SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                     For the fiscal year ended July 31, 1999
                         Commission File Number 0-25184

                             U. S. ELECTRICAR, INC.
             (Exact name of registrant as specified in its charter)


          California                                     95-3056150
-------------------------------          ---------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)


                      19850 South Magellan Drive, Torrance,
                     California 90502 (Address of principal
                     executive offices, including zip code)

                                 (310) 527-2800
              (Registrant's telephone number, including area code)


        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                           Common Stock, no par value
                                (Title of class)

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  the  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  and  non-voting  stock  held  by
non-affiliates  of the  registrant as of October 25, 1999 was  $13,515,672.  For
purposes  of this  calculation  only,  (i)  shares of Common  Stock and Series A
Preferred  Stock are deemed to have a market  value of $0.19 per share,  and the
Series B Preferred  Stock is deemed to have a market  value of $0.633 per share,
based on the  average of the high bid and low ask prices of the Common  Stock on
October 25, 1999, and (ii) each of the executive officers, directors and persons
holding 5% or more of the  outstanding  Common Stock  (including  Series A and B
Preferred Stock on an as-converted basis) is deemed to be an affiliate.

The number of shares of Common  Stock  outstanding  as of October  25,  1999 was
251,992,218.



<PAGE>

<TABLE>


                                                         U.S. ELECTRICAR, INC.

                                                     1999 FORM 10-K ANNUAL REPORT

                                                           TABLE OF CONTENTS

<CAPTION>
<S>                                                                                                                              <C>
                                                               PART I

Item 1. Business ..............................................................................................................    3

Item 2. Properties ............................................................................................................    7

Item 3. Legal Proceedings .....................................................................................................    7

Item 4. Submission of Matters to a Vote of Security Holder ....................................................................    8

                                                              PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters .................................................   10

Item 6. Selected Financial Data ...............................................................................................   11

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................   12

Item 7a. Quantitative and Qualitative Disclosures about Market Risk ...........................................................   16

Item 8. Financial Statements and Supplementary Data ...........................................................................   16

Item 9 Changes in Disagreements with Accountants on Accounting and Financial Disclosure .......................................   16

                                                              PART III

Item 10. Directors and Executive Officers of the Registrant ...................................................................   17

Item 11. Executive Compensation ...............................................................................................   19

Item 12. Security Ownership of Certain Beneficial Owners and Management .......................................................   22

Item 13. Certain Relationships and Related Transactions .......................................................................   24

                                                              PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K .....................................................   25



SIGNATURE .....................................................................................................................   26








</TABLE>
                                       2


<PAGE>


                                     PART I

              The  matters  addressed  in this  report  on Form  10-K,  with the
exception  of  the  historical  information   presented,   may  contain  certain
forward-looking  statements  involving  risks and  uncertainties.  The Company's
actual  results  could  differ   materially  from  those  anticipated  in  these
forward-looking  statements as a result of certain factors,  including those set
forth under the heading  "Certain Factors That May Affect Future Results" in the
Management's Discussion and Analysis section and elsewhere in this report.

Item 1.  Business

General

         U. S. Electricar,  Inc., a California Corporation (the "Company"),  was
incorporated  on  July  30,  1976,  under  its  original  name,   "Clover  Solar
Corporation,  Inc." The name of the Company was changed in June 1979,  to "Solar
Electric Engineering,  Inc.", and was subsequently changed to "U.S.  Electricar,
Inc." in January 1994.

         The Company originally was established to develop,  convert,  assemble,
manufacture and distribute battery-powered electric vehicles,  including on-road
pick up trucks,  passenger  cars,  buses and  delivery  vehicles,  and  off-road
industrial   vehicles.   Today,  the  Company  has  completely   re-defined  its
product-line  and the Company is directing its efforts toward the development of
electric  drive-trains and related  components,  vehicle systems integration and
the performance of various engineering contracts. The Company's efforts relating
to the converted vehicle program have been discontinued,  and any efforts toward
that program consist primarily of supporting  customers with vehicle integration
and maintenance.

         The Company's  fiscal year ends July 31. All year  references  refer to
fiscal years.

         In  1997,  the  Company  made  two  significant  moves  to  adjust  and
strengthen  its overall  product base and realign its  operations.  In September
1996,  the  Company  sold  substantially  all the assets and  properties  of the
Company's wholly owned subsidiary, Industrial Electric Vehicles, Inc. In October
1996, the Company acquired substantially all the tangible and intangible assets,
and assumed  certain  liabilities  of  Systronix  Corporation  ("Systronix"),  a
developer of fully  integrated  propulsion  systems and related  components  for
electric vehicles, located in Torrance, California.

         In March 1997,  the Company  completed an agreement  with Hyundai Motor
Company ("HMC") and Hyundai Electronics Industries Co., Ltd. ("HEI") whereby HMC
and HEI  collectively  purchased $3.6 million of the Company's  common stock and
secured a technology license for an additional payment of $2.0 million.  For the
technology  license,  the Company received $1,850,000 in cash, and the remaining
$150,000 is to be received over six years.

         In 1998, the Company  restructured  its top  management,  realigned its
product base and  concentrated  on the  reduction of overall  company  operating
costs.  Facilities were closed,  operations  streamlined and personnel  reduced.
Headcount  decreased  from 51 employees at July 31, 1997 to 26 employees at July
31, 1998, yet the Company has maintained its core engineering capabilities.  The
Company has since begun to hire  additional  personnel  as is  warranted  by new
contracts and orders.

         During 1999,  the Company  continued to concentrate on the reduction of
operating costs and outstanding debt. The Company's business  activities are now
focused   primarily  on  the   development  of  electric  and  hybrid   electric
drive-trains  and  related  components,   fuel  cell  systems,  vehicle  systems
integration and the performance of various  engineering  contracts.  The Company
has several key contracts with the U. S. government's  Defense Advanced Research
Project Agency ("DARPA") and the Department of Transportation ("DOT"), including
the analysis of a new plastic  lithium ion vehicle battery  concept,  testing of
advanced vehicle batteries and development of an airport electric passenger tram
system.  The Company also has several major  engineering  contracts  with HMC to
design,  develop and test electric  drive-trains and related  products.  Hyundai
Motor Company is contracting with the Company for the development of an advanced
charging unit and a hybrid vehicle development,  as well as preparing to produce
the family of Panthertm drive system for their electric vehicles. The Company is
extending the PantherTM drive system to hybrid vehicle  applications in projects
sponsored by Hyundai.  These hybrid systems will be applied to light, medium and
heavy duty  transportation  vehicles.  The Company is also  offering the modular
drive




                                       3
<PAGE>

systems to Original Equipment  Manufacturers ("OEM") and other customers.  These
drive systems have been installed in various vehicles.  The Company offers other
components such as air conditioning,  heat pump units,  electro-hydraulic  power

steering  units  and  battery  management  units  to  OEMs,  both  domestic  and
international.  The Company is also developing a high power charger for use with
its drive systems.  HMC has adapted a customized version of the PantherTM 60 for
their production electric vehicle.

         The Company has completed the sale of a license to certain  proprietary
PantherTM  Drive System  software and  hardware,  for the Republic of Korea,  to
Hyundai Heavy Industries  ("HHI") for further design and development of electric
drive systems.  The Company anticipates  deriving further development  contracts
from this new relationship  with HHI as well as utilizing HHI to manufacture the
Company's drive systems for international sales.

         The  Company  is  aggressively  pursuing  various  avenues  of  revenue
generation  to increase its cash flow.  These  include  further  developing  its
relationship with the Hyundai Group, joint venturing with global vehicle and bus
manufacturers  to utilize its  electric  drive train  system,  and  developing a
comprehensive  marketing plan to penetrate  various  alternate niche markets for
its  drive  system  and  its   components.   The  Company  is  also  looking  at
non-automotive applications for its products.

         The Company received capital  investments from Jagen,  Pty, Ltd. in the
amount of $2,500,000 on June 4, 1999 and from Anthony Rawlinson in the amount of
$500,000 on July 30, 1999, which have enabled the Company to further develop its
hybrid drive  systems as well as embark on other  in-house  funded  research and
development. The Company intends to explore new markets and develop an agressive
sales and marketing plan to sell the current  product line of  drive-trains  and
components.


Debt Restructuring

         The Company's debt restructuring plan has progressed  positively during
1999. With the addition of capital as discussed  below,  the Company will retire
the  $307,000,  three-year  debt  due  to the  Credit  Managers  Association  of
California  ("CMAC")  which has been  extended  to  August,  1999.  CMAC's  $3.3
million, 20-year promissory note becomes due and payable in 2016. In March 1999,
the  Company's  Chief  Executive  Office  and  President  purchased  all  of the
Company's outstanding debt due to Itochu Corporation,  which was $4,300,000 plus
accrued interest.  As of July 30, 1999, this individual has forgiven  $1,300,000
in principal and $1,393,506 in accrued  interest.  This effectively  reduced the
Company's total  outstanding  obligation  including  interest to $3,000,000 from
$5,693,506. The Company has also been aggressively reducing its outstanding past
due  accounts  payable.  The  Company  shall  continue  to pursue a strategy  of
negotiating settlements on these outstanding payables where prudent.


Environmental Initiatives and Legislation

               Federal legislation was enacted to promote the use of alternative
fuel vehicles,  including  electric  vehicles.  Several states have also adopted
legislation that sets deadlines for the  introduction of zero emission  vehicles
("ZEV").  The State of California delayed the mandated  introduction of ZEV from
1998 to 2003, but still retained the original required percentage of ZEV and now
hybrid-electric vehicles for 2003 at 10%. The State of California estimates that
a combination of 100,000 electric and hybrid electric  vehicles will be required
to meet the State's 2003  mandate.  The U.S.  Department of Energy also modified
their rules  governing how state fleets and utility  fleets must comply with the
Energy Policy Act of 1992 on alternative fuel transportation programs.


                                       4
<PAGE>

Products

         The Company  continued  to enhance  and expand its product  line during
1999.  The Company is  concentrating  its  product  base to focus  primarily  on
electric propulsion systems and components for electric and hybrid vehicles. The
Company maintains a family of electric  propulsion  systems consisting of a 60kW
drive system for light  vehicles,  a 90kW drive system for medium size  vehicles
and a 120kW drive system for larger trucks and buses.  Additionally  the Company
has  completed the  development  and  prototyping  of both a Series and Parallel
Hybrid drive system in  conjunction  with Hyundai  Motor  Company of Korea.  The
Company has developed various  components for integration into the drive systems
or as stand-alone  systems such as the Battery Care Unit, the Safety  Disconnect
Unit and the Electric Power  Steering  unit. The Company is currently  analyzing
the  non-automotive  applications  for many of its products in other  industries
such as telecommunications.

         The  Company  is no longer  involved  in  product  sales of  conversion
vehicles,  industrial  electric vehicles or light electric delivery trucks.  The
Company is in negotiations to sell an international  manufacturing license for a
1.5 ton electric delivery truck previously built for international markets.

Strategic Partnering And Technology Developments

         The Company has made efforts to establish  third-party licensing and/or
distribution  arrangements and align itself with various technology  development
companies and electric  vehicle  component  manufacturers  to complement its own
expertise in the electric vehicle market.  The Company has continued its efforts
to  implement a strategy to be a "systems  integrator"  by seeking to  establish
relationships to utilize other independently  developed technology.  The Company
believes that its competitive advantage may be its ability to identify,  attract
and  integrate  the latest  technology  available  to  produce  state of the art
products at competitive  prices.  The Company believes this strategy will reduce
capital and research  and  development  costs to the extent  other  companies or
organizations will fund these expenses.

         The Company believes that two of the principal  component  technologies
relevant to a cost effective  electric vehicle are the electric drive system and
the  battery/charging  system.  The  Hyundai  Group of Korea and the Company are
cooperating in the  development of advanced  drive-train  technology and related
systems.   It  is  the  Company's  strategy  to  continuously   review  emerging
technological  developments and seek alliances with or, if sufficient additional
capital funding can be obtained,  complete  acquisitions  with companies that it
perceives own the best proven  technologies for incorporation  into its electric
vehicles. The Company's progress and current plans for each system are described
below.

Electric Drive System

         The electric drive system  consists of an electric motor and electronic
controls  that  regulate the flow of  electricity  to and from the batteries (at
various  voltages  and  amperages)  to propel  the  vehicle.  Auxiliary  vehicle
functions (e.g.,  radio,  lights,  windshield wipers,  etc.) are also powered by
stored electrical energy similar to that of an internal combustion drive system.

         The Hyundai Group of Korea has recognized this advanced  technology and
has  invested  in the Company  and  licensed  the drive  system  technology  for
production in Korea. The Company has fully validated its first propulsion system
product,  the PantherTM 60  alternating  current (AC) drive train for light duty
vehicles.  The  Company  has  continued  to develop a family of  electric  drive
systems with the PantherTM 90 and PantherTM 120 systems for buses and heavy-duty
vehicles,  and the 40kW off-board  charging system,  the second  generation in a
family of rapid chargers for all sizes of electric vehicles.

