```

                                  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
                    September 30, 2003

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

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

           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 November 14, 2003
  Common stock, par value $.01 per                        326,148,783 Shares
                           share

  Transitional Small Business Disclosure Format                 Yes ___ No _X__
                       (check one):

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

                                      INDEX

                                                                            PAGE

PART I.  FINANCIAL INFORMATION

     Item 1.      Financial Statements

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

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

         Condensed Consolidated Statements of
         Cash Flows (unaudited) for the nine
         months ended September 30, 2003 and 2002..........................    5

         Notes to Condensed Consolidated
         Financial Statements (unaudited)..................................    6

     Item 2.      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations ......................  18

     Item 3.      Controls and Procedures ..................................  25

PART II.        OTHER INFORMATION

      Item 1.     Legal Proceedings ........................................  26

      Item 3.     Defaults Upon Senior Securities...........................  28

      Item 6.     Exhibits and Reports on Form 8-K..........................  29

      Signatures ..........................................................   30

                          ENER1, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (Unaudited)
                        (In thousands except share data)
                                                              September 30, 2003
                                                             -------------------
                                     ASSETS
Current assets
     Cash and equivalents                                                78
     Trade receivables, net                                              25
     Inventories                                                        841
     Prepaid expenses and other current assets                          205
                                                             -------------------
           Total current assets                                       1,149
Property and equipment, net                                          22,500
Investment in EnerStruct                                              1,924
Other assets                                                          1,067
                                                             -------------------
           Total assets                                              26,640
                                                             ===================
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
     Accounts payable                                                 1,616
     Customer deposits                                                  969
     Notes payable to stockholder                                     6,862
     Due to stockholder                                               2,676
     Related party debt                                               1,672
     Accrued expenses and other current liabilities                   2,037
     Notes payable to bank current                                    1,600
     Current maturities of mortgage payable                              29
                                                             -------------------
     Total current liabilities                                       17,461
                                                             -------------------
Long-term liabilities
        Mortgage note payable on building                               682
                                                             -------------------
                                                                        682
                                                             -------------------
Commitments and contingencies (see Note 12)

Stockholders' equity
Minority interest                                                      ---
     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, 326,138,783 issued and outstanding        3,261
     Additional paid-in capital                                     59,887
     Accumulated deficit                                           (54,651)
                                                             -------------------
           Total stockholders' equity                                8,497
                                                             -------------------
           Total liabilities and stockholder' equity                26,640
                                                             ===================

            See notes to condensed consolidated financial statements.

                                        3

                          ENER1, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)
                      (In thousands except per share data)

                             Three Months Ended          Nine Months Ended
                                September 30                 September 30
                              2003           2002          2003           2002
                             --------------------        ----------------------
Net sales
    Product sales            $   356      $   208          $ 1,191         $924
    Engineering services         ---          549              151        1,666
                             --------------------        ----------------------
              Total              356          757            1,342        2,590

Cost of goods sold               263          745            1,188        3,318
                             --------------------        ----------------------
    Gross profit (loss)           93           12              154         (728)

Operating expenses:
    Research and development     379          151            1,147          446
    Management fee to
        related third party.     ---          307              ---          717
    Selling, general and
       administrative           2,164      1,643            4,214        4,802
                             --------------------        ----------------------
    Total operating expenses    2,543      2,101            5,361        5,965
                             --------------------        ----------------------
Loss from operations           (2,450)    (2,089)          (5,207)      (6,693)

Other income (expense), net      (218)       (99)            (739)        (159)

Equity in loss from investment in
  EnerStruct                      (79)       ---              (79)          ---
                             --------------------        ----------------------
Loss before income taxes       (2,747)    (2,188)          (6,025)      (6,852)
Income taxes                      ---        ---              ---
                             --------------------        ----------------------                                                                                     1

Loss before minority interest  (2,747)    (2,188)          (6,025)     (6,853)
Minority interest in net loss     251        180              440         348
                             --------------------        ----------------------
Net Loss                       $(2,496)  $(2,008)         $(5,585)    $(6,505)
                             ====================        ======================
Loss per share (basic and
 diluted)                      $ (0.01)  $ (0.01)         $ (0.02)    $ (0.02)
                             ====================        ======================
Weighted average
 shares outstanding            325,201   305,423          313,740     296,399
                             ====================        ======================

            See notes to condensed consolidated financial statements.

                                       4

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

                                                        Nine Months
                                                     Ended September 30,
                                                   2003            2002
                                               ---------------- ----------------

Cash provided by (used in):
Operating activities:
      Net loss                                     $ (5,585)           $ (6,505)

      Depreciation and amortization                     196                 504

      Equity in loss from investment in EnerStruct       79                 ---
      Common stock and options issued for services      703                 205
      Minority interest in loss of subsidiary          (440)               (348)
      Changes in assets and liabilities                 808               2,107
                                               ---------------- ----------------
        Net cash used in operating activities        (4,239)             (4,037)

Investing activities:
      Capital expenditures                             (518)             (1,909)
      Purchase of technology licenses                   ---              (1,170)
      Investment in EnerStruct                       (2,003)                ---
                                               ---------------- ----------------
        Net cash used in investing activities        (2,521)             (3,079)
                                               ---------------- ----------------
Financing activities:
       Repayment of related party debt                  ---              (1,073)
       Repayment of long-term debt                      ---                 (18)
       Repayment of short-term note payable            (595)                ---
       Net proceeds from issuance of common stock.     3,521              2,428
       Proceeds from advances from stockholder         3,394              3,994
       Repayment of mortgage payable                     (20)               ---
       Proceeds from note payable                       ---                 215
       Proceeds from minority investment in
        subsidiary                                      250               1,600
                                               ---------------- ----------------
           Net cash provided by financing
            activities                                6,550               7,095
                                               ---------------- ----------------
Net increase (decrease) in cash and equivalents        (210)                (21)
Cash and equivalents, beginning of period               288               1,495
                                               ---------------- ----------------
Cash and equivalents, end of period                  $   78             $ 1,474
                                               ================ ================

            See notes to condensed consolidated financial statements.

                                        5

                          ENER1, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. 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 normal recurring
nature. Operating results for the three and nine months ended September 30, 2003
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2003. Certain notes and other information have been
condensed or omitted from the interim financial statements presented in this
Quarterly Report on Form 10-QSB. The Company's audited financial statements for
the year ended 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.

