due to
      the
      new office in Indianapolis; an increase of 715%, or $25,000, in postage
      expenses; and an increase of 222%, or $25,000, in office supplies partially
      offset by a decrease of 12.2%, or $112,000, in administrative salaries; and
      a
      decrease of 23%, or $184,000, in professional fees.





Manufacturing
      Pre-production Costs. Beginning in June 2004, we began preparing our battery manufacturing plant
      in
      Fort Lauderdale to begin production, in addition to continuing our research
      and
      development activities. Manufacturing pre-production cost for the three months
      ended March 31, 2005 and 2004 were $793,000 and $0 respectively. These expenses
      were incurred for implementing new manufacturing infrastructure, including
      new
      personnel, policies, and procedures.





Gain
      on derivative liability




The
      gain
      on derivative liability for the three months ended March 31, 2005 decreased
      by
      $29 million to $35 million for the three months ended March 31, 2005 compared
      to
      $63 million in the prior year period. The decrease was due to corresponding
      decrease in the reported value of freestanding derivatives and
      embedded derivatives resulting from decreases in the market value of our
      common stock at the end of the quarter.


27




Liquidity
      and Capital Resources





At
      March
      31, 2005, we had a working capital deficit of $70 million primarily due to
      a
      derivative liability of $89 million. A s
      of
      December 31, 2004, we had working capital excluding
      derivative liability of
      $11.8
      million compared to $19.0 million as of March 31, 2005. Our working capital
      at
      March 31, 2005 included $21 million of cash and equivalents offset by $2 million
      in current liabilities. During the period from December 31, 2004 through March
      31, 2005, our working capital excluding derivative liability increased by $7.2
      million. This increase was primarily the result of the receipt of net proceeds
      of $13.1 million from the sale of our 7.5% Senior Secured Convertible Debentures
      due March 2009 and warrants to purchase our common stock.





During
      the three month period ended March 31, 2005 we purchased $152,728 of capital
      equipment, of which: $20,920 was for manufacturing equipment in our battery
      manufacturing plant; and $131,808 was for administrative equipment, primarily
      computing equipment.





We
      will
      require additional capital within the next twelve months to support the
      activities of EnerDel, EnerFuel and NanoEner. We intend to seek additional
      financing, which may take the form of equity or debt funding. We cannot assure
      you that any such required capital will be available on terms acceptable to
      us,
      if at all, and, at such time or times as it we require it. 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.





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 (“SFAS 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.





In
      December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment
      (Statement 123(R)), which is a revision of FASB Statement No. 123, Accounting
      for Stock-Based Compensation (Statement 123). Statement 123(R) supersedes APB
      Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB
      Statement No. 95, Statement of Cash flows. Statement 123 (R) requires all
      share-based payments to employees, including grants of employee stock options,
      to be recognized at the date of grant in the income statement based on their
      fair values. Pro forma disclosure is no longer an alternative. Statement 123(R)
      is effective at the beginning of the first interim or annual period beginning
      after December 15, 2005. The impact of adoption of Statement 123(R) cannot
      be
      accurately predicted at this time since it will depend on levels of share-based
      payments in the future. However, had we adopted Statement 123(R) in prior
      periods, the impact of the standard would have approximated the impact of
      Statement 123 as described in the disclosure of pro forma net income and
      earnings per share in the notes to our financial statements. Statement 123(R)
      also requires the benefits of tax deductions in excess of recognized
      compensation cost to be reported as a financing cash flow, rather than as an
      operating cash flow as required under current literature. This requirement
      will
      reduce net operating cash flows and increase financing cash flows in periods
      after adoption. The Company cannot estimate what those amounts will be in the
      future because they depend on, among other things, when employees exercise
      stock
      options. We expect to adopt Statement 123(R) on January 1, 2006.




28





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, 2005, we carried out an evaluation, under the supervision and with
      the
      participation of our management, including the individuals then serving as
      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.





After
      the
      conclusion of the evaluation described above, in connection with the completion
      of its review of our financial statements for the quarter ended September 30,
      2005, our independent registered public accounting firm identified deficiencies
      that existed in the design or operation of our internal control over financial
      reporting that it considers to be “material weaknesses.” The Public Company
      Accounting Oversight Board has defined a material weakness as a “significant
      deficiency or combination of significant deficiencies that results in more
      than
      a remote likelihood that a material misstatement of the annual or interim
      financial statements will not be prevented or detected.”





Specifically,
      our independent auditors identified deficiencies in our internal controls and
      disclosure controls related to the accounting for convertible debt with
      detachable warrants and convertible preferred stock with detachable warrants,
      as
      well as deficiencies in the valuation of such financial instruments. Our
      independent auditors also noted deficiencies related to late filings with the
      Securities Exchange Commission and failure to properly classify mandatorily
      redeemable preferred stock as a liability. The financial statements for the
      quarters ended March 31, 2004 and 2005 included in this Quarterly Report on
      Form
      10-QSB have been restated in order to properly classify mandatorily redeemable
      preferred stock as a liability and appropriately account for convertible debt
      with detachable warrants and convertible preferred stock with detachable
      warrants.





As
      a
      result of the identification of the material weakness in our internal control
      over financial reporting described above and our determination that as a result
      of this material weakness, it was necessary to restate our financial statements
      for the quarters ended March 31, 2004 and 2005, we re-evaluated, under the
      supervision and with the participation of the individuals now serving as our
      Chief Executive Officer and our Chief Financial Officer, of the effectiveness
      of
      the design and operation of our disclosure controls and procedures as of March
      31, 2005. Based on that evaluation, our Chief Executive Officer and our Chief
      Financial Officer concluded that our disclosure controls and procedures were
      ineffective as of March 31, 2005.





