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

                               FORM 10-KT/A

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

           [X]   TRANSITION REPORT PURSUANT TO SECTION 13 OR
                15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the Transition Period from
                  November 1, 1996, to March 31, 1997

                     Commission file number 1-10869

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

                   Colorado                     84-0579156
           (State or other jurisdiction of   (I.R.S. Employer
           incorporation or organization)     Identification No.)

              425 Corporate Circle, Golden, Colorado  80401
         (Address of principal executive offices)    (Zip Code)

  Registrant's telephone number, including area code:  (303) 278-2002

     Securities registered pursuant to Section 12(b) of the Act:
                      Common stock, $.01 par value

              Name of each exchange on which registered:
                        American Stock Exchange
                         Boston Stock Exchange
                         Pacific Stock Exchange
                         Chicago Stock Exchange

      Securities registered pursuant to Section 12(g) of the Act:


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                      Common stock, $.01 par value

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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.   X

The  aggregate  market  value of the voting stock held by  nonaffiliates  of the
registrant  (11,700,585  shares)  computed by reference to the closing  price of
such stock on the American Stock Exchange, as of June 25, 1997:

                              $81,904,095

The number of shares  outstanding  (including shares held by affiliates) of each
of the registrant's classes of common stock, as of June 25, 1997:

                        13,355,435 shares of the
                       registrant's common stock,
                            $.01 par value.

                  DOCUMENTS INCORPORATED BY REFERENCE
     In Part III certain information is incorporated by reference
         from the Company's definitive Proxy Statement for the
             August 19, 1997 Annual Meeting of Shareholders


ITEM 1.     BUSINESS

General

Unique  Mobility,  Inc.  ("Unique" or the  "Company")  was organized in 1967 and
presently develops and manufactures high efficiency permanent magnet (PM) motors
and controls for automotive,  industrial and aerospace applications. Since 1990,
the Company's  focus has been to apply its products to several types of electric
(EV) and  hybrid  electric  vehicle  (HEV)  propulsion  systems.  The  Company's
objective is to leverage its  technology  base and name  recognition  to serve a
number of high  potential  niche markets in the near-term,  and automotive  mass
markets in the  longer-term.  The Company's common stock trades on the American,
Boston, Pacific and Chicago Stock Exchanges under the symbol "UQM".

Historically,  the Company's revenue has been derived from contract research and
development services.  These sponsored research and development  activities have
supplemented  internally  funded  product  development  programs  and have added
significantly to the Company's technology base. Now, the Company, its affiliates
and its  licensees  hope to begin  commercial  production  of products  that the
Company hopes will generate a more  consistent  and greater  revenue stream than
that of prior years.  The Company's future  commercial  products are expected to
include:

     Bicycle Motors: Proprietary PM motors, controllers and chargers for
     application in electrically powered bicycles.

     Wheelchair Motors: Proprietary PM wheelchair motors that are compact and
     energy efficient for application in motorized wheelchair products.


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     Scooter  Motors:  Advanced  hub-mounted PM traction motors and controls for
     motor scooter applications.  These matched systems deliver high performance
     over a wide power range with programmable control and regenerative braking.
     They will be  manufactured  in Taiwan by the  Company's  licensee for Kwang
     Yang Motor Co., Ltd. (KYMCO), one of the world's largest producers of motor
     scooters.

     Golf Cart Motors:  Higher power (5-10 kW)  variations  of the scooter motor
     and  controller  designed  to reach  existing  markets  for small  electric
     vehicles  such as golf  carts,  light  industrial  vehicles  and lawn  care
     products.

     EV and  HEV  Motors:  Power  ranges  from  30-100  kW.  Typical  is the UQM
     PowerPhase  System,  developed for on-road EV and HEV  applications  and is
     currently  offered for sale on a  prototype  low volume  basis.  The system
     includes a 53 kW PM motor,  matching  controller and single stage transaxle
     with differential gearing and parking lock. Larger versions (63-100 kW) are
     currently offered or under development for bus and truck applications.

Management  believes that the innovative  designs,  carefully selected materials
and advanced  manufacturing  processes used in UQM products  provide a number of
benefits.  These  benefits  include high power  density  (packageability),  high
efficiency over a wide range of operation,  and simplified  construction that is
capable of  achieving  cost  benefits at higher  production  levels.  High power
density and efficiency are critical attributes in any application where space is
at a premium and the energy supply is limited.

Unique's  relationships with major original equipment  manufacturers  (OEMs) and
other  industry  leaders has enabled the Company to obtain  partial  funding for
product  development  while  still  retaining  substantially  all  rights to its
intellectual property. In some cases, these funding sources are, or are expected
to become,  manufacturing  partners,  customers or  licensees  of the  developed
products.  Such is the case with KYMCO,  co-funder and licensee of the Company's
electric  scooter  power system,  who is also the Company's  partner in a Taiwan
based joint venture company.

The Company  intends to continue to advance its  technology  base and to develop
new products that have a high potential for  commercialization.  Key among these
are the  development  of 75 and 100 kW  traction  drive  systems  for trucks and
buses;  an advanced high speed motor for  flywheels,  spindle  drives and vacuum
pumps;  electric  and hybrid  electric  passenger  car  conversion  projects for
customers in Korea and Taiwan;  and the  application  of the Company's  electric
scooter  power  system to small  vehicles for  customers in Asia and Europe.  In
addition,  the UQM powered  Ethos 3 EV  electric  car is being  demonstrated  to
potential  licensees in collaboration with the Pininfarina Group of Turin, Italy
(Pininfarina).

Unique  believes  that its  technology,  its  developed  products,  its cadre of
strategic  partners  and  its  key  management  and  technical   personnel  have
positioned  the Company to  potentially  capitalize on existing niche markets an
global mass markets,  should they develop, for  energy-efficient  clean vehicles
and related products.

Recent Developments

During  fiscal  1997,   the  Company   continued  to  strengthen  its  strategic
relationships with Invacare Corporation (Invacare),  KYMCO and Pininfarina.  The
Company also formed a new strategic  relationship  with EV Global Motors,  a new
company  formed by former  Chrysler  Chairman,  Lee A. Iacocca,  to market light
electric vehicles.



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Invacare  Relationship:  The design for  manufacture of the Invacare  wheelchair
motor has been completed and prototypes  have been delivered to Invacare for in-
chair  testing.  Invacare is a leading U.S. based  manufacturer  and marketer of
home  medical   equipment   with  products  that  include  a  complete  line  of
wheelchairs,  patient aids, seating and positioning products, home institutional
beds, and  respiratory  assistance  products.  Mr. J. B. Richey,  Invacare's top
technical  executive,  is a member  of the  Company's  board of  directors.  The
Company is currently  negotiating  with Invacare (1) to  manufacture  wheelchair
motors  pursuant to a long-term  supply  agreement and (2) to grant  Invacare an
exclusive  worldwide  royalty bearing license to make, use and sell other of the
Company's motors for application in medical products. There can be no assurance,
however, that such negotiations will be successful.

Taiwan Joint Venture:  During fiscal 1997, Taiwan UQM Electric Co., Ltd. (Taiwan
UQM), a Taiwan corporation owned jointly by the Company,  KYMCO and Turn-Luckily
Technology  (TLT),  completed  construction  of a factory for the manufacture of
products  under  license  from the Company.  Taiwan UQM is currently  installing
semi-automated  manufacturing equipment and is planning to launch the production
of  conventional  starter  motors and  generators  in August 1997  pursuant to a
supply agreement with KYMCO.  Taiwan UQM plans to launch  production of electric
power systems for KYMCO scooters in 1999 and eventually will produce a full line
of UQM products for other Asian automotive and industrial customers.

The Pininfarina Ethos 3 EV: The Company has continued to demonstrate the Ethos 3
EV electric car to automotive OEMs and other interested parties with its partner
Pininfarina.  During fiscal 1997, product  presentations and demonstrations were
conducted in Italy for Audi,  BMW, Fiat,  Mercedes-Micro  Compact Car, Rover and
Saab.  Upon its return to the U.S.,  the  vehicle  was  showcased  at the Denver
"Summit of the Eight." Other  demonstrations  are planned in Denver and in Italy
throughout  the  remainder  of  calendar  1997.  It is the  objective  of  these
demonstrations  to secure one or more funded programs leading to the development
of  a  global  family  of  "clean"  vehicles  that  can  be  industrialized  and
distributed by third party automotive  clients for sale to the general public in
several models in many markets worldwide.

EV Global Motors: In June 1997, the Company entered into a strategic partnership
with EV Global Motors  Company  (EVG),  a new entity  recently  formed by former
Chrysler   Chairman   Lee   Iacocca  to  develop  and  market   light   electric
transportation  systems  such as  bicycles,  scooters  and  electric  cars.  EVG
purchased  1,151,925 shares of the Company's stock in a private transaction from
Alcan  Aluminum  Limited  and  purchased  warrants  from  other  sources  for an
additional 350,000 shares.  Separately, the Company and EVG entered into a Stock
Purchase  Agreement whereby the Company has agreed to purchase 400,000 shares of
EVG's common stock in exchange for 200,000  newly-issued shares of the Company's
common  stock.  Upon  completion  of the latter  transaction,  EVG's  beneficial
ownership will represent approximately 12.2 percent of the Company's outstanding
shares,  making  EVG the  Company's  largest  shareholder.  Concurrently,  it is
contemplated that Mr. Iacocca will join the Company's board of directors and Mr.
Ray A. Geddes, the Company's chairman and Chief Executive Officer, will join the
board of EVG.

Also in June 1997, the Company,  EVG,  KYMCO,  TLT and Taiwan UQM entered into a
memorandum  of  understanding  for the formation of an  international  strategic
alliance  to  develop  and market  KYMCO  electric  scooters  in North and South
America.

Products/Technology

The Company has an aggressive  strategy to  commercialize  its  technologies and
develop  products to provide for future growth.  Initial  product  offerings are
being directed primarily toward near term markets for low voltage small vehicle


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traction  applications  and will be followed by an  expansion  into the markets,
should they develop, for larger, high voltage vehicle propulsion systems.  Small
vehicle  applications  include  wheelchairs,  bicycles,  motor  scooters,  small
industrial  vehicles,  golf carts and lawn care products that generally  require
power levels from 1 kW to 10 kW at voltages from 12 Vdc to 48 Vdc. Large vehicle
applications  include  electric and hybrid electric  passenger cars,  commercial
trucks and urban transit buses that generally require power levels from 20 kW to
250 kW at voltages from 96 Vdc to 400 Vdc.

The  Company's  current  product   offerings   typically  utilize  a  number  of
proprietary  technologies,  several of which are patented,  including high pole-
count PM motor design with six step commutation and phase advanced control.  The
high  pole-count,  together with a relatively large air-gap  diameter,  create a
higher torque,  lower speed motor than that of more conventional  architectures.
Higher  torque at lower speed  allows for a lower gear ratio,  fewer  mechanical
losses and higher  efficiency  at light  "cruising"  loads.  These  designs have
excellent heat rejection  capability,  high copper  utilization  (i.e. tight end
turns),  and a "hollow"  profile that provides room to package other  components
inside  the  motor.  Six step  commutation  enables  the use of low  cost  rotor
positioning  sensing mechanisms and reduces switching losses to improve inverter
efficiency.  Phase advanced control is a technique for  manipulating  current to
allow the motor to run faster and thus  deliver  more power  without the cost of
having to increase the current supply.

Currently developed products include:

Wheelchair  Motor:  A proprietary  PM motor has been  developed for the Invacare
powered  wheelchair  product  line.  The Motor is compact and energy  efficient.
While  it  was  developed  specifically  for  powered  wheelchair  applications,
management believes that scaled-up versions of the motor can serve several other
markets for electrically powered vehicles.  The Company is currently negotiating
with Invacare to manufacture motors for its wheelchairs;  however,  there can be
no assurance that such negotiations will be successful.



               Picture of Wheelchair and Motor

     Fig. 1  Invacare  Storm' Wheelchair and PM Wheelchair Motor


Scooter Motor and  Controller:  A 3.6 kW hub-mounted PM motor and full authority
48 Vdc controller with integrated charger and dc-dc converter has been developed
for the KYMCO electric scooter product line. This system is air-cooled,  compact
and efficient over a wide operating range. It delivers torque at a wide range of
speeds and provides  regenerative  braking  down to zero rpm.  While the scooter
motor system was developed for KYMCO's exclusive use in most Asian markets,  the
Company  has  reserved  commercial  rights in Japan and India and in all markets
outside Asia.

                Picture of Prototype Electric Scooter

  FIG. 2  KYMCO  Prototype Electric Scooter and Traction System


Golf Cart Motor and Controller:  A higher power (5-10 kW) variation of the KYMCO
scooter motor and controller is being  developed to reach  existing  markets for
small electric vehicles such as golf carts,  light industrial  vehicles and lawn
care  products.  The golf cart  motor is longer in  dimension  than the  scooter
motor,  but has the same  diameter  stator  core and can be built  from the same
tooling. Its features of merit are similar to those of the scooter motor, but


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at power levels up to 10 kW. Management believes this product can be marketed as
an aftermarket  replacement  motor as well as original  equipment,  and for this
reason   universal   motor  mounts  have  been   designed  for  easy   "drop-in"
installation.



                       Picture of Golf Cart Motor

                    Fig. 3  Golf Cart Motor


PowerPhase  System:  A high power,  modular  traction  drive  system for on-road
electric and hybrid electric  vehicle  applications.  The PowerPhase  system was
initially developed for the Ethos 3 EV demonstrator vehicle, but has application
as a power system for all types of passenger  cars and light trucks.  The system
includes a matched set of components composed of a 53 kW liquid cooled PM motor,
a 180-400 Vdc microprocessor  based  programmable  controller with phase advance
control, and a single stage transaxle with differential and a mechanical parking
lock. The transaxle connects the output shaft of the motor to the road wheels in
a  variety  of front  or rear  wheel  drive  configurations.  A 63 kW motor  and
controller of the same frame size is offered with in-line gear reduction for bus
and heavy truck applications.


                    Picture of Unique PowerPhase System

                    Fig. 4   53 kW PowerPhase System


Ethos 3 EV Demonstrator

In  partnership  with   Pininfarina,   the  Company  has  developed  the  system
architecture  for the Ethos 3 EV electric  car.  The Ethos 3 EV is a  four-door,
four-passenger  hatchback sedan, styled as a wedge-like aerodynamic cube. It has
a  rectangular  base,  short in  length,  but wide and tall to  provide  a roomy
interior.  The split  tailgate  simplifies  the  loading  of cargo  from  above,
particularly  when the car is  parked  bumper to  bumper  along  the  curb.  The
McPherson-type front suspension has telescoping arms and coil springs, while the
rear suspension has interconnected  trailing arms. Electric power steering is by
rack and pinion and the braking system  incorporates full  regenerative  braking
supplemented by discs on the front and drums on the rear.


           Picture of Ethos e EV Demonstrator and Space Frame Structure

          Fig. 5   Ethos 3 EV Demonstrator and Space Frame Structure


The Ethos 3EV is built on an extruded  aluminum  space frame that forms a sturdy
cage to give a high level of occupant protection.  Impact beams are incorporated
in the doors.  The front  seats are fitted with  pre-tensioned  seat belts and a
driver's side air bag. Instruments and controls include a speedometer, a battery
state-of-charge  gauge,  shift  lever,  an  engine-on  light,  and a main  power
disconnect  switch.  Integrated  into the dash  panel is an  efficient  heating,
cooling  and  ventilating  system  specially  developed  for  the  Ethos 3 EV by
Calsonic  International,  one of the world's  largest  suppliers  of  automotive
climate control systems.

At the heart of the  Ethos 3 EV is the front  mounted  UQM  PowerPhase  traction
drive system that provides 53 kW maximum power and 150 Nm of continuous torque.


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The motor  drives  through a 6.8 to 1 single stage  transaxle  with a mechanical
differential  and parking brake.  Electric current is supplied to the motor by a
400 Vdc,  300 Amp  inverter  using IGBT power  switching  modules  with  digital
microprocessor   control.   Proprietary  software  provides  for  smooth,  quick
acceleration with phase advance control for extended power and full regenerative
braking for extended range.

The UQM PowerPhase system is matched to a high-performance energy storage system
that uses 26 Ovonic nickel  metal-hydride  (NiMH) batteries.  NiMH batteries are
characterized by high power, long cycle life, no memory effect,  few maintenance
problems and they are totally  recyclable.  GM Ovonic,  a joint venture  between
General Motors and Ovonic Battery  Company is the  manufacturing  agent.  In the
Ethos 3 EV, the batteries are housed in three compartments,  two under the front
seats and one under  the rear  cargo  area.  They have a  specific  energy of 70
Wh/kg,  a specific  power of 220 W/kg and are connected in series to provide 312
Vdc with 85 Amp hours of capacity.  This system permits the Ethos 3 EV to travel
more than twice as far per charge as would lead-acid  batteries of the same size
and weight, or approximately 150 miles at 45 mph.