         The Company continues to be awarded a significant number of engineering
contracts from HMC and HHI for the  development of various types of drive trains
and related systems.

Hybrid Vehicles

         The Company completed its development for HMC of a Series Hybrid System
and Parallel  Hydrid System for vehicles  introduced by HMC. The hybrid  systems
performed without complication and served as a validation of the capabilities of
the  Company.  The Company is extending  the Panther  drive system to the hybrid
vehicle  application  by adapting the  PantherTM 120 as the drive system and the
PantherTM  60 as  the  induction  generator  for a  series  hybrid  bus



                                       5
<PAGE>

project sponsored by HMC. The Company has also developed a parallel hybrid drive
system and a dual-mode hybrid drive system utilizing the Panther  controller and
the brushless DC motor.

Battery Management and Charging System

         Pursuant to a DARPA program, the Company has completed a "beta test" of
new  battery  technologies  from  various  battery  manufacturers.  The  Company
believes that these new battery systems will allow design  advantages in battery
placement, weight distribution,  and vehicle crashworthiness.  Additionally, the
Company is  monitoring  other  battery  innovations  that may extend an electric
vehicle  driving range by up to 50% and permit a shorter  recharging  time.  The
Company is  developing  and testing  Plastic  Lithium Ion ("PLI")  batteries  in
collaboration  with a major  battery OEM. The PLI battery  project  sponsored by
DARPA is in two  phases.  The  project  is  currently  in its  second  phase and
continues to show promising results.

         The Company is also  developing a 40 kW high power charger for HMC. The
high power charger is based on our modular Panther system technology,  and it is
sufficiently precise that it could also be used for battery conditioning.

Components

         The Company is offering the modular drive system and components to OEMs
and other  customers.  The  PantherTM  60,  PantherTM 90 and PantherTM 120 drive
systems have been  installed in various  vehicles  and are under  evaluation  by
customers and potential  customers.  HMC has adapted a customized version of the
PantherTM 60 for their production  electric vehicle.  The Company also offers an
air  conditioning/heat  pump,  an  electro-hydraulic  power  steering unit and a
safety  disconnect  unit for  utilization  by OEMs. The Company is also offering
BatteryCareTM,  a battery  management  system, to OEMs. This battery  management
system is  utilized  in the U.S.  Postal  Service  electric  vehicle,  and it is
capable of providing  communication  to both inductive and  conductive  chargers
simultaneously  and managing the on-board and  off-board  charging  systems with
multiple technologies.  This battery care unit is also being utilized to upgrade
the electric  vehicles in the DARPA battery testing program in Hawaii.  It makes
these vehicles  compatible with the high power charging  stations  utilizing the
Society of Automotive Engineering standards.

Competitive Conditions

         The competition to develop and market  electric  vehicles has increased
during  the last  year and the  Company  expects  this  trend to  continue.  The
competition  consists of development  stage  companies as well as major U.S. and
international companies. The Company's future prospects will be highly dependent
upon the  successful  development  and  introduction  of new  products  that are
responsive to market needs and can be manufactured  and sold at a profit.  There
can be no  assurance  that the Company will be able to  successfully  develop or
market any such products.

         The development of hybrid-electric and alternative fuel vehicles,  such
as compressed natural gas, fuel cells and hybrid cars poses a competitive threat
to the Company in markets for low  emission  vehicles  (LEVs) but not in markets
where government mandates call for zero emission vehicles (ZEVs). The Company is
directly involved in the development of hybrid vehicles and fuel cell systems in
order to meet future requirements and applications.

         Various  providers of electric vehicles have proposed products or offer
products  for sale in this  emerging  market.  These  products  encompass a wide
variety of  technologies  aimed at both  consumer and  commercial  markets.  The
critical  role of  technology  in this market is  demonstrated  through  several
product  offerings.  Applied  technologies  range from direct current (DC) motor
drives to  alternate  current  (AC)  induction  motor  drives,  from  conversion
vehicles to  purpose-built  (OEM)  vehicles,  from  lead-acid  batteries to more
advanced  power  storage  technologies  and from  traditional  materials to more
advanced  "composite"  materials.  As the industry matures, key technologies and
capabilities are expected to play critical competitive roles. The Company's goal
is to position  itself as a long term competitor in this industry by focusing on
vehicle electric drive systems and related sub systems,  component  integration,
technology  application and strategic  partnerships.  The Company  believes that
this  strategy will enhance the  Company's  position as an electric  drive train
system supplier because,  whether the OEMs build electric,  hybrid-electric of a
fuel-cell  powered  vehicles,  the  electric  drive  system will be an essential
component.


                                       6
<PAGE>

Research and Development

         The Company  believes that timely  development and  introduction of new
products are essential to establishing and maintaining a competitive  advantage.
The Company is  currently  focusing  its  development  efforts  primarily in the
following areas:

         *Technical  proposals  and  program  development  under  DARPA/DOT  and
          Hyundai Group Contracts;

         *Power Control and Drive Systems and related technologies;

         *Shuttle and Transit Bus integration and development; and

         *Subsystem development (i.e., climate control, power management).

         In 1999,  1998 and 1997,  the  Company  spent  $499,000,  $445,000  and
$1,218,000,  respectively,  on internal research and development activities. The
Company is continually evaluating and updating the technology and equipment used
in developing each of its products.  The electric  vehicle  industry is still in
its infancy and the  technology  involved in the  industry is rapidly  changing.
There is limited  experience in the  operation and testing of electric  vehicles
and components,  and the development of electric  vehicle  technology  therefore
involves inherent risks.

Intellectual Property

         The Company  currently holds one patent has submitted  applications for
another patent and several  trademarks or service marks in the United States. As
the Company further  develops its own technology,  particularly  relating to its
proprietary  drive  train and  component  technology,  the Company may apply for
patents or for other  appropriate  statutory  protection.  The status of patents
involves complex legal and factual questions,  and the breadth of claims allowed
is uncertain. Accordingly, there can be no assurance that any patent application
filed by the Company will result in patents being issued. Moreover, there can be
no assurance  that third parties will not assert claims against the Comapny with
respect to existing and future products. Although the Company intends to protect
its rights  vigorously,  there can be no assurance  that these  measures will be
successful.  In the event of  litigation  to determine the validity of any third
party  claims  such  litigation  could  result in  siginificant  expense  to the
Company.  Additionally,  the laws of certain  countries  in which the  Company's
products  are or may be  developed,  manufactured  or sold may not  protect  the
Company's  prodcuts and  intellectual  property rights to the same extent as the
laws of the United States.

Employees

         As of July 31,  1999,  the  Company had 35  employees,  of which 20 are
full-time and 11 are part-time. Three employees are contract employees, employed
on an hourly  basis,  and one is  domiciled  in South  Korea.  The  departmental
breakdown of these individuals  include 3 in  administration,  1 in sales, 23 in
engineering and research and development, and 8 in production.

Item 2.   Properties

         The Company's corporate offices are located in Torrance, California, in
leased office space of  approximately  20,000 square feet.  This facility houses
the Company's administrative departments and senior level operations,  including
executive,  legal,  finance,  planning,  purchasing,  personnel,  engineers  and
operations  personnel.  This lease terminates in February,  2000. The Company is
currently  reviewing its options to remain at its current location or move to an
alternate location.

 Item 3. Legal Proceedings

         As previously  disclosed in the Company's  periodic  reports filed with
the  Securities  and  Exchange  Commission  in 1995,  the  Company  restructured
approximately $22 million in debt to vendors and lenders. A creditor's committee
was formed of substantially  all the vendors and lenders at that time.  Nineteen
creditors,  at that time,  chose not to join the creditor's  committee,  instead
opting to pursue their legal remedies individually. The total outstanding dollar
value of these lawsuits is approximately $650,000.00.  At this time, the Company
anticipates  minimal  impact  from the  resolution  of any of these  lawsuits or
judgments  as all assets of the  Company are  collateralized  against a priority
security interest

         In February  1999, the Company became a defendant in a lawsuit filed by
an individual  alleging  personal  injury by a vehicle  manufactured  by a prior
subsidiary of the Company,  Nordskog Electric Vehicles,  Inc., a.k.a.



                                       7
<PAGE>

Industrial Electric Vehicles, Inc. The matter has been referred to the insurance
company  which has  assumed  legal  liability  and is  proceeding  to defend the
matter.  As of October  27,  1999,  the  potential  liability  to the Company is
unknown, however due to the insurance coverage, it is believed to be minimal.

         In April 1999, the City of Napa filed a lawsuit  against the Company in
the Superior Court of California,  County of Napa,  regarding  certain  electric
vehicles  sold by the  Company to the City of Napa.  The suit  alleges  that the
vehicles  did not meet certain  performance  specifications  and an  unspecified
amount in damages is sought.  The Company does not concur with the suit's claims
and intends to vigorously defend the suit.

Item 4.  Submission of Matters to a Vote of Security Holders

         The Company held its annual meeting of  stockholders  on July 29, 1999,
at which the following matters were voted upon.

1.       The  Company's  stockholders  voted upon and  approved  a  proposal  to
         approve an amendment to the Company's  Certificate of  Incorporation to
         increase  the  authorized   number  of  shares  of  Common  Stock  from
         300,000,000 to 500,000,000. The results of the voting were as follows:

                Number of Shares voted FOR:                   206,493,826
                Number of Shares voted AGAINST:                 1,399,245
                Number of Shares ABSTAINING:                      102,917
                Number of Broker NON-VOTES:                           N/A

2.       The  Company's  stockholders  voted upon and  approved  a  proposal  to
         approve an amendment to the Company's  Certificate of  Incorporation to
         effect a reverse stock split of the  Company's  Common Stock in a ratio
         of  one-for-twenty,  at any time  until  the  next  Annual  Meeting  of
         Shareholders. The results of the voting were as follows:

                Number of Shares voted FOR:                   204,967,360
                Number of Shares voted AGAINST:                 2,896,031
                Number of Shares ABSTAINING:                      132,597
                Number of Broker NON-VOTES:                           N/A

3.       The  Company's  stockholders  voted upon and  approved  a  proposal  to
         approve an amendment to the Company's  Certificate of  Incorporation to
         change the name of the Company and  authorize the Board of Directors to
         select a new name for the Company in their sole discretion. The results
         of the voting were as follows:

                Number of Shares voted FOR:                   205,351,202
                Number of Shares voted AGAINST:                 1,070,449
                Number of Shares ABSTAINING:                    1,574,217
                Number of Broker NON-VOTES:                           N/A

4.       The Company's stockholders voted upon and approved a proposal to ratify
         the action of the Board of Directors  increasing the authorized  number
         of shares of common stock under the U.S.  Electricar,  Inc.  1996 Stock
         Option Plan from  15,000,000 to 45,000,000  shares.  The results of the
         voting were as follows:

                Number of Shares voted FOR:                   183,408,560
                Number of Shares voted AGAINST:                 2,814,775
                Number of Shares ABSTAINING:                      121,282
                Number of Broker NON-VOTES:                           N/A


                                       8
<PAGE>


5.       The  Company's  stockholders  voted upon and  approved  a  proposal  to
         approve an amendment to Article III,  Section 2 of the Company's Bylaws
         to change the  variable  authorized  number of  directors to a range of
         from four (4) to seven (7). The results of the voting were as follows:

                  Number of Shares voted FOR:                   207,068,636
                  Number of Shares voted AGAINST:                   777,752
                  Number of Shares ABSTAINING:                      148,908
                  Number of Broker NON-VOTES:                           N/A

6.       The  Company's  stockholders  voted upon and  approved to elect six (6)
         individuals  to the Board of Directors.  The following  Directors  will
         serve  until the next  Annual  Meeting of  Shareholders  or until their
         respective successors are elected and qualified.

                  Re-elected Directors:                 FOR          WITHHELD

                  Donald Dreyer                        861,108           --
                  Carl D. Perry                    205,151,652       217,038
                  Edwin Riddell                    205,171,624       197,066

                  New Directors                         FOR          WITHHELD

                  Dr. Malcolm Currie               205,166,624       202,066
                  John J. Micek, III               205,229,894       138.796
                  Anthony Rawlinson                205,124,128       244,562

7.       The Company's stockholders voted upon and approved a proposal to ratify
         the action of the Board of Directors  appointing  Moss Adams LLP as the
         independent  auditors  for the Company for the fiscal years ending July
         31, 1999 and 2000. The results of the voting were as follows:

                  Number of Shares voted FOR:                   206,365,882
                  Number of Shares voted AGAINST:                    47,497
                  Number of Shares ABSTAINING:                    1,575,931
                  Number of Broker NON-VOTES:                           N/A



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                                       9
<PAGE>



                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Shareholder Matters

         The Company's Common Stock is presently traded in the  over-the-counter
market and quoted on the  National  Association  of  Securities  Dealers  (NASD)
"Bulletin  Board" under the symbol  "ECAR." The  following  table sets forth the
high and low prices of the Common Stock as reported on the NASD  Bulletin  Board
by the National Quote Bureau for the fiscal  quarters  indicated.  The following
over-the-counter  market quotations reflect inter-dealer prices,  without retail
mark-up,  mark-down or  commission,  and may not  necessarily  represent  actual
transactions.

