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

                                     FORM 10-K
                 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                      OF THE SECURITIES EXCHANGE ACT OF 1934
 
                 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
                     15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                         For the Year Ended March 31, 1998

                          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:
                           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  (13,653,258  shares)  computed by reference to the closing  price of
such stock on the American Stock Exchange, as of June 25, 1998:

                                    $95,572,806

The number of shares  outstanding  (including shares held by affiliates) of each
of the registrant's classes of common stock, as of June 25, 1998:

                             15,880,709 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
                 September 14, 1998 Annual Meeting of Shareholders
<PAGE>

ITEM 1.     BUSINESS

This  Report may  contain  forward-looking  statements  that  involve  risks and
uncertainties.  These statements may differ materially from actual future events
or results. Readers are referred to the Risk Factors section of the Registration
Statement  on Form S-3 (File No.  333-52861)  filed by the Company with the SEC,
which  identifies  important  risk factors  that could cause  actual  results to
differ from those  contained in the  forward-looking  statements,  including the
Company's  history  of  operating  losses,  its  ability  to  obtain  additional
financing,  competition,  the Company's ability to integrate acquired businesses
into  existing  operations,  the  Company's  ability to protect its  proprietary
information, and the Company's limited experience in manufacturing processes and
procedures  and marketing and  distribution.  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.

General

Unique Mobility,  Inc. ("Unique" or the "Company") was incorporated in 1967. The
Company's  common stock trades on the  American,  Boston,  Chicago,  Pacific and
Berlin stock exchanges under the symbol "UQM".

Historically,  the  majority  of the  Company's  revenue has been  derived  from
contract research and development  services performed for strategic partners and
clients.  These sponsored research and development  activities have supplemented
internally   funded  product   development   programs  and  have  accounted  for
approximately  sixty percent of the Company's $34 million cumulative  investment
in its proprietary  technology portfolio.  In addition,  the Company has derived
revenue from the sale of prototype  products to customers for evaluation and the
limited  production and sale of highly energy  efficient  propulsion  systems to
customers who compete in solar and hybrid electric vehicle racing and other such
competitions throughout the world.

The Company's  objective is to leverage its technology base and name recognition
to develop,  manufacture and market products in a number of high potential niche
markets in the near  term,  and  automotive  mass  markets  in the longer  term.
Fundamental  to this  strategy  is the  creation  of large  scale  manufacturing
capability for products developed by the Company.  In furtherance  thereof,  the
Company formed a wholly owned subsidiary,  Unique Power Products,  Inc. ("UPP"),
in January 1997, to manufacture  brushless  permanent magnet motors for Invacare
Corporation  pursuant to a two-year  renewable  supply  arrangement.  In January
1998,  the  Company  completed  the  acquisition  of  Aerocom  Industries,  Inc.
("Aerocom"),   a  manufacturer  of  precision  gears  and  gear  assemblies  for
automotive,  industrial and aerospace  application.  Following the  acquisition,
Aerocom  constructed  a 25,000  square foot  manufacturing  plant in  Frederick,
Colorado,  to house the  manufacturing  operations  of both UPP and Aerocom.  In
April 1998,  the Company  completed the  acquisition  of Franklin  Manufacturing
Company  ("Franklin"),  a St.  Charles,  Missouri-based  manufacturer of printed
circuit boards, wire harnesses and electronic boxes for the automotive, medical,
telecommunications and industrial markets.
<PAGE>
In order to access markets in Taiwan and in other Asian  countries,  the Company
formed a joint  venture  with  Kwang  Yang Motor  Co.,  Ltd.,  Taiwan's  largest
producer of motor scooters and Turn-Luckily Technology Co., Ltd., a Taiwan-based
manufacturer of automotive components. The joint venture corporation, Taiwan UQM
Electric  Co.  Ltd.,  is  licensed  to  manufacture  the  Company's  motors  and
controllers  exclusively  in Taiwan and  non-exclusively  throughout  Asia.  The
Company owns a 38.25 percent  interest in Taiwan UQM. Taiwan UQM has constructed
a 75,000 square foot engineering and manufacturing facility in Tao-Yuan, Taiwan,
and is currently launching production of starter motors and alternators pursuant
to a supply  agreement  with KYMCO,  although  KYMCO has not yet accepted any of
Taiwan UQM's starter motors or alternators.  KYMCO has indicated their intent to
use Taiwan UQM as their sole supplier of electric vehicle propulsion systems for
KYMCO electric scooters.

The Company believes that the manufacturing infrastructure and capacity recently
brought on line, the continuation of its acquisition  strategy,  cross marketing
activities  amongst  operating  companies  and  the  continued   development  of
strategic   alliances  with  leading   companies   worldwide  will  provide  the
opportunity  for the Company to rapidly  expand its operations and product lines
and access new markets.

Technology

The Company's technology base includes a number of proprietary  technologies and
patents relating to brushless permanent magnet motors, generators and electronic
controls,  together with software code and computer area network design utilized
to manage individual  components and the flow of energy between  components in a
system.

Attributes  of the  Company's  permanent  magnet motor  technology  include high
operating  efficiencies  (90%),  packageability  (small  and  lightweight)  and
two-way   operation   as  either  a  motor  or   generator.   High  pole   count
configurations,  together with a relatively large air-gap  dimension,  creates a
higher  torque,   lower  speed  motor  than  possible  with  more   conventional
architectures.  Typically,  the Company's motors feature high copper utilization
(which minimizes energy loss);  hollow  construction (for the interior packaging
of other  components  such as gears  and  electromechanical  brakes);  good heat
rejection; lower iron content; and minimal mechanical losses.

Attributes  of  the  Company's  microprocessor-based  controllers  include  four
quadrant control  (forward/reverse  and power in/power out),  reduced  switching
losses (which minimizes energy loss) and intelligent control. Patented circuitry
and software  (Phase  Advance  Control)  dynamically  adjusts the phase angle of
current into the motor  windings to increase  base speed by a factor of three to
four times.

The  Company's  technology  portfolio  represents  a  cumulative  investment  of
approximately  $34  million  in  the  development  of  systems  and  components,
manufacturing processes and software. Approximately 60 percent of the investment
was funded by strategic  partners and customers  under  research  grants,  "cost
share"    contracts   or    sponsored    application    engineering    programs.
Internally-funded research and development costs are expensed in the period they
are incurred. Income from sponsored development is recorded as contract services
revenue  and the  associated  development  costs are  shown as cost of  contract
services in the Company's financial statements.  Internally-funded  research and
development  expenditures  amounted to $902,407  for the fiscal year ended March
31, 1998,  $513,544 for the five-month  transition  period ended March 31, 1997,
and  $1,698,352  and  $1,298,311 for the fiscal years ended October 31, 1996 and
1995, respectively.

In recent  years,  the Company has focused the major portion of its research and
development  activities on the development of commercial  products as opposed to
basic  research in the field.  Management  believes  that the  Company's  future
growth  is  dependent,  in  part,  on the  continued  advancement  of  its  core
technology,  the extension of its technological  capabilities and its ability to
develop  additional  products.  Accordingly,  the Company expects to continue to
invest in research and development at approximately  the same levels as in prior
years .
<PAGE>
Business Segments

The Company,  subsequent  to the  acquisition  of Aerocom  Industries,  Inc. and
Franklin  Manufacturing  Company,  will  operate  in  three  business  segments;
technology,   mechanical  products  and  electronic   products.   The  principal
operations,  products and services and markets  served by each business  segment
are described below.


                     Technology Business Segment

The technology  segment  encompasses the Company's  technology-based  operations
including core research to advance its technology,  application  engineering and
product development and job shop production of prototype components.

Historically,  the technology  business segment has accounted for  substantially
all  of  the  Company's  revenue.  Segment  revenue  is  generated  through  the
performance  of  contract  research  and  development  services  and the sale of
products which are constructed in small batch builds or are one-off  engineering
prototypes.

The  principle  focus of the  technology  segment  has been the  development  of
vehicle propulsion systems ranging in power from 1 horsepower to 135 horsepower.
Vehicle  propulsion  systems include low voltage components which have operating
voltages  from 12v to 48v and  high  voltage  components  which  have  operating
voltage  from 48v to 600v.  Low  voltage  propulsion  systems  are used in small
vehicles such as bicycles, wheelchairs,  scooters, golf carts, warehouse utility
vehicles and the like. High voltage  propulsion systems are used in electric and
hybrid electric neighborhood vehicles, automobiles, trucks and buses.

The technology segment is also responsible for marketing contract services,  and
for establishing strategic relationships with end user manufacturers. Typically,
these  relationships  are with industry  leaders who provide partial funding for
specific product development  programs. By sharing in the development costs, the
Company generally retains rights to the resultant intellectual property.

The Company has completed a strategic  alliance  with KYMCO which  provided $1.4
million in product  development  funding for an electric  propulsion  system for
motor scooters and is a joint venture partner in Taiwan UQM.

Invacare  Corporation funded, in part, the development of an electric wheelchair
motor  through a private  purchase of $500,000 of the  Company's  common  stock.
Subsequently,  the Company entered into a supply agreement with Invacare for the
manufacture of wheelchair motors with initial deliveries expected to commence in
fiscal 1999. Mr. J. B. Richey, Senior Vice President of Invacare,  serves on the
Company's board.

The Company has a strategic  alliance with EV Global Motors Company  ("EVG") for
the  development  and  manufacture  of  electric  propulsion  systems  for light
electric vehicles,  such as bicycles,  scooters,  autorickshaws and neighborhood
electric  vehicles.  As part of this  alliance,  EVG acquired  approximately  11
percent of the Company's common stock, and the Company acquired  approximately a
one percent  equity  position  in EVG. In  addition,  EVG's  Chairman  and Chief
Executive Officer,  Lee Iacocca,  serves on the Company's board of directors and
Ray Geddes, the Company's Chairman and Chief Executive Officer,  serves on EVG's
board of directors.
<PAGE>
The Company  expects to  continue to pursue  strategic  alliances  with  leading
manufacturers and partners worldwide to accelerate the  commercialization of its
technology, expand product lines and reach new markets.

                     Mechanical Products Segment

The  mechanical  products  segment  encompasses  the  manufacture  and  sale  of
permanent magnet motors, precision gears, gear assemblies and related mechanical
products. This segment includes the operations of UPP, a wholly owned subsidiary
of the Company formed to  manufacture  motors and Aerocom,  a recently  acquired
manufacturer of gears.

UPP was  organized  in  fiscal  1997 and is  currently  launching  manufacturing
operations  in a newly  constructed  25,000  square foot  facility in Frederick,
Colorado  which it shares with  Aerocom.  UPP is expected to begin  shipments of
wheelchair  motors to Invacare  during  fiscal 1999  pursuant to a renewable two
year  supply  agreement.  UPP  expects  to  invest  approximately  $750,000  for
manufacturing  equipment and tooling. At March 31, 1998,  approximately $152,165
of this amount had been expended, with the balance to be funded during the first
half of fiscal 1999.  Unique funded this subsidiary upon its formation with $1.5
million in cash. All expenditures  for the launch of  manufacturing  operations,
including capital expenditures,  are expected to be funded from cash balances on
hand.

In January 1998,  the Company  acquired all of the  outstanding  common stock of
Aerocom for  $3,377,020.  The  purchase  price  consisted  of a cash  payment of
$337,702 and the issuance of 371,555  shares of the Company's  common stock.  In
addition,  the Company  assumed the then existing  liabilities of Aerocom in the
amount of  $1,308,788.  The  acquisition  was  accounted  for under the purchase
method of  accounting.  The excess of the purchase  price over the fair value of
Aerocom's net assets amounted to $1,297,087.

Historically,  Aerocom's core business has been the precision  grinding of gears
for customers serving the industrial and aerospace markets. These gears are used
in transmissions for large off-highway  vehicles such as construction  equipment
and agricultural  machinery as well as in actuators for satellites and the space
shuttle  program.  This  subsidiary  is currently  expanding  its  manufacturing
capability  to  include  the  heat  treatment  of  manufactured  parts  and  the
manufacture of complete gear shaft  assemblies.  Coincident with this expansion,
the Company  constructed a 25,000 square foot  manufacturing and office facility
in  Frederick,  Colorado  which will be  utilized  by the  Company's  mechanical
products  subsidiaries.  The cost of the building was approximately $1.2 million
of which  approximately  $.9 million is expected to be funded through  long-term
mortgage debt. In addition,  the Company expects to acquire  approximately  $1.5
million  in  gear   manufacturing   equipment.   The  Company  funded  the  gear
manufacturing  subsidiary  with an  additional  $.75  million in cash during the
fourth quarter of Fiscal 1998 to be used for these expansion activities and this
subsidiary completed loan agreements with a commercial bank which provides for a
$.75  million  revolving  line of credit  and a $2 million  equipment  term loan
commitment.
<PAGE>

                     Electronic Products Segment

The electronic  products segment encompasses the manufacture and sale of surface
mount and thru-hole printed circuit boards, electro-mechanical assemblies, cable
harness  assemblies  and  complete  electronic  boxes  and the  distribution  of
electronic  components.  This segment  includes the  operations  of Franklin,  a
wholly  owned  subsidiary  of the Company,  which was acquired  during the first
quarter of fiscal 1999.

This segment manufactures wire harness assemblies primarily for customers in the
automotive,  and  industrial  markets  which  accounts for  approximately  seven
percent of its annual sales volume.  Printed  circuit board  assemblies  and the
manufacture  of  complete  electronic  boxes for  customers  in the  automotive,
medical, telecommunications and industrial markets accounts for approximately 78
percent  of its  annual  sales  volume.  Wholesale  distribution  of  electronic
components accounts for approximately 15 percent of annual sales volume.

The Company  acquired all of the  outstanding  common stock of Franklin in April
1998 for  $6,247,316  which  consisted of a cash payment of  $4,000,000  and the
issuance of 286,282  shares of the  Company's  common  stock.  In addition,  the
Company  assumed  the then  existing  liabilities  of  Franklin and debt on a
related asset in the amount of $3,148,146.  The  acquisition  was  accounted
for under the purchase  method of accounting.  The excess of the purchase
price over the fair value of Franklin's net assets amounted to $5,296,916.

