<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

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

      For the quarter ended                       Commission File Number 0-21138
           June 30, 2003

                                   ENER1, INC.
             (Exact name of registrant as specified in its charter)

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

550 West Cypress Creek Road-Suite 120                      33309
      Ft. Lauderdale, Florida                            (Zip Code)
     (Address of principal
       executive offices)

                                 (954) 202-4442
              (Registrant's telephone number, including area code)

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

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

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

         CLASS                                           Outstanding as of
Common stock, par value                                    AUGUST 19, 2003
    $.01 per share                                          323,890,520

<PAGE>

                          ENER1, INC. AND SUBSIDIARIES
                 FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 2003

                                      INDEX

                                                                            PAGE
                                                                            ----
PART I. FINANCIAL INFORMATION

      Item 1.   Financial Statements

                         Condensed Consolidated Balance Sheet
                           (unaudited) as of June 30, 2003..................   3

                         Condensed Consolidated Statements of
                           Operations (unaudited) for the three and six
                           months ended June 30, 2003 and 2002 .............   4

                         Condensed Consolidated Statements of
                           Cash Flows (unaudited) for the six
                           months ended June 30, 2003 and 2002.............. 5-6

                         Notes to Condensed Consolidated
                           Financial Statements (unaudited)

      Item 2.   Management's Discussion and Analysis of Financial
                Condition and Results of Operations ........................  19

      Item 3.   Controls and Procedures ....................................  24

PART II.        OTHER INFORMATION

      Item 1.   Legal Proceedings ..........................................  25

      Item 3.   Defaults Upon Senior Securities ............................  26

      Item 6.   Exhibits and Reports on Form 8-K ...........................  26

      Signatures ...........................................................  27


                                       2
<PAGE>

                          ENER1, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)
                        (IN THOUSANDS EXCEPT SHARE DATA)

                                                                        June 30,
                                                                          2003
                                                                        --------
                                     ASSETS
Current assets
    Cash and equivalents ............................................        52
    Trade receivables, net ..........................................        --
    Inventories .....................................................       966
    Prepaid expenses and other current assets .......................       117
                                                                        -------
          Total current assets ......................................     1,135
Property and Equipment, net .........................................    22,238
Other assets ........................................................     1,232
                                                                        -------
          Total .....................................................    24,605
                                                                        =======
          assets

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
    Accounts payable ................................................     1,836
    Customer deposits ...............................................       847
    Notes payable to stockholder ....................................     6,862
    Due to stockholder ..............................................     2,088
    Current maturities of related party debt ........................     1,672
    Accrued expenses and other current liabilities ..................     1,934
    Current maturities of mortgage payable ..........................        29
                                                                        -------
    Total current liabilities .......................................    15,268
                                                                        -------

Long-term liabilities
        Mortgage note payable on building ...........................       689
       Notes payable to bank ........................................     1,600
                                                                        -------
                                                                          2,289

Minority interest ...................................................       251
                                                                        -------

Commitments and contingencies

Stockholders' equity
     Preferred stock, par value $.01 per share, 5,000,000
        shares authorized, none issued and outstanding ..............        --
     Common stock, par value $.01 per share, 500,000,000
        shares authorized, 309,856,520 issued and outstanding .......     3,099
     Additional paid-in capital .....................................    55,853
     Accumulated deficit ............................................   (52,155)
                                                                        -------
           Total stockholders' equity ...............................     6,797
                                                                        -------
          Total liabilities and stockholders' equity ................    24,605
                                                                        =======

            See notes to condensed consolidated financial statements.


                                       3
<PAGE>

                          ENER1, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                      (IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                   Three Months Ended           Six Months Ended
                                                     June 30, 2003               June 30, 2003
                                                 -----------------------     -----------------------
                                                    2003         2002          2003          2002
                                                 ---------     ---------     ---------     ---------
<S>                                              <C>           <C>           <C>           <C>
Net sales
    Product sales ...........................    $     102     $      72     $     835     $     716
    Engineering services ....................           --           577           151         1,117
                                                 ---------     ---------     ---------     ---------
              Total .........................          102           649           986         1,833
Cost of goods sold ..........................           83         1,010           925         2,573
                                                 ---------     ---------     ---------     ---------
    Gross profit (loss) .....................           19          (361)           61          (740)
                                                 ---------     ---------     ---------     ---------
Operating expenses:
    Research and development ................          449           426           768           628
    Selling, general and administrative .....        1,073         1,787         2,050         3,255
                                                 ---------     ---------     ---------     ---------
    Total operating expenses ................        1,522         2.213         2,818         3,883
                                                 ---------     ---------     ---------     ---------
Loss from operations ........................       (1,503)       (2,574)       (2,757)       (4,623)
Other income (expense), net .................         (249)          (34)         (521)          (42)
                                                 ---------     ---------     ---------     ---------
Loss before income taxes ....................       (1,752)       (2,608)       (3,278)       (4,665)
Income taxes ................................           --            --            --             1
                                                 ---------     ---------     ---------     ---------
Loss before minority interest ...............       (1,752)       (2,608)       (3,278)       (4,666)
Minority interest in net loss ...............          109           159           189           167
                                                 ---------     ---------     ---------     ---------
Net Loss ....................................    $  (1,643)    $  (2,449)    $  (3,089)    $  (4,499)
                                                 =========     =========     =========     =========
Loss per share (basic and diluted) ..........    $   (0.01)    $   (0.01)    $   (0.01)    $   (0.02)
                                                 =========     =========     =========     =========
Weighted average
     shares outstanding .....................      309,748       305,410       309,704       292,072
                                                 =========     =========     =========     =========
</TABLE>

           See notes to condensed consolidated financial statements.


                                       4
<PAGE>

                          ENER1, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

                                                                  Six Months
                                                                Ended June 30,
                                                             -------------------
                                                               2003       2002
                                                             -------    -------
Cash provided by (used in):
Operating activities:
       Net loss ..........................................   $(3,089)   $(4,499)
       Depreciation and amortization .....................       124        410
       Foreign currency transaction gain .................        --         14
       Common stock issued for services ..................        20        138
       Minority interest in loss of subsidiary ...........      (189)      (167)
       Changes in assets and liabilities .................       877      3,304
                                                             -------    -------
         Net cash used in operating activities ...........    (2,257)      (800)
                                                             -------    -------
Investing activities:
       Capital expenditures ..............................      (431)    (1,982)
       Purchase of technology licenses ...................        --     (1,170)
                                                             -------    -------
         Net cash used in investing activities ...........      (431)    (3,152)
                                                             -------    -------
Financing activities:
       Repayment of related party debt ...................        --     (1,156)
       Repayment of short-term note payable ..............      (595)        --
       Net proceeds from issuance of common stock ........         5        945
       Proceeds from advances from stockholder ...........     2,806      2,440
       Repayment of mortgage payable .....................       (14)       (12)
       Proceeds from note payable ........................        --        208
       Proceeds from minority investment in subsidiary ...       250      1,600
                                                             -------    -------
           Net cash provided by financing activities .....     2,452      4,025
                                                             -------    -------
Net increase (decrease) in cash and equivalents ..........      (236)        73
Cash and equivalents, beginning of period ................       288      1,495
                                                             -------    -------
Cash and equivalents, end of period ......................   $    52    $ 1,568
                                                             =======    =======

            See notes to condensed consolidated financial statements


                                       5
<PAGE>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

<TABLE>
<CAPTION>
<S>                                                              <C>       <C>
Cash paid during the six months for
    Income taxes .............................................             $     1
                                                                           =======
    Interest paid ............................................   $   100   $    34
                                                                 =======   =======
Non-cash investing and financing activities:
   Equipment sold to stockholder at net book value for
           a reduction in the amount due to stockholder ......             $   103
                                                                           =======
   Advances from stockholder converted to additional paid
            in capital .......................................   $   909   $ 5,958
                                                                 =======   =======
   Equipment purchase from Parent at net book value for
         the assumption of various promissory notes to
         related parties and an increase in the amount due
          to  Parent .........................................             $12,363
                                                                           =======
</TABLE>

            See notes to condensed consolidated financial statements



                          ENER1, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NATURE OF BUSINESS, GOING CONCERN AND MANAGEMENT PLANS


                                       6
<PAGE>

The Company  has, in the past year,  changed the focus of its  business  and now
concentrates  most  of  its  effort  on  developing  and  marketing  new  energy
technologies  (lithium batteries,  fuel cells and solar cells) through its Ener1
Battery Company  subsidiary,  which it acquired from its parent  company,  Ener1
Group, Inc. in September of 2002.