2. NATURE OF BUSINESS

In the past nine months, Ener1, Inc., a Florida corporation (the "Company"), has
changed the focus of its business plan and now concentrates primarily on
developing and marketing new energy technologies and products using those
technologies, including lithium batteries for military, industrial and consumer
applications, as well as fuel cells and solar cells.

Ener1 Battery Company

The Company's lithium battery business is conducted through its wholly-owned
subsidiary Ener1 Battery Company ("Ener1 Battery" or "Battery Company"), which
it acquired from its parent company, Ener1 Group, Inc. ("Ener1 Group"), in
September 2002. Ener1 Group owns approximately 93% of the Company's outstanding
common stock.

On September 6, 2002, the Company entered into a merger agreement with Ener1
Group, pursuant to which it acquired 100% of the outstanding capital stock of
Ener1 Battery in exchange for debt and equity. In accordance with Statement of
Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"),
because the Company and Ener1 Battery were entities under common control, the
operations of the two entities were combined from the beginning of each period
and presented in a method similar to the pooling of interests method. The
Company previously reported the financial statements of Ener1 Battery for the
year ended March 31, 2002 and the three months ended June 30, 2002 and June 30,
2001 in the Company's Current Report on Form 8-K/A filed on October 18, 2002.

                                       6

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, designs, materials and manufacturing processes and is developing
additional technologies for lithium metal batteries (and products using those
technologies), fuel cells and solar cells. The Company expects to file
additional patent applications in the next twelve months involving these new
technologies.

EnerLook Solutions, Inc.

In February 2002, the Company formed EnerLook Solutions Inc. ("EnerLook
Solutions"), which develops and markets turn-key video-on-demand and interactive
TV-based information and communications systems to customers in the health care
and hospitality industries. To date, the Company has transferred substantially
all of the assets of its former Digital Media Technologies Division, which
developed the proprietary set top box used in EnerLook Solutions' systems, to
EnerLook Solutions. The Company initially owned 51% of the outstanding common
stock of EnerLook Solutions; in the second quarter of 2003, EnerLook Solutions
issued 333,333 shares to Solution Investment Group, LLC in exchange for $250,000
and, as a result, the Company currently owns 49.35% of EnerLook Solutions'
outstanding common stock.

Ener1 Technologies, Inc.

On June 13, 2002, the Company formed Ener1 Technologies, Inc. ("Ener1
Technologies"), a wholly-owned subsidiary of the Company, to develop and market
products and services for neutralizing the harmful effects of electromagnetic
fields in electric power transmission lines and related equipment, using
technology acquired by Ener1 Technologies under an exclusive license from an
affiliate of Ener1 Group. See Note 5, "Recent Developments - Proposed Spin-Off
of Ener1 Technologies.

Ener1Ukraine

On September 12, 2003, the Company finalized, through its Ener1 Battery Company
subsidiary, the acquisition of its R&D partner company in Ukraine. The
transaction value was nominal, and the impact on the Company's assets and
liabilities resulting from the transaction is not material. The primary purpose
of the transaction was to bring the Company's offshore R&D operations more
directly under the Company's financial and management control.

Other Subsidiaries

The Company has numerous other subsidiaries, which are listed in Exhibit 21
to its Annual Report on Form 10-KSB for the year ended December 31, 2002 filed
with the Securities and Exchange Commission. All of these subsidiaries are
dormant.

                                       7

3. 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, incurred negative cash
flows from operations since 1999 and, as of September 30, 2003, had an
accumulated deficit of $54.7 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 had negative cash flows
from operations of $4.2 million for the nine months ended September 30, 2003.
The Company's management expects that the Company will continue to incur
negative cash flows in the fourth quarter of 2003 and additional cash will be
required to fund the Company's operations. These 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.

4. MANAGEMENT PLANS

Concurrently with the acquisition of the Battery Company from Ener1 Group,
the Company re-directed its focus primarily on development and marketing of new
energy technologies and products, including lithium batteries, fuel cells and
solar cells.

Ener1 Battery, EnerLook Solutions and Ener1 Technologies are all
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 Company has been funded by Ener1 Group, since the
latter's acquisition of control of the Company in January 2002. During the nine
month period ended September 30, 2003, Ener1 Group has provided additional debt
and equity funding to the Company of approximately $3.4 million. The Company
believes Ener1 Group will continue to provide additional working capital to the
Company in the form of equity or debt funding; however, the Company is also
pursuing other sources of financing, including private placements of debt or
equity securities to fund the Company's operations.

As part of these financing activities, on July 25, 2003, the Company issued
14 million shares of the Company's common stock to ITOCHU Corporation in
exchange for $3.5 million. (See Note 5, "Recent Developments - Investments and
Other Transactions with Itochu Corporation"). All of the $3.5 million has been
received by the Company.

5. RECENT DEVELOPMENTS

*Proposed spin-off of Ener1 Technologies*

On November 6, 2002, Ener1 Technologies filed a registration statement on
Form SB-2 with the Securities and Exchange Commission (the "Commission") to
register the spin-off by the Company of all of Ener1 Technologies' common stock
to the record holders of the Company's common stock. The spin-off distribution
would occur once the Commission's review of the proposed transaction is
completed and the registration statement is declared effective. The Company
believes that the distribution of Ener1 Technologies common stock will be
treated as a taxable dividend to the Company's 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"), pursuant to which the Company
issued 14 million shares of its common stock to ITOCHU in exchange for $3.5
million, or $0.25 per share. In addition, the Company granted the following
options to ITOCHU to increase its ownership of the Company's common stock at the
following prices: During the six month period from July 25, 2003 through January
24, 2004, ITOCHU has the option to purchase up to 12,461,861 shares of the
Company's common stock, which equals 4% of the number of shares of common stock
outstanding as of July 24, 2003, for $0.70 per share. During the six month
period from January 25, 2004 through July 24, 2004, ITOCHU has the option to
purchase up to 9,346,396 additional shares of the Company's common stock, which
equals 3% of the number of shares of the Company's common stock outstanding as
of July 24, 2003, for $2.50 per share.

On August 14, 2003, using proceeds from the ITOCHU investment, the Company
invested $2 million for 49% of the outstanding capital stock of EnerStruct,
Inc., a newly formed Japanese company ("EnerStruct") to pursue technology
development and marketing opportunities for lithium batteries in Japan, using
technologies licensed to it by the Company, Ener1 Battery and ITOCHU. ITOCHU
owns 51% and the Company owns 49% of EnerStruct. The Company's investment in
EnerStruct is being accounted for on the equity method of accounting.