                                            Common Stock           Average Daily
                                     High Price       Low Price         Volume
                                     ----------       ---------         ------
    Fiscal 1998
    -----------
    First Quarter . . . . . . .        $0.120          $0.045          104,692
    Second Quarter  . . . . . .        $0.085          $0.039           71,019
    Third Quarter. . . . . . . .       $0.047          $0.031           16,094
    Fourth Quarter. . . . . . .        $0.048          $0.040           22,739


                                           Common Stock            Average Daily
                                     High Price     Low Price           Volume
                                     ----------     ---------           ------
    Fiscal 1999
    -----------
    First Quarter . . . . . . .       $0.048         $0.020            72,223
    Second Quarter  . . . . . .       $0.031         $0.029           134,535
    Third Quarter. . . . . . . .      $0.031         $0.029            58,224
    Fourth Quarter. . . . . . .       $0.190         $0.031           427,624



         On October 25,  1999,  the last  reported  high bid price of the Common
Stock was $0.19 and the last reported low asking price was $0.19.  As of October
25, 1999, there were approximately  1,656 holders of record of the common stock.
As of October 25,  1999,  the  Company's  Series A  Preferred  Stock was held by
approximately 124 shareholders, many of whom are also Common Stock shareholders.
The Company's Series B Preferred Stock was held by approximately 37 shareholders
as of October  25,  1999.  The number of holders of record  excludes  beneficial
holders whose shares are held in the name of nominees or trustees.

Dividend Policy

         To date,  the Company has neither  declared nor paid any cash dividends
on shares of its Common  Stock or Series A or B  Preferred  Stock.  The  Company
presently  intends to retain all future  earnings  for its business and does not
anticipate  paying cash dividends on its Common Stock or Series A or B Preferred
Stock in the foreseeable future. The Company is required to pay dividends on its
Series A and B Preferred  Stock  before  dividends  may be paid on any shares of
Common  Stock.  At July 31,  1999,  the  Company had an  accumulated  deficit of
approximately  $85,445,000  and,  until  this  deficit  is  eliminated,  will be
prohibited  from  paying  dividends  on any  class  of stock  except  out of net
profits,  unless it meets  certain  asset and other tests under  Section 500 et.
seq. of the California Corporations Code.

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                                       10
<PAGE>


<TABLE>

Item 6.  Selected Financial Data
As of and for the fiscal year ended July 31, (in thousands,
except per share data)
<CAPTION>

                                                                1999           1998           1997           1996           1995
                                                                ----           ----           ----           ----           ----
<S>                                                           <C>            <C>            <C>            <C>            <C>
NET SALES                                                     $   2,774      $   1,938      $   4,484      $   4,209      $  11,625
COST OF SALES                                                     1,460          2,765          2,042          5,370         20,210
                                                              ---------      ---------      ---------      ---------      ---------
GROSS MARGIN                                                      1,314           (827)         2,442         (1,161)        (8,585)
                                                              ---------      ---------      ---------      ---------      ---------
OTHER COSTS AND EXPENSES
      Research and Development                                      499            445          1,218          1,401          6,697
      Selling, general and administrative                         1,141          1,697          3,116          5,608         13,952
      Interest and financing fees                                   724            665            792          1,890          5,732
      Other expense (income)                                        (41)           (67)           274            740            449
      Acquisition of research and development                                                   1,630
      Market development expense                                                                                                 77
      Gain on Warranty Reevaluations                               (474)
      Facility closures and consolidations of
      operations                                                                                                 701          2,378
                                                              ---------      ---------      ---------      ---------      ---------
      Total other costs and expenses                              1,849          2,740          7,030         10,340         29,285
                                                              ---------      ---------      ---------      ---------      ---------
LOSS FROM CONTINUING OPERATIONS                                    (535)        (3,567)        (4,588)       (11,501)       (37,870)
LOSS FROM DISCONTINUED OPERATIONS
GAIN ON DEBT RESTRUCTURING                                          140             42             53          2,147            305
                                                              ---------      ---------      ---------      ---------      ---------
NET LOSS                                                      $    (395)     $  (3,525)     $  (4,535)     $  (9,354)     $ (37,565)
                                                              =========      =========      =========      =========      =========

PER COMMON SHARE:

      Loss from continuing operations                         $   (0.01)     $   (0.02)     $   (0.03)     $   (0.17)     $   (1.88)

      Loss from discontinued operations

      Gain on debt restructuring                              $    0.00                                         0.03           0.02
                                                              ---------      ---------      ---------      ---------      ---------

      Net loss per common share                               $   (0.01)     $   (0.02)     $   (0.03)     $   (0.14)     $   (1.86)
                                                              =========      =========      =========      =========      =========

WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                              152,077        151,265        133,806         67,906         20,156
                                                              =========      =========      =========      =========      =========

      Total Assets                                            $   3,940      $   1,658      $   4,513      $   4,363      $  10,230
                                                              =========      =========      =========      =========      =========

      Long-term debt                                          $   3,332      $   3,332      $   3,639      $   3,987
                                                              =========      =========      =========      =========      =========

      Shareholders' equity (deficit)                          $  (7,316)     $ (12,615)     $  (9,095)     $ (12,736)     $ (24,760)
                                                              =========      =========      =========      =========      =========

</TABLE>

                                       11
<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

You should read this Management's Discussion and Analysis of Financial Condition
and Results of Operations in conjunction with our 1999 Financial  Statements and
Notes  thereto.  The  matters  addressed  in this  Management's  Discussion  and
Analysis of Financial Condition and Results of Operations, with the exception of
the historical information presented contains certain forward-looking statements
involving risks and  uncertainties.  Our actual results could differ  materially
from  those  anticipated  in these  forward-looking  statements  as a result  of
certain  factors,  including those set forth under the heading  "Certain Factors
That May Affect Future Results" and elsewhere in this report.

OVERVIEW

         The  financial  statements  present  the  financial  condition  of U.S.
Electricar,  Inc.  (the  "Company")  as of July  31,  1999  and the  results  of
operations and cash flows of the Company for the three years then ended.

         The Company  acquired  substantially  all the tangible  and  intangible
assets, and assumed certain  liabilities,  of Systronix on October 25, 1996, for
stock, a note and cash.

         In March 1997,  the Company  completed  an  agreement  with HMC and HEI
whereby HMC and HEI collectively  purchased $3.6 million of the Company's common
stock for cash and secured a  technology  license for an  additional  payment of
$2.0 million.  For the technology  license,  the Company received  $1,850,000 in
cash and the remaining $150,000 is to be received over six years.

         In 1998, the Company  restructured  its top  management,  realigned its
product base and  concentrated  on the  reduction of overall  company  operating
costs.  Facilities were closed,  operations  streamlined and personnel  reduced.
Headcount  decreased  from 51 employees at July 31, 1997 to 26 employees at July
31, 1998, yet the Company has maintained its core engineering capabilities.  The
Company has since begun to hire  additional  personnel  as is  warranted  by new
contracts and orders.

         During 1999,  the Company  continued to concentrate on the reduction of
operating costs and outstanding debt. The Company's business  activities are now
focused   primarily  on  the   development  of  electric  and  hybrid   electric
drive-trains  and  related  components,   fuel  cell  systems,  vehicle  systems
integration and the performance of various  engineering  contracts.  The Company
has several key contracts with the U.S.  government's  Defense Advanced Research
Project Agency ("DARPA") and the Department of Transportation ("DOT"), including
the analysis of a new plastic  lithium ion vehicle battery  concept,  testing of
advanced vehicle batteries and development of an airport electric passenger tram
system.  The Company also has several major  engineering  contracts  with HMC to
design,  develop and test electric  drive-trains and related  products.  Hyundai
Motor Company is contracting with the Company for the development of an advanced
charging unit and a hybrid vehicle development,  as well as preparing to produce
the family of Panthertm drive system for their electric vehicles. The Company is
extending the PantherTM drive system to hybrid vehicle  applications in projects
sponsored by Hyundai.  These hybrid systems will be applied to light, medium and
heavy duty  transportation  vehicles.  The Company is also  offering the modular
drive systems to Original Equipment  Manufacturers ("OEMs") and other customers.
These drive systems have been installed in various vehicles.  The Company offers
other components such as air  conditioning,  heat pump units,  electro-hydraulic
power steering  units and battery  management  units to OEMs,  both domestic and
international.  The Company is also developing a high power charger for use with
its drive systems. Hyundai Motor Company has adapted a customized version of the
PantherTM 60 for their production electric vehicle.

         The Company has completed the sale of a license to certain  proprietary
PantherTM  Drive System  software and  hardware,  for the Republic of Korea,  to
Hyundai Heavy Industries  ("HHI") for further design and development of electric
drive systems.  The Company anticipates  deriving further development  contracts
from this new  relationship  with Hyundai Heavy  Industries as well as utilizing
HHI to manufacture the Company's drive systems for international sales.

         The  Company  is  aggressively  pursuing  various  avenues  of  revenue
generation  to increase its cash flow.  These  include  further  developing  its
relationship with the Hyundai Group, joint venturing with global vehicle and bus
manufacturers  to utilize its  electric  drive train  system,  and  developing a
comprehensive  marketing plan to




                                       12
<PAGE>

penetrate  various  alternate  niche  markets  for  its  drive  system  and  its
components.  The Company is further looking at  non-automotive  applications for
its products.

         The Company received capital  investments from Jagen,  Pty, Ltd. in the
amount of $2,500,000 on June 4, 1999 and from Anthony Rawlinson in the amount of
$500,000 on July 30, 1999, which have enabled the Company to further develop its
hybrid drive  systems as well as embark on other  in-house  funded  research and
development. The Company intends to explore new markets and develop an agressive
sales and marketing plan to sell the current  product line of  drive-trains  and
components.

LIQUIDITY AND CAPITAL RESOURCES

         The  Company  has  experienced  recurring  cash flow  shortages  due to
operating losses primarily attributable to research, development, administrative
and other costs associated with the Company's efforts to become an international
manufacturer  and distributor of electric  vehicles.  Cash flows from operations
have  been  negative  and  have  not  been  sufficient  to  meet  the  Company's
obligations  as they came due.  The  Company  has  therefore  had to raise funds
through  numerous  financial  transactions.  At least until the Company  reaches
breakeven  volume in sales and  develops  and/or  acquires  the  capability  and
technology  necessary to manufacture and sell its products  profitably,  it will
need to  continue  to rely  extensively  on cash from  external  financing.  The
Company  anticipates that it will require  additional  outside  financing for at
least one more year.

         During 1999, the Company spent $798,000 in cash on operating activities
to fund the net loss of $395,000,  resulting  from the factors  explained in the
following section of this discussion and analysis. Accounts receivable increased
by $560,000 as the Company  increased the number of  engineering  contracts from
Hyundai Motor Company and Hyundai Heavy Industries.  Customer Deposits decreased
by $387,000 as the Company completed various contracts started in 1998 and moved
toward a milestone based billing procedure. Inventory decreased by $329,000, net
of  write-downs of $36,000.  The decrease was primarily  caused by the Company's
reclassification  of certain finished goods inventory to fixed assets to reflect
the assets current usage.  These items will now be depreciated over their useful
lives.

         The  operations of the Company  during 1999 were financed  primarily by
the funds received on engineering contracts and partly on funds received in from
the sale of a technology  license to Hyundai Heavy Industries.  In June and July
1999 the Company received  $3,000,000 from two investors,  Jagen.  Pty., Ltd. Of
Australia and Anthony Rawlinson

         It is  management's  intention  to  continue  its  debt  restructuring,
support current operations through sales of products and technology  consulting,
as well as seek additional  financing through private placements and other means
to increase  research and  development  into leading  edge  technologies.  As of
October 25, 1999, the Company has no firm commitments for significant additional
financing.

THE FUTURE  UNAVAILABILITY OR INADEQUACY OF FINANCING TO MEET FUTURE NEEDS COULD
FORCE THE COMPANY TO DELAY, MODIFY,  SUSPEND OR CEASE SOME OR ALL ASPECTS OF ITS
PLANNED  OPERATIONS,  AND/OR SEEK PROTECTION  UNDER APPLICABLE STATE AND FEDERAL
BANKRUPTCY AND INSOLVENCY LAWS.

RESULTS OF OPERATIONS

         Net  sales  of  $2,774,000  for  1999  increased  $836,000  or 43% from
$1,938,000  in 1998.  Two primary  factors  caused the  increase.  In 1999,  the
Company sold a technology  license to HHI for  $600,000.  Secondly,  the Company
increased  engineering,  development  and testing of electric  and hybrid  drive
trains and related components in conjunction with Hyundai Motor Company of Korea
and the U.S.  Government  through  United States Postal  Service,  DARPA and DOT
programs.  Of the  Company's  total  sales  for  1999,  $1,954,000,  or 70% were
revenues  realized on  engineering  contracts  with DARPA,  the Hyundai Group of
Korea and other customers.