On September 6, 2002, the Company entered into a merger  agreement,  pursuant to
which it acquired 100% of the outstanding capital stock of Ener1 Battery Company
("Ener1 Battery" or "Battery  Company") from the Company's parent,  Ener1 Group,
Inc. In accordance with SFAS 141 Business Combinations,  because the Company and
Ener1 Battery were entities under common control, operations of the two entities
were combined from the beginning of each period presented similar to the pooling
of interests method. The Company  previously  reported the details of operations
of the formerly separate Battery Company before the combination in the Company's
Form 8-K/A dated October 18, 2002.

Ener1 Battery  develops and markets lithium  technology  batteries for military,
industrial  and  consumer  applications,  as well as fuel cells and solar cells.
Ener1  Battery has five  patent  applications  on file with the U.S.  Patent and
Trademark  Office  relating to its  technologies  for advanced  lithium  battery
materials  and designs and is  developing  additional  technologies  for lithium
metal batteries,  fuel cells and solar cells that are expected to be the subject
of further patent applications.

The  Company  has  been  phasing  out  those  portions  of its  set  top box and
consulting  business (the "Digital Media  Technologies  Division") that have not
been  transferred  to  EnerLook  Solutions,  Inc.,  f/k/a  EnerLook  Health Care
Solutions,  Inc. (of which the Company owns  approximately 49% as of the date of
this Form 10-QSB).  EnerLook  Solutions  delivers  interactive  information  and
entertainment   systems  and  services  to  customers  in  the  hospitality  and
healthcare businesses.

On June 13,  2002 the Company  formed  Ener1  Technologies,  Inc. to develop and
market   products  and  services  for   neutralizing   the  harmful  effects  of
electromagnetic   fields  in  electric  power  transmission  lines  and  related
equipment, under an exclusive technology license.

ENER1, INC. CORPORATE STRUCTURE:

         ENER1 BATTERY - 100% OWNED SUBSIDIARY

Ener1  Battery  develops new energy  technologies  and products and services for
lithium  batteries,  fuel cells and solar,  using  patented  and patent  pending
technologies.   The  Company  believes  these  battery   technologies   will  be
particularly   useful  in  military   applications,   specialty  and  industrial
applications, such as medicine and, ultimately, in high-end consumer electronics
applications, such as 3G telecommunications products.

Ener1 Battery is considered a development  stage  company,  but is now producing
prototypes and samples of its products for internal and third party testing.


                                       7
<PAGE>

         OTHER OPERATING UNITS:

         The Company also owns 49.35% of EnerLook Solutions, Inc. f/k/a EnerLook
Health Care Solutions, Inc., which develops and markets turn-key video-on-demand
and  interactive  TV to customers in the health care and  hospitality  industry.
EnerLook  integrates  its  interactive  systems  and  services  with a  patient,
administrative,  and clinical  services for its hospital  customers and customer
and administrative  functions for its hospitality customers.  The former Digital
Media division,  which developed the proprietary set top box used by EnerLook in
its systems, has been substantially combined into EnerLook Solutions, Inc.

         On June 13,  2002,  the  Company  formed  Ener1  Technologies,  Inc. to
develop and market products for the electric power transmission industry,  using
the licensed,  patent-pending  EnerWatchTM technology for detecting,  monitoring
and  mitigating  energy  losses  and other  harmful  effects  of  transients  in
electronic circuits and systems.

BASIS OF  PRESENTATION  The  accompanying,  unaudited,  condensed,  consolidated
financial statements have been prepared in accordance with accounting principles
generally  accepted  in the  United  States of  America  for  interim  financial
information and with the instructions to Form 10-QSB for quarterly reports under
section 13 or 15 (d) of the Securities Exchange Act of 1934.  Accordingly,  they
do not include  all of the  information  and  footnotes  required by  accounting
principles  generally  accepted  in the United  States of America  for  complete
financial statements.  In the opinion of management,  all adjustments considered
necessary for a fair presentation have been included and such adjustments are of
a normal recurring nature.  Operating results for the three and six months ended
June 30, 2003 are not necessarily indicative of the results that may be expected
for the year ending  December  31, 2003.  The audited  financial  statements  at
December 31, 2002,  which are included in the  Company's  Annual  Report on Form
10-KSB,  should  be  read  in  conjunction  with  these  condensed  consolidated
financial statements.

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,  negative cash flows
from operations  since 1999 and as of June 30, 2003, had an accumulated  deficit
of $52.2 million. Cash used in operations for the years ended December 31, 1999,
2000,  2001 and 2002 was $6.1  million,  $8.2  million,  $6.2  million  and $6.5
million respectively.  The Company continued to have negative cash flows of $2.3
million from  operations  for the six months  ended June 30, 2003.  It is likely
that the Company's  operations will continue to incur negative cash flows in the
third quarter of 2003, and additional  cash will be required.  Such  conditions,
among others,  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.

MANAGEMENT  PLANS.  Through the  acquisition  of the Battery  Company from Ener1
Group,  Inc.,  the Company  has  re-directed  its focus  almost  exclusively  on
development  and  marketing  of new


                                       8
<PAGE>

energy  sources in the areas of lithium  batteries,  fuel cells and solar cells.
Therefore,  an important  contribution to the Company's future success will have
to come from its bringing the Battery  Company from a development  stage company
to production of batteries and/or other new energy products.

Both EnerLook Solutions, Inc. and Ener1 Technologies,  Inc. are also development
stage companies.

The Company will require  additional capital to pursue and complete its business
plans,  and there can be no assurance  that the capital will be  available.  The
Battery  Company has been funded in the past by its parent  company Ener1 Group,
Inc..  Ener1,  Group,  Inc.  (Parent  Company) has provided  additional debt and
equity funding of  approximately  $2.8 million during the six month period ended
June 30, 2003. The Company  believes Ener1 Group,  Inc. will continue to provide
additional working capital;  however, the Company is also pursuing other sources
of financing as well. In this connection,  on July 25, 2003, the Company secured
additional  funding of $3.5  million from ITOCHU  Corporation's  purchase of its
common  stock (See  Investment  Transaction).  All of the $3.5  million has been
received by the Company.

RECENT DEVELOPMENTS

FILING WITH SEC TO SPIN-OFF ENER1 TECHNOLOGIES, INC. SUBSIDIARY:

         Ener1 Technologies, Inc., a development stage company and subsidiary of
the Company,  filed on November 6, 2002 an SB-2 registration  statement with the
Securities  and Exchange  Commission  to register the spin-off by the Company of
100% of Ener1  Technologies'  common stock to the record holders of Ener1,  Inc.
common  stock  once a  record  date  for  the  spin-off  is  set.  The  spin-off
distribution  would  occur  once  SEC  review  of the  proposed  transaction  is
completed and the  registration  statement goes effective.  The Company believes
that the distribution will be treated as a dividend to Ener1, Inc. stockholders.