Markets for the Company's Products and Services

The Technology  Business Segment will continue to pursue contract  opportunities
as sources of funding for technology development as well as product development.
It is expected that the U.S.  Departments of Defense,  Energy and Transportation
will continue to solicit research and development  proposals for advanced motor,
generator  and  controller   systems  including  electric  and  hybrid  electric
propulsion  systems.  These  solicitations  are expected to include  potentially
sizable  awards as part of the  Partnership  for a New  Generation  of  Vehicles
(PNGV)  program  as well  as  smaller  awards  as  part  of the  Small  Business
Innovative  Research  (SBIR)  program.  The  Company  plans to  propose on those
opportunities  that match its  technology  and  product  development  goals.  In
addition to government  contracts,  the Company plans to pursue  contracts  with
original equipment  manufacturers (OEMs) and their 1st and 2nd tier suppliers to
supplement its product development expenses.

The  Company's  technology  and  products  have  been  developed  primarily  for
application  in electric and hybrid  electric  vehicles and its focus will be on
entering markets that have a high probability of near term production (providing
products  that can be produced in its UPP,  Aerocom and  Franklin  manufacturing
facilities).  Target electric and hybrid electric  vehicle markets include those
that are emerging such as bicycles,  scooters,  neighborhood vehicles,  lawn and
grounds care equipment, automobiles, buses, trucks and off-highway agricultural,
construction and military equipment.  Existing markets include wheelchairs, golf
carts,  warehouse  vehicles,  floor cleaners and sweepers,  fork lift trucks and
mining  equipment.   Target  products  that  will  be  pursued  include  on  and
off-highway, low and high voltage electric and hybrid electric traction systems,
generators, DC-DC converters,  battery chargers, power steering pump motors, air
conditioning  compressor  motors,  fuel cell air handling  compressor motors and
cooling fan motors.
<PAGE>
In addition to the electric and hybrid  electric  vehicle  markets,  the Company
believes that its  technology has potential  application  in industrial  markets
such as pumps, compressors,  machine tool spindle drives, hoists, conveyors, and
stationary generator sets to name a few. These markets will be initially pursued
by leveraging off of products developed for vehicle application.

Through the  acquisition  of Aerocom,  the Company has entered the gear  market.
This market in the U.S.  alone,  is forecasted by The Freedonia  Group,  Inc. to
grow to $25  billion  by the year  2000,  at a rate of  approximately  6%.  This
subsidiary has focused on the off-highway equipment and aerospace market sectors
which account for $2.5 billion and $1.3 billion respectively, of that total. The
motor  vehicle  sector is forecasted  at $17.5  billion.  As a small player in a
large  market,  the Company has  significant  upside  potential.  As a flexible,
responsive,  low cost supplier,  the Company,  through this subsidiary,  is well
positioned to take advantage of the continuing  trend of OEMs to outsource their
gear production requirements. Specific to electric propulsion, this subsidiary's
expertise  lies in  precision  grinding  which is  required in quiet and durable
gearboxes.  For  electric  drives,  quiet is the name of the game and Aerocom is
well  positioned  to provide  value-add to the  Company's  products  sold to the
electric and hybrid electric vehicle growth market.

Franklin is an  established  player in the  electronics  contract  manufacturing
market. This market in the U.S. alone is forecasted,  by Frost and Sullivan,  to
grow to nearly $50 billion at a rate of approximately  26%. This growth is being
fueled by the continuing trend by OEMs to outsource their  electronic  component
manufacturing.  As is the case with the Company's gear manufacturing subsidiary,
Franklin is a small player in a very large market.  As a low cost, high quality,
responsive  supplier,  the Company  expects to  continue to grow its  electronic
products  business.  To gain a greater  value-add,  priority  will be focused on
producing  printed  circuit  boards  and boxes  that  represent  content  in the
Company's  other  products  sold into the  electric and hybrid  electric  growth
market.

Expanding the  Company's  products  beyond  motors,  generators  and controls to
include  gears  and  electronic  components  opens up a much  greater  marketing
opportunity. The Company's traditional customers when combined with those of the
acquired  Aerocom and Franklin  entities  provide the  opportunity to cross sell
product.  Many  customers  want to buy  integrated  motor,  gear and  electronic
controls   systems  and  the  Company  now  has  the   components  and  credible
manufacturing resources in place to meet these requirements

Competition

All of the markets  that the Company  competes  in are highly  competitive.  The
markets served by the technology segment are additionally characterized by rapid
changes due to technological  advances that can render existing technologies and
products obsolete.

The  technology  segment  has  developed  advanced  electric  drive  systems and
components  which it hopes to market to vehicle OEM's  throughout  the world for
use in electric and hybrid electric  vehicles.  At present,  the market for such
systems is not significant, although various legislative mandates and incentives
are expected to accelerate the development of a market for vehicles propelled by
such systems.  There are numerous companies  developing products that do or soon
will compete with the Company's drive systems.  Some of these companies  possess
significantly greater financial, personnel and other resources than the Company,
including established supply arrangements and volume manufacturing operations.
<PAGE>
The Company  believes its principal  competitors  include  Hitachi,  Matsushita,
Siemens, Delphi, and Visteon.

The mechanical products segment competes primarily in the automotive,  aerospace
and  medical  products  industries.   Each  of  these  industries  is  extremely
competitive. The Company will face substantial competition on a continuing basis
from numerous  competitors,  many of whom possess  longer  operating  histories,
significantly   greater  financial   resources,   marketing,   distribution  and
manufacturing capability. The Company believes its principal competitors include
Advanced DC, Emerson Electric, General Electric, Rockwell International, Baldor,
ABB, Fairfield Manufacturing, Precision Gear and Fairlane Gear.

The  electronic   products  segment   competes   primarily  in  the  automotive,
telecommunications,  medical and  industrial  markets.  Each of these markets is
extremely  competitive.  The  Company  will face  substantial  competition  on a
continuing  basis  from  numerous  competitors,  many  of  whom  possess  longer
operating  histories,  significantly  greater  financial  resources,  marketing,
distribution and  manufacturing  capability.  The Company believes its principal
competitors  include  Jabil  Circuit,  Plexus,  EFTC  Corporation,   Flextronics
International and Baldwin.

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,  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  was  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 been issued in Australia,  Brazil, Canada,
India, Israel,  South Korea,  Mexico, New Zealand,  South Africa and Taiwan. Six
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  patent
application  (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  South  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 EPO which designates the European group of countries.
<PAGE>
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; the European application has been allowed.

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 resulted in the issuance
of U.S. Patent  5,677,605 dated October 14, 1997. In June 1995 a counterpart PCT
International  Patent  Application  was filed.  Applications  have been filed in
Canada, China, Finland, Hong Kong, Japan, Korea, Mexico, Norway and Europe.

In December 1997, the Company filed a new patent  application titled "Motor with
Internal  Brake"  in  connection  with  its  current   development  of  electric
wheelchair drives. This application remains pending.

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  registered the letters UQM and a stylized  version thereof as its
new  trademark.  Counterpart  applications  have  been  filed  in  26  countries
throughout  the world and 24 of those  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  identifier 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  "POWER  PHASE" 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 in the European  community,  which has issued a favorable  search
report.

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
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.
<PAGE>
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.

Backlog

The  Company's   technology  segment  had  unperformed  service  contracts  from
customers which will provide payments to the Company upon completion aggregating
approximately   $1,315,310   and   $2,875,000  at  May  31,  1998  and  1997,
respectively.  The  technology  segment also had an order  backlog for prototype
motors and controls of approximately $516,512 and $158,000 at May 31, 1998 and
1997, respectively. All such contracts are subject to amendment, modification or
cancellation.  The Company expects to perform all unperformed  service contracts
over the next twelve months.

The Company's  mechanical products segment had an order backlog of approximately
$16.5 million at May 31, 1998,  and expects to ship  approximately  $8.5 million
against this backlog over the next twelve months.

The Company's  electronic products segment had an order backlog of approximately
$5.5 million at May 31, 1998. The Company  expects to ship all backlog  products
within the next twelve months.

Customers and Suppliers

The technology segment had six significant customers,  KIA Motors Corp., Deere &
Co.,  Metropolitan Transit Authority,  Koyo Seiko Co., Ltd., Pan Asia Technology
Co., Ltd., and the Southern  Coalition of Advance Technology which accounted for
80 percent of contract  services  revenue  during the year ended March 31, 1998.
For the five month transition period ended March 31, 1997 the technology segment
derived $452,478 or 65 percent of contract  services revenue from General Motors
Corporation, KIA Motors Corp. and Pan Asia Technology, Co., Ltd.

The  mechanical  products  segment  had  three  significant   customers,   Eaton
Corporation,  Funk Manufacturing,  and Sunstrand Corporation which accounted for
approximately  $1,354,000  or 67  percent of segment  product  sales during the
year ended March 31, 1998.  During the five month  transition  period ended
March 31, 1997 the mechanical  products  segment derived  $386,250 or 67
percent of product sales from Transmisiones TSP SA de CV, Funk Manufacturing
and Sundstrand Corporation.

The electronic products segment had three significant  customers,  Siemens, L.R.
Nelson and Montgomery Elevator,  which accounted for $6,304,320 or 60 percent of
revenue for its most recently  completed fiscal year prior to its acquisition by
the Company which ended September 30, 1997.

Principal raw materials and  components  purchased by the Company  include iron,
steel, electronic components,  magnet material and copper wire. All of the above
items are available from several  suppliers and the Company  generally relies on
more than one supplier for each item.
<PAGE>
U.S. Government Contracts

For the year ended  March 31,  1998,  $846,740  or 30  percent of the  Company's
contract  services  revenue was derived from contracts with agencies of the U.S.
Government and from subcontracts with U.S. Government prime contractors.

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 May 31, 1998,  the Company had 146  full-time  employees.  The Company has
entered into  employment  contracts with its four executive  officers,  three of
which expire in December 1998 and one which expires in April,  2001. 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

The Company owns or leases its offices and manufacturing facilities and believes
these  facilities  to be well  maintained,  adequately  insured and suitable for
their present and intended uses. Information concerning leased facilities of the
Company as of May 31, 1998, is set forth in the table below:
<PAGE>


                                 Ownership or
                         Square Expiration DateRenewal
Location                  Feet     of Lease     Option        Use

Golden, Colorado         40,000 September 2002    Yes    manufacturing,
                                                         laboratories
                                                         and offices

Boulder, Colorado        12,000 Month-to-Month    No     manufacturing
                                                         and offices

Frederick, Colorado      25,000 Own               -      manufacturing
                                                         and offices

St. Charles, Missouri    31,000 March 2007        No     manufacturing,
                                                         warehouse
                                                         and offices

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 quarter ended March 31, 1998.

ITEM 5.    MARKET PRICE OF COMMON STOCK

The Company's common stock trades on the American,  Boston,  Pacific,
Chicago  and  Berlin  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:

                                                              
1998                                         High             Low

  Fourth Quarter ....................   $   8.88       $     7.44
  Third Quarter .....................   $   9.44       $     6.94
  Second Quarter ....................   $   9.50       $     5.81
  First Quarter .....................   $   7.2        $     3.06

1997
  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

On June 25, 1998 the closing  price of the  Company's  common  stock,
as reported on the American Stock  Exchange,  was $7.00 per share and
there were 912 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.
<PAGE>

ITEM 6.    SELECTED FINANCIAL DATA

                        Unique Mobility, Inc.
                Consolidated Selected Financial Data

<TABLE>
<CAPTION>
                      Year          Five Months
                     Ended            Ended
                    March 31,         March 31,                          Year Ended October 31,
                      1998             1997             1996           1995         1994           1993
<S>               <C>                <C>           <C>             <C>         <C>            <C>
  Contract
  Services
  Revenue .....   $  2,790,496         700,132       1,436,484       4,031,951   1,643,203      1,461,568

  Product
  Sales .......   $  1,274,236         152,016         611,213         701,700     708,917        695,300

  Operating
  Loss ........   $ (3,007,599)     (1,120,900)     (2,744,606)     (1,134,338) (3,367,873)    (2,446,574)

  Net Loss ....   $ (3,266,360)     (1,201,085)     (2,904,743)     (1,330,433) (3,395,356)    (2,473,804)

  Net Loss
  Per Common
  Share .......   $       (.23)           (.12)           (.26)           (.13)      (.35)           (.28)

  Total
  Assets ......   $ 19,585,551      12,370,699       8,712,649       7,626,178   5,903,551      7,791,826

  Long-term
  Obligations .   $  1,029,924         726,218         744,389         807,003     886,996        921,758

  Cash Divi-
  dend Declared
  Per Common
  Share .......   $        -0-             -0-             -0-             -0-          -0-            -0-

 </TABLE>
ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS

The Company  changed its fiscal year end from October 31 to March 31  commencing
with  periods  beginning  after  October 31,  1996.  This  change  resulted 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,  1998 and  March  31,  1997 and  results  of
operations,  changes in  stockholders'  equity and changes in cash flows for the
year ended March 31, 1998, the five-month transition period ended March 31, 1997
("Fiscal  1997")  and  the  fiscal  years  ended  October  31,  1996  and  1995,
respectively.