         Net  sales of  $1,938,000  for 1998  decreased  $2,546,000  or 57% from
$4,484,000  in 1997.  Two primary  factors  caused the  decrease.  In 1997,  the
Company sold a technology license to HMC and HEI for $2,000,000,  and there were
no such  corresponding  sales of a  technology  license in 1998.  Secondly,  the
Company  discontinued the


                                       13
<PAGE>

sales of electric  vehicles in 1998 and focused on the engineering,  development
and testing of electric drive trains and related components.

         Cost of sales as a  percentage  of sales  decreased to 53% in 1999 from
143% in 1998. Sales revenue for 1999 included a sale of a technology  license of
$600,000.  Excluding the sale of the technology license,  cost of sales for 1999
was 67% of sales.

         Research and  development  expense  increased in 1999 to $499,000  from
$445,000,  an increase of $54,000, or 12%. While the Company's has reduced staff
and cut costs in all areas, the focus of the Company continues to be centered on
research  and  development.   The  product  development  cost  incurred  in  the
performance of engineering development contracts is charged to cost of sales for
this contract revenue. Non-funded development costs are reported as research and
development  expense.  Research  and  development  expense of  $445,000  in 1998
declined  $773,000,  or  63%  from  1997.  The  decline  was  the  result  of  a
continuation  of the  reduction  of  technical  resources  by the Company as the
Company changed from a manufacturer  and  retrofitter of electric  vehicles to a
components developer and producer.

         Selling,  general  and  administrative  expense of  $1,141,000  in 1999
continued to decline from  $1,697,000,  or 33% from 1998, as the Company reduced
continued to reduce spending and consolidated  operations.  Selling, general and
administrative  expense  of  $1,697,000  decreased  significantly  in  1998,  by
$1,419,000,   or  46%,  from  $3,116,000  in  1997.  Continued  and  significant
reductions in headcount,  facility costs and spending were  responsible  for the
decline.

         In 1999,  interest and financing  fees  increased  slightly to $724,000
from $665,000 in 1998, an increase of 9% due mainly to default  interest rate on
certain notes payable  becoming  effective.  Interest and financing fees in 1998
decreased  $127,000 or 16% to $665,000 from $792,000 in 1997. The forgiveness of
$1,300,000 of debt,  formerly the Itochu debt, and the scheduled  payment of the
$307,000 note to CMAC shall continue to reduce interest expense in the future.

         During 1999,  several unsecured  creditors agreed to settle their trade
debt claims for amounts less than the original debt owed to them. The reductions
from the original amounts owed and the settlement  amounts resulted in a gain on
debt  restructuring of $140,000 in 1999.  Additional  settlements  resulted in a
gain on debt restructuring of $42,000 in 1998 and $53,000 in 1997.

         As a result of the foregoing changes in net sales, cost of sales, other
costs and  expenses  and gain on debt  restructuring,  the net loss of  $395,000
decreased $3,130,000 or 89% from the $3,525,000 loss in 1998, while the net loss
for 1998 decreased  $1,010,000,  or 22% from the $4,535,000 loss in 1997.  These
results reflect a significant change in the operating  condition of the Company.
The cost structure and operating  conditions of the Company are now more in line
with the sales  volume and the scope of  business.  While the Company is not yet
operating at a profit, the fixed costs have been reduced significantly,  and the
Company  is now  approaching  a position  where it will be able to  sustain  its
current level of operations through self-funding.

Impact of Year 2000

          The  Company is aware of the issues  associated  with the  programming
code in existing  computer systems as the Year 2000 approaches.  The "Year 2000"
problem is concerned with whether computer systems will properly  recognize date
sensitive  information  when  the year  changes  to  2000.  Systems  that do not
properly  recognize such  information  could generate  erroneous data or cause a
system to fail.  The  Company,  like most owners of computer  software,  will be
required to modify significant portions of its software so that it will function
properly in the Year 2000.  The  Company  has  replaced  its  accounting  system
software  with  software  that is  compliant  with Year 2000  requirements.  The
Company  mainly  uses  third  party "off the  shelf"  software,  and it does not
anticipate a problem in resolving the Year 2000 problem in a timely manner.  The
Company is  currently  taking  steps to ensure  that its  computer  systems  and
services will continue to operate on and after January 1, 2000.  However,  there
can be no assurance  that Year 2000  problems will not occur with respect to the
Company's computer systems.

         The Year 2000 problem may impact other  entities with which the Company
transacts  business,  and the Company cannot predict the effect of the Year 2000
problem on such entities or the economy in general,  or the



                                       14
<PAGE>

resulting effect on the Company.  As a result, if preventative and/or corrective
actions by the Company and those  companies  with whom the Company does business
are not made in a timely  manner,  the Year 2000  issue  could  have a  material
adverse  effect on the Company's  business,  financial  condition and results of
operations.  The Company has not yet developed a contingency  plan to operate in
the event that any noncompliant  critical systems are not remedied by January 1,
2000, but it intends to develop such a plan in the near future.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

         Future  trends  for the  Company's  revenue  and  profitability  remain
difficult to predict.  The Company operates in a rapidly changing and developing
market that  involves a number of risks,  some of which are beyond the Company's
control. In addition,  as previously  disclosed in this Form 10-K, the Company's
financial  condition remains  precarious.  The following  discussion  highlights
certain of these risks.

Going Concern / Net Operating Losses.

          The Company has experienced  recurring  losses from operations and had
an accumulated  deficit of $85,445,000 at July 31, 1999.  There is no assurance,
however,  that any net operating  losses will be available to the Company in the
future  as  an  offset  against  future  profits  for  income  tax  purposes.  A
substantial  portion of the losses are  attributable to product  development and
other  start-up  costs  associated  with  the  Company's  business  focus on the
development,  production and sale of battery powered electric vehicles.  In June
and July 1999,  the Company  received  $3,000,000 in additional  capital to fund
operations,  invest in new technologies and provide for the commercialization of
the  current  product  line.  Cash  flows  from  future  operations  may  not be
sufficient  to enable  the  Company  to achieve  profitable  operations.  Market
conditions  and the  Company's  financial  position  may  inhibit its ability to
achieve profitable  operations.  These factors, as well as others,  indicate the
Company may be unable to continue as a going concern unless it is able to obtain
significant  additional financing and generate sufficient cash flows to meet its
obligations as they come due and sustain its operations. As of October 27, 1999,
the  Company  had no firm  commitments  from any  person or  entity  to  provide
capital,  and there can be no assurance that additional  funds will be available
from any source at the time the Company will need such funds.

Continued  Losses.  For the fiscal years ended July 31, 1999, 1998 and 1997, the
Company had  substantial  net losses of  $395,000,  $3,525,000  and  $4,535,000,
respectively on sales of $2,774,000, $1,938,000 and $4,484,000, respectively.

Nature  of  Industry.  The  electric  vehicle  ("EV")  industry  is still in its
infancy.  Although the Company  believes that it has  manufactured a significant
percentage of the electric vehicles sold in the United States based upon its own
knowledge  of the  industry,  there are many  large and  small  companies,  both
domestic and foreign,  now in, poised to enter, or entering this industry.  This
EV industry is subject to rapid technological change. Most of the major domestic
and foreign automobile  manufacturers (1) have produced  design-concept electric
vehicles,  and/or (2) have developed  improved electric storage,  propulsion and
control  systems,  and/or  (3)  are now  entering  or  planning  to  enter  into
production.  Various  non-automotive  companies  are  also  developing  improved
electric storage,  propulsion and control systems. Growth of the present limited
demand for electric  vehicles depends upon (a) future regulation and legislation
requiring  more  use  of  non-polluting  or  low-emission   vehicles,   (b)  the
environmental  consciousness  of  customers  and (c) the ability of electric and
hybrid-electric  vehicles to  successfully  compete with  vehicles  powered with
internal combustion engines on price and performance.

Changed  Legislative  Climate.  Because vehicles powered by internal  combustion
engines cause pollution,  there has been  significant  public pressure in Europe
and Asia, and enacted or pending legislation in the United States at the federal
level and in certain  states,  to promote or mandate the use of vehicles with no
tailpipe  emissions  ("zero emission  vehicles") or reduced  tailpipe  emissions
("low  emission  vehicles").  Legislation  requiring  or  promoting  zero or low
emission  vehicles is  necessary  to create a  significant  market for  electric
vehicles.  There can be no assurance,  however, that further legislation will be
enacted or that current  legislation  or state  mandates will not be repealed or
amended (as recently  occurred in California),  or that a different form of zero
emission or low emission  vehicle will not be invented,  developed and produced,
and achieve  greater  market  acceptance  than  electric  vehicles.  Extensions,
modifications or reductions of current federal and state  legislation,  mandates
and potential  tax  incentives  could  adversely  affect the Company's  business
prospects if implemented.


                                       15
<PAGE>

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

None.

Item 8.  Financial Statements and Supplementary Data

The response to this Item is submitted as a separate  section of this Form 10-K.
See Item 14.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

None.

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                                       16

<PAGE>


                                    PART III

<TABLE>
Item 10.     Directors and Executive Officers of the Registrant

         The following table sets forth certain  information with respect to the
Directors and executive officers of the Company:
<CAPTION>

------------------------------------------------------ ----------------- -------------------------------------------
Name                                                   Age               Position
------------------------------------------------------ ----------------- -------------------------------------------
<S>                                                    <C>               <C>
Anthony Rawlinson                                      44                Chairman of the Board
------------------------------------------------------ ----------------- -------------------------------------------

Carl D. Perry                                          67                Chief Executive Officer, President and
                                                                         Director
------------------------------------------------------ ----------------- -------------------------------------------

Edwin O. Riddell (1)                                   56                Director
------------------------------------------------------ ----------------- -------------------------------------------

Dr. Malcolm Currie (1)                                 70                Director
------------------------------------------------------ ----------------- -------------------------------------------

John J. Micek, III (2)                                 47                Director
------------------------------------------------------ ----------------- -------------------------------------------

Donald H. Dreyer (2)                                   63                Director
------------------------------------------------------ ----------------- -------------------------------------------
<FN>

(1)      Member of the Compensation Committee.
(2)      Member of the Audit Committee.
</FN>
</TABLE>

         Anthony  Rawlinson,  Chairman of the Board. Mr. Rawlinson was appointed
Chairman of the Board in July 1999. Mr. Rawlinson has been Managing  Director of
the Global Value  Investment  Portfolio  Management Pte. Ltd., a Singapore based
international fund management company managing  discretionary  equity portfolios
for  institutions,  pension funds and clients  globally.  Mr.  Rawlinson is also
Chairman of IXLA Ltd.,  an  Australian  public  company which is a leader in the
field  of PC  photography  software.  He is also  Chairman  of the  Board of its
wholly-owned   subsidiary,   photohighway.com,   an   internet   portal  for  PC
photography.

         Carl D. Perry,  Chief Executive  Officer,  President and Director.  Mr.
Perry  served as a Director and as an  Executive  Vice  President of the Company
from July 1993 until  November  1997. In November 1997, Mr. Perry was elected as
Chairman  of the Board and  Chief  Executive  Officer  of the  Company,  and was
elected  President in June 1999. In July,  1999, Mr. Perry resigned his position
as Chairman of the Board to allow Mr. Anthony Rawlinson to become Chairman.  Mr.
Perry  continues as Chief  Executive  Officer and  President  and as a Director.
Prior to joining the Company,  he was an  international  aerospace and financial
consultant  from 1989 to 1993.  Mr. Perry served as Executive  Vice President of
Canadiar Ltd., Canada's largest aerospace corporation,  from 1984 to 1993, where
he conducted strategic planning,  worldwide  marketing,  and international joint
ventures. From 1979 to 1983, Mr. Perry served as Executive Vice President of the
Howard Hughes Helicopter Company, now known as Boeing Helicopter Company,  where
he was responsible for general management,  worldwide business development,  and
international operations.

         Malcolm R. Currie,  Ph.D,  Director.  Dr. Currie was  re-elected to the
Board of  Directors  in July 1999.  Dr.  Currie had served as a Director  of the
Company from March 1995 through May 1997.  Since 1994, he has served as Chairman
of Electric Bicycle Co., a developer of electric bicycles.  From 1986 until July
1992,  Dr.  Currie  served as  Chairman  and Chief  Executive  Officer of Hughes
Aircraft  Co. (now  Hughes  Electronics),  and from 1985 until 1988,  he was the
Chief  Executive  Officer of Delco  Electronics.  His career in electronics  and
management  has included  research with many patents and papers in microwave and
millimeter wave electronics,  laser,  space systems,  and related fields. He has
led major programs in radar,  commercial satellites,  communication systems, and
defense  electronics.  He served as  Undersecretary  of Defense for Research and
Engineering,  the Defense Science Board,  and currently  serves on the Boards of
Directors of UNOCAL,  Investment Company of America, and LSI Logic, all of which
are publicly  traded  companies.  He is  President of the American  Institute of
Aeronautics  and  Astronautics,  and is Chairman of the Board of Trustees of the
University of Southern California.