INVESTMENTS AND OTHER TRANSACTIONS WITH ITOCHU CORPORATION

         On  July  25,  2003,  the  Company  entered  into  a  Subscription  and
Investment  Agreement with ITOCHU  Corporation  ("ITOCHU"),  whereby among other
things,  in return for an  investment  by ITOCHU of $3.5  million  in cash,  the
Company issued 14 million  shares of its restricted  common stock to ITOCHU at a
price of $0.25 per share.  ITOCHU also has options to increase its  ownership in
the Company at escalating prices and in specific amounts during set periods. For
the six month period  beginning on the date of the  Subscription  and Investment
Agreement (July 25, 2003),  ITOCHU has the option to purchase  additional shares
equivalent to up to 4% of the Company's total outstanding Common Stock (computed
as of July 24, 2003) for US$0.70 per share.  During the  immediately  subsequent
six month period, ITOCHU has the option to purchase additional shares equivalent
to up to 3% of the Company's  outstanding Common Stock (also computed as of July
24, 2003) for US.2.50 per share.  The Company has completed a  transaction  with
ITOCHU on August 14, 2003 to form a new Japanese company called EnerStruct, Inc.
("EnerStruct"),  of which  ITOCHU own 51% and the Company  owns 49%. The Company
has invested $2 million in cash into  EnerStruct for the Company's 49% interest.


                                       9
<PAGE>

The Company made this  investment  on August 14, 2003,  using  proceeds from the
ITOCH  investment.  The Company has also entered into a license  agreement  with
ITOCHU,  Ener1  Battery  Company and  EnerStruct to provide  EnerStruct  with an
exclusive  license (for Japan only) to the technologies  covered by two of Ener1
Battery Company's  pending patent  applications at the U.S. Patent and Trademark
Office:  (i) U.S. Patent  Application  No.10/038,556  Solid Polymer  Electrolyte
Lithium Battery,  and (ii) U. S. Patent  Application No. 10/108,140  Methods and
Apparatus for Deposition of Thin Films.  Concurrently,  ITOCHU has also licensed
to EnerStruct patents relating to ITOCHU's high-rate battery technology).

SEGMENT REPORTING

         On  September 6, 2002,  the Company  acquired  100% of the  outstanding
stock of Ener1 Battery from the Company's parent,  Ener1 Group, Inc. On June 13,
2002,  the Company  formed Ener1  Technologies,  Inc.,  and in February 2002, it
formed a (then) 51% owned subsidiary,  EnerLook Solutions,  Inc. (f/k/a EnerLook
Health Care Solutions,  Inc.).  EnerLook Solutions has raised additional capital
during the second quarter of 2003, which has reduced the Company's  ownership to
49.35%.  These businesses are reportable  segments since they reflect  different
types of businesses  from the  Company's  original  business of  developing  and
marketing advanced  interactive digital  information and entertainment  software
and hardware systems that provide video and movies on demand, Web access, e-mail
and  interactive  TV services  delivered  through  television  for  customers in
industries  such as hospitality,  healthcare,  and other vertical  markets.  The
Company has mostly  completed  combining  the  activities  of the Digital  Media
division  and  EnerLook  Solutions,  Inc.  Former  Digital  Media net  assets of
approximately  $1.0 million were transferred to EnerLook as of May 31, 2003. The
sales, losses and other financial  information reported below by segment are for
the three and six months ended June 30, 2003 and 2002.

         Ener1 Battery was incorporated on March 1, 2001 in the State of Florida
under  the  name of Ener1  USA  Incorporated.  On  March  27,  2002,  Ener1  USA
Incorporated  changed its name to Ener1 Battery Company. In accordance with SFAS
141 Business  Combinations,  because  Ener1,  Inc. and Ener1  Battery were under
common  control,  operations of the entities were combined from the beginning of
each  period  presented  similar to the  pooling of  interests  method as if the
acquisition  occurred at the beginning of the first period presented.  Therefore
the  Battery  Company  operating   performance  is  included  in  the  financial
statements and in the  information  below for both the three-month and six-month
periods ended June 30, 2003 and 2002.

         EnerLook  Solutions,  Inc. was  successful  during the first quarter of
2003 in  implementing  its  first  hospital  system  contract,  which  generated
approximately  $146,000 in revenue,  the majority of which was  attributable  to
system equipment sales.

         The Company operated Ener1 Technologies,  Inc. during the three and six
month  ended June 30, 2003 and 2002 as a cost  center.  As a  development  stage
company,  Ener1  Technologies  did  not  have  significant  financial  statement
activity.


                                       10
<PAGE>

         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. Segment Reporting

<TABLE>
<CAPTION>
                                       Three Months Ended June 30,        Six Months Ended June 30,
                                       ---------------------------       -------------------------
                                           2003           2002               2003         2002
                                          ------         ------             ------       ------
<S>                                        <C>            <C>               <C>          <C>
Amounts in thousands

Sales:
      Digital Media Division                 102            649                840        1,833
      EnerLook Solutions, Inc.                --             --                146           --
      Ener1 Technologies, Inc.                --             --                 --           --
      Ener1 Battery Company                   --             --                 --           --
                                          ------         ------             ------       ------

       Net Sales                             102            649                986        1,833
                                          ======         ======             ======       ======

 Loss before minority interest
       Digital Media Division                523          1,529              1,124        3,198
       EnerLook Solutions, Inc.              214            325                378          351
       Ener1, Technologies, Inc.              94             60                102           71
       Ener1 Battery Company                 921            694              1,674        1,046
                                          ------         ------             ------       ------

       Loss before minority interest       1,752          2,608              3,278        4,666
                                          ======         ======             ======       ======

Assets
       Digital Media Division                                                  967        1,716
       EnerLook Solutions, Inc.                                              1,452        1,365
       Ener1 Technologies, Inc.                                                 11           --
       Ener1 Battery Company                                                22,175       21,234
                                                                            ------       ------

       Total Assets                                                         24,605       24,315
</TABLE>



                                       11
<PAGE>

REVENUE RECOGNITION

         Revenue from engineering  services  contracts is recognized as the work
is performed.  Contracts are either  time-and-material or fixed-price in nature.
With time-and-material type contracts,  revenue is calculated by multiplying the
number of hours  worked by the  contractually  agreed  upon rate per hour.  With
fixed-price type contracts,  revenue is calculated by applying the percentage of
completion  method,  which is based on the ratio of total hours incurred to date
to the total estimated hours.  Revenue  recognition must satisfy several factors
depending on the nature of the contract. These factors include the completion of
certain  contractual  milestones,  which are  verified  by the  customer  before
revenue is recognized,  and a calculation of the costs incurred and an estimated
cost to  complete  to  determine  if costs are in excess of  potential  revenue.
Contracts  generally allow for modification of the number of hours or the stated
deliverables via change orders based upon the actual work required to complete a
project and upon agreement between the Company and its customer(s).  The Company
records a loss in the current  period  during which a loss on a project  appears
probable.  The  amount  of such  loss is the  reasonably  estimated  loss on the
project  and is  recorded  immediately  upon  determination  that  the  loss  is
probable.  The Company is doing  business  with a number of start up  companies.
Generally accepted  accounting  principles require that  collectability  must be
reasonably  assured before revenue is recognized.  The Company evaluates each of
its customers who are in a start up mode and assesses its ability to pay and the
customer's recent history of payments before the Company  recognizes revenue for
services  performed.  Revenue from product  licensing  is  recognized  as earned
pursuant to the terms of the related  contract,  which generally occurs when the
Company ships equipment in conjunction  with such license.  Amounts received but
unearned as of June 30, 2003 are recorded as deferred revenue.