Financial Condition

The Company's  financial  condition  strengthened  during Fiscal 1998 due to the
sale of 626,875 shares of common stock pursuant to offerings under  Regulation D
of the Securities Act of 1933, the issuance of common stock upon the exercise of
outstanding  common  stock  warrants  and options,  the  acquisition  of Aerocom
Industries, Inc. and an investment in EV Global Motors Company. Cash proceeds to
the Company from the Regulation D offering,  net of offering costs,  amounted to
$4,673,797 and cash proceeds  received upon the exercise of  outstanding  common
stock warrants and options amounted to $3,024,709.  Primarily as a result,  cash
and cash  equivalents  rose to $7,005,533  at March 31, 1998 from  $5,713,557 at
March 31, 1997 and  shareholders'  equity rose to $16,731,132  from  $8,574,799.
Subsequent to year-end,  the Company used $4,000,000 in cash as part of the
consideration to acquire Franklin Manufacturing  Company.  Working  capital
(the  excess of current  assets  over current  liabilities)  increased to
$7,566,627 at March 31, 1998 from $4,174,184 at March 31, 1997.
<PAGE>
Accounts  receivable rose $716,152 to $1,105,466 at March 31, 1998 from $389,314
at March 31, 1997.  The increase is  attributable  to the  consolidation  of the
trade accounts  receivable of the two new  subsidiaries,  Aerocom and UPP, which
accounted for $371,815 and $304,177 of the increase, respectively.

Costs and estimated  earnings on  uncompleted  contracts  increased  $262,853 to
$454,738 at March 31, 1998 from the fiscal 1997 year end level of $191,885.  The
increase  was due to  increased  levels of  contract  services  in  process  and
milestone  billing  arrangements  on  such  contracts.   Estimated  earnings  on
contracts  in process  rose to $515,782  at March 31, 1998 on costs  incurred on
contracts in process of $1,724,552  compared to estimated  earnings on contracts
in process of $490,407 on costs  incurred on contracts in process of  $3,158,704
at March 31,  1997.  The  increase  reflects  improved  margins on  contracts in
process and is attributable to greater labor content in contracts in process and
a reduction in anticipated cost overruns.

Raw  materials  and  finished  products  inventories  declined by  $206,778  and
$55,061,  respectively, to $76,377 and $17,715,  respectively, at March 31, 1998
compared to $283,155 and $72,776, respectively, at the beginning of Fiscal 1998.
The decrease is primarily  attributable  to an inventory  write-down  associated
with the Company's  decision to terminate its past practice of batch  production
of  specialty  motors  and  controllers  and the  associated  stocking  of these
specialty  components in inventory.  Coincident with this decision,  the Company
intends to cease the  marketing of these  products to the solar  racing  market,
which has historically accounted for approximately $300,000 in specialty product
sales,  although the Company intends to continue to produce these components for
customers on a custom build basis.  Likewise,  the Company recorded an inventory
write-down on its entire line of prototype  motors,  controllers  and associated
components.  The Company intends to devote  substantially  all of its marketing,
sales and engineering  personnel to securing and executing development programs,
both  customer  and  internally  funded,  which  have a  higher  probability  of
resulting in products  that can be  manufactured  in volume and sold in existing
commercial  markets.  Work in process  inventories  rose  $90,365 to $159,825 at
March 31, 1998 due to production of twenty SR286 motors and associated  controls
pursuant to existing customer orders.

In January,  1998 the Company  acquired all of the  outstanding  common stock of
Aerocom for  $3,377,020.  The  purchase  price  consisted  of a cash  payment of
$337,702 and the issuance of 371,555 shares of the Company's  common stock.  The
acquisition  was accounted for under the purchase  method of  accounting.  Under
this method,  the excess of the purchase  price over the net assets  acquired is
first  allocated to increase the recorded value of the tangible  assets acquired
to their fair market  value,  with any excess then  recorded  as  goodwill.  The
excess of the purchase price over the net assets acquired of Aerocom resulted in
an increase in the  recorded  value of property  and  equipment in the amount of
$1,788,598 with the excess of $1,297,087 being recorded as goodwill.

The Company  invested  $703,562 for the  acquisition  of property and  equipment
during  Fiscal  1998  compared  to  $118,608  for the  five-month  period  ended
March 31, 1997 and $182,011 and $440,079 in Fiscal 1996 and 1995,  respectively.
The increase in capital  expenditures is primarily  attributable to the purchase
of  manufacturing  equipment by Aerocom  coincident  with the expansion of their
manufacturing capabilities.
<PAGE>
Investment  in Taiwan joint  venture  declined to $2,044,393 at Fiscal 1998 year
end from  $2,677,730  at the  beginning  of the fiscal  year.  The  decrease  is
attributable  to the  Company's  proportionate  share of operating  losses which
amounted  to  $246,648  during  Fiscal  1998 and  foreign  currency  translation
adjustments which amounted to $386,689.

Patent and trademark  costs,  net of accumulated  amortization,  was $575,985 at
March 31, 1998 an increase of $73,688  from the Fiscal 1997 year end level.  The
increase is primarily attributable to increased legal fees, application fees and
maintenance  fees which  amounted to  $110,411  during  Fiscal 1998  compared to
$47,865 for the  five-month  transition  period ended March 31, 1997 and $92,390
and $64,766 for fiscal 1996 and 1995,  respectively.  Prior to June 1997,  Alcan
Aluminium Limited paid one-half of the Company's  qualifying patent  prosecution
costs.  Coincident  with  Alcan's  sale of its equity  stake in the Company this
reimbursement  provision  expired,  contributing,  in part,  to the  increase in
patent and trademark costs.

Accounts  payable rose to $389,791 at March 31, 1998 from $169,403 at the end of
Fiscal 1997. The increase is primarily  attributable to the consolidation of the
trade accounts payable of Aerocom which accounted for $147,197 of the increase.

Other  current  liabilities  increased to $876,357 at Fiscal 1998 year end, from
$459,223 at March 31,  1997.  The  increase  is  primarily  attributable  to the
consolidation  of the  other  current  liabilities  of  Aerocom  and  UPP  which
accounted for $113,709 and $467,871 of the increase. The principal components of
the increase were accrued machinery and equipment  purchases which rose $402,834
and accrued material purchases which rose $82,357.

Billings  in excess of costs and  estimated  earnings on  uncompleted  contracts
declined  $659,357 to $450 at March 31, 1998 from $659,807 at March 31, 1997 due
to the  completion  of  work  on a  large  program  where  the  customer  made a
substantial prepayment.

Long-term  debt rose $303,706  during Fiscal 1998 due to the  assumption of debt
upon the  acquisition  of Aerocom.  Long-term  debt consists of term debt on the
manufacturing  equipment of its gear manufacturing  operations and mortgage debt
on the Company's facility in Golden, Colorado.

Common  stock  and  additional   paid-in  capital   increased  to  $153,946  and
$38,852,446  at  March  31,  1998,   respectively,   compared  to  $130,430  and
$27,094,170  at March 31,  1997.  The  increases  were due to the sale of common
stock to  investors  in the amount of  $4,673,797;  proceeds  received  upon the
exercise of warrants  of  $1,932,375;  sales of common  stock to  employees  and
consultant's  through the Company's benefit plans and the exercise of options of
$1,163,892;  the  issuance  of common  stock for the  acquisition  of Aerocom of
$3,039,318;  and the  exchange  of common  stock for the common  stock of EVG of
$1,000,000.

Results of Operations

Operations  for the  year  ended  March  31,  1998,  resulted  in a net  loss of
$3,266,360 or $0.23 per share  compared to a net loss of $1,201,085 or $0.12 per
share for the five-month  transition  period ended March 31, 1997, a net loss of
$2,904,743 or $0.26 per share for the year ended October 31, 1996 and a net loss
of $1,330,433 or $0.13 per share for the year ended October 31, 1995.
<PAGE>
Revenue  derived  from  contract  services  was  $2,790,496  during  fiscal 1998
compared to $700,132 for the five months ended March 31, 1997 and $1,436,484 and
$4,031,951  for the fiscal years ended October 31, 1996 and 1995,  respectively.
The increase in contract  services  revenue over the annualized  Fiscal 1997 and
the  Fiscal  1996  levels is  attributable  to  increased  levels  of  sponsored
development  activities  in 1998 which were  driven by  several  contracts  with
governmental  agencies  for the  development  of  higher  power  systems  and an
electric vehicle  conversion  program for an  international  automotive OEM. The
decline in fiscal 1998 revenue compared to fiscal 1995 is due to the performance
of a multi-million  dollar research program in fiscal 1995 for the US Department
of Energy and Ford Motor Company.

Product sales during Fiscal 1998 rose to $1,274,236 compared to $152,016 for the
five month transition  period last year and $611,213 and $701,700 in Fiscal 1996
and 1995,  respectively.  The  increase  is  primarily  due to product  sales by
Aerocom subsequent to its acquisition which amounted to $531,787.  Product sales
by the technology  segment remained at approximately the same levels as in prior
years.

Gross profit  margins for fiscal 1998  increased  to 11.0 percent  compared to a
margin  of 10.3  percent  for the  five-month  transition  period  last year and
declined  compared to margins of 15.1  percent and 28.7  percent for fiscal 1996
and 1995,  respectively.  Gross profit on contract  services was 5.6 percent for
the year  ended  March 31,  1998  compared  to 9.8  percent  for the  five-month
transition  period ended March 31, 1997,  18.6 percent for the fiscal year ended
October 31, 1996 and 31.0  percent for the fiscal year ended  October 31,  1995.
The decline in gross profit  margins  during  fiscal 1998  compared to all prior
periods is attributable to increased  material content in programs  performed in
fiscal 1998 and cost overruns on various  development  programs which negatively
impacted margins.  Gross profit on product sales in Fiscal 1998 was 23.1 percent
compared to a margin of 12.9 percent for the five-month  transition period ended
March 31, 1997,  6.7 percent for the fiscal year ended October 31, 1996 and 15.2
percent for the fiscal year ended  October 31, 1995.  The increase in margins on
product  sales in Fiscal 1998 is  primarily  attributable  to higher  margins on
product sales of gears which averaged 32.5 percent  during the period  following
the acquisition of Aerocom.

Research  and  development  expenditures  in fiscal  1998  declined  to $902,407
compared to the annualized rate for the five month transition period ended March
31, 1997 of $1,232,506  and the fiscal 1996 and 1995 amounts of  $1,698,352  and
$1,298,311,  respectively.  The decrease is generally attributable to decreasing
levels of  internally-funded  development  activities  and  declining  levels of
development expenditures on the product launch for Invacare Corporation.

General and  administrative  expense for Fiscal 1998 was $2,121,340  compared to
$695,263  for  the  five-month  transition  period  ended  March  31,  1997  and
$1,354,713  and  $1,193,030  during  fiscal  1996 and  1995,  respectively.  The
increase  over the prior  periods  presented  is generally  attributable  to the
consolidation  of the  general  and  administrative  expenses of Aerocom and UPP
which amounted to total  expenditures of $115,607 during Fiscal 1998,  legal and
accounting  expenditures  related to the  negotiation  and due diligence for the
Aerocom and Franklin  acquisitions  which  totaled  $105,887,  higher  levels of
investor  relations,  marketing  and  business  development  expenditures  which
totaled $85,073 and the write-off of an accounts  receivable from a customer who
filed for bankruptcy of $229,872.

Interest income increased to $191,186 in Fiscal 1998 compared to $54,802 for the
five-month  transition period last year and $113,582 and $50,890 for Fiscal 1996
and 1995,  respectively.  The  increase  is  attributable  to  higher  levels of
invested cash during Fiscal 1998.
<PAGE>
Interest expense was $96,073 during Fiscal 1998 which represents a decrease from
the annualized  Fiscal 1997 amount and the amounts  reported for Fiscal 1996 and
1997. The decrease is  attributable  to generally lower interest rates in Fiscal
1998 and the funding of capital  call  obligations  to Taiwan UQM during  Fiscal
1997 which carried a 10 percent  interest rate  throughout  the period they were
due and not paid.

Equity in loss of Taiwan  joint  venture  rose to  $246,648  for the year  ended
March 31,  1997 compared to $24,121 for the five-month  transition  period ended
March 31, 1997 and $45,164  and $11,952 for the fiscal  years ended  October 31,
1996 and 1995,  respectively.  The  increase  is due to  expanded  staffing  and
operations at Taiwan UQM preparatory to the launch of manufacturing operations.

Liquidity and Capital Resources

The Company's cash balances and liquidity  throughout  Fiscal 1998 were adequate
to meet operating  needs.  Net cash used by operating  activities was $3,679,072
for the year ended March 31, 1998. Cash requirements  throughout the period were
funded primarily through the sale of common stock to investors and cash received
upon the exercise of outstanding common stock warrants and options.

During the first  quarter of Fiscal 1998,  the Company  entered into a strategic
alliance with EV Global Motors  Company.  As part of this alliance EVG exchanged
400,000  shares of its common stock for 200,000  shares of the Company's  common
stock.  The value of the exchange  transaction was  $1,000,000.  Coincident with
this  transaction  Mr. Lee Iacocca,  EVG's Chief  Executive  Officer  joined the
Company's  board of directors  and Ray Geddes,  the  Company's  Chief  Executive
Officer,  joined EVG's board of directors.  As of May 31, 1998 EVG  beneficially
owned 1,455,806  shares of the Company's  common stock or 9.2 percent making EVG
the Company's largest shareholder.