On September 12, 2003, the Company finalized, through its Ener1 Battery
Company subsidiary, the acquisition of its R&D partner company in Ukraine. The
transaction value was nominal, and the impact on the Company's assets and
liabilities resulting from the transaction is not material. The primary purpose
of the transaction was to bring its offshore R&D operations more directly under
the Company's financial and management control.

In connection with the foregoing activities, the Company and Ener1 Battery
have entered into a license agreement with ITOCHU and EnerStruct and agreed to
provide EnerStruct with an exclusive license (for Japan only) to use the
technologies covered by two of Ener1 Battery Company's pending patent
applications. ITOCHU has also licensed to EnerStruct, on an exclusive basis,
several of its patents relating to its lithium battery technologies.

                                       8

6. SEGMENT REPORTING

The Company has reported its result of operations in the following
reporting segments for the nine and three months ended September 30, 2003: Ener1
Battery, a wholly-owned subsidiary of the Company that develops and markets
lithium technology batteries for military, industrial and consumer applications;
EnerLook Solutions, a 49.35%-owned subsidiary of the Company that develops and
markets turn-key video-on-demand and interactive TV-based information and
communications systems to customers in the health care and hospitality
industries; Ener1 Technologies, a wholly-owned subsidiary of the Company formed
to develop and market products and services for neutralizing the harmful effects
of electromagnetic fields in electric power transmission lines and related
equipment; and Digital Media Technologies Division, a division of the Company
that, until its remaining assets were transferred to EnerLook Solutions in May
of 2003 was in the business of developing and marketing set top boxes. The
sales, losses and other financial information reported below by segment are for
the three and nine months ended September 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 September 2002, the
Company acquired all of the outstanding stock of Ener1 Battery from Ener1 Group.
In accordance with SFAS 141, because the Company and Ener1 Battery were under
common control, operations of the entities were combined from the beginning of
each period and presented in a manner similar to the pooling of interests
method, as if the acquisition of Ener1 Battery had occurred at the beginning of
the first period presented. As a result, the Battery Company's results of
operations are included in the Company's condensed consolidated financial
statements and in the information below for both the three-month and nine-month
periods ended September 30, 2003 and 2002.

In January 2003, EnerLook Solutions implemented its first hospital system
contract for interactive, in-room, TV-based communications systems, which
generated approximately $146,000 in revenue, the majority of which was
attributable to system equipment sales.

The Company has operated Ener1 Technologies during the three and nine
months ended September 30, 2003 and 2002 as a development stage company. Ener1
Technologies did not have significant financial statement activity during these
periods as its operations were limited.

                                       9

Transactions between segments, consisting principally of product sales and
purchases, are recorded at the sales price. The Company evaluates the
performance of its segments and allocates resources to them based on anticipated
future contributions of each segment to income and expenses.

                                Segment Reporting

                                                   Three Months Ended                            Nine Months Ended
                                                      September 30,                                September 30,
                                            --------------------------------------    ----------------------------------
                                                   2003                2002                2003              2002
           Amounts in thousands

Sales:
      Digital Media Division                         380               815               1,219             2,691
      EnerLook Solutions, Inc.                        24               ---                 171               ---
      Ener1 Technologies, Inc.                       ---               ---                 ---               ---
      Ener1 Battery Company                          ---               ---                 ---               ---
      Intercompany Eliminations                      (48)              (58)                (48)             (101)
                                            --------------------------------------    ----------------------------------
Net Sales                                            356               757               1,342             2,590
                                            ======================================    ==================================
Income (Loss) before minority
  interest
      Digital Media Division                          (4)           (1,008)               (126)           (4,202)
      EnerLook Solutions, Inc.                      (929)             (367)             (1,568)             (718)
      Ener1 Technologies, Inc.                       (40)              (52)               (142)             (126)
      Ener1 Battery Company                       (1,783)             (761)             (4,189)           (1,807)
                                            --------------------------------------    ----------------------------------
Loss before minority interest                     (2,747)           (2,188)             (6,025)           (6,853)
                                            ======================================    ==================================
Assets
      Digital Media Division                                                               486             1,700
      EnerLook Solutions, Inc.                                                           1,641               975
      Ener1 Technologies, Inc.                                                              10                13
      Ener1 Battery Company                                                             24,503            22,069
                                                                                      ----------------------------------
Total Assets                                                                            26,640            24,757
                                                                                      ==================================
7. REVENUE RECOGNITION

Revenue from contracts for services is recognized as the work is performed.
Services are provided under these contracts on either a time-and-materials basis
or on a fixed-price basis. Under time-and-materials contracts, revenue is
calculated by multiplying the number of hours worked by the contractually agreed
upon rate per hour. Under fixed-price 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. Several factors must
be satisfied before revenue may be recognized under services contracts. These
factors depend on the nature of the contract and include the completion of
certain contractual milestones, which must be verified by the customer before
revenue is recognized; and a calculation of the costs incurred and an estimated
cost to complete the contract to determine if costs are in excess of potential
revenue. 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.]

                                       10

Revenue from product licenses is recognized as earned pursuant to the terms
of the related contract, which generally occurs when the Company ships equipment
in conjunction with a license. Amounts received but unearned as of September 30,
2003 (including amounts for such licenses as well as equipment sales) were
$969,110 and are recorded as customer deposits.

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

When formed in February 2002, EnerLook Solutions was a 51% subsidiary of
the Company. Earlier this year, EnerLook Solutions issued 333,333 shares of
common stock to Solution Investment Group, LLC in exchange for $250,000,
reducing the Company's ownership to 49.35%. The issuance of securities was a
private placement under Section 4(2) of the Securities Act of 1933 (the
"Securities Act") and exempt from registration under the Securities Act. Ener1
Group owns 42.58% of the outstanding common stock of EnerLook Solutions. Since
EnerLook Solutions was formed, the Company has consolidated EnerLook Solutions'
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
Solutions and own an aggregate of 91.93% of EnerLook Solutions' outstanding
common stock. Management believes that the reduction in its ownership percentage
of EnerLook Solutions' common stock from 51% to 49.35% does not materially
reduce the control the Company exercises over EnerLook Solutions' operations.

If the Company were to report the investment in EnerLook Solutions under
the equity method of accounting, the Company would report its investment in
EnerLook Solutions' assets and liabilities as a net investment by the Company
instead of consolidating EnerLook Solutions' assets and liabilities with those
of the Company. In addition, the Company's share of losses of EnerLook Solutions
would be included in the Company's results of operations as one line item
instead of including EnerLook Solution' revenue and expenses in the Company's
statement of operations. At September 30, 2003, EnerLook Solutions had total
assets of $1.6 million, liabilities of $1.8 million and net deficit of $0.2
million.