CONSOLIDATION OF 49.35% SUBSIDIARY (ENERLOOK SOLUTIONS, INC.)

         EnerLook  Solutions,  Inc.  ("Solutions")  was a 51%  subsidiary of the
Company at its  inception.  42.58% of Solutions  is owned by Ener1  Group,  Inc.
Solutions  recently  raised  $250,000  by sale of its  restricted  shares,  in a
private transaction, reducing the Company's ownership to 49.35%. The transaction
was exempt under Section 4(2) of the Securities Act of 1933. Since the inception
of Solutions, the Company has consolidated its operating results and its balance
sheet as part of the  Company's  consolidated  financial  statements.  Ownership
below 51% is most often recorded under the equity method of accounting, as it is
presumed that control does not exist and therefore  consolidation is prohibited.
The Company has elected to continue consolidating this subsidiary as part of its
financial  statements  because  the Company and Ener1  Group,  Inc.  are related
parties and exercise  substantial  control over the activities of the subsidiary
and in total own 91.93%. Management believes that the reduction in its ownership
percentage of Solutions by 1.65% (from 51% to 49.35%) does not materially reduce
the control over Solutions operations exercisable by the Company.

         If the Company were to report the investment in Solutions  under to the
equity  method of  accounting,  the  Company's  share of the losses of Solutions
would be  included  in its  financial  results  as a one line  item  instead  of
reflecting  sales and  expenses in the  statement of  operations.  In the equity
method of accounting,  the assets and  liabilities  of the  subsidiary  would be
shown as


                                       12
<PAGE>

a net  investment  in the  subsidiary  instead of  consolidating  the assets and
liabilities  with those of the Company.  Solutions  at June 30, 2003,  had total
assets of $1.5  million,  liabilities  of $0.6  million,  and net equity of $0.9
million.

         The Company in the second  quarter  transferred  certain  assets of its
Digital Media division to Ener1 Solutions,  Inc. in order to consolidate the set
top box business,  which  delivers  interactive  information  and  entertainment
systems and services to vertical  markets such as  hospitality  and  healthcare,
into one entity - EnerLook  Solutions  Inc..  Since  Digital Media was no longer
pursuing  contract-engineering  business, the activities of the two units became
quite similar.  As part of this restructuring of the activities of Digital Media
and Solutions, the Company transferred net assets in the amount of approximately
$1.0  million  to  Solutions,  resulting  in  an  intercompany  receivable  from
Solutions  in the amount of $0.5 million and a  contribution  of capital of $0.5
million to Solutions. Preparatory to this restructuring, Solutions sold $250,000
of its restricted shares to outside private investors,  which also increased the
equity base of Solutions.

TECHNOLOGY LICENSES

         During the six months  ended June 30,  2002,  the  Company  capitalized
approximately  $1.0 million for licenses  related to the set-top box technology.
Management  believes that this technology and the related set-top boxes will not
be fully developed and marketable  with this  technology  until mid 2004 and the
Company will not generate  significant  revenues  from the sale of set-top boxes
with this  technology  until that time.  Based on this, the Company is currently
not  amortizing  the licenses.  These  licenses will continue to be reviewed for
impairment in accordance  with SFAS No. 144. As indicated  above,  Digital Media
transferred  its  portion  of the  licenses  in the  approximate  amount of $0.8
million to Solutions to  consolidate  the activities of the set top box into one
entity.

GUARANTEE OF CERTAIN LOANS

         At June 30, 2003, Ener1 s.r.l.,  a related Italian company,  had a loan
outstanding to Meliorbanca, an Italian bank, in the amount of EURO approximately
2,367,685. This was approximately $2,700,000 in US dollars at June 30, 2003. The
loan to Meliorbanca is payable in monthly installments of EURO 100,000, starting
March 31, 2003,  with a balloon payment for the remainder on March 31, 2004. All
required  payments  under the loan have been made.  The  collateral  coverage on
specified Ener1 Battery  production  equipment is EURO 5,000,000  (approximately
US$5,540,000 as of the date of this filing). Ener1, Inc., Ener1 Group, and Ener1
Battery are guarantors on the loan, along with other related parties.

         Ener1 Group,  Inc. (the Parent  Company) has loans  outstanding  with a
principal investor,  BZINFIN,  S.A., totaling  approximately $24.3 million.  The
Battery  Company  equipment  and two of the five  pending  patents  owned by the
Battery Company  comprise a portion of the collateral for these loans.  (BZINFIN
released its security  interest in a third pending patent in connection with the
ITOCHU  Investment  Transactions.)  Repayment of these loans has been  postponed
until December 31, 2003 by agreement of the parties involved.


                                       13
<PAGE>

NET LOSS PER SHARE

         The Company  computes  net loss per share under  Statement of Financial
Accounting  Standards ("SFAS") No. 128,  "Earnings Per Share",  which requires a
dual  presentation  of basic and diluted  earnings  per share on the face of the
statement  of  operations.  Basic  earnings per share  excludes  dilution and is
computed by dividing income or loss  attributable to common  shareholders by the
weighted-average  number of common shares  outstanding  for the period.  Diluted
earnings  per  share  reflects  the  potential  dilution  that  could  occur  if
securities or other  contracts to issue common stock were  converted into common
stock,  but such  securities or contracts are excluded if their effects would be
anti-dilutive.  The Company excluded stock equivalents from the weighted-average
shares outstanding  calculation for the three and six months ended June 30, 2003
and 2002, respectively, as their effect was anti-dilutive.

COMMITMENTS AND CONTINGENCIES

         The  Company's  litigation  with  Eduard  Will,  the  Company's  former
President and Chief Executive  Officer,  regarding amounts allegedly owed by the
Company to Will under an employment  agreement,  has been settled.  Mr. Will, as
plaintiff in the litigation was seeking  monetary  damages for alleged breach of
his  employment  agreement  with the  Company,  including  severance  and  other
compensation.  The law suit was  settled on June 28,  2003 for  $100,000 in cash
payments,  spread  equally over a twelve  month  period,  and 240,000  shares of
restricted  common stock at a stipulated  price of $0.25 per share. The issuance
of the shares is exempt under Section 4(2) of the Securities Act of 1933.

         The Company's  litigation with GMC  Properties,  Inc., the landlord for
the Company's former leased facility in Boca Raton,  Florida,  regarding amounts
allegedly  owed by the  Company  to GMC for  rent  and  certain  repairs  to the
property,  has been settled for $150,000,  which includes  $30,000 down (already
paid by the Company) and monthly payments of $10,000 for twelve months.

         The Company was named a co-defendant in an action brought in the United
States District Court for the District of  Massachusetts,  by NEC  Technologies,
Inc. ("NEC").  The suit alleges that the Company supplied modem hardware to NEC,
which was combined by NEC with software supplied by another  co-defendant,  Ring
Zero Systems, Inc. NEC was subsequently sued for patent infringement by PhoneTel
Communications, Inc. ("PhoneTel"), allegedly as a result of NEC's combination of
modem  hardware  and software  supplied by the vendors in its personal  computer
products.  NEC alleges that the Company and Ring Zero are obligated to indemnify
NEC for NEC's costs of defense  and  settlement  of the  PhoneTel  suit,  in the
amount of $327,000.  This action was  dismissed  without  prejudice on April 25,
2000; however, the reason for the dismissal was entirely procedural. While it is
possible  that NEC  might  attempt  to  refile  this  action  in an  appropriate
jurisdiction  in the near  future,  no such  action has been taken  against  the
Company.  The Company  cannot predict at this time whether any such future claim
would  have a  material  adverse  effect  on the  Company's  operating  results,
financial condition, or cash flows.