Marketing/Markets

The Company's  marketing strategy is to build on its technology base to become a
leading  supplier  of  advanced  vehicle  power  systems  for energy  efficient,
environmentally clean surface  transportation  throughout the world. In the near
term,  the  Company's  focus is  being  directed  toward  existing  markets  for
low-voltage  systems  used in  small  vehicles  such as  wheelchairs,  bicycles,
electric  scooters,   golf  carts,  light  industrial  vehicles  and  lawn  care
equipment.  This effort will be followed by  initiatives to reach the market for
larger,  high-voltage  systems required for on-road  passenger cars,  trucks and
buses, should such a market develop.

Near Term Markets

Wheelchair  Motors:  The  Company  hopes to  manufacture  wheelchair  motors for
Invacare. Each powered wheelchair requires two motors. Invacare is the country's
largest manufacturer of home health care and mobility products. It holds the No.
1 position in powered  wheelchairs  with  approximately 60 percent of the market
and is No. 2 in Europe.  The Company is currently  negotiating  with Invacare to
manufacture motors for its wheelchairs;  however, there can be no assurance that
such negotiations will be successful.

Scooter Motors and Controllers:  The Company's  electric scooter power system is
expected  to be  manufactured  by Taiwan  UQM for KYMCO and  possibly  for other
scooter  manufacturers  in markets  where KYMCO does not have  exclusive  rights
(i.e.,  Japan,  India and all markets outside Asia).  KYMCO is Taiwan's  largest
producer of  two-wheeled  vehicles with  approximately  one third of the market.
Timing for the production  launch of the KYMCO  electric  scooter has not as yet
been released, but the launch is scheduled to occur no later than 1999 to meet a
government mandate requiring, by the year 2000, that two percent of all scooters
sold in  Taiwan  be  electric.  There can be no  assurance  that the  government
mandates will not be modified or rescinded.

The Taiwan  Ministry  of  Transportation  and  Communication  reports  that 1994
domestic sales of gasoline powered two-wheeled  vehicles totaled 1,192,503 units
with approximately 500,000 additional units being produced for export, primarily
to the People's  Republic of China.  This would  indicate a Taiwanese  market of
23,850 electric  scooters by the year 2000,  assuming a flat sales rate from now
until then.  Other potential  markets for electric  scooters and/or power system
components include China, India and Indonesia, all of which have larger usage of
two-wheeled vehicles than Taiwan.



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Golf Cart Motors and Controllers:  Motors used to power golf carts are also used
for other commercial vehicle  applications.  To better understand the potential,
the Company  commissioned  Markowitz &  McNaughton,  Inc.,  a Reston,  Virginia,
consulting firm, to define and quantify the U.S. market for golf cart motors and
controllers.

The  golf  cart  market  is  defined  as  vehicles  sold to golf  courses,  golf
communities  and resorts for the transport of one or more persons  around a golf
course or  residential  community.  Also  included  are golf carts  operating as
utility  vehicles  for on-site and  in-plant  materials  transport  and security
patrol  vehicles.  The domestic market for golf carts is  approximately  190,000
units annually, with 65,000 being electric.  Environmental concerns are expected
to increase the percentage of electric models in future years.

Neighborhood  electric  vehicles (NEVs) are an outgrowth of electric golf carts.
They  are used  for  personal  transportation,  primarily  to carry  two or four
persons  around  closed  residential  subdivisions,  resorts,  and town centers.
Current market size is estimated at 15,000 units annually,  with most being some
type of modified golf cart.  Growth of this segment is expected to come from the
retired  residential  community  market that is being served by a combination of
new NEV manufacturers and the golf cart industry.

Industrial  personnel and cargo  carriers also  represent a market for golf cart
motors.  These  vehicles  are used for  towing,  materials  handling  and people
transport in plants,  industrial  parks,  warehouses  and other close  proximity
manufacturing and industrial settings.  Generally,  they are electrically driven
by brushed dc motors that often require expensive brush replacement  maintenance
during the life of the  vehicle.  Market size of this  segment is  estimated  at
6,000 units annually.

Lawn  tractors,  riding mowers and turf  equipment are used for  residential  or
commercial  grounds keeping.  They are almost  exclusively  gasoline powered and
current vehicle designs are not oriented toward electric motor use. However, the
demand for electric equipment could escalate with  environmental  regulation and
advances in battery  technology.  Electric  versions  would require at least two
motors,  one or more for the cutting blade and one for propulsion.  Current U.S.
market size is estimated at 135,000 riding mowers and 1,000,000 riding tractors,
not including farm equipment.

At present,  the Company does not have  distribution  channels in place to reach
the described markets for golf cart motors and controllers.  It is the Company's
goal, however, to establish  distribution channels either directly or by a joint
venture or licensing  arrangement with a major original  equipment  manufacturer
during  calendar  1997,  although,  there  can be no  assurance  that it will be
successful.

Emerging Growth Markets

In a world that produces over 50 million cars,  trucks and buses every year, the
Company  believes that the potential  for electric and hybrid  electric  vehicle
power systems is  substantial,  especially in those markets that place a premium
on fuel efficiency and good air quality.  The Company's long term goal has been,
and is, to become a leading  provider to this emerging segment of the automotive
industry.  However, the electric vehicle market has been slow to develop and the
hybrid electric vehicle market could take even longer.  Early product  offerings
are  costly,  advanced  batteries  are not yet in mass  production  and  battery
charging infrastructure is virtually non-existent.

Recently, a joint study by the Electric Vehicle Association of the Americas
(EVAA) and the Electric Transportation Coalition (ETC) attempted to project a
timetable for the emergence of a sustainable market for electric vehicles. The


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conclusions  drawn  from this study  reveal an  anticipated  three-phase  growth
pattern:

       Phase I: Entry of electric vehicles into limited early markets, primarily
       fleets;  time frame  1996-1998  with  production of low thousand of units
       over the period.

       Phase II:  Expansion  to  additional  markets  with  improved  technology
       (batteries); time frame 1999-2002 with production of tens of thousands of
       units over the period.

       Phase III: Broad based market launch of commercially competitive electric
       vehicles; time frame 2003-2006 with production of 50,000 units or more.

Several  market  drivers  such  as  advanced  battery  development,   government
incentives  and the degree to which the market  accepts early product  offerings
could  speed  up or  slow  down  this  timetable,  making  accurate  forecasting
extremely difficult.  The Company believes that its technology,  as evidenced by
the  Ethos  3 EV and  the  UQM  PowerPhase  system,  has  positioned  it well to
capitalize on this potential, should such a market develop.

Environmental Initiatives and Legislation

The major  driving  force  behind the  commercialization  of electric and hybrid
electric  vehicles in the United  States is the demand for clean urban air.  The
federal  government  has responded with the Clean Air Act, the Energy Policy Act
and other initiatives directed toward reducing vehicular  emissions.  Some state
governments,  California,  Massachusetts  and New York in particular,  have done
likewise. California, for example, mandated that beginning in 1998, at least two
percent of all cars and light trucks offered for sale by major  automakers  must
be zero  emission  vehicles  (ZEVs).  The  requirement  was to  increase to five
percent in 2001 and to ten percent in 2003.  Massachusetts  and New York adopted
similar regulations.

During  1996,  California  canceled  the  mandates  for ZEVs until 2003 when all
automakers  that sell more than 3,000 vehicles in California will be required to
meet the ten percent ZEV requirement.  Massachusetts has announced its intention
to follow California, but New York has not. In lieu of the earlier mandates, the
California Air Resources Board (CARB) opted for a market-based  approach whereby
the major automakers agreed to install limited ZEV manufacturing  capacity prior
to 2003,  and CARB  would  grant  credit  for early ZEV  sales  toward  the 2003
mandate.  As of December 31, 1996,  six  manufacturers  --- GM, Ford,  Chrysler,
Toyota,  Nissan and Honda --- have announced  plans to market limited numbers of
ZEVs beginning in the first quarter of 1997.

Also during 1996, the U.S. Department of Energy modified its rules governing how
certain state government and utility/fuel  provider fleets covered by the Energy
Policy  Act of 1992  must  comply  with the  Act's  requirements  for the use of
alternative  fuels.   Under  the  modified  rules,   covered  fleets  must  make
increasingly higher purchases of alternatively fueled light duty vehicles (which
may include  electric) over the 1997-2001  period. A fleet is covered by the Act
if the fleet has 50 or more light-duty vehicles (under 8,500 GVW).
The current fleet acquisition formula is as follows:

               Model            Utility/Fuel     State Government
               Year            Provider Fleets        Fleets

               1997                   30%               10%
               1998                   50%               15%
               1999                   70%               25%


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               2000                   90%               50%
               2001                   90%               75%

The Company views the  relaxation of the  California  ZEV mandates as a positive
step  in the  development  of the EV  industry.  While  the  ZEV  mandates  were
instrumental in jump starting the development of several new technologies,  they
have the potential to force manufacturers to offer poorly performing products at
prohibitive  costs  that  may not be  accepted  in the  marketplace.  Management
believes  such a result would create an  artificial  market and would  seriously
damage the ultimate  acceptance of electric vehicles.  There can be no assurance
that the state and federal mandates will not be further modified or rescinded.

License Agreements

The Company and Alcan  Aluminium  Limited (Alcan) have entered into an agreement
(Assignment  Agreement) wherein Alcan assigned to the Company all of its rights,
title and interest in all technology  previously developed by the Company for or
on behalf of Alcan. The Assignment  Agreement  further provides that the Company
shall pay to Alcan royalties on revenue derived from the manufacture and sale of
products  or  processes  embodying  PM  technology,  subject to an offset in the
amount of one-half of the Company's  patent  application  and  maintenance  fees
related to the PM technology.

In May 1996,  the  Company  entered  into a  License  and  Technical  Assistance
Agreement with Taiwan UQM, a joint venture company in which the Company has a 39
percent equity  interest.  Pursuant to the agreement,  Taiwan UQM was granted an
exclusive license in Taiwan to make, use and sell the Company's  electric motors
and controls an exclusive license in the People's Republic of China with respect
to  the  propulsion  system  developed  for  KYMCO  and a  nonexclusive  license
throughout the rest of Asia (except India and Japan) for the Company's  electric
motors  and  controls.  The  license is royalty  bearing  except for  propulsion
systems manufactured by Taiwan UQM for KYMCO.

In November 1996, KYMCO entered into a supply agreement with Taiwan UQM relating
to the purchase from Taiwan UQM of propulsion  systems developed by the Company.
With the execution of the supply  agreement,  the grant of license  contained in
the  Company's  Product  Development  and License  Agreement  with KYMCO  became
effective.  Pursuant  thereto,  KYMCO  has a  worldwide,  royalty-free  license,
exclusive in Asia except for Japan and India,  to sell scooters with  propulsion
systems manufactured by Taiwan UQM using the Company's technology.

Competition

The automotive,  industrial and commercial  markets into which the Company hopes
to  introduce   and  market  its  products  are  all  highly   competitive   and
characterized by rapid changes due to technological improvements. The automotive
industry,  in particular,  is currently  being driven by  legislation  and other
initiatives to develop low-emission,  fuel efficient vehicle propulsion systems.
The Company is aware of efforts by many companies,  including  large  automotive
OEMs, to develop  electric and hybrid electric  vehicles.  The Company  believes
that its principal  competitors in the automotive supply sector include Auxilec,
Delco  Power  Electronics,  Fuji  Electric,  Hitachi,  Matsushita  and  Siemans.
Principal  competitors in the industrial and commercial sectors include Advanced
DC, Emerson  Electric,  General  Electric and the Reliance  Division of Rockwell
International.  The Company is aware of other  companies,  both large and small,
that have entered or may enter the market and expects  competition  to intensify
as demand increases for high efficiency PM motors.

Although the Company is not as well capitalized as many of its competitors,  its
strategy is to compete with larger  companies on the basis of technical  skills,
proprietary know-how and its affiliation with large and well-financed strategic


<PAGE>



partners.

Patents and Trademarks

The Company  filed a motor patent  application  with the U.S.  Patent  office in
December  1985,  and similar  applications  are being  prosecuted  in many other
countries  throughout the world.  As a result of the original U.S.  Application,
U.S. Patent No. 5,004,944 was issued on April 2, 1991 containing one independent
claim  and  three  dependent  claims.  A  Continuing  Application  of  the  1985
application  was filed in October  1990 to pursue  subject  matter  that was not
allowed in the original U.S. Patent.  As a result,  U.S. Patent 5,311,092 issued
on May 10, 1994 with four  independent  claims and one dependent  claim.  Of the
foreign  applications,  a patent has been published  covering  thirteen European
member countries of the European Patent Office (EPO), and an opposition  thereto
has been resolved. In addition,  corresponding patents have issued in Australia,
Brazil,  Canada,  India, Israel, South Korea, Mexico, New Zealand,  South Africa
and Taiwan. Seven other foreign applications remain pending, three of which have
been indicated to be allowable.

In August 1989, the Company filed a separate  application  with the U.S.  Patent
office to cover certain proprietary aspects of its electronic control circuitry.
Additional  claims were added by means of a Continuation  in Part (CIP) filed in
May 1990. In April 1992, the Company was issued U.S.  Patent No.  5,107,151 as a
result  of  the  CIP  Application.  In  August  1990,  an  International  Patent
Application  corresponding to the U.S.  Application and the Continuation in Part
was filed under the  provisions  of the Patent  Cooperation  Treaty  (PCT) which
includes the EPO,  Japan and South Korea,  among others.  National  applications
were also  filed in eight  additional  countries  including  India,  Taiwan  and
Israel;  patents  have  been  granted  in  Mexico,  Taiwan,  India  and  Israel.
Applications  remain pending in Japan and Korea but the EPO Application has been
withdrawn.

In March  1990,  a  Continuing  Application  was  filed to claim  the  method of
constructing the motor as disclosed in U.S. Patent No. 5,004,944. The Continuing
Application  resulted in U.S.  Patent  5,319,844  issued June 14, 1994. In March
1991 the Company filed an International Patent Application  corresponding to the
U.S.  Application;  as a result a patent has been granted in Australia and there
are seven applications  pending in foreign countries and one pending application
in the European  Patent  Office  (EPO) which  designates  the European  group of
countries.

In September 1992, the Company filed a separate application with the U.S. Patent
Office  titled  "Stator and Method of  Constructing  Same for High Power Density
Electric  Motors and  Generators"  which has resulted in issuance of U.S. Patent
5,382,859  in January,  1995.  This patent  embodies the  Company's  most recent
enhancement  to its motor  technology  which  utilizes a  segmented  iron powder
stator ring developed  specifically for brushless permanent magnet stator cores.
A Divisional U.S. Patent Application has been filed to pursue a second invention
disclosed in the original application;  that divisional application has resulted
in U.S.  Patent  5,592,731  issued  January 14,  1997.  Patent  Applications  in
Canada,Europe,  Japan and Korea are  pending  as a result of a  counterpart  PCT
International Patent Application.

In July 1994 the Company filed an application  in the U.S.  Patent office titled
"Brushless DC motor using Phase Timing Advance" which embodies a low cost method
of controlling the drive current to a motor to achieve operating characteristics
ideal for vehicle  traction  drives.  This  application has been allowed and the
company is  awaiting  issuance  of the patent.  In June 1995 a  counterpart  PCT
International  Patent  Application  was filed and various foreign country patent
applications are now being filed.



<PAGE>



During  1994  the  Company  acquired  the  assets  of  Everton  Developments  of
Birmingham,  England  including  all rights  under PCT  Application  WO 92/22121
published  December 10, 1992.  Patent  applications  filed  thereunder are still
pending in four  countries.  The United States  application has been allowed and
the company is awaiting issuance of the patent.  Corresponding patents have been
granted in  Australia  and in Europe where the patent is effective as to France,
Germany,  Italy,  Switzerland,  Liechtenstein  and United  Kingdom.  The Company
elected to  write-off  the costs  associated  with this  patent  during the five
months ended March 31, 1997,  due to the  uncertainty of applying the underlying
technology  to  commercial  markets  in the  near  term.  See  also  "Management
Discussion and Analysis of Financial Condition and Result of Operations" below.

The Company owns the trademark  "UM," which is registered with the United States
Patent and  Trademark  Office and is  subject to renewal in October  2000.  This
trademark is available for use in connection with the products and  publications
of  Unique.  The  Company  owns three U.S.  Trademark  Registrations  for "UNIQ"
(International  Class 7 for power  Transducers,  and Class 12 for  Utility  Land
Vehicles  and Class 16 for  Publications).  The Class 12 trademark is subject to
renewal  in June  2006;  the Class 7  trademark  is subject to renewal in August
2006; and the Class 16 trademark is subject to renewal in February 2007.

The Company  currently holds a patent issued by the United States Patent Office,
in August  1980,  which  covers  certain  mechanical  features  of the  ElecTrek
automobile,  principally its composite unibody structure and battery trays. This
patent  expires in August  1997.  The  Company no longer  produces or market its
ElecTrek automobile.

The Company has also  initiated  registration  of the letters UQM and a stylized
version thereof as its new trademark in the U.S. and 26 countries throughout the
world.  Two  U.S.  Trademark  Registrations  and 22  out  of 26 of  the  foreign
countries have granted  registrations  or indicated them to be allowable.  These
trademarks are directed to the same trademark  classes as for the marks "UM" and
"UNIQ". UQM is the American Stock Exchange code  identification for the Company.
The foreign trademark registrations and applications include major markets where
the Company is doing business or establishing business contacts.