In the second quarter of 2003, the Company transferred certain assets of
its Digital Media division to EnerLook Solutions, Inc. in order to consolidate
the Company's set top box business, which delivers interactive information and
entertainment systems and services to customers in vertical markets such as
hospitality and healthcare. As part of this restructuring, the Company
transferred net assets in the amount of approximately $1.0 million to EnerLook
Solutions, resulting in an intercompany receivable from EnerLook Solutions in
the amount of $1.0 million. The Company is winding up the remaining operations
of its Digital Media Technologies Division, which currently consist primarily of
inventory liquidation and warranty/support services.

9. TECHNOLOGY LICENSES

During the nine months ended September 30, 2002, the Company capitalized
approximately $1.0 million of expenses in connection with licenses purchased by
the Company related to its set-top box technology. Management believes that this
technology and the related set-top boxes will not be fully developed and
marketable until sometime during 2004, and the Company will not generate
significant revenues from the sale of these set-top boxes 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 Statement of
Financial Accounting Standards No. 144 ("SFAS 144").

As part of the Company' consolidation of the former operations of the
Digital Media Technologies Division and EnerLook Solutions described above,
Digital Media transferred its portion of the licenses to EnerLook Solutions to
consolidate the activities of the set top box business into one entity, EnerLook
Solutions.

                                       11

10. GUARANTEE OF CERTAIN LOANS

At September 30, 2003, Ener1 s.r.l., a related Italian company, had a loan
outstanding to Meliorbanca, an Italian bank, in the amount of approximately EURO
1,967,685, or approximately US$2,282,515. 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. The Company, Ener1 Group, and Ener1
Battery are guarantors on the loan, along with other related parties. All
required payments under the loan have been made to date. Ener1 Battery has
provided certain production equipment as collateral to secure the obligations
due under the loan and Meliorbanca has a security interest in this equipment.
The collateral coverage on specified Ener1 Battery production equipment is EURO
5,000,000 (approximately US$5,800,000 as of the date of this filing).

Ener1 Group has borrowed approximately $24 million from one of its
principal stockholders, BZINFIN, S.A. The Battery Company equipment (up to the
amount of $1,000,000 plus interest thereon) and two of the five pending patents
owned by the Battery Company comprise a portion of the collateral securing one
of these loans. (BZINFIN released its security interest in a third pending
patent in connection with the ITOCHU Investment Transactions.) Repayment of
these loans is scheduled for December 31, 2003 in a lump sum. The Company
believes that the repayment date will be extended, and the Company is currently
in discussions with BZINFIN regarding the terms of such extension.

11. NET LOSS PER SHARE

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

12. COMMITMENTS AND CONTINGENCIES

On June 28, 2003, the Company settled a lawsuit brought by Eduard Will, the
Company's former President and Chief Executive Officer, regarding amounts
allegedly owed by the Company to Mr. Will under an employment agreement. Mr.
Will sought monetary damages for the Company's alleged breach of his employment
agreement with the Company, including severance payments and other compensation.
The Company agreed to pay Mr. Will a total of $100,000 in cash, to be paid in
twelve equal monthly payments and to issue to him 240,000 shares of the
Company's unregistered common stock. The issuance of the shares was exempt from
registration under the Securities Act of 1933. The shares have not been
registered under the Securities Act. Mr. Will has the right, under the
settlement agreement, to have his shares registered in the first registration
for which such shares are eligible for registration.

On August 13, 2003, the Company settled a lawsuit brought by 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. The Company has agreed to pay GMC
Properties a total of $150,000, which includes $30,000 that has already been
paid by the Company and monthly payments of $10,000 for twelve months.

                                       12

The Company was named as 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 of its personal computer
products. NEC alleges that the Company and Ring Zero are obligated to indemnify
NEC for NEC's costs of defense and settlement of the PhoneTel suit, in the
amount of $327,000. This action was dismissed without prejudice on April 25,
2000; however, the reason for the dismissal was procedural. While it is possible
that NEC might attempt to refile this action in an appropriate jurisdiction in
the future, NEC has not taken any such action against the Company to date. The
Company cannot predict at this time whether any future claim brought by NEC
would have a material adverse effect on the Company's operating results,
financial condition or cash flows.

The Company and a wholly-owned subsidiary, Boca Global, Inc., were named as
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 Gateway 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 was previously expected to 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 claims brought against the Company. Boca Global, Inc. remains a defendant
in the lawsuit. While the Company believes that Boca Global, Inc. will be able
to assert numerous defenses to 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.),
majority stockholder of the Company. This note matured on February 22, 2003, and
none of the principal or accrued interest has been paid.

The Company's wholly-owned subsidiary, Ener1 Battery Company, is the
obligor on a negotiable promissory note in the amount of $5,500,000, payable to
its majority stockholder Ener1 Group, which note matured on August 31, 2003. The
Company is the obligor on a promissory note in the amount of $1,161,850, payable
to Ener1 Group, which note matured on September 1, 2003. None of the principal
or accrued interest has been paid on either of these notes. The Company is in
the process of negotiating alternate payment arrangements for all three of the
above notes at this time and believes that such arrangements will be completed
shortly.

                                       13

13. STOCKHOLDERS' EQUITY

During the quarter ended March 31, 2003, the Company issued 300,000 shares of
common stock to a consultant in accordance with the terms of a consulting
agreement. Under the agreement, the Company is also obligated to issue a warrant
to the consultant to acquire 200,000 shares of common stock at an exercise price
of $.10 per share which would expire in December 2004. As of the date of this
filing, the warrant has not yet been issued. During the quarter ended September
30, 2003 the Company issued 1,000,000 shares to the consultant in exchange
for early termination of the consulting agreement. During the nine months ended
September 30, 2003, options to purchase 2,710,000 shares of Common Stock were
issued, options to purchase 262,333 shares of Common Stock were terminated and
options to purchase 421,846 shares of Common Stock were exercised. In addition,
in September 2003 the Company signed an employment agreement with Kevin
Fitzgerald, its new Chairman and CEO, pursuant to which the Company is obligated
to issue to Mr. Fitzgerald (1) as of the date of the agreement, 300,000 shares
of Common Stock, and an option to purchase 9,716,716 shares of the Company's
common stock, (2) on December 31, 2004, an option to purchase that number of
shares of Common Stock equal to one percent of the Company's fully diluted
common shares outstanding as of December 31, 2004 and (3) on December 31, 2005,
an option to purchase that number of shares of Common Stock equal to one half of
one percent of the Company's fully diluted common shares outstanding as of
December 31, 2005. The Company is obligated to register the resale of the shares
issued to Mr. Fitzgerald by filing an S-8 registration statement with the
Securities and Exchange Commission. The Company has also issued 450,000 shares
of restricted Common Stock to certain members of its management in transactions
that were exempt from registration under the Securities Act, and the Company is
obligated to register the resale of such shares under an S-8 registration
statement.