                                       14
<PAGE>

         The  Company  and  its  Boca  Global,   Inc.   subsidiary   were  named
co-defendants  in an action  brought in the District  Court of South Dakota,  by
Gateway,  Inc.  ("Gateway").  Global Village,  Inc. had contracted to supply its
FaxWorks  software to be bundled with Gateway PCs.  Gateway's  complaint against
the Company and Boca Global,  Inc. alleges that either or both of these entities
assumed the  liabilities  of Global  Village,  Inc. with respect to the FaxWorks
product. Gateway reportedly will pay between $5 million and $6 million to settle
litigation  brought by PhoneTel,  for which  Gateway has sought  indemnification
from the Company, Boca Global, Inc., and an unrelated  co-defendant.  On January
19, 2001,  a motion to dismiss was granted  with  respect to the  Company.  Boca
Global,  Inc.  remains as a  defendant.  While the  Company  believes  that Boca
Global,  Inc. will be able to assert  numerous  defenses to the  liability,  the
Company is unable to estimate what impact, if any, this claim will have upon the
Company's financial statements, given the preliminary nature of the claim.

         The  Company is the obligor on a Term Note in the  principal  amount of
$200,000,  payable to Ener1 Holdings, Inc. (now known as Ener1 Group, Inc.), the
majority stockholder of the Company. This note matured on February 22, 2003, and
none of the principal or accrued interest has been paid.

STOCKHOLDERS' EQUITY

         During the  quarter  ended  March 31,  2003,  related to the terms of a
consulting  agreement,  the Company issued to the  consultant  300,000 shares of
common stock. Under the agreement, the Company is also obligated to issue to the
consultant a warrant to acquire  200,000 shares of common stock.  The warrant is
required  to have an  exercise  price of $.10 per share and  expire in  December
2004.  As of the date of this  filing,  the  warrant  has not yet  been  issued;
however,  the Company is still  obligated to issue the  warrant.  During the six
months ended June 30, 2003, 2,460,000 options were issued,  179,000 options were
terminated and 108,500 options were exercised.

RELATED PARTY TRANSACTIONS

         During the three and six months  ended  June 30,  2003 and 2002,  Ener1
Group,  Inc.  incurred  expenses on behalf of the  Company,  including  payroll,
advisory services and other administrative expenses for the three and six months
ended June 30, 2003 totaling  approximately  $193,516 and $405,096,  and for the
three and six months  ended June 30, 2002  totaling  approximately  $410,207 and
$630,511 respectively. These advances are non-interest bearing and due on demand
and are included in Due to Stockholder on the balance sheet.

         During the  quarter  ended  March 31,  2003,  a total of  approximately
$1,420,000 was allocated and advanced  (including the allocation of the incurred
expenses above) to the Company of which approximately  $909,000 was converted to
capital.  During the quarter ended June 30, 2003,  approximately  $1,388,000 was
allocated and advanced  (including the allocation of incurred expenses above) to
the Company.  None of the additional  $1,388,000 was converted to capital and is
reflected in Due to Stockholder.


                                       15
<PAGE>

RECLASSIFICATION

         Certain amounts reflected in the financial statements for the three and
six month  period ended June 30, 2002 have been  reclassified  to conform to the
presentation for the three and six month period ended June 30, 2003.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AND INTERPRETATIONS

         In June 2001,  the FASB  issued  SFAS No.  143,  "Accounting  for Asset
Retirement Obligations." SFAS No. 143 requires entities to record the fair value
of a liability for an asset  retirement  obligation in the period in which it is
incurred  and a  corresponding  increase in the  carrying  amount of the related
long-lived asset. Subsequently, the asset retirement cost should be allocated to
expense using a systematic  and rational  method over its useful life.  SFAS No.
143 is effective  for fiscal years  beginning  after June 15, 2002.  Adoption of
this  statement  did not  have a  material  effect  on the  Company's  financial
condition, results of operations and cash flows.

         In June  2002,  the FASB  issued  SFAS No.  146,  Accounting  for Costs
Associated with Exit or Disposal Activities. This statement addresses accounting
and  reporting  for  costs  associated  with  exit or  disposal  activities  and
nullifies EITF Issue No. 94-3.  This statement is effective for exit or disposal
costs  initiated  after  December  31,  2002,  with early  adoption  encouraged.
Adoption  of this  statement  did not have a  material  effect on the  condensed
consolidated financial statements of the Company.

         In November  2002,  the EITF  reached a consensus  on Issue No.  00-21,
"Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides
guidance  on how to account  for  arrangements  that  involve  the  delivery  or
performance  of multiple  products,  services  and/or rights to use assets.  The
provisions  of EITF Issue No. 00-21 will apply to revenue  arrangements  entered
into in fiscal  periods  beginning  after June 15, 2003. The Company has not yet
determined what the effects of this Statement will be on its financial  position
and results of operations.

         In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN45"),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect Guarantees of Indebtedness of Others." FIN 45 requires that a liability
be recorded in the  guarantor's  balance sheet upon issuance of a guarantee.  In
addition,  FIN 45 requires  disclosures  about the guarantees that an entity has
issued,  including a reconciliation  of changes in the entity's product warranty
liabilities.  The initial recognition and initial measurement  provisions of FIN
45 are applicable on a prospective  basis to guarantees issued or modified after
December  31,  2002,  irrespective  of  the  guarantor's  fiscal  year-end.  The
disclosure  requirements  of FIN 45 are effective  for  financial  statements of
interim or annual  periods  ending after  December  15,  2002.  Adoption of this
Statement did not have a material impact on the condensed consolidated financial
statements.

         In  December  2002,  the FASB  issued  SFAS No.  148,  "Accounting  for
Stock-Based  Compensation,  Transition  and  Disclosure."  SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based


                                       16
<PAGE>

employee  compensation.  SFAS No. 148 also requires that  disclosures of the pro
forma  effect  of using the fair  value  method of  accounting  for  stock-based
employee  compensation  be displayed more  prominently  and in a tabular format.
Additionally,  SFAS No.  148  requires  disclosure  of the pro  forma  effect in
interim financial statements.  The transition and annual disclosure requirements
of SFAS No. 148 are  effective  for fiscal years ended after  December 15, 2002.
The interim disclosure  requirements are effective for interim periods beginning
after  December 15,  2002.  Adoption of this  Statement  did not have a material
impact on the condensed consolidated financial statements.

         In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities,  an Interpretation of ARB No. 51."
FIN 46 requires  certain  variable  interest  entities to be consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to  February  1, 2003,  the  provisions  of FIN 46 must be applied for the first
interim or annual period  beginning after June 15, 2003. The Company has not yet
determined what the effects of this Statement will be on its financial  position
and results of operations.

         In April 2003,  the FASB issued  SFAS No. 149,  which  amends SFAS 133,
"Accounting  for Derivative  Instruments  and Hedging  Activities".  The primary
focus of this  Statement  is to  amend  and  clarify  financial  accounting  and
reporting for derivative instruments.  This Statement is effective for contracts
entered into or modified after June 30, 2003. The Company has not yet determined
what the effects of this Statement will be on its financial position and results
of operations.