During the fourth quarter of Fiscal 1998, the Company  completed the acquisition
of  all  of  the  outstanding  common  stock  of  Aerocom  Industries,  Inc.,  a
privately-held  Boulder,   Colorado  based  precision  gear  manufacturer.   The
acquisition  price was  $3,377,020  consisting of a cash payment of $337,702 and
the issuance of 371,555 shares of the Company's  common stock. In addition,  the
Company assumed  $1,264,464 of then existing  Aerocom  liabilities and debt. The
cash portion of the  transaction  was paid from  existing  cash  balances of the
Company.  Subsequent to the  acquisition,  the Company began  construction  of a
25,000  square foot  manufacturing  plant in Frederick,  Colorado.  The plant is
situated  on 2 acres of land and the  Company  holds an  option  to  acquire  an
adjacent  2 acre  parcel  to  accommodate  future  expansion  of  the  facility.
Construction cost of the plant, including land acquisition costs, is expected to
be  $1.2  million.  Construction  financing  was  provided  from  existing  cash
balances.  The Company has  received a  commitment  from a  commercial  bank for
mortgage  financing  which is expected to amount to  approximately  $.9 million.
Coincident  with this  expansion,  prior to the end of Fiscal  1998 the  Company
expended  $461,550  for year  manufacturing  equipment of the  approximately  $2
million  it  expects to expend on such  equipment  prior to the end of  calendar
1998. These expenditures are expected to increase its manufacturing  capability,
both in manufacturing  processes and throughput capacity. In order to expand its
operations and fund its capital expenditure needs, the Company secured financing
from a commercial bank which consists of a $.75 million revolving line-of-credit
and  term  loan  financing  for  up to $2  million  of  manufacturing  equipment
purchases,  including the  refinancing  of existing term  equipment  loans.  All
financing of the subsidiary has been unconditionally guaranteed by Unique as the
parent entity.
<PAGE>
During the fourth  quarter of Fiscal  1998,  the Company  completed  the private
placement  of  626,875  units  of  its   securities,   at  $8.00  per  unit,  to
institutional investors and individual investors in an offering under Regulation
D of the  Securities  Act. Each unit sold consisted of one share of common stock
and one warrant to purchase  one share of common  stock at $8.00 per share for a
period of two years subsequent to the date of the offering.  The warrants may be
called after one year from the date of the offering if the closing  price of the
common stock on the American Stock Exchange has been $16.00 or more for a period
of 20 days. Net proceeds to the Company were $4,673,797.  Subsequent, to the end
of  Fiscal  1998,  the  Company  acquired  Franklin   Manufacturing  Company,  a
privately-held St. Charles,  Missouri manufacturer and distributor of electronic
assemblies  and  components.  The  Company  completed  the  acquisition  of  the
outstanding  common stock of Franklin for $4 million in cash,  the assumption of
approximately  $3.1 million in liabilities  and debt and the issuance of 286,282
shares of the  Company's  common  stock.  The Company  intends to  negotiate  an
increase in Franklin's  revolving  line-of-credit to accommodate  future growth,
however,  there can be no assurance that such  negotiations  will be successful.
All financing of Franklin has been unconditionally guaranteed by the Company. In
June 1998,  Franklin was notified by a significant  customer,  who accounted for
$3,380,401  of revenue for the fiscal year ended  September  30, 1997,  to cease
production  due to a labor  dispute  between the United Auto Workers and General
Motors  Corporation.  If the labor  dispute is not  settled  expeditiously,  the
cessation of product  shipments to the  customer  could have a material  adverse
effect on the Company's results of operations.

The  Company met  capital  calls from Taiwan UQM of $1.4  million in both fiscal
1996 and 1997.  Taiwan UQM reported a net loss of  approximately  $.6 million in
fiscal 1998.  Further losses or capital investment by Taiwan UQM could result in
additional capital calls by Taiwan UQM.

During  the  first  half  of  Fiscal  1999,   the  Company   expects  to  invest
substantially greater amounts of capital to launch manufacturing  operations and
supply motors to Invacare  Corporation  pursuant to a supply agreement  executed
during  Fiscal  1998.  Anticipated  capital  expenditures  for working  capital,
production machinery,  equipment, computer hardware and software are expected to
be  approximately  $1.5  million.  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.  However,  there can be no assurance  that such bank  financing  can be
obtained.  The  Company  believes  it has  cash  resources  sufficient  to  fund
non-manufacturing operations over the next year.

For the longer-term, the Company expects to continue its strategy of growing its
business  through  expanding  its product  line of permanent  magnet  motors and
controllers,  seeking strategic alliances to accelerate the commercialization of
its technology and pursuing synergistic and accretive acquisitions.  The Company
expects to finance its future  growth from existing  cash  resources,  cash flow
from  operations,  if any, and through the issuance of equity or debt securities
or a  combination  thereof.  There  can,  however,  be no  assurance  that  such
financing or capital will be available on terms  acceptable  to the Company.  In
the event  financing  or  capital  for  future  growth as  envisioned  under the
Company's  strategy is not available,  the Company believes it can configure its
operations  such that existing cash balances and cash flow from  operations will
be sufficient to meet its operating requirements.
<PAGE>
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,  1998  and  1997,  and  the  related
consolidated statements of operations,  stockholders' equity, and cash flows for
the year ended March 31, 1998,  the five months ended March 31, 1997 and each of
the years in the two-year  period ended  October 31,  1996.  These  consolidated
financial  statements are the  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 38.25 percent owned investee company). The Company's investment at
March 31, 1998 in Taiwan UQM Electric Co., Ltd. was $2,044,393, and for the year
ended March 31, 1998 the Company  recognized  equity in the losses of Taiwan UQM
Electric Co., Ltd of $(246,648). 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 year ended March 31,  1998 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, 1998 and 1997, and the results of their  operations
and their cash flows for the year ended March 31,  1998,  the five months  ended
March  31,  1997  and  each  of  the  years  in  the   two-year   period   ended
October 31, 1996, in conformity with generally accepted accounting principles.



                                 KPMG Peat Marwick LLP


Denver, Colorado
May 22, 1998
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets




                                                     March 31,        March31,
Assets                                                 1998             1997

  Current assets:
       Cash and cash equivalents ..............   $  7,005,533       5,713,557
       Accounts receivable (note 14) ..........      1,105,466         389,314
       Costs and estimated earnings in excess
         of billings on uncompleted contracts
         (note 3) .............................        454,738         191,885
       Inventories (note 4) ...................        253,917         425,391
       Prepaid expenses .......................        158,764         115,260
       Other ..................................         18,361          17,675

               Total current assets ...........      8,996,779       6,853,082

    Property and equipment, at cost:
       Land (notes 5 and 9) ...................        444,480         335,500
       Building (notes 5 and 9) ...............      1,511,635       1,438,090
       Molds ..................................        102,113         102,113
       Transportation equipment ...............        209,920         258,675
       Machinery and equipment ................      5,605,326       1,963,146
                                                     7,873,474       4,097,524
       Less accumulated depreciation ..........     (2,186,805)     (1,764,288)

               Net property and equipment .....      5,686,669       2,333,236

    Investment in Taiwan joint venture (note 6)      2,044,393       2,677,730

    Investment in EV Global (note 7) ..........      1,000,000            --

    Patent and trademark costs, net of
       accumulated amortization of $63,542
       and $45,551(note 13) ...................        575,985         502,297

    Goodwill, net of accumlated amortization
       of $16,215 (note 2) ....................      1,280,872            --

    Other assets ..............................            853           4,354

                                                  $ 19,585,551      12,370,699
(Continued)
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets, Continued




                                                     March 31,        March 31,
Liabilities and Stockholders' Equity                   1998             1997
                                                    
  Current liabilities:
     Accounts payable .......................   $    389,791         169,403
     Note payable to Taiwan joint venture
       (note 6) .............................           --         1,345,285
     Other current liabilities (note 8) .....        876,357         459,223
     Current portion of long-term
       debt (note 9) ........................        163,554          45,180
     Billings in excess of costs and
       estimated earnings on uncompleted
       contracts (note 3) ...................            450         659,807

            Total current liabilities .......      1,430,152       2,678,898

  Long-term debt, less current portion
     (note 9) ...............................      1,029,924         726,218

            Total liabilities ...............      2,460,076       3,405,116

  Minority interest in consolidated
     subsidiary (note 5) ....................        394,343         390,784

  Stockholders' equity (notes 11 and 12):
     Common stock, $.01 par value, 50,000,000
       shares authorized; 15,394,621 and
       13,042,964 shares issued .............        153,946         130,430
     Additional paid-in capital .............     38,852,446      27,094,170
     Accumulated deficit ....................    (21,798,724)    (18,532,364)
     Notes receivable from officers .........        (56,056)        (83,646)
     Cumulative translation adjustment ......       (420,480)        (33,791)

            Total stockholders' equity ......     16,731,132       8,574,799

  Commitments (notes 6, 9, 16, 19 and 20)



                                                $ 19,585,551      12,370,699


See accompanying notes to consolidated financial statements.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations


<TABLE>
<CAPTION>

                                                     Year         Five Months
                                                    Ended           Ended
                                                  March 31,        March 31,      Year Ended October 31, 
                                                    1998             1997            1996            1995
<S>                                          <C>                <C>             <C>              <C>                     
  Revenue:
       Contract services (note 14) .........   $  2,790,496         700,132       1,436,484       4,031,951
       Product sales .......................      1,274,236         152,016         611,213         701,700
                                                  4,064,732         852,148       2,047,697       4,733,651

    Operating costs and expenses:
       Costs of contract services ..........      2,635,599         631,823       1,168,757       2,781,866
       Costs of product sales ..............        980,034         132,418         570,481         594,782
       Research and development ............        902,407         513,544       1,698,352       1,298,311
       General and administrative ..........      2,121,340         695,263       1,354,713       1,193,030
       Amortization of goodwill ............         16,215            --              --              --
       Write-down of inventory .............        416,736            --              --              --
                                                  7,072,331       1,973,048       4,792,303       5,867,989

               Operating loss ..............     (3,007,599)     (1,120,900)     (2,744,606)     (1,134,338)

    Other income (expense):
       Interest income .....................        191,186          54,802         113,582          50,890
       Interest expense ....................        (96,073)        (84,704)       (202,798)       (177,051)
       Equity in loss of Taiwan joint
         venture (note 6) ..................       (246,648)        (24,121)        (45,164)        (11,952)
       Minority interest share of earnings
         of consolidated subsidiary ........        (70,905)        (27,725)        (69,400)        (64,627)
       Other ...............................        (36,321)          1,563          43,643           6,645
                                                   (258,761)        (80,185)       (160,137)       (196,095)

               Net loss ....................   $ (3,266,360)     (1,201,085)     (2,904,743)     (1,330,433)


               Net loss per common share -
                 basic and diluted (note 1n)   $       (.23)           (.12)           (.26)           (.13)

    Weighted average number of shares
      of common stock outstanding ..........     13,924,434      12,043,481      11,021,742      10,090,778
</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, 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 11) ..............    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 services
    (note 12) ..........................       --          --       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
    of $247,309 (note 11) .............   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 11) ..............  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

  Issuance of common stock in private
    offerings, net of offering costs
    of $341,202 (note 11) ..............    626,875      6,269   4,667,528         --       --          --        --     4,673,797
  Issuance of common stock upon
    exercise of employee and directors
    options ............................    226,332      2,263   1,081,888         --       --          --        --     1,084,151
  Issuance of common stock upon
    exercise of warrants ...............    918,026      9,180   1,923,195         --       --          --        --     1,932,375
  Issuance of common stock under
    employee stock purchase plan .......      7,523         75      23,963         --       --          --        --        24,038
  Issuance of common stock for
    services ...........................      4,000         40      28,480         --       --          --        --        28,520
  Compensation expense accrued for
    issuance of common stock options
    granted for services ...............      --         --         19,000         --       --          --        --        19,000
  Issuance of common stock for
    acquisition of Aerocom .............    371,555      3,716   3,035,602         --       --          --        --     3,039,318
  Issuance of common stock for
    investment in EV Global ............    200,000      2,000     998,000         --       --          --        --     1,000,000
  Cumulative translation adjustment ....      --         --          --         (386,689)   --          --        --      (386,689)
  Repayment of executive note ..........     (2,654)       (27)    (19,380)        --       --         27,590     --         8,183
  Net loss .............................      --         --          --            --     (3,266,360)   --        --    (3,266,360)

  Balances at March 31, 1998 ........... 15,394,621  $ 153,946  38,852,446      (420,480)(21,798,724) (56,056)    --    16,731,132
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>

                                                           Year         Five Months
                                                           Ended           Ended
                                                         March 31,        March 31,     Year Ended October 31, 
                                                            1998             1997         1996            1995 

<S>                                                   <C>             <C>            <C>           <C>      
  Cash flows used by operating activities:
     Net loss .......................................   $(3,266,360)    (1,201,085)    (2,904,743)    (1,330,433)
     Adjustments to reconcile net loss to
       net cash used by operating activities:
          Depreciation and amortization .............       545,295        159,473        375,590        346,567
          Minority interest share of earnings of
            consolidated subsidiary .................        70,905         27,725         69,400         64,627
          Noncash compensation expense for
            common stock and warrants issued
            for services ............................        28,520          3,949         61,391         50,000
          Noncash compensation expense for stock
            options granted to consultants ..........        19,000           --             --             --
          Equity in loss of Taiwan joint venture ....       246,648         24,121         45,164         11,952
          (Gain) loss on sale of property and
            equipment ...............................        32,180           --          (45,676)        (3,534)
          Write-off of patent costs .................        18,731         55,529           --             --
          Other .....................................          --            1,210        (20,092)          (466)
          Change in operating assets and liabilities:
             Accounts receivable and costs and
               estimated earnings in excess of
               billings on uncompleted contracts ....      (609,588)       167,846       (148,782)       161,223
             Inventories ............................       331,294        (17,246)        (3,444)        70,450
             Prepaid expenses and other current
               assets ...............................       (41,084)       (66,910)       (12,846)        27,105
             Accounts payable and other current
               liabilities ..........................      (395,256)       106,497        (25,681)      (200,703)
             Billings in excess of costs and
               estimated earnings on uncompleted
               contracts ............................      (659,357)       634,122         25,685       (137,247)
                   Net cash used by operating
                     activities .....................    (3,679,072)      (104,769)    (2,584,034)      (940,459)

  Cash provided by(used by)investing activities:
     Cash paid for acquisition of subsidiary, net ...      (337,702)          --             --             --
     Acquisition of property and equipment ..........      (703,562)      (118,608)      (182,011)      (440,079)
     Increase in patent and trademark costs .........      (110,411)       (47,865)       (92,390)       (64,766)
     Investment in Taiwan joint venture .............          --       (1,375,121)          --             --
     Proceeds from sale of certificates of deposit
       and other investments ........................          --             --          319,107        117,127
     Proceeds from sale of property and equipment ...        25,250           --           63,361           - 

                  Net cash provided by (used by)
                    investing activities ............   $(1,126,425)    (1,541,594)       108,067       (387,718)

</TABLE>

(Continued)
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued


<TABLE>
<CAPTION>

                                                         Year           Five Months
                                                        Ended              Ended
                                                       March 31,        March 31,         Year Ended October 31,
                                                         1998              1997          1996           1995
<S>                                                <C>             <C>              <C>          <C>       <C>

  Cash flows provided by financing activities:
     Proceeds from borrowings ....................   $      --             --             --          212,337
     Repayment of debt ...........................      (212,440)       (34,085)       (83,045)      (250,905)
     Repayment of note payable for investment
       in Taiwan joint venture ...................    (1,345,285)          --             --             --
     Proceeds from sale of common stock, net .....     4,673,797      4,146,820      3,909,379      1,950,554
     Issuance of common stock upon exercise
       of employee options .......................     1,092,334         45,000        130,565         76,396
     Issuance of common stock under employee
       stock purchase plan .......................        24,038           --           20,267          2,526
     Issuance of common stock upon exercise of
       warrants ..................................     1,932,375           --             --             --
     Distributions paid to holders of minority
       interest ..................................       (67,346)       (28,061)       (67,345)       (67,347)
                 Net cash provided by financing
                   activities ....................     6,097,473      4,129,674      3,909,821      1,923,561

                 Increase in cash and cash
                   equivalents ...................     1,291,976      2,483,311      1,433,854        595,384
  Cash and cash equivalents at beginning of period     5,713,557      3,230,246      1,796,392      1,201,008

  Cash and cash equivalents at end of period .....   $ 7,005,533      5,713,557      3,230,246      1,796,392

  Interest paid in cash during the period ........   $   129,599        276,591         82,494         89,133
</TABLE>

Non-cash investing and financing transactions:

Cumulative translation  adjustments of $386,689 were recorded for the year ended
March 31,1998, $12,761 for the five months ended March 31, 1997, and $21,030 for
the year ended October 31, 1996.