                                       17

<PAGE>

         John J. Micek III,  Director.  Mr.  Micek was elected a Director of the
Company in April 1999. Mr. Micek served as the Company's Vice President, General
Counsel  and  Secretary  from March 1994 to March 1997.  From 1997 to 1999,  Mr.
Micek served as Chief Financial  Officer of Protozoa,  Inc., a private animation
and software production company.  From 1997 to the present, Mr. Micek has served
as President of Universal Assurors, Inc. Prior to joining the Company, Mr. Micek
practiced  law since  January  1989.  From 1987 to March  1994,  Mr.  Micek held
several  positions with Armanino Foods of  Distinction,  Inc., a publicly traded
specialty  foods  company,  including  serving as its General  Counsel and Chief
Financial  Officer from February 1987 to December 1988 and Vice  President  from
January 1989 to March 1994,  and a Director of Armanino Foods from 1988 to 1989.
Mr. Micek served as the  President  and  Director of Catalina  Capitol,  Inc., a
publicly  traded  company,  from  1990  until  its  merger  into  Instant  Video
Technologies,  Inc.  ("IVT"),  an  interactive  multi-media  network  technology
company, in 1992. Mr. Micek continues to serve as a Director of IVT.


         Edwin O. Riddell, Director. Mr. Riddell has served as a Director of the
Company  since June 1995.  From  January 1991 to the  present,  Mr.  Riddell has
served as Manager of the  Transportation  Business Unit in the Customer  Systems
Group at the Electric Power  Research  Institute in Palo Alto,  California,  and
from 1985 until November 1990, he served with the  Transportation  Business Unit
as Vice  President,  Engineering,  working  on  electric  public  transportation
systems. From 1979 to 1985, he was Vice President and General Manager of Lift U,
Inc., the leading  manufacturer of handicapped  wheelchair lifts for the transit
industry. Mr. Riddell has also worked with Ford, Chrysler, and General Motors in
the  area of auto  design  (styling),  and has  worked  as a  member  of  senior
management for a number of public transit vehicle manufacturers. Mr. Riddell has
been a member of the American Public Transit Association's  ("APTA") Association
Member Board of Governors for over 15 years.  He has also served on APTA's Board
of Directors.

         Donald H. Dreyer,  Director.  Mr.  Dreyer was elected a Director of the
Company in January  1997.  Mr.  Dreyer is President and CEO of Dreyer & Company,
Inc., a consultancy in credit,  accounts  receivable  and  insolvency  services,
which was established in 1990. Mr. Dreyer has served as Chairman of the Board of
Credit  Managers  Association  of  California  during  the 1994 to 1995 term and
continues to serve as a member of the Advisory  Committee of that  organization.
Mr. Dreyer is currently the co-Chair of the Creditors  Committees'  Subcommittee
of the American  Bankruptcy  Institute  and is a member of the Western  Advisory
Committee of Dun & Bradstreet, Inc.

Relationships Among Directors or Executive Officers

         There  are no  family  relationships  among  any of  the  Directors  or
executive officers of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section  16(a) of the Exchange Act  requires the  Company's  Directors,
executive  officers  and persons who own more than 10% of the  Company's  Common
Stock  (collectively,  "Reporting  Persons") to file  reports of  ownership  and
changes  in  ownership  of the  Company's  Common  Stock to the  Securities  and
Exchange  Commission  ("SEC").  Copies of these  reports are also required to be
delivered to the Company.

         The Company believes,  based solely on its review of the copies of such
reports received or written representations from certain Reporting Persons, that
during fiscal 1999, all Reporting  Persons  complied with all applicable  filing
requirements:   EXCEPTIONS:  (i)  Anthony  Rawlinson,  Chairman  of  the  Board,
inadvertently  missed a filing deadline for Form 5 for one transaction  effected
in July 1999; the required Form 5 will be filed shortly;  (ii) Malcom Currie,  a
Director,  unintentionally  missed  a  filing  deadline  for Form 3 that was due
within ten days of his appointment as a Director in July 1999; the required Form
3 will be filed shortly; (iii) John J. Micek, a Director, unintentionally missed
a filing  deadline for Form 3 that was due within ten days of his appointment as
a Director in April 1999; the required Form 3 will be filed shortly.



                                       18
<PAGE>

Item 11.     Executive Compensation

<TABLE>
Summary Compensation Table

         The following table sets forth all compensation earned by the Company's
Chief Executive Officer and each of the other most highly compensated  executive
officers of the Company whose annual salary and bonus exceeded  $100,000 for the
years ended July 31, 1999,  1998, and 1997  (collectively,  the "Named Executive
Officers"). Mr. Carl D. Perry is the sole executive officer of the Company whose
salary currently exceeds $100,000.
<CAPTION>

                                                                          Summary Compensation Table
                                                    ------------------------------------------------------------------------
Name and Principal Position                                                   Annual Compensation
--------------------------------------------------- ------------------------------------------------------------------------
                                                                                             Long-Term Compensation Awards
                                                                                            --------------------------------
                                                                                                      Securities
                                                                                                      Underlying
                                                                  Salary      Bonus                  Options/SARs
                                                      Year          ($)       ($)                         (#)
--------------------------------------------------- --------- --------------- ------------- --------------------------------
<S>                                                   <C>         <C>              <C>                    <C>
Carl D. Perry (1)                                     1999        50,000           --                     --
Chief Executive Officer                               1998        55,770           --                     --
  And President                                       1997        75,000           --                     --
--------------------------------------------------- --------- --------------- ------------- --------------------------------
<FN>

(1)  Mr. Perry was elected as Chief Executive Officer in November 1997. Amounts paid to Mr. Perry for all periods shown were paid to
     Mr. Perry as an Executive Vice President of the Company. Mr. Perry's current salary is $110,000 per year.
</FN>
</TABLE>


Option/SAR Grants

              No grants of stock options or stock  appreciation  rights ("SARs")
were made  during  fiscal 1999 to the Named  Executive  Officers.  However,  the
option exercise price,  for Mr. Perry's and other employees under the 1996 Stock
Option  Plan,  was reset to $0.10 per share  from  $0.30 per share on August 19,
1998 at the direction of the Board of Directors.


                                       19
<PAGE>


<TABLE>
Option Exercises and Option Values

              The  following  table sets  forth  information  concerning  option
exercises during 1999, and the aggregate value of unexercised options as of July
31, 1999, held by each of the Named Executive Officers:

<CAPTION>

                                           Aggregated Option/SAR Exercises in 1999
                                             and Option Values at July 31, 1999

                                                                      Number of Securities
                                Aggregate                          Underlying Unexercised        Value of Unexercised
                                 Option                                  Options at              In-the-Money Options at
                             Exercises in 1999                          July 31, 1999              July 31, 1999 (1)
                             -----------------                        ------------------      --------------------------


                                  Shares         Value
                               Acquired on      Realized
Name                           Exercise (#)       ($)         Exercisable   Unexercisable  Exercisable    Unexercisable
---------------------------- -------------- --------------- -------------- -------------- -------------- ---------------

<S>                                <C>            <C>           <C>              <C>         <C>               <C>
Carl D. Perry                      --             --            1,200,000        --          $ 30,000          $ --
<FN>

(1)  Calculated  on the basis of the  average of the high bid and low ask prices of the Common  Stock on July 31, 1999 of $0.125 per
     share, minus the exercise price.
</FN>
</TABLE>

Compensation of Directors

         Directors  of the  Company do not receive  any  compensation  for their
services as Directors.  All Directors are  reimbursed  for expenses  incurred in
connection with attending Board and committee meetings. One Director,  Donald H.
Dreyer is paid a consulting  fee for  attendance at Company Board  meetings.  In
1999,  the total amount paid to Mr. Dreyer was  approximately  $10,559 for Board
meetings and other consulting activities.

         Each nonemployee  Director of the Company is entitled to participate in
the Company's 1994 Director Stock Option Plan (the "Director Option Plan").  The
Board of  Directors  and the  shareholders  have  authorized  a total of 150,000
shares of Common Stock for issuance under the Director Option Plan. The Director
Option  Plan  provides  for the grant of  nonstatutory  options  to  nonemployee
Directors  of the  Company.  The  Director  Option  Plan  is  designed  to  work
automatically  and  not  to  require  administration;  however,  to  the  extent
administration is necessary, it will be provided by the Board of Directors.

         The  Director  Option  Plan  provides  that each  eligible  Director is
granted  an option to  purchase  1,000  shares  of Common  Stock for each  Board
meeting attended in person.  Options granted under the Director Option Plan have
a term of five years unless terminated sooner upon termination of the optionee's
status as a Director or  otherwise  pursuant to the  Director  Option  Plan.  No
option granted under the Director  Option Plan is  transferable  by the optionee
other than by will or the laws of descent and  distribution,  and each option is
exercisable,  during the lifetime of the optionee,  only by such  optionee.  The
Director  Option Plan  provides  that the  options  become  exercisable  in full
immediately upon the grant of such options.

         The  exercise  price of all stock  options  granted  under the Director
Option Plan is equal to the fair market value of a share of the Company's Common
Stock on the date of grant of the option. Fair Market Value is defined under the
Director  Option Plan as the  average of the bid and asked  prices of the Common
Stock in the  over-the-counter  market on the date of grant,  as reported by the
National Association of Securities Dealers Automated Quotation System.

         In  the  event  of a  merger  of  the  Company  with  or  into  another
corporation or a sale of substantially all of the Company's assets, the Director
Option Plan  requires that each  outstanding  option be assumed or an equivalent
option substituted by the successor  corporation.  The Director Option Plan will
terminate in December  2004.  The Board of Directors  may amend or terminate the
Director  Option  Plan;  provided,  however,  that no such action may  adversely
affect any outstanding  options,  and the provisions of the Director Option Plan
affecting the grant and terms of options  granted  thereunder may not be amended
more than once in any six-month  period.  Executive  officers of the Company are
not eligible to participate in the Director Option Plan.

         As of October 27,  1999,  25,000  options had been granted and remained
outstanding under the Director Option Plan.

                                       20
<PAGE>

Compensation Committee Interlocks and Insider Participation

         The Compensation  Committee currently consists of Mr. Edwin Riddell, as
Chairman,  and Dr. Malcolm  Currie.  Mr. Riddell was elected  Chairman in August
1998. Dr. Currie was elected to the  Compensation  Committee in July,  1999. Mr.
Ishag  served as a member of the  Compensation  Committee  during  all of Fiscal
1999. Dr. Malcolm Currie also served on the  Compensation  Committee  during his
prior term as a Director until his resignation in 1998.






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                                       21
<PAGE>

<TABLE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information regarding beneficial
ownership of the Company's  stock as of September  30, 1999,  (i) by each person
(or group of affiliated persons) who is known by the Company to own beneficially
more than 5% of each class of the Company's stock, (ii) by each of the Company's
Directors, (iii) by each of the Company's Named Executive Officers listed in the
Summary  Compensation  Table  below,  and  (v) by the  Company's  Directors  and
executive  officers as a group.  Except as  indicated  in the  footnotes to this
table and subject to applicable  community  property  laws, the persons named in
the table, based on information  provided by such persons,  have sole voting and
investment power with respect to all shares of stock beneficially owned by them.
<CAPTION>

------------------------------------------  -----------------------------  ------------------------------  -----------------

5% Shareholders, Directors, Officers and           Common Shares            Percentage of Common Shares         Voting
    Directors and Officers as a Group          Beneficially Owned (1)         Beneficially Owned (2)        Percentage (3)
------------------------------------------  -----------------------------  ------------------------------  -----------------
<S>                                                      <C>                                      <C>                <C>
Jagen, Pty., Ltd.                                        125,000,000 (4)                          36.60%             32.13%
9 Oxford Street, South Yorra 3141
Melbourne, Victoria Australia
------------------------------------------  -----------------------------  ------------------------------  -----------------
Carl D. Perry                                             48,548,789 (5)                          14.21%             14.40%
c/o U.S. Electricar, Inc.
19850 South Magellan Drive
Torrance, CA 90502
------------------------------------------  -----------------------------  ------------------------------  -----------------
Citibank N.A.                                             43,508,314                              12.74%             16.77%
111 Wall Street, 8th Floor
New York, NY  10043
------------------------------------------  -----------------------------  ------------------------------  -----------------
Anthony Rawlinson                                         25,000,000 (6)                           7.32%              6.43%
c/o U.S. Electricar, Inc.
19850 South Magellan Drive
Torrance, CA 90502
------------------------------------------  -----------------------------  ------------------------------  -----------------
John J. Micek, III                                           568,000 (7)                               *                  *
------------------------------------------  -----------------------------  ------------------------------  -----------------
Edwin O. Riddell                                              20,000 (8)                               *                  *
------------------------------------------  -----------------------------  ------------------------------  -----------------
Dr. Malcolm Currie                                             1,000 (9)                               *                  *
------------------------------------------  -----------------------------  ------------------------------  -----------------
Donald H. Dreyer                                                   0                                   *                  *
------------------------------------------  -----------------------------  ------------------------------  -----------------
All Directors and executive officers as                  74,137,789 (10)                               *                  *
a group (6 persons)
------------------------------------------  -----------------------------  ------------------------------  -----------------
<FN>

*        Indicates less than 1%


                                       22
<PAGE>


(1)      Number of Common Stock shares includes Series A Preferred Stock, Series
         B Preferred  Stock and Common Stock shares  issuable  pursuant to stock
         options,  warrants and other  securities  convertible into Common Stock
         beneficially  held by the  person  or class in  question  which  may be
         exercised or converted within 60 days after September 30, 1999.