         In May 2003,  the FASB  issued SFAS No.  150,  "Accounting  For Certain
Financial Instruments with Characteristics of both Liabilities and Equity". SFAS
No.  150  changes  the  accounting  for  certain   financial   instruments  with
characteristics   of  both   liabilities   and  equity  that,   under   previous
pronouncements, issuers could account for as equity. The new accounting guidance
contained in SFAS No. 150  requires  that those  instruments  be  classified  as
liabilities in the balance sheet.  SFAS No. 150 affects the issuer's  accounting
for three types of  freestanding  financial  instruments.  One type is mandatory
redeemable  shares,  which  the  issuing  company  is  obligated  to buy back in
exchange  for cash or other  assets.  A second  type  includes  put  options and
forward purchase  contracts,  which involves  instruments that do or may require
the issuer to buy back some of its shares in exchange for cash or other  assets.
The third type of  instruments  that are  liabilities  under this  Statement  is
obligations  that can be settled  with shares,  the  monetary  value of which is
fixed,  tied solely or  predominantly  to a variable such as a market index,  or
varies  inversely with the value of the issuers'  shares.  SFAS No. 150 does not
apply to features embedded in a financial instrument that is not a derivative in
its entirety.  Most of the  provisions of SFAS No. 150 are  consistent  with the
existing  definition of liabilities in FASB Concepts  Statement No. 6, "Elements
of  Financial  Statements".  The  remaining  provisions  of this  Statement  are
consistent  with the FASB's  proposal to revise  that  definition  to  encompass
certain  obligations  that a reporting  entity can or must settle by issuing its
own shares. This Statement shall be


                                       17
<PAGE>

effective for financial  instruments entered into or modified after May 31, 2003
and otherwise  shall be effective at the  beginning of the first interim  period
beginning  after  June 15,  2003,  except  for  mandatory  redeemable  financial
instruments of a non-public entity, as to which the effective date is for fiscal
periods  beginning  after December 15, 2003. The Company is currently  assessing
the impact of SFAS No. 150,  which is not expected to have a material  impact on
the Company's financial statements.


                                       18
<PAGE>

PART I

ITEM 2

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         This report on Form 10-QSB contains  forward-looking  statements within
the  meaning of Section  27A of the  Securities  Act of 1933,  as  amended,  and
Section 23E of the Securities Act of 1934, as amended.  These statements  relate
to the  Company's  expectations  regarding  future  events or  future  financial
performance.  Any statements contained in this report that are not statements of
historical  fact  may be  deemed  forward-looking  statements.  In  some  cases,
forward-looking  statements  can be  identified  by  terminology  such as "may,"
"will,"  "should,"   "expect,"  "plan,"   "anticipate,"   "intend",   "believe,"
"estimate,"  "predict," "potential" or "continue," or the negative of such terms
or other comparable terminology.  These statements are only predictions.  Actual
events or results may differ materially.

         Although the Company  believes that the  expectations  reflected in the
forward-looking  statements are reasonable,  the Company cannot guarantee future
results, levels of activity, performance or achievements.  Moreover, neither the
Company,  nor any other  entity,  assumes  responsibility  for the  accuracy and
completeness  of  the  forward-looking  statements.  The  Company  is  under  no
obligation to update any of the  forward-looking  statements after the filing of
this Form 10-QSB to conform such  statements to actual  results or to changes in
the Company's expectations.

         The  following  discussion  should  be read  in  conjunction  with  the
Company's condensed  consolidated  financial  statements,  related notes and the
other financial information appearing elsewhere in this Form 10-QSB. Readers are
also urged to carefully review and consider the various  disclosures made by the
Company,  which attempt to advise interested parties of the factors which affect
the Company's business, including without limitation, the disclosures made under
the caption "Certain Factors That May Affect Future Performance."


                                       19
<PAGE>

RESULTS OF OPERATIONS

         NET SALES.  The Company's net sales decreased 84.3% to $0.1 million for
the three  months  ended June 30, 2003 from $0.6  million  for the three  months
ended June 30, 2002. For the six months ended June 30, 2003 net sales  decreased
by 46.1% to $1.0  million  from $1.8  million  for the six month  ended June 30,
2002.  Sales for the three months ended June 30, 2003  consisted of $0.1 million
in product sales.  No revenue was recorded for contract  engineering.  Sales for
the three months ended June 30, 2002  consisted of $0.1 million in product sales
and $0.5  million in contract  engineering.  Sales for the six months ended June
30, 2003 consisted of $0.8 million in product sales and $0.2 million in contract
engineering.  Sales for the six months  ended June 30,  2002  consisted  of $0.7
million in product sales and $1.1 million in contract engineering.  The decrease
in contract engineering sales for the three months and six months ended June 30,
2003 compared to the previous  year is the result of the  Company's  decision to
focus its activities on completing  product  development for several new lithium
batteries concurrently phase out the contract engineering business. Furthermore,
the Company is now pursuing sales of its  interactive  system iTV devices to the
hospital and lodging  markets only  through its EnerLook  Solutions  subsidiary.
During the six months ended June 30, 2003 this 49.35% owned subsidiary completed
the installation of its first hospital system at the Hackensack  Medical Center.
This generated  $146,000 in revenue in the first quarter,  the majority of which
was attributable to system equipment sales. In the second quarter ended June 30,
2003, EnerLook secured a contract from CentraState Hospital, which may result in
revenue  during the third  quarter.  The Battery  Company did not have any sales
during the six months ended June 30, 2003,  and it is unlikely that it will have
any significant sales until 2004.

         GROSS PROFIT (LOSS). The Company recorded a gross profit of $19,000 for
the three months  ended June 30,  2003,  as compared to a gross loss of $361,000
for the three months  ended June 30,  2002.  For the six month period ended June
30, 2003 the Company reported a gross profit of $61,000 compared to a gross loss
of 740,000 for the six month period  ended June 30, 2002.  Over the last several
years,  the Company  has been  unable to  consistently  achieve  positive  gross
margins on the  contract  engineering  services  business.  In the three and six
months ended June 30, 2003, the Company  significantly  reduced its  engineering
services staff as it scaled back its engineering services operations to focus on
primarily on research,  development  and  marketing of lithium  batteries,  fuel
cells  and  solar  cells and  secondarily  on  EnerLook's  sales of  systems  to
hospitals and hotels.

         RESEARCH AND  DEVELOPMENT  EXPENSES.  The Company has determined that a
significant  portion of  Battery  operating  expenses  should be  classified  as
research and development expenses, which has not been done previously. Therefore
these financial  statements  reflect the  reclassification  of certain  expenses
previously  classified as selling,  general,  and  administrative in the battery
operations  to research  and  development  expenses for the three and six months
ended June 30, 2003 and June 30, 2002.  The Company's  research and  development
expenses  for the three  month  periods  ended June 30,  2003 and 2002 were $0.4
million and $0.4 million,  respectively and for the six month periods ended June
30, 2003 and 2002 were $0.8 million and


                                       20
<PAGE>

$0.6 million, respectively. As a result of the phasing out of the former Digital
Media division, the Company did not record any research and development expenses
for the three and six months  ended June 30, 2003 for this  division as compared
to $171,000 and  $295,000 for the three and six months ended June 30, 2002.  The
Company expects that R & D expenses for Digital Media and EnerLook will continue
to be insignificant.  However, it expects to increase in the future R&D expenses
for the Battery Company now that the Company has shifted its focus to new energy
technologies   and  the   development  of  products  and  services  using  those
technologies.

         SELLING,  GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"). As noted in the
discussion  concerning  Research  and  Development  expenses  ("R&D"),   certain
Selling,  General and  Administrative  expenses in the Battery Company have been
reclassified to R & D expense. The Company's SG&A expenses for the three and six
months ended June 30, 2003  decreased from $1.8 million to $1.1 million and $3.3
million to $2.1  million  respectively.  The  decrease  was  primarily  due to a
decrease in the Company's  Digital  Media and EnerLook  division and to a lesser
extent from a lesser decrease in the Battery  Company.  The chart below reflects
the actual dollar expenditures in these categories after the reclassification.