In January 1998, the Company  purchased all of the outstanding  stock of Aerocom
Industries,  Inc. for $337,702 cash and 371,555  shares of the Company's  common
stock (see note 2).

In June 1997, the Company entered into a stock purchase agreement with EV Global
Motors Company (EVG) whereby the Company  exchanged 200,000 shares of its common
stock for 400,000 shares of EVG (see note 7).

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 6).

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 year ended  March 31,  1998 and the five
months  ended March 31,  1997,  there were no such  transactions.  For the years
ended October 31, 1996 and 1995,  the Company issued 13,666 and 32,130 shares of
common stock for options  exercised for an aggregate  exercise  price of $10,250
and  $22,130,  respectively,  for which the  Company  received  2,000 and
<PAGE>

UNIQUE MOBILITY, INC. 
AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued


5,365  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.  There were no notes receivable exchanged for the exercise
of options during the year ended March 31, 1998. 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 and 1995,  the Company
issued 13,395 and 2,900 shares of common stock for an aggregate  exercise  price
of $13,395 and $1,750,  respectively,  for which the Company received promissory
notes for the same amount.

See accompanying notes to consolidated financial statements.
<PAGE>

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 permanent magnet
          electric  motors  and the  electric  controls  for  such  motors.  The
          Company's  revenue is derived  primarily  from  contract  research and
          development  services  and  sales  of  products  developed  from  such
          technology.  Through its recently  acquired  wholly-owned  subsidiary,
          Aerocom  Industries,  Inc,  the  Company  provides  contract  grinding
          services and manufactures  high-precision  gears for the aerospace and
          commercial industries.

          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.

          The minority interests as of March 31, 1998 and 1997, consisted of the
          other  stockholders'  ownership  interests  in  a  subsidiary  of  the
          Company. See Note 5.

    (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.


<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued


          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 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 year ended
          December 31, 1997,  the two months ended  December 31,  1996,  and the
          twelve  months  ended  October  31,  1996  and  1995.  Similarly,  the
          accompanying   consolidated   balance  sheets  and  related   footnote
          disclosures  as of March 31,  1998 and  1997,  include  the  financial
          position of the Taiwan joint venture as of December 31, 1997 and 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 year ended  December 31, 1997,  and
          the two and twelve-month periods ended December 31,  1996, and October
          31, 1996 and 1995,  respectively,  and the spot rates in effect at the
          respective December 31, 1997 and 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
          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)   Goodwill

          The excess of the  consideration  exchanged over the fair value of the
          net  assets   obtained  in   acquisitions  is  recorded  as  goodwill.
          Amortization of goodwill is calculated using the straight-line  method
          over a period of 20 years.

    (i)   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  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 consolidated financial statements.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued


    (j)   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 cost
          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 and other indirect costs.  General and administrative  costs are
          charged  to  expense  as  incurred.  At the time a loss on a  contract
          becomes known, the entire amount of the estimated 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.

    (k)   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
          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.

    (l)   Research and Development

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

    (m)   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.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued


    (n)   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).

    (o)   Loss Per Common Share

          In  March  1997,  the  Financial  Accounting  Standards  Board  issued
          Statement  of Financial  Accounting  Standards  No. 128,  Earnings per
          Share ("SFAS 128"), which specifies the computation,  presentation and
          disclosure  requirements for earnings per share. SFAS 128 is effective
          for periods  ending after  December 15, 1997 and requires  retroactive
          restatement  of earnings  per share in prior  periods.  The  statement
          replaces the  calculation of "primary  earnings per share" with "basic
          earnings per share" and  redefines  the  "diluted  earnings per share"
          computation.  Common  stock  equivalents  were  not  included  in  the
          computations because their effect was anti-dilutive.  Adoption of SFAS
          128 did not effect the reported net loss per common share for the year
          ended  March 31,  1998,  the five  months  ended March 31, 1997 or the
          years  ended  October  31,  1996  or  1995.  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.

    (p)   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.

    (q)   Reclassifications

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

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued


(2)  Acquisition of Aerocom

     On January 16, 1998,  the Company  acquired all of the  outstanding  common
     stock of Aerocom  Industries,  Inc.  ("Aerocom") for cash and shares of the
     Company's common stock totaling $3,377,020.  The allocation of the purchase
     price, based on preliminary estimates of fair value which may be subject to
     adjustment, was as follows:

           Accounts receivable                $    369,417
           Inventories                             159,820
           Property, plant and equipment         2,812,054
           Goodwill                              1,297,087
           Other                                     3,106

                                                 4,641,484
           Debt and other liabilities
             assumed                            (1,264,464)

           Purchase price                      $ 3,377,020

     The  acquisition  has been  accounted  for  using  the  purchase  method of
     accounting and the results of Aerocom's  operations have been included with
     those of the  Company  since  January 16,  1998.  The  unaudited  pro forma
     revenue,  net loss,  and loss per common share for the year ended March 31,
     1998, assuming the acquisition occurred on November 1, 1996, is as follows:

                                       Year Ended   Five Months Ended
                                     March 31, 1998   March 31, 1997

           Revenue                    $ 5,515,859        1,438,293
           Net loss                   $(3,200,747)      (1,206,853)
           Basic and diluted loss
             per common share           $ (.23)            (.11)

     The pro forma  information does not necessarily  represent the results that
     would have occurred if the acquisition had been  consummated on November 1,
     1996,  nor  are  they  necessarily  indicative  of the  results  of  future
     operations.

(3)  Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts
     and  Billings  in Excess of Costs and  Estimated  Earnings  on  Uncompleted
     Contracts

     At March 31, 1998,  the estimated  period to complete  contracts in process
     ranged  from  1  to  12  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,
     1998, within one year.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued


    The following  summarizes  contracts in process at March 31, 1998,
    and 1997:

                                               March 31,         March 31,
                                                 1998              1997

       Costs incurred on uncompleted
           contracts ........................   $ 1,724,552      3,158,704
       Estimated earnings .................         515,782        490,407
                                                  2,240,334      3,649,111
       Less billings to date ..............      (1,786,046)    (4,117,033)

                                                $   454,288       (467,922)

       Included in the accompanying balance
         sheets as follows:
           Costs and estimated earnings
             in excess of billings on
             uncompleted contracts ........     $   454,738        191,885
           Billings in excess of costs and
             estimated earnings on
             uncompleted contracts ........            (450)      (659,807)

                                                $   454,288       (467,922)

 (4)    Inventories

    Inventories at March 31, 1998, and 1997 consists of:

                                               March 31,    March 31,
                                                 1998       1997

         Raw materials ...                    $ 76,377    283,155
         Work in process .                     159,825     69,460
         Finished products                      17,715     72,776

                                              $253,917    425,391

 (5) Limited Liability Company

     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 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
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued


     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.

 (6) 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 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 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.

     During the  current  fiscal  year an  investment  was made in Taiwan UQM by
     employees of Taiwan UQM diluting the Company's investment to 38 1/4%.

     Summarized unaudited financial information for Taiwan UQM is as follows:

                                               December 31,     December 31,
        Financial Position                        1997             1996 

  Current assets ....................         $  341,178             889,881
  Noncurrent assets-land, property
    and equipment ...................          6,474,301           4,542,142
         Total assets ...............          6,815,479           5,432,023

  Current liabilities ...............          1,470,684             607,453
  Noncurrent liabilities ............              --                   --
  Stockholders' equity ..............          5,344,795           4,824,570

         Total liabilities and equity        $ 6,815,479           5,432,023

                                        Year         Two Months     Year
                                       Ended           Ended       Ended
                                    December 31,   December 31,  October 31,
        Results of Operations          1997            1996         1996

  Revenue                             $     663       10,123         --
  Expenses                             (597,278)     (56,403)    (128,214)

  Net loss                            $(596,615)     (46,280)    (128,214)

<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

 (7) Investment in EV Global

     In June of 1997, the Company entered into a strategic  relationship with EV
     Global  Motors   Company  (EVG)  to  develop  and  market  light   electric
     transportation  products.  EVG purchased  1,151,925 shares of the Company's
     common  stock in a private  transaction  from Alcan  Aluminum  Limited  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 which was valued at $1,000,000.

 (8) Other Current Liabilities

     Other current liabilities at March 31, 1998 and 1997, consists of:

                                       March 31, March 31,
                                         1998      1997

  Accrued interest ................   $  5,692     39,218
  Accrued loss reserves ...........     22,678      8,120
  Accrued legal and accounting fees     55,376     37,171
  Accrued payroll, consulting,
    personal property
    taxes and real estate taxes ...    158,604     99,997
  Accrued material purchases ......     82,357       --
  Accrued machinery and equipment
     purchases ....................    402,834       --
  Unearned revenue ................     65,037       --
  Refund of overpayment ...........       --      250,005
  Other ...........................     83,779     24,712

                                      $876,357    459,223
(9)    Long-term Debt

    Long-term debt at March 31, 1998 and 1997, consists of:

<TABLE>
<CAPTION>

                                                             March 31,     March 31,
                                                               1998          1997

<S>                                                       <C>            <C>    
  Note payable to bank, payable in monthly install-
     ments with interest at 9.1%; matures October 2007;
     secured by land and building with a net book value
     of $1,530,041 .....................................   $  726,202      771,398
  Note payable to bank, payable in monthly installments
     with interest at 10.05%; matures November 2001; see
     note 20 ...........................................      467,276         --
             Total long-term debt ......................    1,193,478      771,398
      Less current portion .............................      163,554       45,180
             Long-term debt, less current portion ......   $1,029,924      726,218

</TABLE>
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

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

        1999               $   163,554
        2000                   179,278
        2001                   197,660
        2002                   155,388
        2003                    71,536
        Thereafter             426,062

                           $ 1,193,478
 (10) 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:

                                            Five Months
                                 Year Ended    Ended
                                 March  31,  March  31,  Year  Ended October 31,
                                    1998        1997       1996         1995

      Computed "expected" tax
         benefit                $(1,110,562)  (408,369)  (987,613)   (452,347)
      Increase (decrease) in
        taxes resulting from:
            Increase in
              valuation
              allowance for
              net deferred
              tax  assets        1,015,804     407,443    985,132     450,383
            Other, net              94,758         926      2,481       1,964

      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,      March 31,
                                          1998          1997

      Deferred tax assets:
         Research and development
            credit carryforwards     $   74,864            61,188
          Net operating loss
            carryforwards             6,730,804         5,728,676
               Total deferred
                  tax assets          6,805,668         5,789,864

       Less valuation allowance       6,805,668         5,789,864

               Deferred tax assets,
                  net of valuation
                  allowance          $     --               --

<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued


     As of March 31,  1998,  the Company had net  operating  loss  carryforwards
     (NOL) of  approximately  $22.1 million for U.S.  income tax purposes  which
     expire in varying amounts through 2013.  Approximately  $2.1 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 NOLs. In addition,  the Section 382 limitation  could be reduced to zero
     if the Company  fails to satisfy  the  continuity  of  business  enterprise
     requirement for the two-year period following an ownership change.

(11) Stockholders' Equity

     During the year ended October 31, 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 the year ended  October  31,  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.