The Company has recently begun using "POWERPHASE" as a trademark to identify its
modular  brushless  permanent magnet electric motor traction drives for electric
and hybrid electric vehicles.  An application for trademark  registration in the
United States was filed in September  1996 and is still  pending.  Corresponding
applications for trademark  registration have been filed in 11 countries and the
European community.

In November 1994, the Company and Alcan completed an assignment  agreement which
provided,  among other things,  that for so long as Alcan  beneficially  owns at
least five percent of the Company's  common stock,  it shall be obligated to pay
one-half of the patent  application and maintenance  fees (including  reasonable
attorney's fees related thereto)  associated with the Company's PM technology in
an amount not to exceed the aggregate amount of royalty revenue derived from the
PM technology.

The Company's  future success depends,  in part, on the diligent  prosecution of
its issued and pending motor and electronic  patents,  as well as the filing and
prosecution of patents on future technological advances, if any. There can be no
assurance  that the Company will possess the  financial  resources  necessary to
prosecute and maintain existing applications or to pursue additional patents. If
the  Company  is  not  able  to  prosecute  and  maintain  its  existing  patent
applications,  they will lapse.  There can be no  assurance  that the  Company's
patents will not be circumvented,  invalidated or infringed, or that the Company
will possess the financial resources to enforce its existing patents and patent


<PAGE>



applications  in the event of an  infringement.  Further,  new technology may be
developed by third parties or may already  exist unknown to the Company  causing
the Company's proprietary technology to be obsolete.

The Company also intends to rely on the unpatented  proprietary  know-how it has
developed  and now  utilizes in its  products.  There can be no  assurance  that
others will not independently develop, acquire or obtain access to the Company's
technology.  Although the Company  protects its proprietary  rights by executing
confidentiality agreements with its management, employees and others with access
to the Company's  technology,  these measures may not be adequate to protect the
Company from disclosure or misappropriation of its proprietary information.

Manufacturing

To date,  the Company has  manufactured  all of its  products at its facility in
Golden,  Colorado. The Company anticipates investing in manufacturing  equipment
to further develop the  manufacturing  capacity at this facility at such time as
the Company  secures a commitment for the volume  purchase of its products.  The
Golden facility has current  available  capacity of approximately  15,000 square
feet which can be  dedicated to  manufacturing  operations  without  significant
alteration.  Although the Company has no prior  experience in  delivering  large
volumes of its  products,  it is  currently in the process of  establishing  the
capacity  to meet such high  volume  production  requirements  and has  retained
talented  personnel  with  experience  in motor  manufacturing  to assist in the
launch of such operations.  The Company believes additional  manufacturing space
and equipment is readily available.

Backlog

At May 31, 1997, the Company had  unperformed  service  contracts from customers
which  will  provide  payments  to  the  Company  upon  completion   aggregating
approximately  $2,875,000.  The Company expects to complete substantially all of
these service contracts during the five month transition period ending March 31,
1997 and the  balance  during the fiscal year ending  March 31,  1998.  All such
contracts are subject to amendment, modification or cancellation. At January 28,
1997,  the  Company  had  unperformed   service   contracts  from  customers  of
approximately $2,750,000.

In addition, the Company had an order backlog for motors and electronic controls
at May 31, 1997, with an aggregate sales value of  approximately  $158,000.  The
Company  expects to ship all of its current  backlog of products  during  fiscal
1998.  At January 31,  1997,  the Company had an order  backlog for  products of
approximately $70,000.

Customers and Suppliers


The Company has historically  derived significant contract services revenue from
a few key customers.  The customers from which this revenue has been derived and
the percentage of total contract services revenue is summarized in the following
table:

                             Five Months ended       Year ended October 31,
                              March 31, 1997      1996        1995        1994
Ford Motor Company,                             $378,640    $1,720,347  $316,740
Kwang Yang Motor Co., Ltd.                       202,343       880,420   369,595
Pentastar Electronics, Inc.                      194,600
Hyundai Motor Company                            135,950
Naval Air Systems Command                                      657,330
Walt Disney Imagineering                                                 280,469
General Motors Corporation         162,500


<PAGE>



Kia Motors Corp.                   113,229
Asia Pacific Technology, Ltd.      176,749

Total                              452,478       911,533      3,258,097  966,831
Percentage of total contract
 services revenue                      65%           63%            81%      59%

Principal raw materials  purchased by the Company  include iron,  steel,  copper
wire, neodymium boron iron alloy,  fiberglass and epoxy resins. All of the above
items are available from several  suppliers and the Company  generally relies on
more  than  one for  each  item.  Principal  purchased  products  include  power
electronic  switching  devices  and magnet  material  which are  available  from
several suppliers.]

US Government Contracts

For the five months ended March 31, 1997, $78,532 or 11 percent of the Company's
contract  service  revenue was derived from  contracts with agencies of the U.S.
Government and from subcontracts with U.S. Government prime contractors.

Some of the Company's business with the U.S.  Government was performed on a cost
plus fixed fee basis. These contracts provide for reimbursement of costs, to the
extent  allocable and allowable under applicable  regulations,  and payment of a
fee.  Certain  other  contracts  with  the  U.S.   Government  provide  for  the
reimbursement of costs on a 50 percent cost sharing basis based on not-to-exceed
billing rates negotiated between the Company and the U.S. Government. Other U.S.
Government   business  is  performed  under  firm  fixed  price  contracts.   On
"cost-share" and "firm fixed price"  contracts,  the Company can incur an actual
loss in the  performance  thereof if incurred costs exceed the contract  amount.
All U.S.  Government  contracts with the Company are subject to  modification or
cancellation at the convenience of the Government.

Employee and Labor Relations

As of March  31,1997,  the Company had 32 full-time  employees.  The Company has
entered into employment contracts with its three executive officers which expire
in December  1999.  None of the Company's  employees are covered by a collective
bargaining  agreement.  The Company's  management believes that its relationship
with its employees has been generally satisfactory.

In addition to its  full-time  staff,  the Company from time to time engages the
services of outside  consultants  and  contract  labor to meet peak  workload or
specialized program requirements. The Company does not anticipate any difficulty
in  locating  additional  qualified  professional  engineers,   technicians  and
production workers, if so required, to meet expanded research and development or
manufacturing operations.

ITEM 2.     PROPERTIES

Facilities

The Company leases a 40,000 square foot office/laboratory/warehouse  building in
Golden,  Colorado,  from a limited liability company of which the Company and an
investor are equal owners.  The Company has entered into a ten-year lease of the
building at $21,667 per month with an option for an additional five years at the
then market  rate.  The Company is  required to pay all taxes,  maintenance  and
insurance.  The Company currently  subleases 12,500 square feet of this facility
for $7,031 per month plus an allocable share of taxes, maintenance and insurance
costs.  The Company  believes its existing  facilities  are adequate to meet its
operational needs for the foreseeable future.



<PAGE>



The Company also owns the basic tools and equipment, including computer hardware
and  software,  necessary  for  the  conduct  of its  production,  research  and
development and vehicle prototyping activities.


ITEM 3.     LEGAL PROCEEDINGS

There is no material litigation with respect to which the Company is a party.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters  submitted  for vote by  security  holders of the  Company
during the five months ended March 31, 1997.


ITEM 5.     MARKET PRICE OF COMMON STOCK

The Company's common stock trades on the American,  Boston,  Pacific and Chicago
Stock Exchanges. The high and low closing prices, by fiscal quarter, as reported
by the  American  Stock  Exchange for the last three  years,  the quarter  ended
January 31, 1997, and the five months ended March 31, 1997, are as follows:

1997                                          High      Low
Two Months Ended March 31, 1997. . . . .  .  $4.50     $3.18
Quarter Ended January 31, 1997. . . . . .  . $4.88     $3.18

1996
Fourth Quarter. . . . . . . . . . . . . . . .$5.19     $3.81
Third Quarter . . . . . . . . . . . . . . . .$5.00     $3.50
Second Quarter. . . . . . . . . . . . . . . .$5.13     $4.19
First Quarter . . . . . . . . . . . . . . . .$4.50     $3.31

1995
Fourth Quarter . . . . . . . . . . . . . . . $5.38     $3.63
Third Quarter. . . . . . . . . . . . . . . . $5.56     $3.83
Second Quarter . . . . . . . . . . . . . . . $5.63     $3.75
First Quarter. . . . . . . . . . . . . . . . $5.75     $4.75

1994
Fourth Quarter . . . . . . . . . . . . . . . $7.00     $4.88
Third Quarter. . . . . . . . . . . . . . . . $6.88     $4.88
Second Quarter . . . . . . . . . . . . . . . $7.88     $5.75
First Quarter. . . . . . . . . . . . . . . . $8.63     $7.00


On June 25, 1997 the closing price of the Company's common stock, as reported on
the American Stock  Exchange,  was $7.00 per share and there were 891 holders of
record of the common stock.

The Company has not paid any cash dividends on its common stock since  inception
and intends  for the  foreseeable  future to retain any  earnings to finance the
growth of its business.  Future  dividend policy will be determined by the Board
of Directors of the Company based upon consideration of the Company's  earnings,
capital needs and other factors then relevant.


ITEM 6.          SELECTED FINANCIAL DATA




<PAGE>



                      Unique Mobility, Inc.
               Consolidated Selected Financial Data
<TABLE>
<CAPTION>
               Five Months
                  Ended
                 March 31,
                  1997(1)      1996       1995         1994         1993
1992
<S>            <C>         <C>         <C>          <C>          <C>         <C>

Contract
Services
Revenue      $   700,132    1,436,484    4,031,951    1,643,203    1,461,568
2,306,070

Product
Sales        $   152,016      611,213      701,700      708,917      695,300
468,508

Operating
Loss         $(1,120,900)  (2,744,      (1,134,338)  (3,367,873)  (2,446,574)
(2,240,170)

Net Loss     $(1,201,085)  (2,904,743)  (1,330,433)  (3,395,356)  (2,473,804)
(2,217,207)

Net Loss
Per Common
Share        $   (.12)        (.26)         (.13)        (.35)        (.28)
(.33)

Total
Assets       $12,370,699    8,712,649    7,626,178    5,903,551    7,791,826
4,700,507

Long-term
Obligations  $   726,218      744,389      807,003      886,996      921,758
2,161,376

Cash Divi-
dend Declared
Per Common
Share        $    -0-           -0-          -0-          -0-          -0-
 -0-
</TABLE>

(1)  Prior to March 31,  1997,  the  Company's  fiscal year ended on October 31.
     Effective  March 31,  1997,  the Company  changed its fiscal year to end on
     March 31. The following  table sets forth unaudited  consolidated  selected
     financial data for the unaudited five months ended March 31, 1996:

     Contract Services Revenue                  $   331,761
     Product Sales                              $   216,325
     Operating Loss                             $(1,313,705)
     Net Loss                                   $(1,367,261)
     Net Loss per Common Share                  $   (0.13)
     Total Assets                               $ 7,799,981
     Long-Term Obligations                      $   774,248
     Cash Divident declared per Common Share    $         0



<PAGE>




ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

This  Report  contains   forward-looking   statements  that  involve  risks  and
uncertainties.  The Company's actual results could differ  materially from those
discussed  in this  Report.  Factors  that  could  cause or  contribute  to such
differences  include, but are not limited to, those discussed in this report and
any documents  incorporated  herein by  reference,  as well as, in the Company's
Registration  Statement  on Form S-3 (file  no.  23843).  These  forward-looking
statements  represent the Company's  judgment as of the date of this Report. The
Company  disclaims,  however,  any intent or obligation to update these forward-
looking statements.

The Company  has  changed its fiscal year end from  October 31 to March 31. This
change  results  in a five  month  transition  period  for  financial  reporting
purposes  commencing  on November 1, 1996,  and ending on March 31,  1997.  This
report  covers the Company's  financial  condition at March 31, 1997 and October
31, 1996 and results of operations,  changes in stockholders' equity and changes
in cash flows for the five months  ended March 31,  1997,  and the fiscal  years
ended October 31, 1996, 1995 and 1994, respectively.

Financial Condition

The Company's  financial  condition  strengthened during five months ended March
31,  1997,  due to the sale of  1,289,288  shares of common  stock  pursuant  to
offerings under  Regulation S and Regulation D of the Exchange Act of 1934. Cash
proceeds to the Company from the offering,  net of offering  costs,  amounted to
$4,146,820.  Primarily as a result thereof,  cash and cash  equivalents  rose to
$5,713,557  at March 31, 1997 compared to $3,230,246 at fiscal 1996 year end and
shareholders'  equity rose to $8,574,799 at March 31, 1997,  from  $5,592,876 at
October 31, 1996.  Working  capital  (the excess of current  assets over current
liabilities)  increased  to  $4,174,184  at March 31,  1997 from  $2,469,197  at
October 31, 1996.

Accounts  receivable  declined to  $389,314  at March 31, 1997 from  $569,562 at
October 31, 1996,  reflecting  collection of certain overdue trade  receivables.
Accordingly,  the accounts  receivable  balance at March 31,  1997,  represented
approximately  69 days revenue  compared to 102 days revenue at fiscal 1996 year
end.

Costs and  estimated  earnings on  uncompleted  contracts  increased  $12,402 to
$191,885 at March 31, 1997 from the fiscal 1996 year end level of $179,483.  The
increase was due to increased levels of contract services in process.  Estimated
earnings  on  contracts  in process  decreased  to $490,407 at March 31, 1997 on
total  contracts  in process of  $3,649,111  compared to  estimated  earnings on
contracts in process of $596,765 on total  contracts in process of $1,678,117 at
October 31, 1996. The decrease is attributable to two contracts,  representing 9
percent  of total  contracts  in  process  at March 31,  1997,  which  have cost
overruns of approximately  $119,000 in the aggregate and a greater proportion of
material costs in contracts in process at March 31, 1997.

Raw  materials  and work in process  inventories  rose to $283,155  and $69,460,
respectively, at March 31, 1997 compared to $273,527 and $55,996,  respectively,
at October 31, 1996. The increase is  attributable  to increased  demand for the
Company's PowerPhase drive system. Finished products inventories declined $5,846
to  $72,776  at March  31,  1996 due to  increased  product  sales  and  product
utilization in contract  services  contracts  during the five months ended March
31, 1997.



<PAGE>



The Company  invested  $118,608 for the  acquisition  of property and  equipment
during the five  months  ended  March 31,  1997,  compared  to  $22,279  for the
comparable  five month  period  ended March 31,  1996.  The  increase in capital
expenditures is primarily  attributable to improvements to the Company's Golden,
Colorado,  facility by Unique Building Partners. The Company expended $47,865 on
the prosecution of its trademark and patent  applications during the five months
ended March 31, 1997.

Investment in Taiwan joint  venture rose to  $2,677,730 at March 31, 1997,  from
$1,366,540 at October 31, 1996,  reflecting the recording of future capital call
obligations to Taiwan UQM. The capital call  obligation to Taiwan UQM was funded
in April 1997 from the proceeds of the Company's sale of common stock  completed
in March, 1997. See also "Liquidity and Capital Resources" below.

Patent and trademark  costs,  net of accumulated  amortization,  was $502,297 at
March 31,  1997 a decrease  of $17,669  from  October  31,  1996.  The  decrease
represents  the net effect of the  write-off of a patent  acquired  from Everton
Developments  Limited in fiscal 1995. The write-off of the patent costs reflects
the  Company's  assessment  that the  revenue  realizable  from  the  technology
encompassed under the patent over the near term would be insufficient to support
the carrying cost of the associated technology asset.

Accounts payable rose to $169,403 at March 31, 1997 from $121,790 at October 31,
1996, due to increased levels of purchased components and materials for projects
in process in the normal course of operation.

Other current liabilities increased to $459,223 at March 31, 1997, from $400,574
at October 31, 1996. The increase was primarily  attributable  to an overpayment
by a participant in the Company's March 1997 common stock offering.

Billings in excess of costs and estimated earnings on uncompleted contracts rose
to $659,807 at March 31, 1997 from $25,685 at October 31, 1996  primarily due to
a substantial prepayment by an overseas customer on a development program.

Long-term debt declined $18,171 during the five months ended March 31, 1997, due
to  scheduled  principal  payments  on the  mortgage  debt  associated  with the
Company's facility.

Common  stock  and  additional   paid-in  capital   increased  to  $130,430  and
$27,094,170  at  March  31,  1997,   respectively,   compared  to  $117,514  and
$23,021,339  at October 31, 1996.  The increases  were due to the sale of common
stock to  institutional  investors and an  individual  investor in the amount of
$4,146,820;  sales of common stock to  employees  and  consultant's  through the
company's  benefit  plans of  $45,000;  and the  issuance  of  common  stock for
services of $3,949.

Results of Operations

Five months ended March 31, 1997

Operations  for the five months ended March 31, 1997,  resulted in a net loss of
$1,201,085 or $0.12 per share  compared to a net loss of $1,367,261 or $0.13 per
share for the comparable five month period last year.