There
      were no changes in our internal control over financial reporting during the
      quarter ended March 31, 2005 that have materially affected, or are reasonably
      likely to materially affect, our internal control over financial reporting.





29


PART
      II.  OTHER INFORMATION





Item
      1.  Legal Proceedings





We
      receive communications from time to time alleging various claims against us
      and
      our subsidiaries. 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.





Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds





On
      March
      1, 2005, we issued 2,500 shares of Series B Preferred Stock and warrants to
      purchase 138,890 shares of our common stock, for an aggregate purchase price
      of
      $250,000 to Ener1 Group. The issuance of these securities was exempt from
      registration under Rule 506 of Regulation D and under Section 4(2) of the
      Securities Act of 1933, as sales not involving a public offering.





30





Item
              6.
            Exhibits


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 the Registrant’s Current
                Report on Form 8-K dated January 21,
                2004.





4.4
            Form
                of 7.5% Senior Secured Convertible Debenture incorporated by reference
                to
                Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated March 15,
                2005.





4.5
            Form
                of Warrant to Purchase Common Stock incorporated by reference to
                Exhibit
                4.2 to the Registrant’s Current Report on Form 8-K dated March 15,
                2005.





4.6
            Registration
                Rights Agreement, dated as of March 14, 2005, by and among the Registrant
                the entities whose names appear on the signature pages thereof
                incorporated by reference to Exhibit 4.3 to the Registrant’s Current
                Report on Form 8-K dated March 15,
                2005.





4.7
            Certificate
                of Designation of Non-Voting, Cumulative and Redeemable Series A
                Preferred
                Stock of EnerDel, Inc., dated October 20, 2004, incorporated by reference
                to Exhibit 4.6 to Amendment No. 1 to Ener1‘s Quarterly Report on Form
                10-QSB/A for the period ending September 30,
                2004.





4.8
            Registration
                Rights Agreement by and between Ener1 and Delphi Automotive Systems
                LLC,
                dated October 20, 2004, incorporated by reference to Exhibit 10.33
                to
                Ener1‘s Annual Report on Form 10-KSB for the period ending December 31,
                2004.





4.9
            Form
                of Warrant to Purchase Common Stock of Ener1, dated October 20, 2004
                Issued to Delphi Automotive Systems, LLC, incorporated by reference
                to
                Exhibit 4.4 to Amendment No. 1 to Ener1‘s Quarterly Report on Form
                10-QSB/A for the period ending September 30,
                2004.





4.10
            Form
                of Warrant to Purchase Common Stock of Ener1, dated December 9, 2004
                Issued to Merriman Curhan Ford & Co, incorporated by reference to
                Exhibit 4.10 of the Registrant’s Registration Statement on Form SB-2 filed
                on May 9, 2005 (Commission File No.
                333-124745).





4.11
            Warrant
                issued to Cofis Compagnie Fiduciaire S.A. dated October 15, 2004
                to
                purchase from Ener1, Inc., 4,166,666 shares of Common Stock of the
                Company
                at a price per share of $1.25, incorporated by reference to Exhibit
                4.4 to
                the Registrant’s Annual Report on Form 10-KSB for the period ending
                December 31, 2004.





4.12
            Warrant
                issued to Cofis Compagnie Fiduciaire S.A. dated October 15, 2004
                to
                purchase from Ener1, Inc., 4,166,666 shares of Common Stock of the
                Company
                at a price per share of $1.50, incorporated by reference to Exhibit
                4.5 to
                the Registrant’s Annual Report on Form 10-KSB for the period ending
                December 31, 2004.





10.1
            Form
                of Security Agreement dated as of March 14, 2005 by and among Ener1,
                Inc.
                and the purchasers of Ener1‘s 7.5% Senior Secured Convertible Debentures
                incorporated by reference to Item 10.2 of Registrant’s Current Report on
                Form 8-K dated March 15, 2005.





10.2
            Form
                of Securities Purchase Agreement, dated as of March 11, 2005 by and
                among
                Ener1, Inc. and the purchasers of Ener1‘s 7.5% Senior Secured Convertible
                Debentures incorporated by reference to Item 10.1 of Registrant’s Current
                Report on Form 8-K dated March 15,
                2005





10.3
            Form
                of Intercreditor Agreement dated as of March 11, 2004, among Ener1,
                Inc.,
                the purchasers of Ener1‘s 7.5% Senior Secured Convertible Debentures and
                the purchasers of Ener1, Inc.‘s 5% Senior Secured Convertible Debentures
                incorporated by reference to Item 10.3 of Registrant’s Current Report on
                Form 8 K dated March 15,
                2005


31





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








32





**ENER1,
      INC.** **AND SUBSIDIARIES**





**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this Amendment No. 1 to Quarterly Report on Form 10-QSB to be signed
      on its behalf of the undersigned thereunto duly authorized.




ENER1,
                INC.Dated:
                March 24, 2006
              By:
              /s/ Ronald
                StewartRonald
                StewartChief
                  Executive Officer
                (Principal Executive
                  Officer)
 Dated: March
                24, 2006
              By:
              /s/ Gerard
                HerlihyGerard
                HerlihyChief
                  Financial Officer
                (Principal
                  Financial and Accounting
                  Officer)










33