     During the year ended March 31,  1998,  the Company  completed  one private
     placement  with  institutional  and  private  investors  of  750,000  units
     consisting of one share of the Company's  common stock and one warrant at a
     price of $8.00 per unit. Each warrant is exercisable  into one share of the
     Company's  common  stock at $8.00 per share and  expires two years from the
     date of issuance. Of the 750,000 units that were privately placed,  626,875
     were issued in March 1998 and the  remaining  123,125  were issued in April
     1998.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



 (12) Common Stock Options and Warrants

     Incentive and Non-Qualified Option Plans

     The  Company  has  reserved  5,104,000  shares  of  common  stock  for  key
     employees,   consultants   and  key  suppliers   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 options that may be granted to any
     eligible  employee  during the term of the 1982 and 1992 plans is 1,000,000
     options. 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:

                                     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
  Granted .......................      601,000        7.88
  Exercised .....................     (210,332)       4.75
  Forfeited .....................      (13,772)       4.80

  Outstanding at March 31, 1998 .    2,828,352    $   5.34

  Exercisable at March 31, 1998 .    1,781,046    $   4.97

<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

     The following  table presents  summarized  information  about stock options
     outstanding at March 31, 1998:

<TABLE>
<CAPTION>
 
                                      Options Outstanding         Options Exercisable
                                            Weighted   Weighted               Weighted
                             Number          Average    Average    Number      Average
               Range of   Outstanding      Remaining   Exercise  Exercisable  Exercise
          Exercise Prices at 12/31/97  Contractual Life Price at  12/31/97      Price
<S>         <C>              <C>           <C>        <C>         <C>         <C>
            $0.50 - 1.00      112,117       1.5 years  $0.79       112,117      $0.79
            $2.25 - 3.31      623,256       8.0 years  $3.08       297,085      $2.83
            $3.50 - 5.00      805,086       6.6 years  $4.05       666,162      $4.03
            $5.38 - 8.13    1,287,893       7.8 years  $7.64       705,682      $7.41
            $0.50 - 8.13    2,828,352       7.5 years  $5.34     1,781,046      $4.97
</TABLE>

      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 presents summarized activity under the plan:

                                                       Weighted
                                     Shares Under       Average
                                      Option         Exercise Price
          
                                                               
      Outstanding at October 31, 1994    48,000          $ 5.96
      Granted                            61,333            5.10

      Outstanding at October 31, 1995   109,333            5.48
      Granted                            32,000            4.38

      Outstanding at October 31, 1996
         and March 31, 1997             141,333            5.23
      Granted                            64,000            7.13
      Exercised                         (16,000)           5.38

      Outstanding at March 31, 1998     189,333          $ 5.86

      Exercisable at March 31, 1998      98,666          $ 5.31
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued


     The following  table presents  summarized  information  about stock options
     outstanding for non-employee directors:

                            Options Outstanding            Options Exercisable
                                    Weighted   Weighted                Weighted
                     Number         Average     Average     Number      Average
     Range of     Outstanding      Remaining  Exercise  Exercisable   Exercise
 Exercise Prices  at 12/31/97  Contractual Life Price   at 12/31/97     Price

 $4.38 - 6.00      93,333        7.3 years  $4.85       66,666       $4.86
 $6.25 - 7.13      96,000        8.3 years  $6.84       32,000       $6.25
                  189,333        7.8 years  $5.86       98,666       $5.31

     Statement  of  Financial  Accounting  Standards  No.  123,  Accounting  for
     Stock-Based  Compensation  ("SFAS  123")  defines  a fair  value  method of
     accounting for employee stock options and similar equity instruments.  SFAS
     123  permits  an  entity to choose to  recognize  compensation  expense  by
     adopting  the new fair value  method of  accounting  or continue to measure
     compensation  costs using the intrinsic value methods  prescribed by APB25.
     The Company  accounts for stock options  granted to employees and directors
     of the Company under the intrinsic  value method.  Stock options granted to
     non-employees  under the Company's 1992 Stock Option Plan are accounted for
     under the fair value method. Had the Company reported compensation costs as
     determined  by the fair value  method of  accounting  for option  grants to
     employees and directors,  net loss and net loss per common share would have
     been the pro forma amounts indicated in the following table:

                                                Five Months
                                 Year Ended        Ended            Year Ended
                              March 31, 1998   March 31, 1997  October 31, 1996
  

Net loss - as reported .......   $(3,266,360)     (1,201,085)     (2,904,743)
Compensation expense - current
  period option grants .......      (821,800)       (116,847)       (339,221)
Compensation expense - prior
  period option grants .......      (619,654)       (145,042)            -

Net loss - pro forma .........    (4,707,814)     (1,462,974)     (3,243,964)
Net loss per common share -
  as reported ................   $      (.23)           (.12)           (.26)
Net loss per common share -
   pro forma .................   $      (.34)           (.14)           (.29)

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

                                             Five  Months
                              Year Ended         Ended           Year Ended 
                            March 31, 1998    March 31, 1997    October 31, 1996

      Expected volatility         48.1%            47.6%              49.1%
      Expected dividend yield      0.0%             0.0%               0.0%
      Risk free interest rate      5.7%             6.4%               5.6%
      Expected life of option
        granted                  6 years          6 years             6 years
      Fair value of options
        granted as computed under
        the Black Scholes option
        pricing models         $4.15 per share $1.79 per share $2.22 per share
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



     Pro forma net loss  reflects  only the fair value  compensation  expense of
     options  granted  since  November  1, 1995.  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.  Future pro forma compensation cost by
     fiscal year,  assuming no additional grants by the Company to employees and
     directors, is as follows:

                      Fiscal Year                 Pro Forma
                       Ended                     Compensation
                      March 31,                    Expense
                                                                       
 
                        1999                 $1,274,212
                        2000                 $  985,386

      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 allowed 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 and expired in August 1997.
     On June 19, 1997,  warrants to acquire  395,000 shares of common stock were
     exercised on a cashless  basis  resulting in the issuance of 249,154 shares
     of common  stock.  On July 31, 1997,  warrants to acquire  45,000 shares of
     common stock were exercised on a cashless  basis  resulting in the issuance
     of 29,000  shares of common stock.  On August 5, 1997,  warrants to acquire
     175,000 shares of common stock were exercised on a cashless basis resulting
     in the issuance of 116,053 shares of common stock.  The remaining  warrants
     to acquire 175,000 shares of the Company's common stock were exercised on a
     cashless  basis on August 15,  1997,  resulting  in the issuance of 117,069
     shares of common stock.

     The  Company  has  reserved  300,000  shares of common  stock for  issuance
     pursuant to a warrant  agreement with an investment  banking  company.  The
     warrants  are  exercisable  at a price of $6.00  per  share  and  expire in
     January,  1999. 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.  On March  19,  1998,  warrants  to  acquire  80,000  shares of the
     Company's  common stock were  exercised  resulting in cash  proceeds to the
     Company of $480,000.  Warrants to acquire  220,000  shares of the Company's
     common stock remain outstanding at March 31, 1998.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



     In connection with the 1995 common stock issuance,  the placement agent was
     issued  warrants  expiring  July,  1998, to acquire  150,000  shares of the
     Compan's   common  stock  at  $5.75  per  share.   During   September  and
     December 1997, and February 1998, warrants to acquire 120,000 shares of the
     Company's  common stock were  exercised,  resulting in cash proceeds to the
     Company of $690,000.  Warrants to acquire  30,000  shares of the  Company's
     common stock remain outstanding as of March 31, 1998.

     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 in February,  1996,  38,100 shares of the Company's  common
     stock at $5.00 per share in May, 1996, and 50,000 shares at $4.25 per share
     in  September,  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.  During October 1997,  warrants to acquire
     5,000  shares  of the  Company's  common  stock at  $4.25  per  share  were
     exercised resulting in cash proceeds to the Company of $21,250. Warrants to
     acquire 50,000 shares at $4.75 per share,  38,100 shares at $5.00 per share
     and 45,000  shares at $4.25 per share  remain  outstanding  as of March 31,
     1998.

     In connection with the 1997 private  placement,  the placement  agents were
     issued  warrants  in  February  1997,  to  acquire  225,625  shares  of the
     Company's  stock at an  exercise  price of $3.50 per share and  warrants to
     acquire 50,000 shares at an exercise price of $4.20 per share. The warrants
     expire three years from the date of issuance.  During the fiscal year ended
     March 31, 1998,  warrants to acquire 151,750 shares of the Company's common
     stock at $3.50 per share were exercised,  resulting in cash proceeds to the
     Company of  $531,125.  During  December  1997,  warrants to acquire  50,000
     shares of the  Company's  common  stock at $4.20 per share were  exercised,
     resulting in cash proceeds to the Company of $210,000.  Warrants to acquire
     73,875  shares of the  Company's  common  stock at $3.50  per share  remain
     outstanding as of March 31, 1998.

     As discussed in Note 11, the Company  completed a private placement in 1998
     of 750,000  units  consisting  of one common share and one warrant.  Of the
     750,000 units privately  placed,  626,875 were issued in March 1998 and the
     remaining  123,125 were issued in April 1998.  Also in connection  with the
     1998  private  placement,  the  placement  agents were  issued  warrants in
     March 1998,  to acquire 176,588 shares of the Company's  common stock at an
     exercise price of $8.00 per share.  The warrants  expire two years from the
     date of issuance. All of the warrants issued prior to March 31, 1998 remain
     outstanding as of that date.

(13)  Alcan Royalty Agreement

     During 1994, the Company and Alcan Aluminum Limited  ("Alcan")  executed an
     agreement in which Alcan  assigned to the Company all of its rights,  title
     and interests in certain motor technology  developed under a program funded
     by Alcan.  This  agreement  further  provides that the Company shall pay to
     Alcan  royalties  of one-half of one  percent on revenue  derived  from the
    
<PAGE>

UNIQUE MOBILITY, INC. 
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



     manufacture  and  sale of  products  or  processes  embodying  the  related
     technology.  For the year ended March 31, 1998, the five months ended March
     31, 1997,  and for the years ended  October 31, 1996 and 1995,  the Company
     recorded   royalty  expense  of  $14,999,   $4,077,   $9,497  and  $23,423,
     respectively, under this agreement.

(14)  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        Year Ended
                         Year Ended            Ended            October 31,
                       March 31, 1998      March 31, 1997    1996        1995
          Customer A      $      -             162,500         -           -
                   B          707,771          113,229         -           -
                   C          182,651          176,749         -           -
                   D             -                -          378,640   1,720,347
                   E             -                -          202,343     880,420
                   F             -                -          194,600       -
                   G             -                -          135,950       -
                   H             -                -            -         657,330
                   I          385,950             -            -           -
                   J          571,924             -            -           -
                   K          173,130             -            -           -
                   L          218,435             -            -           -

                          $ 2,239,861          452,478       911,533   3,258,097

         Percentage of
           contract services
           revenue               80%              65%           63%         81%
 
     These customers,  in total,  also represented 15% and 49% of total accounts
     receivable  at March 31, 1998 and 1997,  respectively,  and the majority of
     costs  and  estimated   earnings  in  excess  of  billings  on  uncompleted
     contracts.

     During the year ended March 31, 1998, the Company derived significant
     product sales revenue from three customers.  Revenue derived was as
     follows: customer M - $122,263; customer N - $75,858; and
     customer O - $188,129.  These three customers accounted for 30% of the 
     product sales revenue.

     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
     above,  totaled $846,740 for the year ended March 31, 1998, $78,532 for the
     five months ended March 31, 1997, and $800,208 and $2,478,350 for the years
     ended October 31, 1996 and 1995, respectively.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued


 (15) 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 providing comparable security to
     the lender.

 (16) 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. 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 $100,212,  $39,535,
     $90,935  and $98,441  for the year ended  March 31,  1998,  the five months
     ended March 31,  1997,  and for the years ended  October 31, 1996 and 1995,
     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 year ended March 31,  1998,  the Company
     issued 7,523 shares of common stock 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 and
     1995,  the  Company  issued  6,668  shares and 511 shares of common  stock,
     respectively, under the Stock Purchase Plan.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



(17)   Segments

     Commencing  in the current  fiscal  year,  the  Company has two  reportable
     segments:  technology  and  mechanical  products.  The  technology  segment
     encompasses  the  Company's  technology-based   operations  including  core
     research to advance its  technology,  application  engineering  and product
     development and job shop production of prototype components. The mechanical
     products  segment  encompasses the manufacture and sale of permanent magnet
     motors, precision gears, gear assemblies and related mechanical products.

     The accounting  policies of the segments are the same as those described in
     the summary of significant  accounting  policies at note 1. During the year
     ended March 31, 1998, there were no intersegment sales or transfers.

     The Company's  reportable  segments are strategic business units that offer
     different  products and services.  They are managed separately because each
     business requires different business strategies.

     The following table summarizes  significant financial statement information
     for each of the reportable segments for the year ended March 31, 1998:

                                                Mechanical
                                   Technology    Products     Totals

     Revenue                     $  3,489,586    575,146    4,064,732
     Interest income                  155,480     35,706      191,186
     Interest expense                 (75,473)   (20,600)     (96,073)
     Depreciation and amortization   (383,137)  (145,943)    (529,080)
     Goodwill amortization               -       (16,215)     (16,215)
     Equity in loss of Taiwan
       joint venture                 (246,648)      -        (246,648)
     Segment loss                  (3,243,204)   (23,156)  (3,266,360)
     Segment assets                12,757,776  6,827,775   19,585,551
     Expenditures for
       segment assets            $   (278,568)  (535,405)    (813,973)

     In determining the foregoing segments,  the Company has allocated corporate
     overhead and expenses and intangible  assets,  including  goodwill,  to the
     appropriate  segment.  Prior to the  current  fiscal  year,  the  Company's
     financial statement information related to the technology segment.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



 (18) 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

 (19)  Commitments

     The Company has entered into various  contracts to purchase vacant land and
     construct a new manufacturing facility in Frederick,  Colorado. Vacant land
     was purchased  under contract for $108,900 and the Company has an option to
     purchase an adjoining block of land for $72,600.

     The construction contract provides for the erection of a 25,000 square foot
     manufacturing facility at a cost not to exceed $850,000 adjusted for change
     orders.  As of year-end,  the Company had paid $73,545 in progress payments
     in relation to this contract. The facility was completed in June 1998.