(2)      The  percentages  are based on the  number  of shares of Common  Stock,
         Series A  Preferred  Stock and Series B  Preferred  Stock  owned by the
         shareholder  divided  by  the  sum  of:  (i)  the  total  Common  Stock
         outstanding,   (ii)  the  Series  A  Preferred   Stock  owned  by  such
         shareholder;   (iii)  the  Series  B  Preferred  Stock  owned  by  such
         shareholder;  and (iv) Common  Stock  issuable  pursuant  to  warrants,
         options and other convertible  securities exercisable or convertible by
         such shareholder within sixty (60) days after September 30, 1999.

(3)      The  percentages  are based on the  number  of shares of Common  Stock,
         Series A  Preferred  Stock and Series B  Preferred  Stock  owned by the
         shareholder  divided  by  the  sum  of:  (i)  the  total  Common  Stock
         outstanding, (ii) the total Series A Preferred Stock outstanding; (iii)
         the total Series B Preferred Stock  outstanding;  and (iv) Common Stock
         issuable pursuant to warrants, options and other convertible securities
         exercisable or convertible by such  shareholder  within sixty (60) days
         after September 30, 1999. This percentage calculation has been included
         to  show  more  accurately  the  actual  voting  power  of  each of the
         shareholders,  since the  calculation  takes into account the fact that
         the  outstanding  Series A Preferred Stock and Series B Preferred Stock
         are entitled to vote  together  with the Common Stock as a single class
         on certain matters to be voted upon by the shareholders.

(4)      Includes  41,666,667 shares issuable pursuant to warrants redeemable at
         $0.06 per share. Said warrants expire in July, 2001.

(5)      Includes  10,000,000 shares of Common Stock issuable upon conversion of
         convertible debt in the amount of $3,000,000 plus accrued interest,  at
         a conversion  price of $0.30 per share and  1,200,000  shares of Common
         Stock issuable  pursuant to stock options issued under a employee stock
         option  plan  exercisable  at a price of $0.10 per  share.  The  option
         exercise  price,  for Mr.  Perry's and other  employess  under the 1996
         Stock Option Plan, was reset to $0.10 per share from $0.30 per share on
         August 19, 1998 at the direction of the Board of Directors.

(6)      Includes  8,333,333 shares issuable pursuant to warrants  redeemable at
         $0.06 per share. Said warrants expire in July, 2001.

(7)      Includes  565,000  shares of Common  Stock  issuable  pursuant to stock
         options  exercisable at a price of $0.10 per share. The option exercise
         price was reset to $0.10  per  share  from  $0.30 per share on June 10,
         1999 at the direction of the Board of Directors.

(8)      Includes  20,000 shares  of Common  Stock  issuable  pursuant  to stock
         options.

(9)      Includes  1,000  shares  of Common  Stock  issuable  pursuant  to stock
         options.

(10)     Includes  1,790,000  shares of Common Stock issuable  pursuant to stock
         options  exercisable  at prices  ranging from $0.10 to $0.60 per share,
         Includes  10,000,000 shares of Common Stock issuable upon conversion of
         convertible debt in the amount of $3,000,000 plus accrued interest,  at
         a conversion  price of $0.30 per share and  8,333,333  shares  issuable
         pursuant  to  warrants  redeemable  at $0.06 per share.  Said  warrants
         expire in July, 2001.
</FN>
</TABLE>

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                                       23
<PAGE>

Item 13.     Certain Relationships and Related Transactions

         The following are certain transactions entered into between the Company
and its  officers,  directors and principal  shareholders  and their  affiliates
since August 1, 1997.

Transactions with Secured Creditors and Others:

Carl D. Perry/Itochu Corporation

               As of March 1999,  there was  $3,000,000 of debt  outstanding  to
Itochu,  a  former  principle   shareholder  of  the  Company,   pursuant  to  a
Supplemental Loan Agreement.  The debt was convertible at the election of Itochu
at any time, or automatically upon the occurrence of certain events, into shares
of Common Stock at a conversion rate of $0.30 per share. The debt was secured by
all of the assets of the  Company.  To date,  no  agreement  has been reached on
extending the maturity date of this debt. Additionally, Itochu issued $1,300,000
of convertible  secured notes to the Company under a Supplemental loan Agreement
with a maturity date of December 1997. To date, no agreement has been reached on
extending the maturity date of this debt.

                In March 1999, Itochu Corporation sold all of the aforementioned
debt plus  accrued  interest  outstanding  ($5,693,400)  to Carl D.  Perry,  the
Company's Chief Executive Officer and President,  for $50,000.  Itochu also sold
all of the  shares of common  stock it held to Mr.  Perry for $1.00.  Mr.  Perry
forgave  $2,693,400  of accrued  interest and  principal on July 30, 1999. As of
July 31, 1999, there is $3,000,000 in principal owed by the Company to Mr. Perry
under this loan.

Fontal International, Ltd. ("Fontal")

         In January 1998, the Company borrowed  $200,000 from Fontal, a creditor
and  principal  shareholder  of the  Company,  under a short term,  non-interest
bearing  promissory  note, and this amount was  outstanding at the end of fiscal
1999.  Additionally,  there is an  outstanding  balance of $800,000 on unsecured
convertible bonds held by Fontal at the end of fiscal 1999.

         The Company believes that the transactions described above were made on
terms no less  favorable  to the  Company  than  could have been  obtained  from
unaffiliated third parties. The above referenced transactions were approved by a
majority  of the  disinterested  members of the Board of  Directors.  All future
transactions   between  the  Company  and  its  officers  directors,   principal
shareholders  and  affiliates  will be  approved  by a majority  of the Board of
Directors,  including,  where  appropriate,  a  majority  of the  disinterested,
nonemployee directors on the Board of Directors, and, where appropriate, will be
on  terms  no  less  favorable  to the  Company  than  could  be  obtained  from
unaffiliated third parties.





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                                       24
<PAGE>


PART IV

Item 14.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K

         (a)1.        Financial Statements

                      The  financial  statements  filed as a part of this report
                      are  identified  in the  Index to  Consolidated  Financial
                      Statements on page F-1

         (a)2.        Financial Statement Schedules

                      No financial  statement  schedules  are filed as a part of
                      this report.

         (a)3.        Exhibits

                      The exhibits filed herewith or  incorporated  by reference
                      to  exhibits  previously  filed  with the  Commission  are
                      identified  in the Exhibit Index  attached  hereto on page
                      E-1. The Company  shall  furnish  copies of exhibits for a
                      reasonable fee (covering the expense of furnishing copies)
                      upon request.

         (b)          Reports on Form 8-K

                      None





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                                       25
<PAGE>

                                   SIGNATURES

                  Pursuant  to the  requirements  of  Section 13 or 15(d) of the
Securities  Exchange Act of 1934,  the registrant has duly caused this report to
be signed on its  behalf  of the  undersigned,  thereunto  duly  authorized,  on
October 29, 1999.

U.S. ELECTRICAR, INC.

By:/s/ Carl D. Perry
--------------------------------------------------------------------------------
Carl D. Perry, Chief Executive Officer and Acting Chief Financial Officer

Dated: October 29, 1999

                               POWER OF ATTORNEY

                  KNOW  ALL  MEN BY  THESE  PRESENTS,  that  each  person  whose
signature  appears below constitutes and appoints Carl D. Perry, with full power
to act alone, his true and lawful attorney-in-fact and agent, with full power of
substitution  for  him  and in his  name,  place  and  stead,  in  any  and  all
capacities,  to sign any and all  amendments  to the annual report on Form 10-K,
and to file  the  same,  with all  exhibits  thereto,  and  other  documents  in
connection therewith, with the Securities and Exchange Commission, granting unto
said  attorney-in-fact full power and authority to do and perform each and every
act and thing  requisite  and necessary to be done in connection as fully to all
intents and  purposes as he might or could do in person,  hereby  ratifying  and
confirming all that said  attorney-in-fact and agent may lawfully do or cause to
be done by virtue hereof.

<TABLE>

                  IN WITNESS WHEREOF,  each of the undersigned has executed this
Power of Attorney as of the date indicated.  Pursuant to the requirements of the
Securities  Exchange Act of 1934,  this report has been signed by the  following
persons  on  behalf  of the  registrant  and in the  capacities  and on the date
indicated.

<CAPTION>
Signature                                  Title                                  Date
---------                                  -----                                  ----
<S>                                        <C>                                    <C>
/s/ Carl D. Perry                          Chief Executive                        October 29, 1999
-----------------------                    Officer and Director
Carl D. Perry                              (Principal Executive Officer)

/s/ Anthony Rawlinson                      Chairman                               October 29, 1999
-----------------------
Anthony Rawlinson

/s/ Malcolm Currie                         Director                               October 29, 1999
-----------------------
Malcom Currie

/s/ Edwin O. Riddell                       Director                               October 29, 1999
-----------------------
Edwin O. Riddell

/s/ John J. Micek, III                     Director                               October 29, 1999
-----------------------
John J. Micek, III

/s/ Donald H. Dreyer                       Director                               October 29, 1999
-----------------------
Donald H. Dreyer


</TABLE>



                                       26
<PAGE>



================================================================================







                             U. S. ELECTRICAR, INC.

                          INDEPENDENT AUDITOR'S REPORT
                                       AND
                              FINANCIAL STATEMENTS

                             JULY 31, 1999 and 1998







================================================================================
<PAGE>

================================================================================

                             U. S. ELECTRICAR, INC.

                          INDEX TO FINANCIAL STATEMENTS


                                                                            PAGE

INDEPENDENT AUDITOR'S REPORT .............................................   F-1

BALANCE SHEETS - JULY 31, 1999 and 1998 ..................................   F-2

STATEMENTS OF OPERATIONS -
     YEARS ENDED JULY 31, 1999, 1998 AND 1997 ............................   F-4

STATEMENTS OF STOCKHOLDERS' DEFICIT -
     YEARS ENDED JULY 31, 1999, 1998 AND 1997 ............................   F-5

STATEMENTS OF CASH FLOWS -
     YEARS ENDED JULY 31, 1999, 1998 AND 1997 ............................   F-6

NOTES TO FINANCIAL STATEMENTS ............................................   F-8




================================================================================
<PAGE>



INDEPENDENT AUDITOR'S REPORT



To the Stockholders and Board of Directors
U. S. Electricar, Inc.


We have audited the accompanying balance sheets of U. S. Electricar,  Inc. as of
July 31, 1999 and 1998, and the related statements of operations,  stockholders'
deficit,  and cash flows for each of the three years ended July 31, 1999.  These
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  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of U. S. Electricar,  Inc. as of
July 31,  1999 and 1998,  and the results of its  operations  and cash flows for
each of the three  years  ended July 31,  1999,  in  conformity  with  generally
accepted accounting principles.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note  2,  the  Company's
recurring  losses from operations and its inability to generate  sufficient cash
flows to sustain  operations and meet its obligations  raises  substantial doubt
about the  Company's  ability to  continue  as a going  concern.  The  financial
statements do not include any adjustments  that might result from the outcome of
these uncertainties.