                                    Three Months Ended         Six Month Ended
                                         June 30                  June 30
                                  ----------------------------------------------
In millions                         2003        2002         2003          2002
                                  -------      -------      -------      -------

Digital Media Division            $   0.5      $   1.0      $   1.1      $   2.2
Ener1 Technologies, Inc.              0.1          0.1          0.1          0.1
Ener1 Battery Company                 0.3          0.4          0.5          0.7
EnerLook Solutions, Inc.              0.2          0.3          0.4          0.3
                                  -------      -------      -------      -------
Total                             $   1.1      $   1.8      $   2.1      $   3.3
                                  =======      =======      =======      =======

LIQUIDITY AND CAPITAL RESOURCES

         As of December 31, 2002, the Company had a working  capital  deficit of
$11.9 million.  As of June 20, 2003, the Company's  working  capital deficit was
$14.1 million,  of which $6.9 million consisted of notes payable to its majority
stockholder,  and $1.7 million consisted of current  maturities of related party
debt.  During the period from  December  31, 2002  through  June 30,  2003,  the
Company's  working capital  decreased by $2.2 million.  This decrease in working
capital  was  primarily  the result of a  decrease  in cash of $0.3  million,  a
decrease in accounts  receivable by $0.3 million, a decrease in prepaid expenses
and  inventory  of $0.6  million,  and increase in due to  stockholders  of $1.9
million, offset by a decrease in accounts payable of $0.2 million, a decrease in
notes  payable  of $0.6  million  and a  decrease  in  deferred  revenue of $0.1
million.

         The Company will require  additional capital to support the development
stage  activities  of its Ener1  Battery  Company  subsidiary  and the expanding
activities of EnerLook.  The Company will also require additional capital to pay
existing balance sheet liabilities.  There can be no assurance that any required
capital will be available on terms acceptable to the Company, if


                                       21
<PAGE>

at all, at such time or times as required by the  Company.  The Company has been
funded primarily for the last twelve months by equity,  loans, and advances from
its parent company,  Ener1, Group, Inc. During the quarter ended March 31, 2003,
a total of approximately $1,420,000 was allocated and advanced to the Company of
which approximately $909,000 was converted to capital.  During the quarter ended
June 30,  2003,  approximately  $1.388,000  was  allocated  and  advanced to the
Company.  EnerLook Solutions raised $1.6 million of equity in 2002 and also sold
shares of its restricted  common stock for $250,000 during the second quarter of
2003 to raise  additional  working  capital.  The stock  was sold to  accredited
investors in a transaction  exempt under Section 4(2) of the  Securities  Act of
1933. This additional investment reduced the Company's ownership to 49.35%.

         The  Company at the end of July  finalized  a $3.5  million  investment
transaction with ITOCHU  Corporation.  The Company issued 14 million  restricted
shares at a price of $0.25 per share.  The  transaction was exempt under Section
4(2) of the Securities Act of 1933.  ITOCHU  Corporation has options to increase
ownership in the Company at specific prices and in specific amounts as described
in a Subscription and Investment  Agreement.  For the six month period beginning
on the date of the Subscription and Investment Agreement (July 25, 2003), ITOCHU
has the  option to  purchase  additional  shares  equivalent  to up to 4% of the
Company's  total  outstanding  Common  Stock  (computed as of July 24, 2003) for
US$0.70 per share.  During the immediately  subsequent six month period,  ITOCHU
has the  option to  purchase  additional  shares  equivalent  to up to 3% of the
Company's  outstanding  Common  Stock (also  computed  as of July 24,  2003) for
US.2.50 per share. As a result of the $3.5 million transaction,  ITOCHU now owns
approximately  4.3% of the Company's  outstanding common stock. The Company also
agreed  with  ITOCHU to form a new  Japanese  company  called  EnerStruct,  Inc.
("EnerStruct"), of which ITOCHU would own 51% and the Company would own 49%, and
the Company  would  invest $2 million into  EnerStruct  for such 49% interest in
EnerStruct. This investment was made on August 14, 2003, using proceeds from the
ITOCH  investment.  The Company has also entered into a license  agreement  with
ITOCHU,  Ener1  Battery  Company and  EnerStruct to provide  EnerStruct  with an
exclusive  license (for Japan only) to the technologies  covered by two of Ener1
Battery Company's  pending patent  applications at the U.S. Patent and Trademark
Office:  (i) U.S. Patent  Application  No.10/038,556  Solid Polymer  Electrolyte
Lithium Battery,  and (ii) U. S. Patent  Application No. 10/108,140  Methods and
Apparatus for  Deposition of Thin Films.  ITOCHU also licensed to EnerStruct its
high-rate battery technology as part of the above transactions.

         The  Company is the obligor on a Term Note in the  principal  amount of
$200,000,  payable to Ener1 Holdings, Inc. (now known as Ener1 Group, Inc.), the
majority stockholder of the Company. This note matured on February 22, 2003, and
none of the principal or accrued interest has been paid.  Interest is payable at
12%. The Company expects to resolve this matter in the near future.

         As of June  30,  2003,  the  Company's  total  indebtedness  was  $17.5
million, of which $15.2 consisted of current  liabilities.  $10.6 million of the
latter consisted of current  portions of notes payable or intercompany  advances
due to either stockholders or related parties.


                                       22
<PAGE>

CRITICAL ACCOUNTING POLICIES

         The accounting  principles  applied by the Company for which acceptable
alternative  principles are available is the use of APB 25 compared to SFAS 123,
related to recording employee stock compensation. The Company continues to apply
the intrinsic method of measuring  employee stock  compensation under APB 25 and
disclose the effects of measuring the  compensation  using the fair value method
prescribed in SFAS 123 which is consistent  with the treatment  employed by most
public companies.

         Revenue from engineering  services  contracts is recognized as the work
is performed.  Contracts are generally either  time-and-materials or fixed-price
in nature.  With  time-and-materials  type  contracts,  revenue is calculated by
multiplying the number of hours worked times the contractually  agreed upon rate
per hour. With fixed-price type contracts, revenue is calculated by applying the
percentage of completion  method.  The Company did not have a significant amount
of work  under a fixed  price  contract  as of June  30,  2003.  The  nature  of
consulting  work for  software  and  hardware  development  projects  can  cause
difficulties  in  estimating  the cost of  completion  on fixed cost  contracts.
Contracts  generally allow for modification of the number of hours or the stated
deliverables via change-orders based upon the actual work required to complete a
project and upon agreement between the Company and its customer(s).  The Company
records a loss in the current  period  during which a loss on a project  appears
probable. The amount of such loss is the reasonably estimated loss on the entire
project  and is  recorded  immediately  upon  determination  that  the  loss  is
probable.  Revenue from product licensing or software royalties is recognized as
earned pursuant to the terms of the related  contracts,  which generally  occurs
when the Company ships  equipment in conjunction  with such license or software.
Amounts  received  but  unearned as of June 30,  2003,  are recorded as deferred
revenue.

         EnerLook  Solutions,  Inc.  ("Solutions")  was a 51%  subsidiary of the
Company at its  inception.  42.58% of Solutions  is owned by Ener1  Group,  Inc.
Solutions,  Inc. recently raised $250,000 by sale of its restricted shares. Thus
reducing the  Company's  ownership to 49.35%.  Since the  inception of Solutions
Company the Company has consolidated its operating results and its balance sheet
as part of the Company's consolidated financial statements.  Ownership below 51%
is most often  recorded  under the equity method of  accounting.  It is presumed
that control  does not exist and  therefore  consolidation  is  prohibited.  The
Company has elected to continue  consolidating  this  subsidiary  as part of its
financial  statements  because the Company's parent company Ener1,  Group,  Inc.
also owns 42.58% of EnerLook  Solutions,  Inc. The Company and Ener1 Group,  Inc
are related parties and exercise  substantial control over the activities of the
subsidiary  and in total own 91.93%.  Management  believes that the reduction in
its  ownership  percentage  of  Solutions by 1.65% (from 51% to 49.35%) does not
materially  reduce the control  over  Solutions  operations  exercisable  by the
Company.