Revenue  derived from  contract  services was $700,132 for the five months ended
March 31, 1997 versus $331,761 for the comparable period last year. The increase
is attributable to increased levels of sponsored development activities.

Product sales during the five months ended March 31, 1997,  declined to $152,016
compared to $216,325 for the comparable five month period last year due


<PAGE>



principally to price  reductions and lower unit volumes of high voltage products
and decreased sales to the solar race car market.

Gross profit margins for the five months ended March 31, 1997, increased to 10.3
percent  compared to a negative  margin of 10.3 percent for the comparable  five
month period last year.  Gross  profit on contract  services was 9.8 percent for
the five months  ended  March 31,  1997,  compared to a negative  margin of 13.5
percent for the comparable  period last year.  Gross profit on product sales for
the five months  ended March 31, 1997,  was 12.9 percent  compared to a negative
margin of 5.4  percent for the  comparable  period  last year.  The  increase in
contract  services  margins  for the  five  months  ended  March  31,  1997,  is
attributable to increased  absorption of overhead costs. The increase in margins
on product sales is attributable  to lower overhead  allocations and improvement
in purchased material costs.

Research and development  expenditures for the five months ended March 31, 1997,
decreased $118,557 to $513,544 for the five months ended March 31, 1997 from the
amount expended during the comparable period last year of $632,101. The decrease
is   attributable   to  lower  levels  of   internally-funded   production   and
facilitization  engineering  activities  associated  with the  launch  of volume
manufacturing  operations at the Company's  Golden,  Colorado facility and lower
levels of "cost sharing" type  contracts  during the five months ended March 31,
1997.

General and  administrative  expense for the five months  ended March 31,  1997,
rose $70,267 over the amount expended during the comparable  period last year to
$695,263.  The increase  during the five months  ended March 31,  1997,  was due
primarily  to the  impairment  of patent costs which were written off during the
period of approximately  $55,000 and commission  costs on the production  design
phase of the KYMCO development program of approximately $30,000 which were
 recorded during the five months ended March 31, 1997.

Interest  income  increased  to $54,802  during the five months  ended March 31,
1997,  compared to $46,214 for the comparable  period last year. The increase is
attributable to higher levels of invested cash and improved yields on short-term
investment instruments.

Interest  expense  decreased  to $84,704  during the five months ended March 31,
1997, compared to $91,780 for the comparable period last year due primarily to a
lower  interest rate achieved  through  refinancing  of the mortgage loan on the
Company's facility.

Equity in loss of Taiwan joint venture rose to $24,121 for the five months ended
March 31,  1997  compared to $16,682 for the  comparable  period last year.  The
increase is due to expanded staffing and operations at Taiwan UQM preparatory to
the launch of manufacturing operations.

Effect of Recently Issued Accounting Standards

The  Financial  Accounting  Standards  Board has issued  Statement  of Financial
Accounting  Standards  No. 128,  Earnings  Per Share  ("SFAS 128") which will be
effective for interim and annual  periods  ending after  December 15, 1997,  and
changes the computation and disclosure  requirements for earnings per share. Had
earnings per share been reported  under the  provisions of SFAS 128 for the five
months ended March 31, 1997,  basic earnings per share would have been $0.12 per
share. The effect of the adoption of SFAS 128 is not expected to have a material
effect on the earnings per share disclosures.

Fiscal years ended October 31, 1996, 1995 and 1994

Operations for the year ended October 31, 1996, resulted in a net loss of


<PAGE>



$2,904,743  or $0.26 per share.  This  compares to a net loss of  $1,330,433  or
$0.13 for the year ended October 31,1995,  and a net loss of $3,395,356 or $0.35
per share of the year ended October 31, 1994.

Revenue  derived from  contract  services in fiscal 1996  declined 64 percent or
$2,595,467  from the fiscal  1995  level,  and 13 percent or  $206,719  from the
fiscal 1994 level.  The  decrease in revenue  from fiscal 1995 was  attributable
principally  to a reduced level of work performed for Ford Motor Company and the
U.S.  Department of Energy which  accounted for  $1,526,445 or 59 percent of the
decrease in revenue. The decrease in revenue from fiscal 1994 was also primarily
attributable to a reduced level of work performed under the product  development
agreement with KYMCO which  accounted for $167,252 or 81 percent of the decrease
in revenue.

Product  sales during fiscal 1996 declined 13 percent from the fiscal 1995 level
and 14 percent from the fiscal 1994 level. The decrease is attributable to price
reductions on the Company's high voltage prototype  products and decreased sales
to the solar racing market.

Gross profit  margins for fiscal 1996 declined to 15.1 percent  compared to 28.7
percent for fiscal 1995 and were 4.2 percent  higher than the fiscal 1994 margin
of 10.9 percent.  The fiscal 1996 decline is attributable to price reductions in
the Company's  high voltage  product line and  decreased  absorption of overhead
costs on sponsored development contracts.  Gross profit on contract services was
18.6  percent  for fiscal 1996  compared to 31.0  percent in fiscal 1995 and 8.6
percent in fiscal 1994. Gross profit on product sales was 6.7 percent for fiscal
1996 compared to 15.2 percent in fiscal 1995 and 16.3 percent in fiscal 1994.


Research and  development  expenditures  in fiscal 1996 rose  $400,041  over the
fiscal 1995 level and declined  $428,429 from the amount  expended during fiscal
1994.  The fiscal 1996  increase is  attributable  primarily to  production  and
facilitization  engineering  activities  associated  with the planned  launch of
volume  manufacturing  operations for Invacare which accounted for approximately
$780,000  or  46  percent  of   internally-funded   research   and   development
expenditures.  The decrease from fiscal 1994  expenditures  is attributable to a
decline in "cost sharing" development  contracts which amounted to approximately
$440,000 in fiscal 1996 compared to $710,000 for fiscal 1994.


General and administrative expense for fiscal 1996 rose $161,683 over the fiscal
1995 level and declined  $142,915 from the amount  expended in fiscal 1994.  The
fiscal 1996 increase was primarily attributable to higher levels of professional
services costs ($20,369),  commission expenses associated with the sublease of a
portion of the Company's facility  ($53,483),  and legal fees associated with an
adverse  arbitration  award  ($15,623).   The  decrease  from  the  fiscal  1994
expenditure  level was primarily  attributable to lower levels of legal expenses
($56,952)and reduced staffing of administrative functions ($62,535).  During the
second quarter of fiscal 1996 an arbitrator awarded  compensation and legal fees
to a consultant of the Company for work the consultant asserted was performed at
the  Company's  request on its  contract  with Ford Motor  Company  and the U.S.
Department  of Energy.  The  Company was unable to secure  reimbursement  of the
consultant's costs under the Ford/DOE contract and therefore recorded such costs
as a cost of contract services.  Legal costs of the arbitration  proceeding were
recorded as general and administrative  expense. The foregoing award represented
a complete settlement of all claims by the consultant against the Company.

Interest  income  increased  to $113,582 in fiscal 1996  compared to $50,890 and
$98,228 for fiscal 1995 and 1994, respectively. The increases were primarily


<PAGE>



attributable to higher levels of invested cash during fiscal 1996.

Interest expense rose to $202,798 during fiscal 1996 due to increased loan value
underlying  leases issued by UQM Leasing,  Inc. and interest  accruals under the
waiver  and  option  agreement  with  KYMCO.  See also  "Liquidity  and  Capital
Resources" below.

Equity in loss of Taiwan joint  venture rose to $45,164 in fiscal 1996  compared
to $11,952 and $3,888 for fiscal 1995 and 1994, respectively. The increases were
due to expanded  staffing and operations at Taiwan UQM preparatory to the launch
of manufacturing operations.

Other  income rose to $43,643 in fiscal 1996  primarily as a result of a gain on
the sale of real  estate held for  investment  ($38,124)  and  foreign  currency
exchange gains ($5,700).

Liquidity and Capital Resources

The Company's cash balances and liquidity during the five months ended March 31,
1997,  were  adequate to meet its  operating  needs.  Net cash used by operating
activities  was $104,769 for the five month period ended March 31, 1997 compared
to net  cash  used  by  operations  for  the  comparable  period  last  year  of
$1,371,427.  The  decrease is  primarily  attributable  to a reduction  in trade
accounts receivable and prepayments by customers for contract services reflected
as an  increase  in  billings  in  excess  of costs and  estimated  earnings  on
uncompleted contracts. Cash requirements during the period were funded primarily
through the sale of common stock.

In January 1996, Invacare purchased 129,032 shares of common stock at a price of
$3.88 per share.  Net proceeds to the Company were  $500,000,  all of which were
applied to fund the development of a wheelchair  motor for Invacare.  Contingent
upon  achieving  development  milestones,  Invacare  further  agreed to purchase
additional shares at the then market price, the proceeds of which would be used,
in  part,  to  fund  the  Company's  anticipated  capital  investment  in  motor
anufacturing  tools and  equipment.  The Company is currently  negotiating  with
Invacare to manufacture  motors for its wheelchairs.  During the course of these
negotiations, Invacare has informed the Company that they would prefer to invest
directly  in the assets  required  to launch  production,  such as  tooling  and
dedicated manufacturing equipment in lieu of the second investment envisioned in
the  original  stock  purchase  agreement.  Accordingly,  the  Company  does not
anticipate any further sales of its equity securities to Invacare.  There can be
no  assurance  that  negotiations  will lead to the  completion  of a definitive
supply agreement.

During the five months ended March 31, 1997, the Company completed the placement
of 1,289,288 shares of its common stock to various  institutional  investors and
an individual  investor in offerings under  Regulation S and Regulation D of the
Securities  and Exchange Act. The common stock was sold at $3.50 per share which
was the average closing price of the common stock on the American Stock Exchange
for the ten  days  prior to the  offering  pricing  date.  Net  proceeds  to the
Company, after deducting offering costs of $365,688, was $4,146,820. The Company
also  completed  two  offerings of its common stock to overseas  individual  and
institutional  investors  under  Regulation S in fiscal 1996.  Pursuant to these
offerings, the Company placed 1,057,708 shares of common stock and received cash
proceeds, net of offering expenses, of $3,909,379.

In  fiscal  1994,  the  Company,  KYMCO  and TLT  entered  into a joint  venture
agreement  which  provided for the  formation,  capitalization  and operation of
Taiwan UQM, a company  organized  under the laws of the  Republic of China.  The
Company purchased 39 percent of the initial stock of Taiwan UQM for


<PAGE>



NT$1,170,000  (US$45,082 on the transaction date). Pursuant to the joint venture
agreement,  the venture  partners are obligated to meet future  capital calls as
the Board of  Directors  of Taiwan UQM, by unanimous  vote,  determines.  During
fiscal  1995,  the company was unable to fund its capital call  obligations.  In
June 1995, the Company, KYMCO and TLT entered into a waiver and option agreement
pursuant to which KYMCO agreed to purchase those shares of Taiwan UQM underlying
the Company's  capital call  obligations.  The purchase price of such shares was
NT$37,830,000  (U.S.$1,403,493 at October 31, 1995). The Company was granted the
option to  repurchase  the shares for the  original  capital call amount plus 10
percent  interest and associated  transfer  taxes. In November 1996, the Company
exercised its option and  subsequently  repurchased the shares from KYMCO,  thus
maintaining  the  Company's  ownership  position  at  39  percent  of  the  then
outstanding  shares of Taiwan UQM. The repurchase  price plus interest and taxes
totaled NT$44,175,505 (US$1,612,539 on the transaction date).

In November  1996,  the Board of Directors of Taiwan UQM announced an additional
capital call to provide  cash to fund  facility  construction  and the launch of
electric component  production.  The Company's capital call obligation  pursuant
thereto is NT$37,050,000 (US$1,348,300 as of December 1, 1996), plus interest at
the rate of 10 percent  per annum on the  outstanding  amount  from  December 1,
1996,  through  the due date.  The  obligation  was due and payable in two equal
installments on March 1, 1997 and June 1, 1997. In April, the Company elected to
fund  the  entire   capital  call   obligation   in  one  payment  and  remitted
approximately $1,384,000 including accrued interest of approximaterly $40,000 in
complete satisfaction of its capital call obligation.  The Company believes that
Taiwan UQM is adequately  capitalized  to meet its operating  cash  requirements
over the next twelve  months.  Accordingly,  the Company does not anticipate any
additional capital calls by Taiwan UQM in fiscal 1998.

Over the next  several  months,  the  Company  expects  to invest  substantially
greater  amounts of capital to launch  manufacturing  operations  for  Invacare,
should Invacare elect to purchase motors from the Company. Anticipated capita
 expenditures for working capital,  production  machinery,  equipment,  computer
hardware  and  software  are  expected  to exceed $1.5  million.  The Company is
negotiating to sell motors to Invacare, a leading wheelchair manufacturer. There
can be no assurance that a final agreement will be reached.  The Company expects
to fund this  investment  requirement  through a  combination  of existing  cash
resources  and  short-term  bank  lines-of-credit.  Although  the  Company  has,
to-date,  not entered into formal  arrangements  for such bank  lines-of-credit,
Management believes bank lines-of-credit are readily available to the Company on
terms acceptable to the Company.  There can,  however,  be no assurance that the
Company will launch volume manufacturing  operations for Invacare or others. The
Company believes it has cash resources,  in addition to those required to launch
volume manufacturing operations, sufficient to fund non-manufacturing operations
through at least March 31, 1998.


ITEM 8.    Financial Statements


                  Independent Auditors' Report

The Board of Directors
Unique Mobility, Inc.:

We have audited the accompanying consolidated balance sheets of Unique Mobility,
Inc. and subsidiaries as of March 31, 1997 and October 31, 1996, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
the five months  ended  March 31,  1997 and each of the years in the  three-year
period ended October 31, 1996. These consolidated financial statements are the


<PAGE>



responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial  statements based on our audits. We did not audit the
financial  statements  of Taiwan UQM Electric  Co.,  Ltd.,  (a 39% percent owned
investee company).  The Company's investment in Taiwan UQM Electric Co., Ltd. at
March  31,  1997 was  $2,677,730,  and its  equity in the  losses of Taiwan  UQM
Electric Co., Ltd were  $(24,121) for the five months ended March 31, 1997.  The
financial  statements  of Taiwan UQM Electric  Co.,  Ltd.  were audited by other
auditors whose report has been  furnished to us, and our opinion,  insofar as it
relates to the amounts  included for Taiwan UQM Electric  Co., Ltd. for the five
months ended March 31, 1997 is based solely on the report of the other auditors.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial statement  presentation.  We believe that our audits and the report of
the other auditors provide a reasonable basis for our opinion.

In our opinion,  based on our audits and the report of the other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material  respects,  the  financial  position  of  Unique  Mobility,   Inc.  and
subsidiaries as of March 31, 1997 and October 31, 1996, and the results of their
operations  and their cash flows for the five  months  ended  March 31, 1997 and
each of the years in the three-year period ended October 31, 1996, in conformity
with generally accepted accounting principles.



                                   KPMG Peat Marwick LLP
Denver, Colorado
June 26, 1997


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets



                                                March 31,       October 31,
Assets                                            1997             1996

Current Assets
   Cash and cash equivalents                 $  5,713,557       3,230,246
   Accounts receivable (note 12)                  389,314         569,562
   Costs and estimated earnings in excess
     of billings on uncompleted contracts
     (note 2)                                     191,885         179,483
   Inventories (note 3)                           425,391         408,145
   Prepaid expenses                               115,260          37,848
   Other current assets                            17,675          28,177

           Total current assets                 6,853,082       4,453,461

Property and equipment, at cost:
   Land (notes 4 and 7)                           335,500         335,500
   Building (notes 4 and 7)                     1,438,090       1,364,500


<PAGE>



   Molds                                          102,113         102,113
   Transportation equipment                       258,675         258,675
   Machinery and equipment                      1,963,146       1,918,128
                                                4,097,524       3,978,916
   Less accumulated depreciation               (1,764,288)     (1,613,786)

           Net property and equipment           2,333,236       2,365,130

Investment in Taiwan joint venture (note 5)     2,677,730       1,366,540

Patent and trademark costs, net of
  accumulated amortization of $45,551
  and $40,030 (note 11)                           502,297         519,966

Other assets                                        4,354           7,552

                                             $ 12,370,699       8,712,649

                                   (Continued)


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets, Continued



                                                March 31,        October 31,
Liabilities and Stockholders' Equity               1997              1996

Current liabilities:
   Accounts payable                         $    169,403           121,790
   Note payable to Taiwan joint venture
     (note 5)                                  1,345,285         1,375,121
   Other current liabilities (note 6)            459,223           400,574
   Current portion of long-term
     debt (note 7)                                45,180            61,094
   Billings in excess of costs and
     estimated earnings on uncompleted
     contracts (note 2)                          659,807            25,685

          Total current liabilities            2,678,898         1,984,264

Long-term debt, less current portion
  (note 7)                                       726,218           744,389

           Total liabilities                   3,405,116         2,728,653

Minority interest in consolidated
  subsidiary (note 4)                            390,784           391,120

Stockholders' equity (notes 9 and 10)
   Common stock, $.01 par value, 50,000,000
     shares authorized; 13,042,964 and
     11,751,365 shares issued                    130,430           117,514
   Additional paid-in capital                 27,094,170        23,021,339
   Accumulated deficit                       (18,532,364)      (17,331,279)
   Notes receivable from officers                (83,646)          (65,816)
   Cumulative translation adjustment             (33,791)          (21,030)
   Treasury stock, at cost                          -             (127,852)


<PAGE>



           Total stockholders' equity          8,574,799         5,592,876

Commitments (notes 5 and 14)

                                            $ 12,370,699         8,712,649


See accompanying notes to consolidated financial statements.