                                                    /s/ MOSS ADAMS LLP

Santa Rosa, California
September 17, 1999

                                                                        Page F-1

<PAGE>

<TABLE>


                                                                                                     U. S. ELECTRICAR, INC.
                                                                                                             BALANCE SHEETS
                                                                                                     July 31, 1999 and 1998
                                                                        (In thousands, except for share and per share data)
---------------------------------------------------------------------------------------------------------------------------



<CAPTION>

                                                          ASSETS

                                                                                       1999                    1998
                                                                                --------------------    --------------------
<S>                                                                                         <C>                       <C>
CURRENT ASSETS
     Cash                                                                                   $ 2,467                   $ 266
     Accounts receivable, net of allowance for doubtful accounts
         of $0 and $108                                                                         751                     108
     Inventories and supplies                                                                   223                     492
     Stockholder receivable, current maturities                                                  50                     250
     Prepaids and other current assets                                                           92                     124
                                                                                --------------------    --------------------

             Total current assets                                                             3,583                   1,240

PROPERTY, PLANT AND EQUIPMENT                                                                   282                     318

STOCKHOLDER RECEIVABLE, less current maturities                                                  75                     100
                                                                                --------------------    --------------------

             Total assets                                                                   $ 3,940                 $ 1,658
                                                                                ====================    ====================



<FN>


The accompanying notes are an integral part of these financial statements.
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                   Page F-2
</FN>
</TABLE>


<PAGE>

<TABLE>

                                                                                                     U. S. ELECTRICAR, INC.
                                                                                                 BALANCE SHEETS (Continued)
                                                                                                     July 31, 1999 and 1998
                                                                        (In thousands, except for share and per share data)
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>

                                           LIABILITIES AND STOCKHOLDERS' DEFICIT

                                                                                       1999                    1998
                                                                                --------------------    --------------------
<S>                                                                                         <C>                     <C>
CURRENT LIABILITIES
     Accounts payable                                                                         $ 507                   $ 540
     Accrued payroll and related expenses                                                       290                     358
     Other accrued expenses                                                                     232                     285
     Current maturities of long-term debt                                                     4,427                   5,727
     Accrued warranty reserve                                                                     -                     474
     Customer deposits                                                                            -                     387
                                                                                --------------------    --------------------

             Total current liabilities                                                        5,456                   7,771

ACCRUED INTEREST PAYABLE                                                                        593                   1,262

LONG-TERM PAYABLES                                                                            1,875                   1,908

LONG-TERM DEBT, less current maturities                                                       3,332                   3,332
                                                                                --------------------    --------------------

             Total liabilities                                                               11,256                  14,273
                                                                                --------------------    --------------------

STOCKHOLDERS' DEFICIT
     Series A preferred stock - no par value; 30,000,000 shares
         authorized; 3,259,000 and 3,321,000  shares issued and
         outstanding at 1999 and 1998; liquidating preference
         at $0.60 per share aggregating $1,955 and $1,993                                     2,191                   2,258
     Series B preferred stock - no par value; 5,000,000 shares
         authorized; 1,242,000 and 1,291,000 shares issued and
         outstanding at 1999 and 1998                                                         2,486                   2,584
     Stock notes receivable                                                                  (1,149)                 (1,149)
     Common stock - no par value; 500,000,000 and 300,000,000
         shares authorized at 1999 and 1998; 251,992,000 and
         151,767,000  shares issued and outstanding at 1999 and 1998                         71,501                  68,742
     Additional paid-in capital                                                               3,100                       -
     Accumulated deficit                                                                    (85,445)                (85,050)
                                                                                --------------------    --------------------

             Total stockholders' deficit                                                     (7,316)                (12,615)
                                                                                --------------------    --------------------

             Total liabilities and stockholders' deficit                                    $ 3,940                 $ 1,658
                                                                                ====================    ====================

<FN>


The accompanying notes are an integral part of these financial statements.
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                   Page F-3
</FN>
</TABLE>


<PAGE>

<TABLE>

                                                                                                     U. S. ELECTRICAR, INC.
                                                                                                   STATEMENTS OF OPERATIONS
                                                                                   Years Ended July 31, 1999, 1998 and 1997
                                                                        (In thousands, except for share and per share data)
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>

                                                                    1999                  1998                   1997
                                                             -------------------    ------------------    -------------------
<S>                                                                     <C>                   <C>                    <C>
NET REVENUES                                                            $ 2,774               $ 1,938                $ 4,484

COST OF REVENUES                                                          1,460                 2,765                  2,042
                                                             -------------------    ------------------    -------------------

GROSS PROFIT                                                              1,314                  (827)                 2,442
                                                             -------------------    ------------------    -------------------

OTHER COSTS AND EXPENSES
     Research and development                                               499                   445                  1,218
     Selling, general and administrative                                  1,141                 1,697                  3,116
     Interest and financing fees                                            724                   665                    792
     Gain on warranty accrual reevaluation                                 (474)                    -                      -
     Other (income)/expense                                                 (41)                  (67)                   274
     Acquisition of research and development                                  -                     -                  1,630
                                                             -------------------    ------------------    -------------------

             Total other costs and expenses                               1,849                 2,740                  7,030
                                                             -------------------    ------------------    -------------------

LOSS FROM CONTINUING OPERATIONS                                            (535)               (3,567)                (4,588)

GAIN ON DEBT RESTRUCTURING                                                  140                    42                     53
                                                             -------------------    ------------------    -------------------

NET LOSS                                                                 $ (395)             $ (3,525)              $ (4,535)
                                                             ===================    ==================    ===================

PER COMMON SHARE
     Loss from continuing operations                                    $ (0.01)              $ (0.02)               $ (0.03)
     Gain on debt restructuring                                               -                     -                      -
                                                             -------------------    ------------------    -------------------

             Net loss per common share                                  $ (0.01)              $ (0.02)               $ (0.03)
                                                             ===================    ==================    ===================

WEIGHTED AVERAGE SHARES
     OUTSTANDING                                                    152,076,615           151,265,026            133,805,603
                                                             ===================    ==================    ===================

<FN>


The accompanying notes are an integral part of these financial statements.
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                   Page F-4
</FN>
</TABLE>


<PAGE>

<TABLE>

                                                                                                     U. S. ELECTRICAR, INC.
                                                                                        STATEMENTS OF STOCKHOLDERS' DEFICIT
                                                                                   Years Ended July 31, 1999, 1998 and 1997
                                                                                                             (In thousands)
----------------------------------------------------------------------------------------------------------------------------

<CAPTION>

                                                         PREFERRED STOCK
                                         -------------------------------------------------
                                                SERIES A                  SERIES B               COMMON STOCK         ADDITIONAL
                                         -----------------------   -----------------------  ------------------------    PAID-IN
                                          SHARES       AMOUNT       SHARES       AMOUNT      SHARES        AMOUNT       CAPITAL
                                         ----------  -----------   ----------  -----------  ----------   -----------  ------------

<S>                                          <C>        <C>            <C>        <C>         <C>          <C>                <C>
BALANCE, JULY 31, 1996                       4,010      $ 2,983        1,587      $ 3,175     120,220      $ 59,157           $ -

PREFERRED STOCK TRANSACTION
    Conversion of unsecured debt                 -            -           42           85           -             -             -
COMMON STOCK TRANSACTIONS
    Sales under Regulation S subscription
      agreement                                  -            -            -            -      12,000         3,600             -
    Systronix acquisition                        -            -            -            -       3,800           760             -
    Conversion of Series S Bonds and
      accrued interest                           -            -            -            -      10,732         3,219             -
    Conversion of Series A preferred stock    (389)        (353)           -            -         389           353             -
    Conversion of Series B preferred stock       -            -         (289)        (578)      1,927           578             -
    Conversion of debt                           -            -            -            -       2,000           600             -
INTEREST ON STOCK NOTES                          -            -            -            -           -             -             -
NET LOSS                                         -            -            -            -           -             -             -
                                         ----------  -----------   ----------  -----------  ----------   -----------  ------------

BALANCE, July 31, 1997                       3,621        2,630        1,340        2,682     151,068        68,267             -

COMMON STOCK TRANSACTIONS
    Conversion of Series A preferred stock    (300)        (372)           -            -         300           372             -
    Conversion of Series B preferred stock       -            -          (49)         (98)        324            98             -
    Stock for services                           -            -            -            -          75             5             -
NET LOSS                                         -            -            -            -           -             -             -
                                         ----------  -----------   ----------  -----------  ----------   -----------  ------------

BALANCE, July 31, 1998                       3,321        2,258        1,291        2,584     151,767        68,742             -

COMMON STOCK TRANSACTIONS
    Conversion of Series A preferred stock     (62)         (67)           -            -          62            67             -
    Conversion of Series B preferred stock                               (49)         (98)        163            98             -
    Sale of stock                                -            -            -            -      83,333         2,375             -
    Conversion of debt                           -            -            -            -      16,667           219             -
    Issuance of common stock warrants            -            -            -            -           -             -           406
    Debt forgiveness by stockholder              -            -            -            -           -             -         2,694
NET LOSS                                         -            -            -            -           -             -             -
                                         ----------  -----------   ----------  -----------  ----------   -----------  ------------

                                             3,259      $ 2,191        1,242      $ 2,486     251,992      $ 71,501       $ 3,100
                                         ==========  ===========   ==========  ===========  ==========   ===========  ============


</TABLE>

<TABLE>
                                                                                                     U. S. ELECTRICAR, INC.
                                                                                        STATEMENTS OF STOCKHOLDERS' DEFICIT
                                                                                   Years Ended July 31, 1999, 1998 and 1997
                                                                                                             (In thousands)
----------------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                    STOCK NOTES      ACCUMULATED
                                                     RECEIVABLE       DEFICIT        TOTAL
                                                    -------------  --------------  -----------

<S>                                                     <C>            <C>          <C>
BALANCE, JULY 31, 1996                                  $ (1,061)      $ (76,990)   $ (12,736)

PREFERRED STOCK TRANSACTION
    Conversion of unsecured debt                               -               -           85
COMMON STOCK TRANSACTIONS
    Sales under Regulation S subscription
      agreement                                                -               -        3,600
    Systronix acquisition                                      -               -          760
    Conversion of Series S Bonds and
      accrued interest                                         -               -        3,219
    Conversion of Series A preferred stock                     -               -            -
    Conversion of Series B preferred stock                     -               -            -
    Conversion of debt                                         -               -          600
INTEREST ON STOCK NOTES                                      (88)              -          (88)
NET LOSS                                                       -          (4,535)      (4,535)
                                                    -------------  --------------  -----------

BALANCE, July 31, 1997                                    (1,149)        (81,525)      (9,095)

COMMON STOCK TRANSACTIONS
    Conversion of Series A preferred stock                     -               -            -
    Conversion of Series B preferred stock                     -               -            -
    Stock for services                                         -               -            5
NET LOSS                                                       -          (3,525)      (3,525)
                                                    -------------  --------------  -----------

BALANCE, July 31, 1998                                    (1,149)        (85,050)     (12,615)

COMMON STOCK TRANSACTIONS
    Conversion of Series A preferred stock                     -               -            -
    Conversion of Series B preferred stock                     -               -            -
    Sale of stock                                              -               -        2,375
    Conversion of debt                                         -               -          219
    Issuance of common stock warrants                          -               -          406
    Debt forgiveness by stockholder                            -               -        2,694
NET LOSS                                                       -            (395)        (395)
                                                    -------------  --------------  -----------

                                                        $ (1,149)      $ (85,445)    $ (7,316)
                                                    =============  ==============  ===========


<FN>


The accompanying notes are an integral part of these financial statements.
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                   Page F-5
</FN>
</TABLE>


<PAGE>

<TABLE>

                                                                                                       U. S. ELECTRICAR, INC.
                                                                                                     STATEMENTS OF CASH FLOWS
                                                                                     Years Ended July 31, 1999, 1998 and 1997
                                                                                                               (In thousands)
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                                                     1999           1998            1997
                                                                                 -------------   ------------   -------------
<S>                                                                                    <C>          <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                                          $ (395)      $ (3,525)       $ (4,535)
     Adjustments to reconcile net loss to net
         cash used by operating activities:
             Depreciation and amortization                                                179            212             578
             Change in allowance for doubtful accounts                                   (108)            (7)           (319)
             Provision to reduce inventory values                                         (36)           949             308
             Gain on debt restructuring                                                  (140)           (42)            (53)
             Changes in valuation allowances and reserves                                (640)          (368)         (1,011)
             Purchase of research and development                                           -              -           1,630
             Stock issued in settlement of legal claim                                      -              5               -
             Loss of disposal of equipment                                                  -            353               -
             Gain on sale of Industrial Electric Vehicles                                   -              -            (158)
             Interest income on stock notes receivable                                      -              -             (88)
             Interest converted to common stock                                                            -             194
         Change in operating assets and liabilities:
             Accounts receivable                                                         (560)           753             (54)
             Inventories                                                                  329            371             589
             Note receivable                                                              250              -               -
             Prepaids and other current assets                                             32            191             (53)
             Accounts payable and accrued expenses                                        678            491             (39)
             Customer deposits                                                           (387)           343            (164)
                                                                                 -------------   ------------   -------------

                     Net cash used by operating activities                               (798)          (274)         (3,175)
                                                                                 -------------   ------------   -------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchases of property, plant and equipment                                            (1)            (8)            (13)
     Proceeds from sale of equipment                                                        -             35               -
     Repayments on advances to Systronix Corporation                                        -              -             209
                                                                                 -------------   ------------   -------------

                     Net cash provided (used) by investing activities                      (1)            27             196
                                                                                 -------------   ------------   -------------


CASH FLOWS FROM FINANCING ACTIVITIES
     Payments on notes payable                                                              -              -         (3,021)
     Payments on capital leases                                                             -            (20)          (152)
     Borrowings on notes payable                                                          400            200          3,122
     Proceeds from issuance of common stock                                             2,600              -          3,350
                                                                                 -------------  -------------   ------------

                 Net cash provided by financing activities                              3,000            180          3,299
                                                                                 -------------  -------------   ------------

NET INCREASE (DECREASE) IN CASH                                                         2,201            (67)           320

CASH
     Beginning of year                                                                    266            333             13
                                                                                 -------------  -------------   ------------

     End of year                                                                      $ 2,467          $ 266          $ 333
                                                                                 =============  =============   ============


<FN>
The accompanying notes are an integral part of these financial statements.
---------------------------------------------------------------------------------------------------------------------------
                                                                                                                   Page F-6
</FN>
</TABLE>

<PAGE>
<TABLE>

                                                                                                              U. S. ELECTRICAR, INC.
                                                                                                STATEMENTS OF CASH FLOWS (Continued)
                                                                                            Years Ended July 31, 1999, 1998 and 1997
                                                                                                                      (in thousands)
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                                                             1999             1998             1997
                                                                                           ---------        -------         --------
<S>                                                                                         <C>             <C>             <C>
SUPPLEMENTAL CASH-FLOW INFORMATION
     Cash paid during the year for interest                                                 $  --           $     3         $   162