         If the Company would report the  investment  in Solutions  under to the
equity  method of  accounting,  the  Company's  share of the losses of Solutions
would be  included  in its  financial  results  as a one line  item  instead  of
reflecting  sales and  expenses in the  statement of  operations.


                                       23
<PAGE>

In the equity method of accounting, the assets and liabilities of the subsidiary
would be shown as a net  investment in the subsidiary  instead of  consolidating
the assets and liabilities with those of the Company. Solutions at June 30, 2003
had total assets of $1.5 million, liabilities of $0.6 million, and net equity of
$0.9 million.

         The Company in the second  quarter  transferred  certain  assets of its
Digital Media division to Ener1 Solutions,  Inc. in order to consolidate the set
top box business,  which  delivers  interactive  information  and  entertainment
systems and services to vertical  markets such as  hospitality  and  healthcare,
into one entity - EnerLook  Solutions  Inc.  Since  Digital  Media was no longer
pursuing  contract-engineering  business, the activities of the two units became
quite similar.  As part of this restructuring of the activities of Digital Media
and Solutions,  the Company  transferred  assets in the amount of  approximately
$1.0  million  to  Solutions,  resulting  in  an  intercompany  receivable  from
Solutions  in the amount of $0.5 million and a  contribution  of capital of $0.5
million to Solutions. Preparatory to this restructuring, Solutions sold $250,000
of its restricted shares to outside private investors,  which also increased the
equity base of Solutions.

ITEM 3.  CONTROLS AND PROCEDURES

         We have carried out an evaluation,  under the  supervision and with the
participation  of our  management,  including our Chief  Executive  Officer (the
"CEO") and our Chief Financial  Officer (the "CFO"), of the effectiveness of the
design and operation of our  disclosure  controls and  procedures (as defined in
Rule  13a-15(e)  and  15d-15(e)  under the  Securities  Exchange Act of 1934, as
amended (the "Act")) as of the end of the fiscal quarter covered by this report.
Based  upon  that  evaluation,  our CEO and CFO  concluded  that our  disclosure
controls and procedures are effective in providing reasonable assurance that (a)
the  information  required to be  disclosed by us in the reports that we file or
submit under the Act is recorded, processed,  summarized and reported within the
time periods  specified in the  Securities and Exchange  Commission's  rules and
forms,  and  (b)  such  information  is  accumulated  and  communicated  to  our
management,  including our CEO and CFO, as appropriate to allow timely decisions
regarding required disclosure.

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


                                       24
<PAGE>

PART II.

                          ENER1, INC. AND SUBSIDIARIES
                                OTHER INFORMATION

Item 1.  Legal Proceedings

         The  Company's  litigation  with  Eduard  Will,  the  Company's  former
President and Chief Executive  Officer,  regarding amounts allegedly owed by the
Company to Will under an employment  agreement,  has been settled.  Mr. Will, as
plaintiff in the litigation was seeking  monetary  damages for alleged breach of
his  employment  agreement  with the  Company,  including  severance  and  other
compensation.  The law suit was  settled on June 28,  2003 for  $100,000 in cash
payments,  spread  equally over a twelve  month  period,  and 240,000  shares of
restricted  common stock at a stipulated  price of $0.25 per share. The issuance
of the shares is exempt under Section 4(2) of the Securities Act of 1933.

         The Company's  litigation with GMC  Properties,  Inc., the landlord for
the Company's former leased facility in Boca Raton,  Florida,  regarding amounts
allegedly  owed by the  Company  to GMC for  rent  and  certain  repairs  to the
property,  has been settled for $150,000,  which includes  $30,000 down (already
paid by the Company) and monthly payments of $10,000 for twelve months.

         The Company has been named a  co-defendant  in an action brought in the
United  States  District  Court  for  the  District  of  Massachusetts,  by  NEC
Technologies,  Inc.  ("NEC").  The suit alleges that the Company  supplied modem
hardware to NEC,  which was  combined by NEC with  software  supplied by another
co-defendant,  Ring Zero  Systems,  Inc.  NEC was  subsequently  sued for patent
infringement  by PhoneTel  Communications,  Inc.  ("PhoneTel"),  allegedly  as a
result of NEC's  combination  of modem  hardware  and  software  supplied by the
vendors in its personal computer products. NEC alleges that the Company and Ring
Zero are obligated to indemnify NEC for NEC's costs of defense and settlement of
the PhoneTel suit, in the amount of $327,000.  This action was dismissed without
prejudice on April 25, 2000; however,  the reason for the dismissal was entirely
procedural. While it is possible that NEC might attempt to refile this action in
an appropriate  jurisdiction  in the near future,  no such action has been taken
against the Company.  The Company  cannot  predict at this time whether any such
future claim would have a material  adverse  effect on the  Company's  operating
results, financial condition, or cash flows.

         The  Company  and  its  Boca  Global,   Inc.   subsidiary   were  named
co-defendants  in an action  brought in the District  Court of South Dakota,  by
Gateway,  Inc.  ("Gateway").  Global Village,  Inc. had contracted to supply its
FaxWorks  software to be bundled with Gateway PCs.  Gateway's  complaint against
the Company and Boca Global,  Inc. alleges that either or both of these entities
assumed the  liabilities  of Global  Village,  Inc. with respect to the FaxWorks
product. Gateway reportedly will pay between $5 million and $6 million to settle
litigation


                                       25
<PAGE>

brought by  PhoneTel,  for which  Gateway  has sought  indemnification  from the
Company, Boca Global, Inc., and an unrelated co-defendant.  On January 19, 2001,
a motion to dismiss was granted with respect to the Company.  Boca Global,  Inc.
remains as a defendant.  While the Company believes that Boca Global,  Inc. will
be able to assert numerous  defenses to the liability,  the Company is unable to
estimate what impact, if any, this claim will have upon the Company's  financial
statements, given the preliminary nature of the claim.

Item 3.  Defaults Upon Senior Securities

         The  Company is the obligor on a Term Note in the  principal  amount of
$200,000,  payable to Ener1 Holdings, Inc. (now known as Ener1 Group, Inc.), the
majority stockholder of the Company. This note matured on February 22, 2003, and
none of the principal or accrued interest has been paid.  Interest is payable at
12%. The Company expects to resolve this matter in the near future.

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  31.1     Certification of CEO,  Pursuant to Section 302 of the
                           Sarbanes-Oxley Act of 2002

                  31.2     Certification of CFO,  Pursuant to Section 302 of the
                           Sarbanes-Oxley Act of 2002

                  32.1     Certification of CEO,  Pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002

                  32.2     Certification of CFO,  Pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002

         b)       Reports on Form 8-K

                  None filed for the quarter ended June 30, 2003.


                                       26
<PAGE>

                          ENER1, INC. AND SUBSIDIARIES

                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf of the
undersigned thereunto duly authorized.

                                                ENER1, INC.

Dated: August 19, 2003                          By:  /s/ Ronald Stewart
                                                     ---------------------------
                                                Ronald Stewart
                                                Chief Executive Officer
                                                (Principal Executive Officer)


Dated: August 19, 2003                          By: /s/ Ronald Stewart
                                                    ----------------------------
                                                Chief Financial Officer
                                                (Principal Financial and
                                                Accounting Officer)

                                       27
<PAGE>