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations
<TABLE>
<caption



<PAGE>




                                          Five Months
                                             Ended
                                            March 31,            Year Ended October 31,
                                              1997          1996          1995          1994
<S>
Revenue:                                    <C>           <C>         <C>            <C>
   Contract services (note 12)           $    700,132      1,436,484    4,031,951     1,643,203
   Product sales                              152,016        611,213      701,700       708,917
                                              852,148      2,047,697    4,733,651     2,352,120

Operating costs and expenses:
   Costs of contract services                 631,823      1,168,757    2,781,866     1,501,919
   Costs of product sales                     132,418        570,481      594,782       593,665
   Research and development                   513,544      1,698,352   1,298,311     2,126,781
   General and administrative                 695,263      1,354,713   1,193,030     1,497,628
                                            1,973,048      4,792,303   5,867,989     5,719,993

           Operating loss                  (1,120,900)    (2,744,606)  (1,134,338)   (3,367,873)

Other income (expense):
   Interest income                             54,802        113,582       50,890        98,228
   Interest expense                           (84,704)      (202,798)    (177,051)      (73,813)
   Equity in loss of Taiwan joint
     venture (note 5)                         (24,121)       (45,164)     (11,952)       (3,888)
   Minority interest share of earnings
     of consolidated subsidiary               (27,725)       (69,400)     (64,627)      (69,517)
   Other                                        1,563         43,643        6,645        21,507
                                              (80,185)      (160,137)    (196,095)      (27,483)

           Net loss                      $ (1,201,085)    (2,904,743)   1,330,433)   (3,395,356)

           Net loss attributable to
             common stockholders
             (note 1n)                   $ (1,402,085)    (2,904,743)

           Net loss per common share
             (note 1n)                       $ (.12)          (.26)       (.13)          (.35)

Weighted average number of shares
  of common stock outstanding              12,043,481     11,021,742  10,090,778      9,763,391
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>





UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>

                                           Number of                                                Notes
                                            common             Additional  Cumulative    Accumu-  receivable              Total
                                            shares    Common    paid-in    translation    lated    due from  Treasury  stockholders'
                                            issued     stock    capital    adjustment    deficit   officers   stock      equity
<S>                                      <C>         <C>      <C>         <C>         <C>         <C>       <C>       <C>
Balances at October 31, 1993              9,461,385  $ 94,614  15,557,205      -      (9,700,747)  (31,944)  (41,823)  5,877,305

Issuance of common stock upon exercise
  of Alcan preemptive right (note 9)        111,395     1,114     199,397      -           -          -         -        200,511
Issuance of common stock upon exercise
  of underwriter warrants                    20,000       200      46,400      -           -          -         -         46,600
Issuance of common stock upon exercise
  of employee options                       325,133     3,251     936,996      -           -       (18,727)  (53,649)    867,871
Issuance of common stock for directors'
  compensation                                6,000        60      42,490      -           -          -         -         42,550
Issuance of common stock under
  employee stock purchase plan                1,632        16       8,507      -           -          -         -          8,523
Net loss                                       -         -           -                (3,395,356)     -         -     (3,395,356)

Balances at October 31, 1994              9,925,545    99,255  16,790,995      -     (13,096,103)  (50,671)  (95,472)  3,648,004

Issuance of common stock in private
  offerings, net of offering costs
  of $141,446 (note 9)                      581,111     5,812   1,944,742      -           -          -         -      1,950,554
Issuance of common stock upon exercise
  of employee options                        64,786       648      99,628      -           -        (1,750)  (22,130)     76,396
Issuance of common stock under
  employee stock purchase plan                  511         5       2,521      -           -          -         -          2,526
Issuance of warrants for service (note 10)     -         -         50,000      -           -          -         -         50,000
Net loss                                       -         -           -         -      (1,330,433)     -         -     (1,330,433)

Balances at October 31, 1995             10,571,953   105,720  18,887,886      -     (14,426,536)  (52,421) (117,602)  4,397,047

Issuance of common stock in private
  offerings, net of offering costs


<PAGE>



  of $247,309 (note 9)                    1,057,708    10,577   3,898,802      -           -          -         -      3,909,379
Issuance of common stock upon
  exercise of employee options              100,542     1,005     153,205      -           -       (13,395)  (10,250)    130,565
Issuance of common stock under
  employee stock purchase plan                6,668        67      20,200      -           -          -         -         20,267
Issuance of common stock for
  services                                   14,494       145      61,246      -           -          -         -         61,391
Cumulative translation adjustment              -         -           -      (21,030)       -          -         -        (21,030)
Net loss                                       -         -           -         -      (2,904,743)     -         -     (2,904,743)

Balances at October 31, 1996             11,751,365   117,514  23,021,339   (21,030) (17,331,279)  (65,816) (127,852)  5,592,876

Issuance of common stock in private
  offerings, net of offering costs
  of $365,688 (note 9)                    1,289,288    12,893   4,133,927      -           -          -         -      4,146,820
Issuance of common stock upon
  exercise of employee options               40,105       401      62,429      -           -       (17,830)     -         45,000
Issuance of common stock for
  services                                    1,547        15       3,934      -           -          -         -          3,949
Cumulative translation adjustment              -         -           -      (12,761)       -          -         -        (12,761)
Retirement of treasury stock                (39,341)     (393)   (127,459)                                   127,852         -
Net Loss                                       -         -           -         -      (1,201,085)     -         -     (1,201,085)

Balances at March 31, 1997               13,042,964  $130,430  27,094,170   (33,791) (18,532,364)  (83,646)     -      8,574,799
</TABLE>

See accompanying notes to consolidated financial statements.


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                     Five Months
                                                        Ended
                                                       March 31,               Year Ended October 31,
                                                         1997           1996          1995             1994
<S>                                                 <C>             <C>            <C>             <C>
Cash flows provided by (used by) operating
  activities:
   Net loss                                        $ (1,201,085)     (2,904,743)    (1,330,433)     (3,395,356)


<PAGE>



   Adjustments to reconcile net loss to net cash used by operating activities:
        Depreciation and amortization                   159,473         375,590        346,567         271,772
        Minority interest share of earnings of
          consolidated subsidiary                        27,725          69,400         64,627          69,517
        Noncash compensation expense for
          common stock and warrants issued
          for services                                    3,949          61,391         50,000          42,550
        Equity in loss of Taiwan joint venture           24,121          45,164         11,952           3,888
        Gain on sale of property and equipment             -            (45,676)        (3,534)           -
        Write-off of patent costs                        55,529            -              -               -
        Other                                             1,210         (20,092)          (466)         35,919
        Change in operating assets and liabilities:
           Accounts receivable and costs and
             estimated earnings in excess of
             billings on uncompleted contracts          167,846        (148,782)       161,223          28,995
           Inventories                                  (17,246)         (3,444)        70,450          52,215
           Prepaid expenses and other current
             assets                                     (66,910)        (12,846)        27,105          28,660
           Accounts payable and other current
             liabilities                                106,497         (25,681)      (200,703)        276,212
           Billings in excess of costs and
             estimated earnings on uncompleted
             contracts                                  634,122          25,685       (137,247)         74,060

                 Net cash used by operating
                    activities                         (104,769)     (2,584,034)      (940,459)     (2,511,568)

Cash provided by (used by)investing activities:
   Acquisition of property and equipment               (118,608)       (182,011)      (440,079)       (413,907)
   Increase in patent and trademark costs               (47,865)        (92,390)       (64,766)       (131,652)
   Investment in Taiwan joint venture                (1,375,121)           -              -            (45,082)
   Proceeds from sale of certificates of deposit
     and other investments                                 -            319,107        117,127            -
   Proceeds from sale of property and equipment            -             63,361            -              -

                Net cash provided by (used by)
                  investing activities             $ (1,541,594)        108,067       (387,718)       (590,641)

</TABLE>


      (Continued)



<PAGE>



UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

<TABLE>
<CAPTION>
                                                      Five Months
                                                        Ended
                                                       March 31,               Year Ended October 31,
                                                         1997             1996          1995            1994
<S>                                                 <C>              <C>            <C>             <C>
Cash flows provided by financing activities:
   Proceeds from borrowings                        $        -               -          212,337            -
   Repayment of debt                                     (34,085)        (83,045)     (250,905)        (36,077)
   Proceeds from sale of common stock, net             4,146,820       3,909,379     1,950,554            -
   Issuance of common stock upon exercise
     of employee options                                  45,000         130,565        76,396         867,871
   Issuance of common stock under employee
     stock purchase plan                                    -             20,267         2,526           8,523
   Issuance of common stock upon exercise of
     underwriter warrants                                   -               -             -             46,600
   Issuance of common stock upon exercise of
     Alcan preemptive right                                 -               -             -            200,511
   Distributions paid to holders of minority
      interest                                           (28,061)        (67,345)      (67,347)        (60,613)

               Net cash provided by financing
                 activities                            4,129,674       3,909,821     1,923,561       1,026,815

               Increase (decrease) in cash and
                 cash equivalents                      2,483,311       1,433,854       595,384      (2,075,394)

Cash and cash equivalents at beginning of period       3,230,246       1,796,392     1,201,008       3,276,402

Cash and cash equivalents at end of period           $ 5,713,557       3,230,246     1,796,392       1,201,008

Interest paid in cash during the period              $   276,591          82,494        89,133          72,638
</TABLE>



<PAGE>




Non-cash investing and financing transactions:

   In December 1996, the Company financed an additional investment in the Taiwan
   joint  venture  through  the  issuance  of a note  payable  in the  amount of
   $1,345,285 (see note 5).

   In accordance  with the provisions of the Company's  stock option plans,  the
   Company  accepts as  payment  of the  exercise  price,  mature  shares of the
   Company's  common stock held by the option  holder for a period of six months
   prior to the date of the option exercise. For the five months ended March 31,
   1997, there were no such transactions.  For the years ended October 31, 1996,
   1995 and 1994, the Company issued 13,666,  32,130 and 24,364 shares of common
   stock for  options  exercised  for an  aggregate  exercise  price of $10,250,
   $22,130 and  $53,649,  respectively,  for which the Company  received  2,000,
   5,365 and 6,813 shares of common stock as payment for the exercise price. The
   shares received were recorded at cost as treasury stock and were subsequently
   retired.  In accordance  with the  provisions  of the Company's  stock option
   plans, the Company may, and has,  accepted  promissory notes from officers of
   the Company in satisfaction of the exercise price of options exercised. These
   notes receivable are recorded as a reduction of  shareholders'  equity in the
   consolidated financial statements.  For the five months ended March 31, 1997,
   the Company  issued 20,105  shares of common stock for an aggregate  exercise
   price of $17,830 for which the Company received promissory notes for the same
   amount.  For the years ended  October 31,  1996,  1995 and 1994,  the Company
   issued  13,395,  2,900 and  48,352  shares of common  stock for an  aggregate
   exercise price of $13,395,  $1,750 and $18,727,  respectively,  for which the
   Company received promissory notes for the same amount.

   See accompanying notes to consolidated financial statements.


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements



(1) Summary of Significant Accounting Policies

     (a)  General Business

      Unique Mobility,  Inc. and subsidiaries  (the "Company") is engaged in the
      research,   development  and  commercialization  of  electric  and  hybrid
      electric vehicles,  propulsion systems for such vehicles, as well as other
      non-automotive applications of its technologies.  The Company's revenue is
      derived  primarily  from contract  research and  development  services and
      sales of products developed from such technology.

      The Company's operations are based in the United States with a significant
      investment in a joint venture in Taiwan.

      (b)  Principles of Consolidation

      The  consolidated  financial  statements  include  the  accounts of Unique
      Mobility, Inc. and those of all majority-owned or controlled subsidiaries.
      All  significant   intercompany   accounts  and  transactions   have  been
      eliminated in consolidation.



<PAGE>



      The  minority  interests  as of March 31,  1997,  and  October  31,  1996,
      consisted of the other  stockholders'  ownership interests in a subsidiary
      of the Company. See Note 4.

     (c)  Cash and Cash Equivalents

      The  Company   considers  cash  on  hand  and  investments  with  original
      maturities of three months or less to be cash equivalents.

     (d)  Inventories

      Inventories are stated at the lower of cost or market.  Cost is determined
      by the first-in, first-out method.

      (e)  Property and Equipment

      Property and equipment is stated at cost.  Depreciation  is computed using
      the  straight-line  method over the  estimated  useful lives of the assets
      which range from three to five  years,  except for the  building  which is
      depreciated over 31 years.  Maintenance and repairs are charged to expense
      as incurred.

      (f)  Investment in Taiwan Joint Venture

      The Company's investment in a joint venture located in Taiwan is accounted
      for  under the  equity  method  of  accounting.  Under  this  method,  the
      investment,  originally  recorded at cost,  is adjusted to  recognize  the
      Company's share of the net earnings or losses of the joint venture. Income
      or loss  recognition is limited to the extent of the Company's  investment
      in,  advances to and guarantees of the joint venture.  Commencing with the
      five  months  ended  March 31,  1997,  due to timing  considerations,  the
      financial position and results of operations


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



      for the Taiwan joint  venture are included in the  Company's  consolidated
      financial  statements  on  a  three-month  time  lag.   Accordingly,   the
      consolidated statements of operations, stockholders' equity and cash flows
      include  activity of the Taiwan  joint  venture  for the two months  ended
      December 31, 1996, and the twelve months ended October 31, 1996,  1995 and
      1994. Similarly, the accompanying  consolidated balance sheets and related
      footnote  disclosures as of March 31, 1997, and October 31, 1996,  include
      the  financial  position of the Taiwan  joint  venture as of December  31,
      1996, and October 31, 1996, respectively.  The cumulative foreign currency
      translation  adjustments  with  respect to the Taiwan  joint  venture were
      calculated using the average rates in effect during the respective two and
      twelve month periods ended December 31, 1996,  and October 31, 1996,  1995
      and 1994,  respectively  and the spot  rates in  effect at the  respective
      December 31, 1996, and October 31, 1996, balance sheet dates.

      (g)  Patent and Trademark Costs

      Patent and  trademark  costs  consist  primarily  of legal  expenses,  and
      represent those costs incurred by the Company for the filing of patent


<PAGE>



      and trademark applications and the annual fees paid to maintain the
patents
      in good standing. Amortization of patent and trademark costs is computed
      using the straight-line method over the estimated useful life of the
asset,
      typically 17 years for patents, and 40 years for trademarks.

      (h)  Long-Lived Assets

      In March 1995, the Financial  Accounting  Standards Board issued Statement
      of Financial  Accounting  Standards No. 121, Accounting for the Impairment
      of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of ("SFAS
      121"). SFAS 121 requires that long-lived  assets and certain  identifiable
      intangibles  to be held and used by an entity be reviewed  for  impairment
      whenever  events or changes in  circumstances  indicate  that the carrying
      amount of an asset may not be recoverable. The Company adopted SFAS 121 in
      1996 and the adoption of SFAS 121 did not have an effect on the  Company's
      financial statements.

      (i)  Contract Services Revenue and Cost Recognition

      Revenue  relating to long-term fixed price  contracts is recognized  using
      the percentage of completion  method.  Under the  percentage-of-completion
      method,  contract  revenues and related costs are recognized  based on the
      percentage that costs incurred to date bear to total estimated costs.

      Changes in job  performance,  estimated  profitability  and final contract
      settlements  may  result  in  revisions  to  cost  and  revenue,  and  are
      recognized in the period in which the revisions are determined.

      Contract costs include all direct materials, subcontract and labor
      costs.  General and administrative costs and other indirect costs are


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



      charged to expense as incurred.  At the time a loss on a contract  becomes
      known, the entire amount of the estimated ultimate loss is accrued.

      The  aggregate of costs  incurred and  estimated  earnings  recognized  on
      uncompleted  contracts in excess of related billings is shown as a current
      asset,  and billings on uncompleted  contracts in excess of costs incurred
      and estimated earnings is shown as a current liability.

      Revenue  relating to cost-plus  type  contracts is recognized as costs are
      incurred.  Revenue relating to "milestone billing" contracts is recognized
      upon completion of the various stages  (milestones) of the project,  based
      upon the contractual amounts.


      (j)  Income Taxes

      The Company accounts for income taxes in accordance with Statement of
      Financial Accounting Standards No. 109, Accounting for Income Taxes.
      Under the asset and liability method of Statement 109, deferred tax


<PAGE>



      assets and  liabilities  are  recognized  for the future tax  consequences
      attributable  to  differences  between the  financial  statement  carrying
      amounts of existing assets and liabilities and their respective tax bases.
      Deferred tax assets and  liabilities  are measured using enacted tax rates
      expected to apply to taxable income in the years in which those  temporary
      differences are expected to be recovered or settled.  Under Statement 109,
      the effect on deferred tax assets and liabilities of a change in tax rates
      is recognized in income in the period that includes the enactment date.