14. RELATED PARTY TRANSACTIONS

Ener1 Group incurred expenses on behalf of the Company, including payroll,
advisory services and other administrative expenses, for the three and nine
months ended September 30, 2003 totaling approximately $86,062 and $491,158,
respectively, and for the three and nine months ended September 30, 2002
totaling approximately $307,522 and $938,033, respectively. The expense advances
are non-interest bearing, due on demand and are included in Due to Stockholder
on the balance sheet. The reduction of allocated expenses to the Company by
Ener1 Group in the three months ended September 30, 2003 is primarily due to the
determination that management salaries be charged directly to the Company.

During the quarter ended March 31, 2003, a total of approximately
$1,420,000 was allocated and advanced by Ener1 Group (including the allocation
of the incurred expenses above) to the Company, of which approximately $909,000
was contributed as Additional Paid-in Capital. During the quarter ended June 30,
2003, approximately $1,388,000 was allocated and advanced by Ener1 Group
(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.

During the quarter ended September 30, 2003, approximately $586,000 was
allocated and advanced by Ener1 Group (including the allocation of advisory
services and other administrative expenses).

15. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS AND INTERPRETATIONS

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143"). 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.

                                       14

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 September 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 , "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN45"). 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 Company's condensed consolidated
financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation, Transition and Disclosure" ("SFAS 148"). SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. SFAS No. 148 also
requires that disclosures of the pro forma effect of using the fair value based
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 of changes based on SFAS No. 148 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 Company's condensed consolidated financial statements.

                                       15

The Company has adopted the disclosure-only provisions of SFAS No.-123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). Accordingly, no
compensation cost has been recognized for the stock option plans because the
exercise prices of employee stock options equals the market prices of the
underlying stock on the date of grant. If compensation cost had been determined
based on the fair value at the grant date for all awards consistent with the
provisions of SFAS 123, the Company's net loss and loss per share would have
been as indicated below for the three and nine months ended September 30, 2002
and 2003:

                                      Three Months Ended        Nine Months Ended
                                         September 30,             September 30,
                                 -------------------------- -------------------------
                                       2003           2002      2003          2002
                                 -------------------------- -------------------------
Net loss, as reported                  ($2,496)    ($2,008)   ($5,585)     ($6,505)
Plus: compensation recorded due
 to variable options                       199          60        199          183
Less: Pro forma stock based
 employee compensation,
 net of related tax                       (80)        (586)      (195)        (586)
                                 -------------------------- ---------------------------
Pro forma net loss                    ($2,377)     ($2,534)   ($5,581)     ($6,908)

Loss per share
    Basic and diluted as reported      ($0.01)      ($0.01)    ($0.02)      ($0.02)
    Basic and diluted pro forma        ($0.01)      ($0.01)    ($0.02)      ($0.02)

In January 2003, the FASB issued FASB Interpretation No. 46 ,
"Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51" ("FIN 46"). 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. Adoption of this Statement did not have a
material impact on the Company's condensed consolidated financial
statements.

In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement
133 on Derivative Instruments and Hedging Activities", 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.
Adoption of this Statement did not have a material impact on the Company's
condensed consolidated financial statements.

                                       16

In May 2003, the FASB issued SFAS No. 150,"Accounting For Certain
Financial Instruments with Characteristics of both Liabilities and Equity"
("SFAS NO. 150"). 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
instrument that is a liability under this Statement is an obligation 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 the existing definition of liabilities to encompass certain
obligations that a reporting entity can or must settle by issuing its own
shares. This Statement shall be 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. Adoption of this Statement did not have a material
impact on the Company's condensed consolidated financial statements.

                                       17

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 from
the events or results described in the forward-looking statements.

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. All
forward-looking statements are based on information available to the
Company on the date of this filing, and we assume no obligation to update
any of the forward-looking statements.

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.
You are also urged to carefully review and consider the various disclosures
made by the Company regarding the factors which affect the Company's
business, including without limitation, the disclosures made under the
caption "Certain Factors That May Affect Future Performance" contained in
our Annual Report on Form 10-KSB for the year ended December 31, 2002.

                                       18

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

Overview

We have reorganized and refocused our business during the last nine
months to concentrate on development and marketing of technologies and
products related to lithium batteries, fuel cells and solar cells. Our goal
is to be the technology leader in both lithium batteries and fuel cells.
Our lithium battery business is conducted through our wholly-owned
subsidiary, Ener1 Battery Company ("Ener1 Battery"). During the last nine
months, we have wound up substantially all of the operations of our former
Digital Media Technologies Division. In May of 2003, we transferred
substantially all of the remaining assets of that division to our 49.35%
owned subsidiary, EnerLook Solutions, Inc. ("EnerLook Solutions").

We are actively engaged in developing and delivering to customers and
potential customers samples of products and components of lithium batteries
based on technologies that are the subject of Ener1 Battery's pending
patents. We are also developing technologies, materials and prototypes for
new types of fuel cells and solar cells and expect to file further patent
applications related to both in the near future. We believe that we have
substantial competitive advantages in our fuel cell technologies, which we
are actively pursuing in product development. We believe that these
advantages include extended working life, higher efficiency of fuel usage;
higher efficiency of fuel cell generator, higher mass and volume specific
energy characteristics and lower $/kilowatt cost.

Our fuel cell business plan will focus on capitalizing on our existing
fuel cell technology to produce complete working fuel cell prototypes
during the next six months and a complete pilot scale production facility
during the next two years. We plan to enter into license and/or third party
manufacturing agreements to eliminate the fixed costs of investing in full
scale fuel cell manufacturing facilities. The pilot scale production
facility would be used for continued research and development and selected
high margin fuel cell component manufacturing.

                                       19

EnerLook Solutions develops and markets turn-key video-on-demand and
interactive TV-based information and communications systems to customers in
the health care and hospitality industries. To date, EnerLook Solutions has
had two contracts under which it has installed its systems in hospitals,
and it is actively marketing its systems to additional potential customers
in the healthcare and hospitality industries.

Our Ener1 Technologies, Inc. ("Ener1 Technologies") subsidiary has
been engaged in the development and marketing of products and services for
neutralizing the harmful effects of electromagnetic fields in electric
power transmission lines and related equipment, using technology licensed
by Ener1 Technologies under an exclusive license from an affiliate of Ener1
Group.