     These commitments will be met through additional financing from third party
     institutions that were arranged subsequent to year end.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



 (20) Subsequent Events

      Acquisition of Franklin

     On April 30, 1998, the Company acquired all of the outstanding common stock
     of Franklin  Manufacturing  Company  (Franklin)  for cash and shares of the
     Company's common stock totaling approximately $6,247,316. The allocation of
     the purchase price based on  preliminary  estimates of fair value which may
     be subject to adjustment, is as follows:

      Assets purchased:

           Cash                           $   151,360
           Accounts receivable              1,426,995
           Inventories                      1,089,539
           Property, plant and equipment      877,199
           Goodwill                         5,296,916
           Related asset acquisition          422,250
           Other                              131,203
                                            9,395,462
 
      Debt and other liabilities assumed   (3,148,146)

           Purchase price                 $ 6,247,316

     The  acquisition  has been  accounted  for  using  the  purchase  method of
     accounting.  The unaudited pro forma revenue,  net loss and loss per common
     share for year ended March 31,  1998 and 1997  respectively,  assuming  the
     acquisition occurred on April 1, 1996 is as follows:

                                           Year Ended      Year Ended
                                         March 31, 1998  March 31, 1997

      Revenue                             $ 15,366,148   $ 10,717,010
      Net loss                              (3,167,509)    (2,437,238)
      Basic and diluted loss                 $    (.22)         $(.21)
         per common share

     The pro forma  information does not necessarily  represent the results that
     would have occurred if the  acquisition  had been  consummated  on April 1,
     1996,  nor  are  they  necessarily  indicative  of the  results  of  future
     operations.

     In conjunction with the closing of the acquisition,  the Company refinanced
     Franklin's existing long-term debt totaling approximately $1.7 million with
     Commerce Bank. The Company is a guarantor on the new financing arrangement.

     The annual aggregate  maturities of the refinanced  long-term debt is as
     follows: 1999 - $424,250; 2000 - $1,168,009; and 2001 - $101,236.
<PAGE>

UNIQUE MOBILITY, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued



    New Financing

     Subsequent to the end of the fiscal year, the Company refinanced  Aerocom's
     existing long-term debt totaling approximately  $467,000. The new financing
     arrangement includes a $750,000 revolving line of credit, a $2 million term
     equipment financing line of credit and a $900,000 mortgage loan on the

     Company's new building in Frederick,  Colorado. As of May 22, 1998, a total
     of  approximately  $900,000 has been drawn against the equipment  financing
     line of credit.
<PAGE>

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 September  14,
1998, to be filed on or about August 3, 1998, pursuant to Regulation 14A.
<PAGE>


                              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, 1998 and March 31,
                  1997.
 
                Consolidated Statements of Operations for the year ended
                  March 31, 1998, the five months ended March 31, 1997 and
                  each of the years in the two-year period ended
                  October 31, 1996.

                Consolidated Statements of Stockholders' Equity for the
                  year ended March 31, 1998, the five months ended
                  March 31, 1997, and each of the years in the two-year
                  period ended October 31, 1996.
 
                Consolidated Statements of Cash Flows for the year ended
                  March 31, 1998, the five months ended March 31, 1997
                  and each of the years in the two-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, 1997 and 1996

                Statements of Income for the year ended December 31, 1997,
                  December 31,1996, and   the period January 17, 1995 to
                  December 31, 1997.

                Statement of Changes in Shareholders' Equity for the years
                  ended December 31, 1997, and December 31, 1996.

                Statement of Cash Flows, for the year ended December 31,
                  1997, December 31, 1996 and the period January 17,
                  1995 to December 31, 1997.

                Notes to Financial Statements


        2.  Financial Statement Schedules:

            None.
<PAGE>


                   INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders
Taiwan UQM Electric Co., Ltd.

We have  examined  the balance  sheets of Taiwan UQM  Electric  Co.,  Ltd. as of
December 31, 1997 and 1996,  and the related  statements  of income,  changes in
shareholders'  equity and cash flows for the years then ended.  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 the  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, 1997 and
1996,  and the results of its  operations  and its cash flows for the years then
ended,  in  conformity  with  accounting  principles  generally  accepted in the
Republic of China applied on a consistent basis.




Horwath & Company

Taipei, Republic of China
January 15, 1998

<PAGE>



                       TAIWAN UQM ELECTRIC CO., LTD.
                              BALANCE SHEETS
                          (In Development Stage)
                        December 31, 1997 and 1996
                 (Amounts Expressed in New Taiwan Dollars)

  
<TABLE>
<CAPTION>
                                                 December 31, 1997            December 31, 1996   
ASSETS                                         Amounts               %       Amounts           %    
<S>                                           <C>                 <C>    <C>             <C>  
CURRENT ASSETS
     Cash and cash equivalents (Notes 2 & 3)   $   8,039,291         3.52 $  22,510,890        15.08
     Other receivables (Note 4) ............         489,564         0.21     1,880,181         1.25
     Inventories (Notes 2 & 5) .............         300,990         0.13          --            --
     Other current assets (Note 6) .........       2,305,201         1.02        69,657         0.05
     Total Current Assets ..................      11,135,046         4.88    24,460,728        16.38


  PROPERTY AND EQUIPMENT (Notes 2, 7 & 13)
    Cost ...................................     212,982,928        93.30   123,488,380        82.70
    Less: accumulated depreciation .........      (1,751,374)       (0.77)     (108,473)       (0.07)
    Net ....................................     211,231,554        92.53   123,379,907        82.63


  OTHER ASSETS
     Refundable deposits ...................          21,200         0.01          --            --
     Deferred charges (Note 2) .............          49,500         0.02          --            --
     Deferred income tax assets
       (Notes 2 & 11) ......................       5,851,399         2.56     1,472,828         0.99
     Total Other Assets ....................       5,922,099         2.59     1,472,828         0.99

  TOTAL ASSETS .............................   $ 228,288,699       100.00 $  49,313,463       100.00
</TABLE>

See accompanying notes to financial statements.
<PAGE>

                         TAIWAN UQM ELECTRIC CO., LTD.
                                 BALANCE SHEETS
                             (In Development Stage)
                           December 31, 1997 and 1996
                   (Amounts Expressed in New Taiwan Dollars)
<TABLE>
<CAPTION>
 
LIABILITIES AND                            December 31, 1997                   December 31, 1996
SHAREHOLDERS' EQUITY                       Amounts           %                 Amounts           %
<S>                                     <C>             <C>                   <C>             <C> 
CURRENT LIABILITIES
   Short-term debts (Note 8)         $    30,000,000       13.14               $     --           --
   Notes payable                             889,221        0.39                     4,014        --
   Other notes payable (Note 13)           5,758,710        2.52                15,915,177       10.66
   Accounts payable                           46,500        0.02                     --           --
   Other payables (Note 9)                11,157,308        4.90                   703,820        0.47
   Other current liabilities                 146,310        0.06                    74,440        0.05
   Total Current Liabilities              47,998,049       21.03                16,697,451       11.18
 
SHAREHOLDERS' EQUITY
  Common stock, $10 par value,
    authorized and issued
    19,880,000 shares in 1997,
    authorized 19,500,000
    shares and issued 10,000,000
    shares in 1996                      198,800,000       87.08                100,000,000       66.97
  Capital received in advance                 --           --                   37,050,000       24.81
  Deficit in development stage
   (Note 10)                            (18,509,350)      (8.11)                (4,433,988)      (2.96)
  Total Shareholders' Equity            180,290,650       78.97                132,616,012       88.82 
 
 

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY                  $ 228,288,699      100.00              $ 149,313,463      100.00
</TABLE>
 
See accompanying notes to financial statements.
<PAGE>

                       TAIWAN UQM ELECTRIC CO., LTD.
                           STATEMENTS OF INCOME
                          (In Development Stage)
              For the Years Ended December 31 ,1997 and 1996
                 (Amounts Expressed in New Taiwan Dollars)
<TABLE>
<CAPTION>
                                                                  January 17,1995 to
                                        1997         1996          December 31,1997   
<S>                                  <C>         <C>          <C>               
NET SALES (Note 13)                  $  21,400    $     --         $       21,400
 
COST OF SALES                          (18,818)         --                (18,818)
 
GROSS PROFIT                             2,582          --                  2,582
 
OPERATING EXPENSES (Note 13)       (14,114,286)   (4,617,699)        (20,551,473)
 
OPERATING LOSS                     (14,111,704)   (4,617,699)        (20,548,891)
 
NON-OPERATING INCOME
   Interest income                   1,484,153       278,258           2,014,524
   Other income (Note 13)            1,525,421         --              1,525,421 
     Total Non-operating Income      3,009,574       278,258           3,539,945 
 
NON-OPERATING EXPENSES
   Interest expense                    (13,718)        --                (13,718)
   Indemnity loss (Note 13)         (5,642,847)        --             (5,642,847)
   Other expenses                   (1,695,238)        --             (1,695,238)
     Total Non-operating Expenses   (7,351,803)        --             (7,351,803)
 
LOSS BEFORE INCOME TAX             (18,453,933)   (4,339,441)        (24,360,749)
 
INCOME TAX BENEFIT (EXPENSE)
  (Notes 2 & 11)
   Current                               --            --                  --
   Deferred                          4,378,571     1,080,984           5,851,399
        Total Income Tax Benefit     4,378,571     1,080,984           5,851,399
 
NET LOSS                         $ (14,075,362)   (3,258,457)      $ (18,509,350)

EARNINGS PER SHARE
  Net loss (Note 12)             $       (1.08)    $   (0.33)
</TABLE>


See accompanying notes to financial statements.
<PAGE>

                                     TAIWAN UQM ELECTRIC CO., LTD.
                             STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                         (In Development Stage)
                             For the Years Ended December 31 ,1997 and 1996
                               (Amounts Expressed in New Taiwan Dollars)
 
 
 
<TABLE>
<CAPTION>
                                                                                Capital Received in       Deficit in
                                            Shares Outstanding     Common Stock       Advance          Development Stage
 
<S>                                          <C>                <C>             <C>                  <C>
BALANCE AT JANUARY 1, 1996                       10,000,000      $ 100,000,000   $       --            $  (1,175,531)
 
   Capital received in advance                        --                 --          37,050,000                --
 
   Net loss for 1996                                  --                 --              --               (3,258,457)
 
BALANCE AT DECEMBER 31, 1996                     10,000,000        100,000,000       37,050,000           (4,433,988)
 
   Capital received in advance                        --                 --          57,950,000                --
 
   Capital increase by transfer from
     capital received in advance                  9,500,000         95,000,000      (95,000,000)               --
 
   Capital increase by cash from
     employees' subscription                        380,000          3,800,000           --                    --
 
   Net loss for 1997                                  --                 --              --              (14,075,362)
 
BALANCE AT DECEMBER 31, 1997                     19,880,000      $ 198,800,000     $     --            $ (18,509,350)
</TABLE>
 
See accompanying notes to financial statements .
<PAGE> 


                                      TAIWAN UQM ELECTRIC CO., LTD.
                                         STATEMENTS OF CASH FLOWS
                                          (In Development Stage)
                              For the Years Ended December 31, 1997 and 1996
                                (Amounts Expressed in New Taiwan Dollars)

<TABLE>
<CAPTION>
                                                                                  January 17, 1995 to
                                                    1997               1996       December 31,1997
<S>                                       <C>                  <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                  $   (14,075,362)    $   (3,258,457)    $ (18,509,350)
  Adjustments:
     Depreciation                                 1,642,901            108,473         1,751,374
     Amortization                                     5,500              --                5,500
     Deferred income tax benefit                 (4,378,571)        (1,080,984)       (5,851,399)
     Net changes in:
       Other receivables                          1,390,617         (1,815,670)         (489,564)
       Inventories                                 (300,990)             --             (300,990)
       Other current assets                      (2,235,544)           (43,422)       (2,305,201)
       Notes payable                                885,207              4,014           889,221
       Accounts payable                              46,500              --               46,500
       Other payables                             1,833,488            311,091         2,537,308
       Other current liabilities                     71,870             60,652           146,310 
          Net Cash Used in Operating Activities (15,114,384)        (5,714,303)      (22,080,291)
 
CASH FLOWS FROM INVESTING ACTIVITIES
   Acquisition of property                      (91,031,015)       (26,458,791)     (198,604,218)
   Increase in refundable deposits                  (21,200)             --              (21,200)
   Addition to deferred charges                     (55,000)             --              (55,000)
      Net Cash Used in Investing Activities     (91,107,215)       (26,458,791)     (198,680,418)
 
CASH FLOWS FROM FINANCING ACTIVITIES
   Increase in short-term debts                  30,000,000              --           30,000,000
   Initial paid-in capital, capital
     received in advance and
     capital increase by cash                    61,750,000         37,050,000       198,800,000 
   Net Cash Provided by Financing Activities     91,750,000         37,050,000       228,800,000 
 
NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                  (14,471,599)         4,876,906         8,039,291
 
CASH AND CASH EQUIVALENTS AT
   BEGINNING OF YEAR                             22,510,890         17,633,984             -- 
 
CASH AND CASH EQUIVALENTS AT
   END OF YEAR                               $    8,039,291     $   22,510,890      $  8,039,291 
 
SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION
  Interest paid (net of amount capitalized)  $       13,718     $        --         $     13,718
  Income tax paid                            $        --        $        --         $      -- 
 
INVESTING AND FINANCING ACTIVITIES
PARTIALLY AFFECTING CASH FLOWS
  Acquisition of property                    $   89,494,548     $   42,373,968      $212,982,928
  Payable at beginning of year                   15,915,177              --                --
  Payable at end of year                        (14,378,710)       (15,915,177)      (14,378,710)
  Cash paid                                  $   91,031,015     $   26,458,791      $198,604,218
</TABLE>
 
See accompanying notes to financial statements.
<PAGE>

                                      TAIWAN UQM ELECTRIC CO., LTD.
                                      NOTES TO FINANCIAL STATEMENTS
                                          (In Development Stage)
                                        December 31, 1997 and 1996
                                 (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  31,1997 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.

  a. 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.

  b. Inventories

     Inventories are stated at the lower of weighted average cost or market.

  c. 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.  When property are  depreciated to
     residual  value  and are  still in use,  they are  depreciated  over  their
     remaining  useful  lives.  When property 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  transferred to
     capital surplus in the following year.

  d. Deferred charges

     Deferred charges are amortized by the straight-line method over five years.