      (k)  Research and Development

      Costs of  researching  and  developing  new  technology  or  significantly
      altering existing technology are charged to operations as incurred.

     (l)   Equity Instruments Issued for Non-Employee Services

      The Company periodically issues common stock to non-employees for services
      rendered.  The cost of these  services  is  recorded  based  upon the fair
      market value of the Company's common stock on the date of issuance.

      (m)  Foreign Currency Translation

      The net assets of the foreign  investment  of the Company is translated at
      the appropriate period-end exchange rates. Income and expense accounts are
      translated at average monthly exchange rates. Net exchange gains or losses
      resulting  from such  translation  are excluded from results of operations
      and accumulated as a separate component of stockholders' equity. Gains and
      losses from  foreign  currency  transactions  are included in other income
      (expense).


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



      (n)  Loss Per Common Share

      Loss per common share is based on the weighted average number of shares of
      common stock  outstanding  during each year. Common stock equivalents were
      not included in the computations  because their effect was  anti-dilutive.
      The fair value of the  pre-emptive  rights  arising  from the  issuance of
      employee  stock options  during the five months ended March 31, 1997,  has
      been  treated in a manner  similar to a  preferred  stock  dividend in the
      calculation  of net loss per common share.  The estimated  aggregate  fair
      value of these rights,  determined using the Black-Scholes  option pricing
      model, was $201,000.

      (o)  Use of Estimates

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


<PAGE>



      (p)  Reclassifications

      Certain  prior  year  amounts  have been  reclassified  to  conform to the
      current period presentation.


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



(2)  Revenue in Excess of Billings and Billings in Excess of Revenue

     At March 31, 1997,  the estimated  period to complete  contracts in process
     ranged  from  1  to  15  months,   and  the  Company   expects  to  collect
     substantially  all  related  accounts  receivable  and costs and  estimated
     earnings  in excess of billings on  uncompleted  contracts  as of March 31,
     1997, within one year.

     The  following  summarizes  contracts  in  process at March 31,  1997,  and
     October 31, 1996:

                                                 March 31,       October 31,
                                                   1997              1996
      Costs incurred on uncompleted
         contracts                            $ 3,158,704        1,081,352
      Estimated earnings                          490,407          596,765
                                                3,649,111        1,678,117

       Less billings to date                   (4,117,033)      (1,524,319)

                                              $  (467,922)         153,798

       Included in the accompanying balance sheets as follows:
           Costs and estimated earnings
             in excess of billings on
             uncompleted contracts             $  191,885          179,483
           Billings in excess of costs and
             estimated earnings on
             uncompleted contracts               (659,807)         (25,685)

                                               $ (467,922)         153,798

(3)   Inventories

      Inventories at March 31, 1997, and October 31, 1996 consists of:
                                                 March 31,      October 31,
                                                   1997             1996

            Raw materials                      $  283,155          273,527
            Work in process                        69,460           55,996
            Finished products                      72,776           78,622

                                               $  425,391          408,145

(4)   Limited Liability Company



<PAGE>



   In  September  1992,  the  Company and a private  investor  formed a Colorado
   limited liability company to acquire,  own and maintain a 40,000  square-foot
   facility in Golden, Colorado, and the surrounding land. This facility serves


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



   as the Company's corporate headquarters.  Ownership in this limited liability
   company is divided  equally  between the  Company  and the private  investor.
   However,  the Company is deemed to have a controlling interest in the limited
   liability  company by virtue of the operating  agreement which authorizes the
   Company to make all  decisions  with  respect to the  business of the limited
   liability  company,  subject only to certain protective rights of the private
   investor,  and by virtue of the lease  agreement  with the limited  liability
   company  covering  the entire  facility.  The limited  liability  company is,
   therefore,  accounted for as a consolidated subsidiary.  Minority interest in
   consolidated  subsidiary  represents the private investor's allocable portion
   of the equity of the consolidated subsidiary.

(5)   Investment in Taiwan Joint Venture

   On January 29, 1994, the Company, Kwang Yang Motor Co. Ltd. ("KYMCO"), and
   Turn Luckily Technology Co. Ltd. ("TLT"), entered into a joint venture
   agreement (the "Joint Venture Agreement") providing for the formation,
   funding, and operation of Taiwan UQM Electric Company, Ltd., a company
   organized under the laws of the Republic of China ("Taiwan UQM").  Taiwan
   UQM was incorporated in April 1995.

   In 1994,  the Company  purchased 39% of the initial  equity capital of Taiwan
   UQM for $45,082,  and agreed to invest 39% of any  additional  capital calls.
   Pursuant to the Joint Venture Agreement, the venturers are required to invest
   additional  funds in Taiwan UQM, as the board of  directors  of Taiwan UQM by
   unanimous vote determines to be required.

   During 1995, the Company was unable to make payments for  additional  capital
   call obligations under the Joint Venture  Agreement.  The Company,  KYMCO and
   TLT entered into a Waiver and Option  Agreement  (the "Option  Agreement") on
   June 12, 1995,  whereby KYMCO agreed to first purchase those shares of Taiwan
   UQM  underlying  the Company's  additional  capital call  obligations  in the
   amount of $1,403,493.  Under the Option Agreement, the Company had the option
   to repurchase these shares from KYMCO for the additional capital call amount,
   plus interest at 10% per annum.  The purchase by KYMCO of the shares  related
   to the Company's  additional  capital call obligations was accounted for as a
   financing  arrangement.  Accordingly,  for financial reporting  purposes,  at
   October 31,  1995,  the  Company  recorded  $1,403,493  as an addition to its
   investment  in the joint  venture and as a note payable to the joint  venture
   participant.  The note payable remained outstanding at October 31, 1996, with
   the  decrease  in its  recorded  value to  $1,375,121  due to  exchange  rate
   fluctuations.

   The Company  exercised its option prior to the November 30, 1996,  expiration
   date of the option and tendered cash to repay the principal amount due to the
   joint  venture  participant.  The  related  interest  and taxes due under the
   Option  Agreement  were  also paid in  conjunction  with the  payment  of the
   principal amount.



<PAGE>



   In  December  1996,  Taiwan  UQM made an  additional  capital  call which was
   payable in two equal  installments  due March 1, 1997, and June 1, 1997, with
   interest  accruing at 10% per annum.  The Company's 39% share of the December
   1996 capital call was $1,345,285. Although 50% of the Company's


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued




   obligation  was payable  March 1, 1997, it was not paid until April 17, 1997,
   at  which  time  the  entire  obligation  plus  accrued  interest  was  paid.
   Therefore, the note payable remained outstanding at March 31, 1997.

   
   Summarized financial information for Taiwan UQM is as follows:
    
                                                  December 31,    October 31,
        Financial Position                            1996           1996

        Current assets                           $   889,881        330,826
        Noncurrent assets-land and
          construction in process                  4,542,142      3,196,300

               Total assets                        5,432,023      3,527,126

        Current liabilities                          607,453         19,816
        Noncurrent liabilities                          -             3,361
        Stockholders' equity                       4,824,570      3,503,949

               Total liabilities and equity      $ 5,432,023      3,527,126


                                                  Two Months
                                                     Ended        Year Ended
                                                  December 31,    October 31,
        Results of Operations                         1996            1996

        Revenue                                  $    10,123           -
        Expenses                                      56,403        128,214

        Net loss                                 $   (46,280)      (128,214)

   
The financial  statements  from which the summarized  financial  information for
Taiwan UQM has been derived were prepared in accordance with generally  accepted
accounting  principles  in the Republic of China which do not differ  materially
from generally accepted accounting principles in the United States.
    

(6) Other Current Liabilities

    Other current  liabilities at March 31, 1997, and October 31, 1996, consists
    of:
                                                     March 31,      October 31,
                                                      1997             1996



<PAGE>



       Accrued interest                            $  39,218        214,002
       Accrued legal and accounting fees              37,171         45,237
       Accrued payroll, consulting,
         personal property taxes and real
         estate taxes                                 67,207         52,585
       Refund of overpayment                         250,005           -
       Other                                          65,622         88,750

                                                   $ 459,223        400,574


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued




(7) Long-term Debt

    Long-term debt at March 31, 1997, and October 31, 1996, consists of:

                                                     March 31,     October 31,
                                                       1997            1996
       Note payable to bank,  payable in monthly  installments  with interest at
          9.1%; matures October 2007; secured interest at a by land and building
          with a net book value of
          $1,575,420                                 $ 771,398        789,793

      Note payable to bank, payable in
          monthly installments with
          interest at 12%; repaid
          in March 1997                                   -            15,690

               Total long-term debt                    771,398        805,483

        Less current portion                            45,180         61,094

               Long-term debt, less current
                 portion                             $ 726,218        744,389

   The annual  aggregate  maturities of long-term debt for each of the next five
   fiscal years and thereafter are as follows:

                   1998                         $  45,180
                   1999                            49,528
                   2000                            54,597
                   2001                            59,523
                   2002                            65,255
                   Thereafter                     497,315

                                                $ 771,398

(8)   Income Taxes

   Income tax expense  (benefit)  attributable  to income (loss) from continuing
   operations  differed from the amounts  computed by applying the U.S.  federal
   income tax rate of 34% as a result of the following:


<PAGE>




UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued




                                  March 31,       Year Ended October 31,
                                    1997       1996       1995        1994

   Computed "expected" tax
       benefit                  $ (408,369)  (987,613)  (452,347) (1,154,421)
   Increase (decrease) in
       taxes resulting from:
          Increase in
            valuation
            allowance for
            net deferred
            tax assets             407,443    985,132    450,383   1,142,656
          Other, net                   926      2,481      1,964      11,765

     Income tax benefit         $     -           -          -           -

    The tax  effects  of  temporary  differences  that give rise to  significant
    portions of the net deferred tax asset are presented below:

                                        March 31,        October 31,
                                           1997              1996

       Deferred tax assets:
          Research & development
             credit carryforwards    $     61,188            61,188
           Net operating loss
             carryforwards              5,728,676         5,321,233

                 Total deferred
                   tax assets           5,789,864         5,382,421

        Less valuation allowance        5,789,864         5,382,421

                 Deferred tax assets,
                   net of valuation
                   allowance         $       -               -

    As of March 31, 1997, the Company had net operating loss carryforwards (NOL)
   of  approximately  $18.3  million for US income tax purposes  which expire in
   varying amounts through 2012. Approximately $1.4 million of the net
    operating loss carryforwards are attributable to stock options,  the benefit
    of which  will be  credited  to  additional  paid-in  capital  if  realized.
    However,  due to the provisions of Section 382 of the Internal Revenue Code,
    the utilization of a portion of these NOLs is limited.  At October 21, 1991,
    the Company  experienced  an  ownership  change for  purposes of Section 382
    subjecting  approximately $2.8 million in NOLs to an annual usage limitation
    of  approximately  $0.9  million.  The amount of this annual  limitation  is
    sufficient to allow for the  utilization  of the entire amount of these NOLs
    prior to expiration should sufficient taxable income be generated.

    Future ownership  changes under Section 382 could occur that would result in
    an additional Section 382 limitation which would further restrict the use of


<PAGE>



    NOLs.  In addition, the Section 382 limitation could be reduced to zero if


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



    the  Company  fails  to  satisfy  the  continuity  of  business   enterprise
    requirement for the two-year period following an ownership change.

(9) Stockholders' Equity

    Alcan

    Alcan   Aluminum   Limited   (Alcan)  and  certain   affiliates   of  Advent
    International Corporation (Advent) and Techno-Venture U.S.A., Inc. (Techno),
    significant stockholders, have preemptive rights to acquire 16.7%, 13.1% and
    2.1%,  respectively,  of the Company's shares of common stock offered in any
    offering for so long as they hold any shares of the Company's  common stock.
    In June 1997, Advent and Techno sold their holding in the Company to various
    investors  and the  preemptive  rights  granted to Advent  and  Techno  were
    terminated.

    Additionally,  Alcan has the right of first  refusal to purchase any private
    placement  equity  securities  to be issued or sold to third parties if such
    issuance  would cause such  parties to become the  beneficial  owner of more
    than 5% of any class of the Company's  equity  securities.  Separately,  the
    Company's Chairman,  who holds or has the right to acquire 982,438 shares of
    the Company's  common  stock,  has granted Alcan a right of first refusal to
    purchase any shares to be sold or  transferred by the Chairman in any public
    or private sale.

    Private Placement

    During fiscal 1995, the Company completed three private placements of common
    stock with  institutions  outside of the United  States.  In total,  581,111
    shares of common stock were privately placed at $3.60 per share.

    During fiscal 1996,  the Company  completed  several  private  placements of
    common stock with  institutional and private investors outside of the United
    States.  In total 928,676  shares were placed at between $3.30 and $4.75 per
    share.  In  addition,  129,032  shares of common stock were sold to Invacare
    Corporation in a private placement, at $3.88 per share.

    During the five months  ended March 31,  1997,  the  Company  completed  one
    private  placement of common stock with  institutional and private investors
    outside of the United States. In total 1,289,288 shares of common stock were
    privately placed at $3.50 per share.

(10) Common Stock Options and Warrants

     The Company has three stock option plans, the 1982 and 1992 Incentive and
     Non-Qualified Stock Option Plans and the Non-Employee Director Stock Option
     Plan.  In October 1995, the Financial Accounting Standards Board issued

     Statement of Financial Accounting Standards No. 123, Accounting for Stock-
     Based Compensation ("SFAS 123").  This standard defines a fair value method
     of accounting for employee stock options and similar equity instruments.


<PAGE>



     SFAS 123 permits an entity to choose to recognize compensation expense by


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



     adopting  the new fair value  method of  accounting  or continue to measure
     compensation   costs  using  the  intrinsic  value  methods  of  accounting
     prescribed by Accounting  Principles  Board Opinion No. 25,  Accounting for
     Stock Issued to Employees  ("APB 25").  The Company has elected to continue
     to account  for its  employee  stock  compensation  plans  using the method
     prescribed  by APB 25 and,  accordingly,  because  the  Company  grants its
     options at or above the current market value, no compensation cost has been
     recognized  for stock  options  granted  under the  Company's  stock option
     plans. Had the Company reported compensation cost as determined by the fair
     value method of  accounting  for option grants under its stock option plans
     as  prescribed  by SFAS 123,  net loss and net loss per common  share would
     have been the proforma amounts indicated.

                                           Five Months
                                             Ended            Year Ended
                                         March 31, 1997     October 31, 1996

        Net loss - as reported          $ (1,201,085)        (2,904,743)
        Net loss - pro forma            $ (1,462,974)        (3,243,964)
        Net loss per common share -
           as reported                       $(.12)              (.26)
        Net loss per common share -
           pro forma                         $(.14)              (.29)

     The fair value of stock  options  granted  was  calculated  using the Black
     Scholes option pricing model based on the following assumptions:

                                          Five Months
                                             Ended            Year Ended
                                         March 31, 1997     October 31, 1996

        Expected volatility                  47.6%              49.1%
        Expected dividend yield               0.0%               0.0%
        Risk free interest rate               6.4%               5.6%
        Expected life of options
           granted                           6 years            6 years
        Fair value of options granted
          as computed under the Black
          Scholes option pricing model   $1.79 per share    $2.22 per share

     Pro forma net loss reflects  only options  granted in the five months ended
     March 31, 1997,  and the year ended October 31, 1996.  Therefore,  the full
     impact of calculating compensation cost for stock options under SFAS 123 is
     not  reflected in the pro forma net loss amounts  presented  above  because
     compensation  cost is reflected  over the option vesting  periods  (ranging
     from 1 to 3 years)  and  compensation  cost for  options  granted  prior to
     November 1, 1995, is not considered.


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES


<PAGE>



Notes to Consolidated Financial Statements, Continued



     Incentive and Non-Qualified Option Plans

     The Company  reserved  4,104,000  shares of common stock for key employees,
     consultants and key supplier under its Incentive and  Non-Qualified  Option
     Plans of 1992 and 1982. Under these option plans the exercise price of each
     option is set at the fair market  value of the common  stock on the date of
     grant and the  maximum  term of the  options  is 10 years  from the date of
     grant.  Options granted to employees vest ratably over a three year period.
     The maximum  number of shares that may be granted to any eligible  employee
     during  the  term of the 1982 and 1992  plans is  500,000  shares.  Options
     granted under the Company's plans to employees require the option holder to
     abide by certain Company  policies which restrict their ability to sell the
     underlying common stock.