Results of Operations

Revenue. Revenue was $.4 million for the three months ended September
30, 2003, a decrease of $.4 million from $.8 million in revenue for the
three months ended September 30, 2002. For the nine months ended September
30, 2003, revenue was $1.3 million, a decrease of $1.3 million from $2.6
million in sales for the nine months ended September 30, 2002. The
substantial majority of revenue in the three and nine months ended
September 30, 2003 consisted of sales of residual inventories of set top
boxes from our former Digital Media Technologies Division.

The decrease in revenue from sales of set top boxes and engineering
services reflects management's decision to shift our activities away from
labor-intensive, intermittent, engineering services contracts and lower
margin sales of set top boxes to focus primarily on development and
marketing of new energy technologies and products using those technologies,
such as lithium batteries, fuel cells and solar cells. Management believes
that our patent pending technologies and access to low cost materials in
these areas will enable us to realize higher margins on future product
sales as the new products are released. Currently, we are producing lithium
battery prototypes and components that are being tested by customers and
potential customers, as well as performing ongoing product development and
product design.

                                       20

EnerLook Solutions develops and markets interactive, in-room TV-based
communication systems for the hospital and hospitality industries. EnerLook
Solutions' sales for the nine months ended September 30, 2003 were
$171,000, which is included in the $0.4 million revenue for the nine months
ended September 30, 2003. EnerLook Solutions had no revenue for the nine
months ended September 30, 2002.

Margins. Gross profit for the three months ended September 30, 2003
was $93,000, an increase of $81,000 from $12,000 for the three months ended
September 30, 2002. Similarly, gross profit for the nine months ended
September 30, 2003 was $154,000, an increase of $882,000 from a loss of
$728,000 for the nine months ended September 30, 2002. Our management
believes that this improvement reflects continuing cost cutting and control
efforts during the last nine months.

 R&D Expense. Given our current positioning and goal of being
the technology leader in both lithium batteries and fuel cells, continuing
R&D plays an important role in our activities. R&D expense for the three
months ended September 30, 2003 was $379,000, an increase of $228,000 from
$151,000 for the three months ended September 30, 2002. R&D expense for the
nine months ended September 30, 2003 was $1.1 million, an increase of
$701,000 from $446,000 for the nine months ended September 30, 2002. We are
no longer incurring R&D expenses for the former Digital Media Technologies
Division.

Selling, General and Administrative Expenses ("SG&A"). SG&A
for the three months ended September 30, 2003 was $2.2 million, an increase
of $0.6 million from $1.6 million for the three months ended September 30,
2002. SG&A for the nine months ended September 30, 2003 was $4.2 million, a
decrease of $0.6 million from $4.8 million for the nine months ended
September 30, 2002. This decrease was the result of our cost cutting and
cost control efforts over the last nine months, offset in the three
months ended September 30, 2003 by the hiring of additional personnel for
the Company's administrative, battery and fuel cell operations.

                                       21

Liquidity and Capital Resources

 Going Concern. We have experienced net operating losses since
1997, incurred negative cash flows from operations since 1999 and, as of
September 30, 2003, had an accumulated deficit of $54.7 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. We had negative cash flows from operations of $4.2 million
for the nine months ended September 30, 2003. Our management expects that
our operations will continue to incur negative cash flows in the fourth
quarter of 2003 and additional cash will be required to fund our
operations. These conditions, among others, give rise to substantial doubt
about our ability to continue as a going concern for a reasonable period of
time.

 Working Capital. Our working capital deficit increased from
$11.9 million at December 31, 2002 to $16.3 million at September 30, 2003.
The latter amount includes $6.9 million in notes payable to our parent
company, Ener1 Group, $2.7 million in advances from stockholders, and $1.7
million in current liabilities owed to related parties. Ener1 Group
provided cash needed to fund our operations since its acquisition of Ener1,
most recently providing $1.5 million in new funding in October and November
of 2003. The decrease in working capital is primarily due to a net $2.5
million increase in Due to Stockholders and the reclassification of $1.6
million of Long Term Notes Payable to Current Notes Payable.

Additional funding was provided in the third quarter by ITOCHU
Corporation, a Japanese company, which purchased 14 million shares of our
Common Stock for an aggregate purchase price of $3.5 million in a private
sale under Section 4(2) of the Securities Act of 1933. In addition, we
granted the following options to ITOCHU to increase its ownership of our
common stock at the following prices: During the six month period from July
25, 2003 through January 24, 2004, ITOCHU has the option to purchase up to
12,461,861 shares of our common stock, which equals 4% of the number of
shares of common stock outstanding as of July 24, 2003, for $0.70 per
share. During the six month period from January 25, 2004 through July 24,
2004, ITOCHU has the option to purchase up to 9,346,396 additional shares
of our common stock, which equals 3% of the number of shares of our common
stock outstanding as of July 24, 2003, for $2.50 per share. (See
"Investment Transactions," below.)

We will need substantial additional capital to continue its R&D
efforts in high energy lithium batteries and fuels cells, as well as to
carry out its marketing efforts and begin production in its battery
manufacturing plant. Additional funds will also be needed for payment of
existing balance sheet payables and general working capital purposes. We
can make no assurances regarding the availability or terms of funding to
meet these needs. We are actively seeking additional capital through
various sources, including its existing investors. Our operations have been
funded primarily for the last two years by equity investments, loans, and
advances from Ener1, Group and funds from the ITOCHU stock purchase.

                                       22

We are the obligor on a Term Note in the principal amount of $200,000,
payable to Ener1 Holdings, Inc. (now known as Ener1 Group, Inc.), our
parent company. This note matured on February 22, 2003, and none of the
principal or accrued interest has been paid. Interest on the principal of
the note is payable at 12%. We expect to refinance this debt with Ener1
Group in the near future.

Our subsidiary, Ener1 Battery, is the obligor on a negotiable
promissory note in the amount of $5,500,000, payable to Ener1 Group. We re
the obligor on a promissory note in the amount of $1,161,850, payable Ener1
Group. These notes matured on August 31, 2003, and September 1, 2003,
respectively. None of the principal or accrued interest has been paid. We
expect to refinance this debt with Ener1 Group in the near future.

As of September 30, 2003, our total indebtedness was $18.1 million, of
which $17.5 million consisted of current liabilities. Current liabilities
include $11.2 million due to either stockholders or related parties. The
remaining current liabilities consisted primarily of $1.6 million in
accounts payable, $2 million in accrued expenses (of which approximately
$1.0 million is accrued interest on the stockholder and related party
debt), $1.0 million in Customer Deposits, and $1.6 million in two bank
loans that mature in August of 2004. We have entered into payment
agreements with a substantial number of our trade creditors, and we are
paying them over various time periods to conserve working capital.