  e. Income tax

     Income tax is provided  in  accordance  with  Statement  of  Financial
     Accounting  Standards No. 22 "Accounting  for Income Tax". Tax effects
     of taxable temporary differences are recognized as deferred income tax
     liabilities,  while those of deductible  temporary  differences,  loss
     carryovers  and tax credits  are  recognized  as  deferred  income tax
     assets.  Valuation allowance is provided on the basis of the estimated
     realizability of deferred income tax assets.
<PAGE>


3   CASH AND CASH EQUIVALENTS
 
                                                        December 31
                                                 1997                  1996    

      Cash on hand                     $       16,335        $       26,130
      Checking accounts                        33,497                18,647
      Demand deposits                       7,989,459            22,466,113 
           Total                       $    8,039,291        $   22,510,890
 
 
4   OTHER RECEIVABLES
 
                                                         December 31         
                                                 1997                  1996    
      Taxes refundable                 $      174,564        $    1,880,181
      Others                                  315,000                 --
           Total                       $      489,564        $    1,880,181
 
 
5   INVENTORIES

                                                         December 31         
                                                 1997                  1996    

      Raw materials                    $      296,406       $         --
      Finished goods                            4,584                 --   
         Total                         $      300,990       $         --

 
6   OTHER CURRENT ASSETS
 
                                                        December 31         
                                                 1997                  1996    
      Prepaid business tax             $    2,227,771       $        48,332
      Others                                   77,430                21,325
           Total                       $    2,305,201       $        69,657
<PAGE> 
 
7   PROPERTY AND EQUIPMENT

                                             
                                                       December 31
                                                 1997                 1996    
      Cost
        Land ....................     $    86,563,756      $          --   
        Buildings ...............          98,205,445                 --
        Machinery and equipment .          20,015,000                 --
        Tools and equipment .....           2,023,400                 --
        Transportation equipment            1,714,946              746,306
        Furniture and fixtures ..           2,811,026              234,536
        Other equipment .........             593,955                 --
        Prepayment for land .....               --              84,414,291
        Construction in progress            1,055,400           38,093,247
          Total ................          212,982,928          123,488,380

      Accumulated Depreciation
        Buildings ..............              791,320                 --
        Machinery and equipment               303,256                 --
        Tools and equipment ....               88,419                 --
        Transportation equipment              299,103               82,923
        Furniture and fixtures .              233,364               25,550
        Other equipment ........               35,912                 --
          Total ..............              1,751,374              108,473

      Net .......................        $211,231,554         $123,379,907
 
          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.  As of December 31,  1997,  the Company has
          paid $ 86,563,756 for the land and $ 95,832,792 for the factory. Since
          the titles of the land and factory  have not been  transferred  to the
          Company,  the Company has obtained certain  collaterals from Everlight
          Electric  Industrial  Co.,  Ltd.  and  its  affiliate  to  secure  the
          transactions.
 
8   SHORT-TERM DEBTS

                                                       December 31          
                                                1997                  1996

Unsecured loans                        $  30,000,000           $      --
  Interest rates                            8.75%                     --
 
9   OTHER PAYABLES

                                                       December 31
                                                1997                  1996
      Payroll                          $   1,898,815           $   467,821
      Equipment                            8,620,000                  --
      Other                                  638,493               235,999
          Total                        $  11,157,308           $   703,820
 

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

11  INCOME TAX

    a.   Summary of deferred income tax assets or liabilities

<TABLE>
<CAPTION>
                                                                          December 31
                                                                 Amounts                Tax Effects
 <S>                                                        <C>                   <C>
   a)Total deferred income tax liabilities                   $     --              $       --
      b)Total deferred income tax assets                        5,851,399                1,472,828
      c)Valuation allowance for deferred income tax assets         --                      --
      d)Tax effects of temporary differences                       --                      --
</TABLE>
<TABLE>
<CAPTION>                                                                          December 31,1997
 
                                                                Amounts                  Tax Effects
<S>                                                         <C>                  <C>
     Deferred organization cost                              $14,759,375          $      3,689,844
           Loss carryover                                      8,646,218                 2,161,555
              Total deferred income tax assets                                    $      5,851,399
</TABLE>
<TABLE>
<CAPTION>
                                                                         December 31, 1996         
                                                                    1997                      1996
<S>                                                        <C>                   <C>       
           Deferred organization cost                        $ 5,891,311          $      1,472,828     
</TABLE>
 
   b. Classification of deferred income tax assets and liabilities
<TABLE>
<CAPTION>
 
                                                                         December 31     
                                                                    1997                      1996
<S>                                                         <C>                  <C>          
      Deferred income tax assets - noncurrent                $ 5,851,399          $      1,472,828
      Valuation allowance                                           --                        --
      Deferred income tax liabilities - noncurrent                  --                        --

      Net deferred income tax assets - noncurrent            $ 5,851,399          $      1,472,828
</TABLE>
   c. Income tax

      Reconciliation of expected income tax computed on pretax earnings at
      statutory rates to current income tax expense:
<TABLE>
<CAPTION>
                                                                    1997                      1996
<S>                                                        <C>                  <C>
      Expected income tax benefit                            $(4,613,484)         $     (1,084,860)
      Permanent differences                                      234,913                     3,876
      Deferred organization cost                               2,217,016                 1,080,984
      Loss carryover                                           2,161,555                      -- 
      Current income tax expense                             $     --             $           --
</TABLE>
<PAGE>
12.   EARNINGS PER SHARE
<TABLE>
<CAPTION>
                                                                     1997                     1996
<S>                                                         <C>               <C>
      Net loss (A)                                           $(14,075,362)     $        (3,258,457)
 
      Weighted average number of outstanding shares (B)        13,085,808               10,000,000

      Earnings per share (A)/(B)                             $      (1.08)     $             (0.33)
</TABLE>
      10,000,000+9,880,000*114/365=13,085,808 (shares)

13.    RELATED PARTIES TRANSACTIONS

   a.  Related parties and relationship.

      Related parties                              Relationship
 
      Unique Mobility, Inc.                        Major shareholder

      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 AUTO components Corp.                     Investee of the Company's
                                                   major shareholder

   b.  Significant transactions with related parties

      a)  Net sales

<TABLE>
<CAPTION>
                                                 1997                      1996 
                                         Amounts        %           Amounts         %
<S>                                 <C>          <C>           <C>            <C>    
      Kymco Motor Co., Ltd.          $     21,400     100.00    $      --          --

      a)  Rental expense
</TABLE>
<TABLE>
<CAPTION> 
                                                 1997                      1996
<S>                                          <C>                     <C>
      Turn Luckily Technology Co., Ltd.       $     1,904              $    40,000
      DJ AUTO Components Corp.                    186,000                  257,143
                                              $   187,904              $   297,143
</TABLE>
      b)  Property purchased from Everlight Electric Industrial Co., Ltd.

                                                      Amounts Paid
     Transactions             Total Prices  December 31,1997 December 31, 1996
     Purchase of land   $      86,563,756       $86,563,756     $84,414,291
                           plus land value
                           increment tax
     Purchase of factory       96,000,000        95,832,792      38,216,089

      c)  Other income

                                        1997                           1996
Turn Luckily Technology Co., Ltd. $  405,637                    $        --
Unique Mobility, Inc.                819,784                             --
Total                             $1,225,421                             --    
 
      d) Indemnity loss

 
                                      1997                             1996
Kymco Motor Co.,  Ltd.           $ 5,642,847                    $        --

In 1997,  the Company entered a sale  agreement  with Kymco Motor Co., Ltd. and
received the advance  payment of  $72,700,000.  Since the Company failed to
deliver the  merchandise  in accordance  with the  agreement,  the Company has
returned the advance payment and also indemnified the related interest
loss of $ 5,642,847.

      e) Other notes payable
<TABLE>
<CAPTION>
                                                                  December 31               
                                                  1997                                   1996     
                                          Amounts             %                   Amounts            %   
<S>                                    <C>               <C>             <C>                <C>
Overlight Electric Industrial Co., Ltd.  $    --             --           $   15,761,177          99.03
</TABLE>
 
14  ADDITIONAL DISCLOSURES
 
                                                                             
                                               1997                     1996 

      Net loss per books (ROC GAAP)   $    (14,075,362)           $(3,258,457)
      Differences in GAAP:
         Accounting for pensions                 --                     --
         Accounting for income tax          (4,378,571)            (1,080,984)

      Net loss per US                 $    (18,453,933)         $  (4,339,441)
 

      a. Accounting for pensions:

          Under the ROC Generally Accepted  Accounting  Principles (GAAP),  only
          public  companies  are  currently  required  to adopt  ROC SFAS  No.18
          "Accounting  for Pensions",  which is similar to US SFAS No.87.  Since
          the  Company  is not a public  company,  it has not  adopted  ROC SFAS
          No.18.The  Company has not yet  established  an employees'  retirement
          plan in accordance  with the Labor  Standards Law and has not obtained
          an actuarial valuation report to accrue the pension liability.
 
      b. Accounting for income tax:
 
          ROC SFAS  No.22 "Accounting  for  Income  Tax" is  similar to US SFAS
          No.109. However, the local accounting practices do not require that an
          100% valuation allowance for deferred tax assets should be provided in
          an operating loss situation. The aforementioned difference represented
          the  additional  valuation  allowance  for  deferred  tax assets to be
          provided for 1997 and 1996 under US GAAP.


(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  strategic  alliance and purchase of Company  common
          stock by EV Global Motor Company dated June 30, 1997.

          Report  regarding  signing  of Letter of  Intent  to  acquire  Aerocom
          Industries, Inc. dated December 9, 1997.

          Report   regarding  the  completion  of  the  acquisition  of  Aerocom
          Industries, Inc. dated January 20, 1998.

          Report  regarding  signing  of Letter of  Intent to  acquire  Franklin
          Manufacturing Company dated April 2, 1998.

          Report  regarding  the  completion  of  the  acquisition  of  Franklin
          Manufacturing Company dated May 6, 1998.

    (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 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 herein by reference.

     10.16 Stock  Purchase  Agreement  by and among  Unique  Mobility,  Inc. and
     Invacare  Corporation 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.

     Amendment to the Stock Purchase Agreement by and among Unique Mobility Inc.
     and  Invacare  Corporation.  Reference  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.

     10.18  Incentive  Stock Option  Agreement with Ray A. Geddes,  Reference is
     made to Exhibit 10.1 in the Company's Quarterly Report on Form 10-Q for the
     quarter ended September 30, 1997, (No. 0-9146) which is incorporated herein
     by reference.

     10.19 Non-qualified Stock Option Agreement with Ray A. Geddes, Reference is
     made to Exhibit 10.2 in the Company's Quarterly Report on Form 10-Q for the
     quarter ended September 30, 1997, (No. 0-9146) which is incorporated herein
     by reference.

     Agreement and Plan of Merger and  Reorganization  between Unique  Mobility,
     Inc., Unique Merger Sub, Inc.,  Aerocom  Industries,  Inc., Thomas J. Lang,
     James M. Buschy, Robert C. Jeffers and Gary R. Morton. Reference is made to
     Exhibit 2 in the  Company's  current  report on Form 8-K filed  January 20,
     1998 (No. 0-9146) which is incorporated herein by reference.

     Escrow Agreement  between Unique Mobility,  Inc.,  Thomas J. Lang, James M.
     Buschy,  Robert C.  Jeffers,  Gary P. Morton and Norwest Bank Colorado N.A.
     Reference is made to Exhibit 2 in the Company's  current report on Form 8-K
     filed   January 20,1998  (No.  0-9146)  which  is  incorporated  herein  by
     reference.

     Share  Exchange   Agreement   between  Unique  Mobility,   Inc.,   Franklin
     Manufacturing Company, Michael G. Franklin and Deborah M. McNatt. Reference
     is made to Exhibit 2.2 in the  Company's  current  report on Form 8-K filed
     May 6, 1998, (No. 09146) which is incorporated herein by reference.

     10.23 Escrow Agreement between Unique Mobility,  Inc., Michael G. Franklin,
     Deborah M. McNatt  and Norwest  Bank  Colorado  N.A.  Reference  is made to
     Exhibit 2.1 in the Company's  current report on Form 8-K filed May 6, 1998,
     (No. 09146) which is  incorporated  herein by reference.  10.24  Employment
     Agreement between Unique Mobility, Inc. and Michael G. Franklin.  Reference
     is made to Exhibit 2.3 in the  Company's  current  report on Form 8-K filed
     May 6, 1998, (No. 09146) which is incorporated herein by reference.

     10.25  Non-competition  Agreement  between  Unique  Mobility,  Inc. and
     Michael G.Franklin.  Reference is made to Exhibit 2.4 in the Company's
     current report on Form 8-K filed May 6, 1998, (No. 09146) 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

<PAGE>

                                              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 to
be signed on its  behalf  by the  undersigned,  thereunto  duly  authorized,  in
Golden, Colorado on the 26th day of June, 1998.

                                        UNIQUE MOBILITY, INC.,
                                        a Colorado Corporation

                                         By: "Ray A. Geddes" 
                                         Ray A. Geddes
                                         Chairman of the Board of Directors

Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
Annual  Report on Form 10-K has been signed  below by the  following  persons on
behalf of Unique  Mobility,  Inc.,  in the  capacities  indicted and on the date
indicated.

 Signature                    Title                           Date


                       Chairman of the Board of Directors
 "Ray A. Geddes"       (Principal Executive Officer)     June 26, 1998
  Ray A. Geddes

                       Treasurer
                       (Principal Financial and
 "Donald A. French"    Accounting Officer)               June 26, 1998
  Donald A. French


 "William G. Rankin"   President and Director            June 26, 1998
  William G. Rankin


                       Director                          June __, 1998
  Francis S.M. Hodsoll


 "H. J. Young"         Director                          June 24, 1998
  H. J. Young


 "J.B. Richey"         Director                          June 25, 1998
  J. B. Richey


 "Lee Iacocca"         Director                          June 24, 1998
  Lee Iacocca


 "Michael G. Franklin" Vice-President - Electronics      June 26, 1998
  Michael G. Franklin  Manufacturing and Director

<PAGE>