     The following  table  summarizes  activity  under the plans during the last
     three fiscal years and the five months ended March 31, 1997:

                                            Shares Under     Weighted-Average
                                               Option         Exercise Price

        Outstanding at October 31, 1994      1,914,533            $5.02
        Granted                                100,000             5.00
        Exercised                              (64,786)            1.55
        Forfeited                              (97,515)            5.38

        Outstanding at October 31, 1995      1,852,232             5.12
        Granted                                590,000             4.15
        Exercised                             (100,542)            1.53
        Forfeited                             (315,978)            5.63

        Outstanding at October 31, 1996      2,025,712             4.94
        Granted                                500,000             3.31
        Exercised                              (40,105)            1.57
        Expired                                (30,000)            5.00
        Forfeited                               (4,151)             3.31

        Outstanding at March 31, 1997        2,451,456             4.66

        Exercisable at March 31, 1997        1,566,715             4.97

     The following  table presents  summarized  information  about stock options
     outstanding at March 31, 1997:
<TABLE>
<CAPTION>
                                Options Outstanding                   Options Exercisable
                                     Weighted
                       Number         Average         Weighted         Number       Weighted
      Range of      Outstanding      Remaining         Average       Exercisable     Average
  Exercise Prices   at 3/31/97   Contractual Life   Exercise Price   at 3/31/97   Exercise Price
   <S>                 <C>           <C>                <C>            <C>            <C>
   $0.50 - 1.00        113,117       3.0 years          $0.79          113,117        $0.79
    2.25 - 3.31        649,849       8.6 years           3.06          154,000         2.25
    3.50 - 5.00        884,555       7.5 years           4.03          595,663         3.99
    5.38 - 8.13        803,935       6.8 years           7.20          703,935         7.07
    0.50 - 8.13      2,451,456       7.4 years           4.66        1,566,715         4.97
</TABLE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



     Non-Employee Director Stock Option Plan

     In February 1994, the Company's Board of Directors  ratified a Stock Option
     Plan for  Non-Employee  Directors  pursuant to which Directors may elect to
     receive stock options in lieu of cash  compensation  for their  services as
     directors.  The Company has  reserved  250,000  shares of common  stock for
     issuance  pursuant to the exercise of options  under the Plan.  The options
     vest ratably over a three-year  period  beginning one year from the date of
     grant  and are  exercisable  for 10 years  from the date of  grant.  Option
     prices are equal to the fair market  value of common  shares at the date of
     grant.

     The following table summarizes activity under the plan:

                                               Shares under     Per share
                                                 option       exercise price

     Granted during 1994 and outstanding at
       October 31, 1994                           48,000       $ 5.38 - 6.25
     Granted                                      61,333         5.00 - 5.13

      Outstanding at October 31, 1995            109,333         5.00 - 6.25
      Granted                                     32,000         4.38

     Outstanding at October 31, 1996
       and March 31, 1997                        141,333         4.38 - 6.25

     At March 31, 1997, options to purchase 83,556 shares were exercisable.

     Warrants

     In  connection   with  the  original   issuance  of  certain   subordinated
     convertible term notes to Advent and Techno, the Company granted Advent and
     Techno warrants to acquire 790,000 shares of the Company's  common stock at
     the lower of $2.40 per share, being the market value of the Company's stock
     at the time of issuance or the market  price of the common  stock  averaged
     over the 30 trading days  immediately  preceding the date of exercise.  The
     warrants  expire  August  1997,  and allow for a cashless  exercise  of the
     warrants into common shares based on the spread between the market price of
     the common stock on the date of exercise and the $2.40 exercise price.  All
     of these warrants remain outstanding at March 31, 1997.

     The Company has reserved 300,000 shares of common stock for issuance


<PAGE>



     pursuant  to a  warrant  agreement  with  an  investment  banking  company.
     Warrants to acquire  200,000  shares of common  stock vested on January 20,
     1994,  and the remaining  100,000  shares  vested on January 20, 1995.  The
     warrants were  exercisable for a period of five years,  expiring on January
     19,  1999,  at a price of $7.63  per  share.  Further,  the  warrants  were
     redeemable  on a one-time  basis only  through  June 30,  1994,  for a like
     number of warrants,  at the then current fair market value of the Company's
     common  stock  with  otherwise  identical  terms.  On April 18,  1994,  the
     warrants were redeemed in accordance with the above provision for a like


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



     number of warrants which are exercisable at a price of $6.00 per share, the
     market price of the common stock of the Company at the date of  redemption.
     The  warrants  contain   transfer   restrictions  and  provisions  for  the
     adjustment  of the  exercise  price and the number  and type of  securities
     issuable upon exercise  based on the occurrence of certain  events.  All of
     these  warrants  remain  outstanding  at March 31, 1997. The estimated fair
     value of the warrants  issued of $50,000 was recorded as  compensation  for
     the investment banking services rendered in 1995.

     In connection with the 1995 common stock issuance,  the placement agent was
     issued  warrants  expiring July 21, 1998, to acquire  150,000 shares of the
     Company's  common stock at $5.75 per share.  All of these  warrants  remain
     outstanding at March 31, 1997.

     In connection with the 1996 private  placements,  the placement agents were
     issued  warrants to acquire 50,000 shares of the Company's  common stock at
     $4.75 per share on February 27, 1996, 38,100 shares of the Company's common
     stock at $5.00 per share on May 31,  1996,  and 50,000  shares at $4.25 per
     share on September 30, 1996,  being the market price of the common stock of
     the Company at the date of each respective grant. The warrants expire three
     years from the date of issuance.  All of these warrants remain  outstanding
     at March 31, 1997.

     In connection with the 1997 private  placement,  the placement  agents were
     issued  warrants to acquire  225,625 shares of the Company's stock at $3.50
     per share on February 27, 1997,  being the average of the closing  price of
     the  Company'  stock  for  the  ten  days  preceding  the  closing  of such
     placement. The agents were also issued warrants to acquire 50,000 shares of
     the Company's  common stock at $4.20 per share on February 27, 1997,  being
     120% of the average closing price of the Company's common stock for the ten
     days preceding the closing of the placement.  All of these warrants  remain
     outstanding at March 31, 1997.

(11) Alcan Agreements

     The Company had previously  entered into agreements with Alcan. Under terms
     of the  agreements,  the  Company's  then  existing  motor  technology  and
     technology  resulting  from  development  projects  for Alcan  were  cross-
     licensed between Alcan and the Company.  Royalties from the manufacture and
     sale of licensed  products  and a portion of  royalties  received  from the
     sub-licensing  of technology to third parties were payable by the licensing
     party to the other if the technology was  commercialized.  During 1994, the
     Company and Alcan executed another agreement, in which Alcan assigned to


<PAGE>



     the  Company  all of its  rights,  title and  interests  in all  technology
     developed under the original agreements between Alcan and the Company.  The
     1994  agreement  further  provides  that  the  Company  shall  pay to Alcan
     royalties  of  one-half  of  one  percent  on  revenue   derived  from  the
     manufacture  and  sale of  products  or  processes  embodying  the  related
     technology (the Technology).  The Company has also agreed to offer to Alcan
     a  first  right  of  refusal  to  acquire  any  and  all  intellectual  and
     proprietary  property  related to the Technology  prior to consummating and
     assignment  or sale of any  Technology.  In  addition,  subject  to certain
     conditions, Alcan has agreed to reimburse the Company for 50% of its


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



     patent  application  and maintenance  expenditures,  up to an amount not to
     exceed the annual royalties from the Company.

     For the five months ended March 31, 1997,  and for the years ended  October
     31, 1996,  1995 and 1994, the Company  recorded  royalty expense of $4,077,
     $9,497,  $23,423 and $11,458,  respectively,  all of which was applied as a
     reduction of patent application and maintenance expenditures.

(12) Significant Customers

     The Company has historically  derived significant contract services revenue
     from a few key  customers.  The customers  from which this revenue has been
     derived  and the  percentage  of this  revenue  as a  percentage  of  total
     contract services revenue is summarized as follows:

                              Five Months
                                 Ended              Year Ended October 31,
                             March 31, 1997      1996       1995       1994

         Customer A          $ 162,500             -           -         -
                  B            113,229             -           -         -
                  C            176,749             -           -         -
                  D               -             378,640   1,720,347   316,740
                  E               -             202,343     880,420   369,595
                  F               -             194,600        -         -
                  G               -             135,950        -         -
                  H               -                -        657,330      -
                  I               -                -           -      280,496

                             $ 452,478          911,533   3,258,097   966,831

         Percentage of
           contract services
           revenue                65%              63%         81%       59%


     These customers,  in total,  also represented 49% and 38% of total accounts
     receivable at March 31, 1997 and October 31, 1996, respectively.

     Contract  services revenue derived from contracts with agencies of the U.S.
     Government and from sub-contracts  with U.S.  Government prime contractors,
     certain portions of which are included in revenue from other key customers


<PAGE>



     above,  totaled  $78,532 for the five  months  ended  March 31,  1997,  and
     $800,208,  $2,478,350  and $331,440  for the years ended  October 31, 1996,
     1995 and 1994, respectively.


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



(13) Fair Value of Financial Instruments

     The following  methods and assumptions were used to estimate the fair value
     of each class of financial instruments:

     Cash and cash equivalents,  certificates of deposit,  accounts  receivable,
     notes payable to joint venture participant, and accounts payable:

        The  carrying  amounts  approximate  fair  value  because  of the  short
        maturity of these instruments.

     Long-term debt:

        The carrying amount of the Company's  long-term debt  approximates  fair
        value since the interest rate on this debt represents the current market
        rate for similar financing available to the Company.

(14) Employee Benefit Plans

     401(k) Plan

     The Company has  established  a 401(k)  Savings Plan (the Plan) under which
     eligible employees may contribute up to 15% of their  compensation.  At the
     direction  of the  participants,  contributions  are  invested  in  several
     investment  options  offered by the Plan  including  the  Company's  common
     stock.The Company matches participant  contributions on a dollar-for-dollar
     basis  on  the   participant's   contributions  up  to  5  percent  of  the
     participant's salary and 25% of participant contributions in excess of this
     limit,  subject to certain  limitations.  These  contributions vest ratably
     over a three-year period. Matching contributions to the Plan by the Company
     were $39,535,  $90,935, $98,441 and $95,257 for the five months ended March
     31,  1997,  and for the  years  ended  October  31,  1996,  1995 and  1994,
     respectively.

     Stock Purchase Plan

     The Company has  established a stock  purchase  plan which allows  eligible
     employees to purchase, through payroll deductions,  shares of the Company's
     common  stock  at 85% of the fair  market  value at  specified  dates.  The
     Company has reserved  200,000 shares of common stock for issuance under the
     stock  purchase  plan.  During the five months  ended March 31,  1997,  the
     Company did not issue any shares under the Stock Purchase Plan.  During the
     years ended  October 31,  1996,  1995 and 1994,  the Company  issued  6,668
     shares,  511 shares and 1,632 shares of common stock,  respectively,  under
     the stock purchase plan.


UNIQUE MOBILITY, INC.
AND SUBSIDIARIES


<PAGE>



Notes to Consolidated Financial Statements, Continued




(15) Transition Period Comparative Financial Information (Unaudited)

     The following  table sets forth certain  unaudited  statement of operations
     data for the five months ended March 31, 1996:

         Revenue:
            Contract services                           $   331,761
            Product sales                                   216,325
                                                            548,086
            Operating costs and expenses:
            Costs of contract services                      376,614
            Costs of product sales                          228,080
            Research and development                        632,101
            General and administrative                      624,996
                                                          1,861,791

                    Operating loss                       (1,313,705)

         Other income (expense):
            Interest income                                  46,214
            Interest expense                                (91,780)
            Equity in loss of Taiwan joint
              venture                                       (16,682)
            Minority interest share of earnings
              of consolidated subsidiary                    (28,588)
            Other                                            37,280
                                                            (53,556)

                    Net loss                            $(1,367,261)

                    Net loss per common share           $   (.13)

         Weighted average number of shares
           of common stock outstanding                   10,708,645



(16) Subsequent Event

     In June of 1997, the Company entered into a strategic  relationship with EV
     Global  Motors  Company  (EVG)  to  develop  and  market  light  electrical
     transportation  products.  EVG purchased  1,151,925 shares of the Company's
     common stock in a private  transaction from Alcan and purchased warrants to
     acquire an additional  350,000  shares of common stock from other  sources.
     Separately,  the Company and EVG entered  into a stock  purchase  agreement
     whereby the Company  agreed to purchase  400,000 shares of EVG common stock
     in exchange for 200,000 shares of the Company's common stock.




ITEM 9. CHANGE IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.


     None.



<PAGE>



                             PART III


Pursuant to  instruction  G(3) to Form 10-K, the  information  required in Items
10-13 is hereby  incorporated by reference from the Company's  definitive  Proxy
Statement for the Annual  Meeting of  Shareholder to be held on August 19, 1997,
to be filed on or about July 7, 1997, pursuant to Regulation 14A.


                             PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

       (a)   1. Financial Statements:

                Unique Mobility, Inc. (included in Part II):

                   Independent Auditors' Report.

                   Consolidated  Balance Sheets,  March 31, 1997 and October 31,
                     1996.

                   Consolidated  Statements  of  Operations  for the five months
                     ended  March  31,  1997 and each of the  years in the three
                     year period ended October 31, 1996.

                   Consolidated  Statements of Stockholders' Equity for the five
                     months ended March 31,  1997,  and each of the years in the
                     three year period ended October 31, 1996.

                   Consolidated  Statements  of Cash Flows for five months ended
                     March  31,  1997 and each of the  years in the  three  year
                     period ended October 31, 1996.

                   Notes to Consolidated Financial Statements.

                Taiwan UQM Electric Co., Ltd. (included in Part IV):

                   Independent Auditors' Report.

                   Balance Sheets, December 31, 1996 and 1995.

                   Statements of Income for the year ended  December  31,  1996,
                     and the period January 17, 1995 to December 31, 1995.

                   Statement  of Changes  in  Shareholders'  Equity for the year
                     ended December 31, 1996 and the period January 17, 1995, to
                     December 31, 1995.

                   Statements of Cash  Flows,  for the year ended  December  31,
                     1996 and the period January 17, 1995 to December 31, 1995.

                   Notes to Financial Statements.


           2. Financial Statement Schedules:

                   INDEPENDENT AUDITORS' REPORT





<PAGE>




The Board of Directors and Shareholders of
Taiwan UQM Electric Co., Ltd.
   
We have  examined  the balance  sheets of Taiwan UQM  Electric  Co.,  Ltd. as of
December 31, 1996 and 1995,  and the related  statements  of income,  changes in
shareholders' equity and cash flows for the year ended December 31, 1996 and the
period  January 17, 1995 to December 31,  1995.  Our  examinations  were made in
accordance with auditing  standards  generally accepted in the Republic of China
and the regulations governing such examinations and, accordingly,  included such
tests of accounting records and such other auditing  procedures as we considered
necessary  in the  circumstances.  Such  auditing  standards  are  substantially
equivalent to auditing standards generally accepted in the United States.
    
In our opinion,  the financial  statements  referred to above present fairly the
financial  position of Taiwan UQM Electric Co., Ltd. as of December 31, 1996 and
1995,  and the results of its  operations  and its cash flows for the year ended
December  31, 1996 and the period  January 17, 1995 to  December  31,  1995,  in
conformity  with  accounting  principles  generally  accepted in the Republic of
China applied on a consistent basis.