Investment Transactions

 ITOCHU Corporation. On July 25, 2003, we entered into a
Subscription and Investment Agreement with ITOCHU Corporation, under which
we issued 14 million shares of our common stock, which represents
approximately 4.3% of our outstanding common stock, to ITOCHU Corporation
at a price of $0.25 per share. The transaction was a private placement
under Section 4(2) of the Securities Act of 1933. In addition, we granted
the following options to ITOCHU to increase its ownership of our common
stock at the following prices: During the six month period from July 25,
2003 through January 24, 2004, ITOCHU has the option to purchase up to
12,461,861 shares of our common stock, which equals 4% of the number of
shares of common stock outstanding as of July 24, 2003, for $0.70 per
share. During the six month period from January 25, 2004 through July 24,
2004, ITOCHU has the option to purchase up to 9,346,396 additional shares
of our common stock, which equals 3% of the number of shares of our common
stock outstanding as of July 24, 2003, for $2.50 per share. The shares
issued to ITOCHU have not been registered under the Securities Act of 1933.
We have granted certain registration rights to ITOCHU for the registration
of these shares.

                                       23

Using the proceeds of the ITOCHU investment, we invested $2 million in
a new Japanese company called EnerStruct, Inc. ("EnerStruct"), of which we
own 49% and ITOCHU owns 51% and the Company would own 49%, with the Company
investing $2 million into EnerStruct for its 49% interest and ITOCHU
investing $1.1 million plus equipment totaling approximately $0.5 million
in EnerStruct. EnerStruct's business plan is to combine the technical,
marketing and financial resources of ITOCHU Ener1 to sell lithium batteries
in Japan, concentrating on automotive and other areas.

We 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's pending
patent applications. ITOCHU also exclusively licensed to EnerStruct
numerous patents involving its battery technologies as part of the above
transactions.

 Ener1 Ukraine. On September 12, 2003, the Company finalized,
through its Ener1 Battery Company subsidiary, the acquisition of its R&D
partner company in Ukraine. The transaction value was nominal, and the
impact on the Company's assets and liabilities resulting from the
transaction is not material. The primary purpose of the transaction was to
bring its offshore R&D operations more directly under the Company's
financial and management control.

Certain Accounting Policies

 Stock Compensation.  We 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.

 Consolidation of EnerLook Solutions, Inc.  When formed in
February 2002, EnerLook Solutions was a 51% subsidiary of the Company.
Earlier this year, EnerLook Solutions issued 333,333 shares of common stock
to Solution Investment Group, LLC in exchange for $250,000, reducing the
Company's ownership to 49.35%. The issuance of securities was a private
placement under Section 4(2) of the Securities Act of 1933 (the "Securities
Act") and exempt from registration under the Securities Act. Ener1 Group
owns 42.58% of the outstanding common stock of EnerLook Solutions. Since
EnerLook Solutions was formed, the Company has consolidated EnerLook
Solutions' 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 Solutions and own an
aggregate of 91.93% of EnerLook Solutions' outstanding common stock.
Management believes that the reduction in its ownership percentage of
EnerLook Solutions' common stock from 51% to 49.35% does not materially
reduce the control the Company exercises over EnerLook Solutions'
operations.

                                       24

If the Company were to report the investment in EnerLook Solutions
under the equity method of accounting, the Company would report its
investment in EnerLook Solutions' assets and liabilities as a net
investment by the Company instead of consolidating EnerLook Solutions'
assets and liabilities with those of the Company. In addition, the
Company's share of losses of EnerLook Solutions would be included in the
Company's results of operations as one line item instead of including
EnerLook Solutions' revenue and expenses in the Company's statement of
operations. At September 30, 2003, EnerLook Solutions had total assets of
$1.6 million, liabilities of $1.8 million and net deficit of $0.2 million.

In the second quarter of 2003, the Company transferred certain assets
of its Digital Media division to EnerLook Solutions, Inc. in order to
consolidate the Company's set top box business, which delivers interactive
information and entertainment systems and services to customers in vertical
markets such as hospitality and healthcare. As part of this restructuring,
the Company transferred net assets in the amount of approximately $1.0
million to EnerLook Solutions, resulting in an intercompany receivable from
EnerLook Solutions in the amount of $1.0 million. The Company is winding up
the remaining operations of its Digital Media Technologies Division, which
currently consist primarily of inventory liquidation and warranty/support
services.

ITEM 3.  CONTROLS AND PROCEDURES

We have carried out an evaluation, under the supervision and with the
participation of its management, including our Chief Executive Officer (the
"CEO") and our Chief Financial Officer (the "CFO"), regarding the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 3a-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, the CEO and CFO
concluded that our disclosure controls and procedures are effective in
providing reasonable assurance that (a) the information required to be
disclosed 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 for 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.

                                       25

PART II.

                                OTHER INFORMATION

Item 1.  Legal Proceedings

As described in the Company's reports on Form 10-QSB filed on May 20,
2003 and August 19, 2003, respectively, the Company has been involved in
litigation brought by Eduard Will, the Company's former President and Chief
Executive Officer, regarding amounts allegedly owed by the Company to Mr.
Will under an employment agreement. Mr. Will filed suit in the Circuit
Court of Palm Beach County, Florida on October 7, 2002, seeking monetary
damages for alleged breach of his employment agreement with the Company,
including severance payments and other compensation. The law suit was
settled on June 28, 2003 for $100,000 in cash, payable in twelve equal
monthly payments, and 240,000 shares of restricted common stock at a price
of $0.25 per share. The issuance of the shares is exempt under Section 4(2)
of the Securities Act of 1933.

On August 13, 2003, the Company settled a lawsuit brought by 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. As previously described in
the Company's reports on Form 10-QSB filed on May 20, 2003 and August 19,
2003, respectively, GMC Properties filed suit on April 14, 2003 in the
Circuit Court of Palm Beach County, Florida. The Company has agreed to pay
GMC Properties a total of $150,000, which includes $30,000 which already
has been paid by the Company and monthly payments of $10,000 for twelve
months.