Horwath & Company

Taipei, Republic of China
January 16, 1997


                          TAIWAN UQM ELECTRIC CO., LTD.
                                 BALANCE SHEETS
                             (In Development Stage)
                           December 31, 1996 and 1995
                    (Amounts Expressed in New Taiwan Dollars)

                                                      December 31
                                              1996                     1995
ASSETS                               Amounts         %      Amounts         %

CURRENT ASSETS
   Cash and cash equivalents
     (Notes 2 & 3)                $ 22,510,890    15.08  $ 17,633,984     17.77
   Other receivables                 1,880,181     1.25        64,511      0.06
   Other current assets                 69,657     0.05        26,235      0.03
   Total Current Assets             24,460,728    16.38    17,724,730     17.86

PROPERTY AND EQUIPMENT (Notes 2, 4 & 7)
   Cost                                980,842      0.66        -            -
   Less: accumulated depreciation     (108,473)    (0.07)       -            -
   Add: construction in progress
     and prepayment for land       122,507,538     82.04   81,114,412     81.74
   Net                             123,379,907     82.63   81,114,412     81.74

OTHER ASSETS
   Deferred income tax assets
     (Notes 2 & 6)                   1,472,828      0.99      391,844      0.40


TOTAL ASSETS                      $149,313,463    100.00 $ 99,230,986    100.00


<PAGE>




                                                      December 31
LIABILITIES AND                               1996                    1995
SHAREHOLDERS' EQUITY                 Amounts         %       Amounts        %

CURRENT LIABILITIES
   Notes payable                   $     4,014       -    $      -          -
   Other notes payable              15,915,177     10.66         -          -
   Accrued expenses (Note 7)           703,820      0.47      392,729      0.01
   Other current liabilities            74,440      0.05       13,788      0.40
   Total Current Liabilities        16,697,451     11.18      406,517      0.41

SHAREHOLDERS' EQUITY
   Common stock-$10 par value,      10,000,000
     shares authorized and issued  100,000,000     66.97  100,000,000    100.77
   Capital received in advance      37,050,000     24.81        -           -
   Deficit in development stage
     (Note 5)                       (4,433,988)    (2.96)  (1,175,531)    (1.18)

   Total Shareholders' Equity      132,616,012     88.82   98,824,469     99.59

TOTAL LIABILITIES
  AND SHAREHOLDERS' EQUITY        $149,313,463    100.00 $ 99,230,986    100.00

(See accompanying notes to financial statements)

                         TAIWAN UQM ELECTRIC CO., LTD.
                             STATEMENTS OF INCOME
                            (In Development Stage)
                     For the Year Ended December 31 ,1996
              and the Period January 17, 1995 to December 31,1995
                   (Amounts Expressed in New Taiwan Dollars)

                                                             January 17,1995 to
                                 1996            1995         December 31, 1996
NET SALES                      $    -          $   -            $    -

COST OF GOODS SOLD                  -              -                 -

GROSS PROFIT                        -              -                 -

OPERATING EXPENSES (Note 7)    (4,617,699)    (1,819,488)       (6,437,187)

OPERATING LOSS                 (4,617,699)    (1,819,488)       (6,437,187)

NON-OPERATING INCOME
   Interest income                278,258        252,113           530,371
INCOME BEFORE INCOME TAX       (4,339,441)    (1,567,375)       (5,906,816)

INCOME TAX
   (Notes 2 & 6)
   Current tax expense              -              -                 -
   Deferred tax benefit         1,080,984        391,844         1,472,828

NET LOSS                      $(3,258,457)   $(1,175,531)      $(4,433,988)

EARNINGS PER SHARE
   Net loss                   $     (0.33)   $     (0.31)


(See accompanying notes to financial statements)


<PAGE>




                         TAIWAN UQM ELECTRIC CO., LTD.
                 STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            (In Development Stage)
                      For the Year Ended December 31,1996
              and the Period January 17, 1995 to December 31,1995
                   (Amounts Expressed in New Taiwan Dollars)

                                  Common Stock Issued
                                                          Capital     Deficit in
                                                          Received   Development
                                  Shares      Amounts    in Advance     Stage

INITIAL PAID-IN CAPITAL,
  JANUARY 17,1995                2,500,000 $ 25,000,000 $    -       $    -

Capital increase by cash         7,500,000   75,000,000      -            -

Net loss for the period
  January 17, 1995 to
  December 31,1995                   -           -           -       (1,175,531)

BALANCE, DECEMBER 31,1995       10,000,000  100,000,000      -       (1,175,531)

Capital received in advance          -            -      37,050,000            -

Net loss for 1996                    -            -                  (3,258,457)

BALANCE, DECEMBER 31, 1996      10,000,000 $100,000,000 $37,050,000 $(4,433,938)

               (See accompanying notes to financial statements)


                       TAIWAN UQM ELECTRIC CO., LTD.
                         STATEMENTS OF CASH FLOWS
                          (In Development Stage)
                        For the Year Ended December 31, 1996
             and the Period January 17, 1995 to December 31, 1995
                 (Amounts Expressed in New Taiwan Dollars)

                                                            January 17, 1995 to
                                          1996        1995    December 31,1996
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                            $(3,258,457) $(1,175,531)   $ (4,433,988)
  Adjustments:
     Depreciation                         108,473         -            108,473
     Net changes in:
       Other receivables               (1,815,670)     (64,511)     (1,880,181)
       Other current assets               (43,422)     (26,235)        (69,657)
       Deferred income tax assets      (1,080,984)    (391,844)     (1,472,828)
       Notes payable                        4,014          -             4,014
       Accrued expenses                   311,091      392,729         703,820
       Other current liabilities           60,652       13,788          74,440
  Net Cash Used in Operating
    Activities                         (5,714,303)  (1,251,604)     (6,965,907)

CASH FLOWS FROM INVESTING ACTIVITIES
   Acquisition of property and
     equipment                        (26,458,791) (81,114,412)   (107,573,203)

CASH FLOWS FROM FINANCING ACTIVITIES


<PAGE>



   Initial paid-in capital and
     capital increase by cash                -     100,000,000     100,000,000
   Increase in capital received
     in advance                        37,050,000         -         37,050,000
   Net Cash Provided by
     Financing Activities              37,050,000  100,000,000     137,050,000

NET INCREASE IN CASH AND CASH
   EQUIVALENTS                          4,876,906   17,633,984      22,510,890

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                 17,633,984       -                 -

CASH AND CASH EQUIVALENTS AT
  END OF PERIOD                       $22,510,890  $17,633,984    $ 22,510,890

               (See accompanying notes to financial statements)


                  TAIWAN UQM ELECTRIC CO., LTD.
                  NOTES TO FINANCIAL STATEMENTS
                      (In Development State)
                    December 31, 1996 and 1995
            (Amounts Expressed in New Taiwan Dollars)


1.   ORGANIZATION AND NATURE OF BUSINESS

     Taiwan UQM Electric Co., Ltd. (the Company) was incorporated on January 17,
     1995, as a company  limited by shares under the Company Law of the Republic
     of China.  The  Company is mainly  engaged in the  manufacture  and sale of
     motors, motor controllers and related components.  However, the Company was
     still in development  stage as of December 31, 1996, and was mainly engaged
     in financial planning, recruitment and training, factory construction, etc.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The  Company's  accounting  policies  conform  with  accounting  principles
     generally accepted in the Republic of China.

   1)     Cash and cash equivalents

     The  statements  of cash flows are  prepared  on the basis of cash and cash
     equivalents.  Cash equivalents are short-term and highly liquid investments
     with original maturities of three months or less.

   2)     Property and equipment

     Property and equipment are stated at cost.  Major  additions,  replacements
     and betterments are capitalized, while maintenance and repairs are expensed
     currently.

     Depreciation  is provided by the  straight-line  method over the  estimated
     useful lives of the  respective  assets.  Property and equipment  which are
     depreciated  to  residual  values and are still in use will be  depreciated
     over their remaining useful lives.  When assets are retired or disposed of,
     their  cost and  related  accumulated  depreciation  are  removed  from the
     respective  accounts.  Any resulting gain or loss is credited or charged to
     income, and the gain after deducting the applicable income tax is


<PAGE>



     transferred to capital surplus in the following year.

   3)     Income tax

     The Company  provides  income tax in accordance with Statement of Financial
     Accounting  standards  22  "Accounting  for Income Tax." The tax effects of
     taxable  temporary  differences  are  recognized  as  deferred  income  tax
     liabilities,   while  those  of  deductible  temporary  differences,   loss
     carryover and tax credits are recognized as deferred income tax assets. The
     valuation allowance is provided on the basis of the estimated realizability
     of deferred income tax assets.


3.   CASH AND CASH EQUIVALENTS
                                                         December 31
                                                   1996             1995

     Cash on hand                            $     26,130    $     8,379
     Checking accounts                             18,647            -
     Demand deposits                           22,466,113      3,625,605
     Time deposits                                  -         14,000,000
     Total                                   $ 22,510,890    $17,633,984


4.   PROPERTY AND EQUIPMENT
                                                        December 31
                                                   1996             1995
     Cost
       Transportation equipment               $   746,306    $      -
       Furniture and fixtures                     234,536           -
       Construction in progress                38,093,247           -
       Prepayment for land                     84,414,291     84,414,412
                                              123,488,380     84,414,412
     Accumulated Depreciation                      82,923           -
       Transportation equipment
       Furniture and fixtures                      25,550           -
                                                  108,473           -
     Net                                     $123,379,907    $84,414,412

     As of December 31, 1996,  the Company has signed  contracts  with Everlight
     Electric  Industrial  Co., Ltd. to purchase  land and factory,  aggregating
     $86,563,756 and $96,000,000, respectively. The Company has paid $84,414,291
     for the land and $36,396,275 for the factory.  To secure the  transactions,
     the Company has  obtained  certain  collateral's  from  Everlight  Electric
     Industrial Co., Ltd. and its affiliate.


5.   RETAINED EARNINGS

     The  Company's  Articles of  Incorporation  provide  that 10% of annual net
     income shall be  appropriated  as legal  reserve,  and 5% of the  remainder
     shall  be  appropriated  as  employees'   bonus,  the  remainder  shall  be
     appropriated at the shareholders' meeting in the following year.

6.   INCOME TAX

     1)   Summary of deferred income tax assets or liabilities

                                                        December 31
                                                    1996           1995



<PAGE>



     a)Total deferred income tax liabilities  $     -          $   -
     b)Total deferred income tax assets        1,472,828        391,844
     c)Valuation allowance for deferred
          income tax assets                         -              -
     d)Tax effects of temporary differences
                                                      December 31, 1996
                                                    Amounts     Tax effects
      Deferred Organization Cost                  $5,891,311     $1,472,828

                                                      December 31, 1995
                                                    Amounts     Tax effects
      Deferred Organization Cost                  $1,567,375     $  391,844


   2)     Classification of deferred income tax assets and liabilities

                                                         December 31
                                                     1996           1995
     Deferred income tax assets - noncurrent      $1,472,828       $391,844
     Valuation allowance                               -              -
                                                  $1,472,828     $  391,844

     Deferred income tax liabilities - noncurrent      -              -
     Net deferred income tax assets - noncurrent  $1,472,828     $  391,844


   3)     Income tax

                                                         December 31
                                                     1996           1995
     Current income tax expense                   $    -         $    -
     Deferred income tax benefit
     Deferred organization cost                    1,080,984        391,884
     Net                                          $1,080,984     $  391,884

7.   RELATED PARTIES TRANSACTIONS

   1)     Related parties and relationship


               Related parties                      Relationship
     Kymco Motor Co., Ltd.                    Major shareholder

     Turn Luckily Technology Co., Ltd.        Major shareholder

     Everlight Electric Industrial Co., Ltd.  Its major shareholder is the
                                              director of the Company

     DJ ATO Components Corp.                  Invested by the Company's
                                              major shareholder


   2)     Significant transactions with related parties

     a) Rental expense and related payable
                                          1996                        1995
                                  Rental                    Rental
                                  expense       Payable     expense    Payable
     Turn Luckily Technology
       Co., Ltd.                  $ 40,000     $    -     $181,500    $85,575
     DJ ATO Components Corp.       257,143          -        -           -


<PAGE>



     Total                        $297,143     $    -     $181,500    $85,575

     b) Property and equipment
                                          1996               Amount Paid as of
                               Transactions  Total amount    December 31, 1996
     Everlight Electric          Purchase
        Industrial Co. Ltd.       of land    $86,563,756        $84,414,291
                                             plus land value
                                             increment tax
     Everlight Electric
        Industrial Co., Ltd.    Purchase of   $96,000,000
                                factory                          $36,396,275

                                          1995                Amount paid as of
        Everlight Electric     Transactions  Total Amount     December 31, 1995
        Industrial Co., Ltd    Purchase of   $87,994,507        $81,114,412
                                   land      Plus land value
                                             increment tax


  (b)   Reports on Form 8-K:

               Report regarding Memorandum of Understanding for the formation of
               a strategic  alliance to import,  distribute and market  electric
               scooters dated June 18, 1997.

               Report regarding  completion of offering of common stock pursuant
               to Regulation S and Regulation D dated March 31, 1997.

  (c)         Exhibits

          3.1  Articles of Incorporation and Bylaws.  Reference is made to
               Exhibit 3.1 of the Company's Registration Statement on Form S-1
               (No. 33-42342), which is incorporated herein by reference.

          3.2  Restated Articles of Incorporation.  Reference is made to
               Exhibit 3.2 of the Company's Quarter Report on Form 10-K for the
               year ended October 31, 1993 (No. 0-9146) which is incorporated
               herein by reference.

          4.1  Specimen Stock Certificate.  Reference is made to Exhibit 3.1 of
               the Company Registration Statement on Form 10, dated
               February 27, 1980 (No. 0-9146) which is incorporated herein by
               reference.

          10.1 Shareholder Agreement by and among Alcan International Limited,
               Ray A. Geddes and Unique Mobility, Inc. dated June 7, 1988.
               Reference is made to Exhibit 10.2 of the Company's Quarterly
               Report on Form 10-Q for the quarter ended April 30, 1988
               (No. 0-9146) which is incorporated herein by reference.

          10.2 Unique Mobility, Inc. Incentive and Non-qualified Stock Option
               Plan (amended and restated effective January 1, 1988). Reference
               is made to Exhibit 10.4 of the Company's Quarterly Report on Form
               10-Q for the quarter ended April 30, 1988 (No. 0-9146).

          10.3 Unique Mobility, Inc. 1992 Stock Option Plan.  Reference is made
               to Exhibit 4.1 to the Company's Registration Statement on Form
               S-8 (No. 33-47454), which is incorporated herein by reference.

          10.4 Unique Mobility, Inc. Employee Stock Purchase Plan.  Reference


<PAGE>



               is made to Exhibit 4.3 to the Company's Registration Statement
               on Form S-8 (No. 33-34612), which is incorporated herein by
               reference.

          10.5 401(k) Savings Plan of Unique Mobility, Inc.  Reference is made
               to Exhibit 4.3 to the Company's Registration Statement on Form
               S-8 (No. 33-34613), which is incorporated herein by reference.

          10.6 Amendment to Shareholder Agreement dated March 25, 1992 between
               Unique Mobility, Inc., Ray A. Geddes and Alcan International
               Limited.  Reference is made to Exhibit 19.7 to the Company's
               Quarterly Report on Form 10-Q for the quarter ended April 30,
               1992 (No. 0-9146) which is incorporated herein by reference.

          10.6 Unique Building Partners, Ltd. Liability Co. Operating Agreement
               dated September 16, 1992.  Reference is made to Exhibit 10.33 of
               the Company's Registration Statement on Form S-2 (No. 33-53376),
               which is incorporated herein by reference.

          10.8 Lease between the Company and Unique Building Partners, Ltd.
               Liability Co. dated September 22, 1992.  Reference is made to
               Exhibit 10.34 of the Company's Registration Statement on Form
               S-2 (No. 33-53376), which is incorporated herein by reference.

          10.9 Amended Warrant Agreements between Unique Mobility, Inc. and
               affiliates of Advent International Corporation and Techno
               Venture U.S.A., Inc.  Reference is made to exhibits 10.1 through
               10.7 to the Company's Quarterly Report on Form 10-Q for the
               quarter ended April 30, 1993, (No. 0-9146) which is incorporated
               herein by reference.

          10.10 Unique Mobility, Inc. Stock Option Plan for Non-Employee
                Directors. Reference is made to Exhibit 10.39 of the Company's
                Quarter Report on Form 10-K (No. 0-9146) for the year ended
                October 31, 1993 which is incorporated herein by reference.

          10.11 Warrant Agreement with Arnhold and S. Bleichroeder, Inc.
                Reference is made to Exhibit 10.41 of the Company's Quarter
                Report on Form 10-K (No. 0-9146) for the year ended
                October 31, 1993 which is incorporated herein by reference.

          10.12 Assignment Agreement with Alcan International Limited.
                Reference is made to Exhibit 10.3 to the Company's Quarterly
                Report on Form 10-Q for the quarter ended April 30, 1994
                (No. 0-9146) which is incorporated herein by reference.

          10.13 Amendment to the 1992 Stock Option Plan of Unique Mobility, Inc.
                Reference is made to Exhibit 10.4 to the Company's Quarterly
                Report on Form 10-Q for the quarter ended April 30, 1994
                (No. 0-9146) which is incorporated herein by reference.

          10.14  Amendment to the 401(k) Savings Plan of Unique Mobility, Inc.
                 dated January 18, 1995.  Reference is made to Exhibit 10.1 in
                 the Company's Quarterly Report on Form 10-Q for the Quarter
                 ended  January 31, 1995 (No. 0-9146) which is incorporated
                 herein by reference.

          10.15 Amendment to the 1992 Stock Option Plan of Unique Mobility, Inc.
                dated December 7, 1994.  Reference is made to Exhibit 10.2 in
                the Company's Quarterly Report on Form 10-Q for the Quarter
                ended  January 31, 1995 (No. 0-9146) which is incorporated


<PAGE>



                herein by reference.

          10.16 Stock Purchase Agreement by and among Unique Mobility, Inc. and
                Invacare Corporat on dated December 7, 1995.  Reference is made
                to exhibit 10.36 in the Company's Annual Report on Form 10-K
                for the fiscal year ended October 31, 1995, (No. 1-10869)which
                is incorporated herein for reference.

          10.17 Amendment to the Stock Purchase Agreement by and among Unique
                Mobility Inc. and Invacare Corporation. Referenced is made to
                exhibit 10.3 in the Company's Quarterly Report on Form 10-Q for
                the quarter ended April 30, 1996, (No. 0-9146) which is
                incorporated herein by reference.

          21*   Subsidiaries of the Company

          23.1  Consent of KPMG Peat Marwick LLP.

          23.2  Consent of Horwath & Co. (Taiwan)

          27*   Financial Data Schedule

- ----------
* Filed with original filing of Form 10-K.

   (d) Financial Statement Schedules

                None.


                            SIGNATURES

Pursuant to the requirements of Section 13 of the Securities and Exchange Act of
1934, Unique Mobility, Inc. has duly caused this Annual Report on Form 10-K/A to
be signed on its  behalf  by the  undersigned,  thereunto  duly  authorized,  in
Golden, Colorado on the 6th day of October, 1997.


                       UNIQUE MOBILITY, INC.,
                       a Colorado corporation

                       By: /s/ Donald A. French
                           Donald A. French, Treasurer