As described in the Company's reports on Form 10-QSB filed on May 20,
2003 and August 19, 2003, respectively, the Company was named as a
co-defendant in an action brought in the United States District Court for
the District of Massachusetts on September 24, 1999 by NEC Technologies,
Inc. ("NEC"). The suit alleges that the Company supplied modem hardware to
NEC, which was combined by NEC with software supplied by another
co-defendant, Ring Zero Systems, Inc. NEC was subsequently sued for patent
infringement by PhoneTel Communications, Inc. ("PhoneTel"), allegedly as a
result of NEC's combination of modem hardware and software supplied by the
vendors of its personal computer products. NEC alleges that the Company and
Ring Zero are obligated to indemnify NEC for NEC's costs of defense and
settlement of the PhoneTel suit, in the amount of $327,000. This action was
dismissed without prejudice on April 25, 2000; however, the reason for the
dismissal was procedural. While it is possible that NEC might attempt to
refile this action in an appropriate jurisdiction in the future, NEC has
not taken any such against the Company to date. The Company cannot predict
at this time whether any future claim brought by NEC would have a material
adverse effect on the Company's operating results, financial condition, or
cash flows.

                                       26

The Company and a wholly-owned subsidiary, Boca Global, Inc. were
named co-defendants in an action brought on April 21, 2000 in the District
Court of South Dakota, by Gateway, Inc. ("Gateway"), as described in the
Company's reports on Form 10-QSB filed on May 20, 2003 and August 19, 2003,
respectively. Global Village, Inc. had contracted to supply its FaxWorks
software to Gateway to be bundled with Gateway PCs. Gateway's complaint
against the Company and Boca Global, Inc. alleged that either or both of
these entities assumed the liabilities of Global Village, Inc. with respect
to the FaxWorks product. On January 19, 2001, a motion to dismiss was
granted with respect to the claims brought against the Company. Boca
Global, Inc. remains a defendant in the lawsuit. 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 2.  Changes in Securities and Use of Proceeds

 Sale of Stock to ITOCHU Corporation.  As described in
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("Investment Transactions"), the Company sold 14 million shares
of its common stock to ITOCHU Corporation on July 25, 2003 for the price of
$0.25 per share, for a total purchase price of $3.5 million. The
transaction was exempt from registration under Section 5 of the Securities
Act of 1933 because it was as private sale with under Section 4(2) of the
Securities Act that did not involve a public offering or any advertising to
the general public.

In addition, the Company granted the following options to ITOCHU to
increase its ownership of the Company's common stock at the following
prices: During the six month period from July 25, 2003 through January 24,
2004, ITOCHU has the option to purchase up to 12,461,361 shares of the
Company's common stock, which equals 4% of the number of shares of common
stock outstanding as of July 24, 2003, for $0.70 per share. During the six
month period from January 25, 2004 through July 24, 2004, ITOCHU has the
option to purchase up to 9,346,396 additional shares of the Company's
common stock, which equals 3% of the number of shares of the Company's
common stock outstanding as of July 24, 2003, for $2.50 per share.

During the quarter ended March 31, 2003, the Company issued 300,000 shares of
common stock to a consultant in accordance with the terms of a consulting
agreement. Under the agreement, the Company is also obligated to issue a warrant
to the consultant to acquire 200,000 shares of common stock at an exercise price
of $.10 per share which would expire in December 2004. As of the date of this
filing, the warrant has not yet been issued. The Company expects this warrant to
be issued in the next 30 days. During the quarter ended September 30, 2003 the
Company issued 1,000,000 shares of its common stock to the consultant in
exchange for cancellation of the consulting agreement. The transactions were
exempt from registration under Section 4(2) of the Securities Act of 1933.

                                       27

During the nine months ended September 30, 2003, options to purchase
2,710,000 shares of Common Stock were issued, options to purchase 262,333
shares of Common Stock were terminated and options to purchase 421,846
shares of Common Stock were exercised.

In addition, in September 2003 the Company signed an employment
agreement with Kevin Fitzgerald, its new Chairman and CEO, pursuant to
which the Company is obligated to issue to Mr. Fitzgerald (1) as of the
date of the agreement, 300,000 shares of Common Stock, and an option to
purchase 9,716,716 shares of the Company's common stock, (2) on December
31, 2004, an option to purchase that number of shares of Common Stock equal
to one percent of the Company's fully diluted common shares outstanding as
of December 31, 2004 and (3) on December 31, 2005, an option to purchase
that number of shares of Common Stock equal to one half of one percent of
the Company's fully diluted common shares outstanding as of December 31,
2005. The Company is obligated to register the resale of the shares issued
to Mr. Fitzgerald by filing an S-8 registration statement with the
Securities and Exchange Commission.

The Company has also issued 450,000 shares of restricted Common Stock
to certain members of its management, and the Company is obligated to
register the resale of such shares under an S-8 registration statement.

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 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.

        The Company's subsidiary, Ener1 Battery, is the obligor on a
negotiable promissory notes in the amount of $5,500,000, payable to Ener1
Group. The Company is the obligor on a promissory note in the amount of
$1,161,850, payable to Ener1 Group. These notes matured on August 31, 2003,
and September 1, 2003, respectively. None of the principal or accrued
interest has been paid. The Company expects to resolve these matters in the
near future.

                                       28

Item 6.  Exhibits and Reports on Form 8-K

   (a)      Exhibits

3.1      Articles of Incorporation of the Company, incorporated by reference to
         Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the
         quarter ended September 30, 2000

3.2     Amendment to the Articles of Incorporation of the Company,
        incorporated by reference to Exhibit 3.2 of the Company's Annual Report
        on Form 10-K for the year ended December 31, 2001

3.3     Amendment to Articles of Incorporation of the Company incorporated by
        reference to Exhibit 3.1 of the Company's current report on Form
        8-K dated October 28, 2002 (No. 000-21138)

3.4     By-laws of the Company

10.1    MASTER AGREEMENT

10.2    LICENSE AND ROYALTY AGREEMENT

10.3    SUBSCRIPTION AND INVESTMENT AGREEMENT

10.4    COMMON STOCK SUBSCRIPTION AGREEMENT

10.5    SHAREHOLDERS AGREEMENT

10.6    EMPLOYMENT AGREEMENT

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

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

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

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

         (b)      Reports on Form 8-K

                  None filed for the quarter ended September 30, 2003.

                                       29

                          ENER1, INC. AND SUBSIDIARIES

                                   SIGNATURES

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

                                                     ENER1, INC.

Dated: November 14, 2003                    By: /s/ Kevin P. Fitzgerald
                                                    Kevin P. Fitzgerald
                                                    Chief Executive Officer
                                                    (Principal Executive Officer)

Dated: November 14, 2003            By: /s/ Ronald Stewart
                                            Ronald Stewart
                                            Chief Financial Officer
                                            (Principal Financial and Accounting Officer)
```