NON-CASH INVESTING AND FINANCING ACTIVITIES
     Conversion of Series A preferred stock to common stock                                 $    68         $   372         $   353
     Conversion of Series B preferred stock to common stock                                 $    98         $    98         $   578
     Issuance of warrants                                                                   $   406         $  --           $  --
     Decrease in capital lease payable due to cancellation                                  $  --           $   190         $  --
     Conversion of investment to note receivable                                            $  --           $   250         $  --
     Conversion of debt to common stock                                                     $   400         $  --           $ 4,069
     Conversion of debt to Series B preferred stock                                         $  --           $  --           $    85
     Notes issued in connection with debt restructuring                                     $  --           $  --           $    15
     Assumption of notes payable in connection with acquisition                             $  --           $  --           $   800
     Note issued in connection with acquisition                                             $  --           $  --           $   830
     Note assumed by buyer in connection with sale of Industrial
         Electric Vehicles                                                                  $  --           $  --           $(1,013)
     Conversion of accrued interest to notes payable                                        $  --           $  --           $   139
     Acquisition of assets through capital lease                                            $  --           $  --           $   361
     Sale of net assets of Industrial Electric Vehicles                                     $  --           $  --           $   858
     Acquistion of certain assets, related debt and research and
         development from Systronix Corporation for debt and
         stock options, net                                                                 $  --           $  --           $  (819)





<FN>
The accompanying notes are an integral part of these financial statements.
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                            Page F-7
</FN>
</TABLE>


<PAGE>


                                                          U. S. ELECTRICAR, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization - U. S. Electricar,  Inc. was incorporated in 1976 in California as
Solar  Electric  Engineering,  Inc.,  and in  1994  changed  its  name  to U. S.
Electricar,  Inc.  Prior to fiscal  year 1998,  the  Company  produced  and sold
electric  vehicles.  In 1998,  the  Company  began to focus its  efforts  on the
development  of  electric  drive  trains and  related  components  for  electric
vehicles and hybrid systems,  vehicle systems integration and the performance of
various engineering contracts. The Company retains development and manufacturing
rights  to  many  of  the  technologies  created,   whether  such  research  and
development  is  internally  or  externally  funded.  The Company  currently has
several engineering  contracts to design,  develop and test electric drive train
products and related products for Hyundai Motor  Corporation  (HMC) and the U.S.
Government.  The Company anticipates deriving further development contracts from
a new relationship with Hyundai Heavy  Industries,  as well as utilizing Hyundai
to  manufacture  the  Company's  drive  systems  for  international  sales.  The
statements of  operations,  stockholders'  deficit,  and cash flows for the year
ending July 31, 1997,  include the activities of Industrial  Electric  Vehicles,
Inc. (IEV). Substantially all assets and liabilities of IEV were sold during the
year ended July 31, 1997 (see Note 3). All  material  intercompany  transactions
affecting the 1997 statements were eliminated in consolidation. IEV is a dormant
company and had no transactions in 1999 and 1998.

Inventory  and  supplies - Inventory  and  supplies at July 1999 is comprised of
materials  used in the design and  development  of electric  drive systems under
ongoing development contracts.  Inventory at July 1998 was comprised of electric
vehicles, raw materials,  and work-in-process,  and were stated at market, which
was lower than cost.

Property, plant and equipment - Property, plant and equipment are stated at cost
and depreciated using the  straight-line  method over the estimated useful lives
of the related assets, which range from three to seven years.  Long-lived assets
are  reviewed  for  impairment  whenever  events  or  changes  in  circumstances
indicates  the sum of expected cash flows from use of the asset is less than its
carrying  value.  Long-lived  assets that  management  has  committed to sell or
abandon are reported at the lower of carrying  amount or fair value less cost to
sell.

Warranties  - Electric  vehicle  warranties  were  provided  by the  Company and
generally  extended  for  one  year  from  the  time  of  sale.  Warranties  for
substantially  all vehicles sold by the Company have elapsed.  As a result,  the
Company  recognized a $474,000 gain in 1999 concurrent with the  reevaluation of
the warranty accrual.

Income taxes - Deferred income taxes are recognized  using enacted tax rates and
are  composed of taxes on  financial  accounting  income  that is  adjusted  for
requirements  of current  tax law and  deferred  taxes.  Deferred  taxes are the
expected future tax consequences of temporary  differences between the financial
statement carrying amounts and tax bases of existing assets and liabilities.

Revenue  recognition - Revenue from the sale of electric vehicles was recognized
when the vehicle was  delivered  to the  customer.  Revenue on  engineering  and
research and development  contracts is recognized at the completion of specified
engineering or billing milestones.

Loss per common  share - Loss per common  share is computed  using the  weighted
average  number  of common  shares  outstanding.  Since a loss  from  operations
exists,  a diluted  earnings  per  share  number is not  presented  because  the
inclusion of common stock  equivalents in the computation would be antidilutive.
Common stock equivalents  associated with Series A and B preferred stock,  stock
options,  warrants and convertible  notes and bonds,  which are exercisable into
shares of common stock,  could  potentially  dilute earnings per share in future
years.

--------------------------------------------------------------------------------
                                                                        Page F-8

<PAGE>

                                                          U. S. ELECTRICAR, INC.
                                       NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentrations  of  risk -  Financial  instruments  potentially  subjecting  the
Company to  concentrations  of credit  risk  consist  primarily  of bank  demand
deposits that may, from time to time, be in excess of FDIC insurance thresholds,
and  trade  receivables.  Demand  deposits  are  placed  with  known  creditable
financial  institutions.  The Company's  largest  customer,  Hyundai,  is also a
stockholder  that holds less than 5% of the  outstanding  common stock.  Hyundai
accounted for  approximately  90% of total  revenues for the year ended July 31,
1999.  Amounts due from Hyundai at July 31, 1999, which are included in accounts
receivable, were $736,000.

Significant  estimates - The  preparation of financial  statements in conformity
with  generally  accepted  accounting  principles  requires  the Company to make
estimates and assumptions affecting the reported amounts of assets, liabilities,
revenues and expenses,  and the disclosure of contingent assets and liabilities.
The amounts estimated could differ from actual results, and the difference could
have a significant impact on the financial statements.

Fair value of financial  instruments - The Company measures its financial assets
and liabilities in accordance with generally accepted accounting principles. The
fair value of a financial instrument is the amount at which the instrument could
be exchanged in a current  transaction  between willing parties.  For certain of
the Company's  financial  instruments,  including cash,  accounts receivable and
accounts  payable,  the carrying amount  approximates  fair value because of the
short maturities.  The fair value of the Company's short-term and long-term debt
may be  substantially  less than the  carrying  value  since there is no readily
ascertainable market for the debt, given the financial position of the Company.


Stock-based  compensation  -  The  Company  accounts  for  stock-based  employee
compensation  arrangements  in  accordance  with the  provisions  of  Accounting
Principles  Board Opinion No. 25 (APB No. 25),  "Accounting  for Stock Issued to
Employees,"  and  complies  with  the  disclosure  provisions  of  Statement  of
Financial  Accounting  Standards  No.  123  (SFAS  No.  123),   "Accounting  for
Stock-Based Compensation." Under APB No. 25, compensation expense is the excess,
if any, of the fair value of the Company's stock at a measurement  date over the
amount  that must be paid to  acquire  the stock.  SFAS No. 123  requires a fair
value method to be used when determining  compensation expense for stock options
and similar  equity  instruments.  SFAS No. 123 permits a company to continue to
use APB No.  25 to  account  for  stock-based  compensation  to  employees,  but
proforma  disclosures  of net income and earnings or loss per share must be made
as if SFAS No. 123 had been  adopted in its  entirety.  Stock  options  issue to
non-employees are valued under the provisions of SFAS No. 123.


Recent accounting  pronouncements - The Financial Accounting Standards Board has
issued  SFAS  No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities."  SFAS No.  133  requires  companies  to record  derivatives  on the
balance sheet as assets or liabilities,  measured at fair market value. Gains or
losses  resulting from changes in the values of those  derivatives are accounted
for  depending on the use of the  derivative  and whether it qualifies for hedge
accounting.  The  key  criterion  for  hedge  accounting  is  that  the  hedging
relationship  must be highly effective in achieving  offsetting  changes in fair
value or cash flows.  The Company  does not expect the adoption of SFAS No. 133,
which is effective for all fiscal  quarters of fiscal years beginning after June
15, 1999, to have a material effect on the Company's financial statements.

Reclassifications - Certain  reclassification have been made to the prior years'
financial statements to conform to the current year's presentation.

--------------------------------------------------------------------------------
                                                                        Page F-9

<PAGE>


                                                          U. S. ELECTRICAR, INC.
                                       NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------

NOTE 2 - GOING CONCERN


The Company has  experienced  recurring  losses from  operations and use of cash
from operations. Prior to the year ended July 31, 1998, a substantial portion of
the losses were attributable to research, development and other costs associated
with the Company's  development and production of electric  vehicles,  including
the conversion of gas-powered  cars and light trucks to electric  power, as well
as restructuring the Company's operations.


During the three years ended July 31, 1999, the Company  obtained  approximately
$12 million (net of debt repayments) in cash from financing  activities  through
private placements of common stock and Series A preferred stock, the exercise of
options and warrants, and the issuance of convertible subordinated notes payable
and secured  convertible bonds and notes. During 1999 the Company was successful
in selling  $3,000,000  of its common  stock.  Also during 1999,  the  Company's
President acquired approximately  $5,694,000 of debt and accrued interest,  plus
37 million shares of stock, from ITOCHU  Corporation.  Under the agreement among
ITOCHU,  the  Company,  and  the  Company's  President,  the  acquired  debt  is
convertible into common stock, under the terms of the original notes.

It is  management's  intention  to complete its debt  restructuring  and to seek
additional  financing  through private  placements as well as other means. As of
September 17, 1999, the Company had no commitments  from any person or entity to
provide additional financing to the Company.

The financial  statements  have been prepared on a going  concern  basis,  which
contemplates  the  realization of assets and  satisfaction of liabilities in the
normal  course  of  business.  Cash  flows  from  future  operations  may not be
sufficient to enable the Company to meet its obligations,  and market conditions
and the  Company's  financial  position  may  inhibit  its  ability  to  achieve
profitable operations.

These factors,  as well as the future availability or inadequacy of financing to
meet future needs,  could force the Company to delay,  modify,  suspend or cease
some or all aspects of its planned  operations,  and/or  seek  protection  under
applicable bankruptcy and insolvency laws.


NOTE 3 - ACQUISITIONS AND SALES

The Company acquired  substantially  all the tangible and intangible  assets and
assumed  certain  liabilities  of Systronix  Corporation  (Systronix) in October
1996. Systronix was a developer of technologically  advanced electric propulsion
systems for  electric-powered  vehicles.  The purchase  was  reported  using the
purchase method of accounting and, accordingly, the purchase price was allocated
to the assets acquired and liabilities assumed based upon the fair values at the
date of acquisition.  Assets  associated with research and development,  and for
which there was no alternative use, were expensed.

In 1997,  substantially  all  assets  of the  Company's  subsidiary,  Industrial
Electrical Vehicles, Inc. were sold to a group headed by former employees of the
Company  in  exchange  for  the  buyers  assuming   certain  defined  debt.  The
liabilities  assumed by the buyers  exceeded the  reported  values of the assets
sold, which resulted in a gain of approximately $155,000.


--------------------------------------------------------------------------------
                                                                       Page F-10


<PAGE>


                                                          U. S. ELECTRICAR, INC.
                                       NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------

NOTE 4 - INVENTORIES (in thousands)

                                                             1999           1998
                                                             ----           ----

Raw materials and supplies                                   $223           $437
Finished goods                                                --             120
Work-in-process                                               --             101
                                                             ----           ----

                                                              223            658
Less valuation adjustment                                     --             166
                                                             ----           ----

                                                             $223           $492
                                                             ====           ====


As of July 31, 1999,  all  inventory is classified as raw materials and supplies
since the Company no longer manufactures electric vehicles.

In 1994 the  Company  entered  into a  manufacturing  agreement  with a  vendor,
whereby  the  Company  agreed  to sell to the  vendor  sufficient  inventory  to
complete the  conversion of 84 sedans and pick-up  trucks to electric  power and
then to repurchase the completed  vehicles upon completion of the  manufacturing
process. The terms of the agreement gave the vendor a purchase money interest in
inventory. Due to the repurchase agreement, the Company did not account for this
transaction as a sale. The Company initially accrued the difference  between the
selling price and repurchase price as interest  expense.  However,  the interest
expense accrual was later reversed by the Company as a result of an amendment to
the agreement in July 1995,  which  eliminated the price difference and required
only the refund to the  vendor of the net  amount of money  paid to the  Company
under the agreement.  During 1995, the vendor paid the Company $867,000, and the
Company  paid the  vendor  $64,000,  for a  difference  of  $803,000,  which was
recorded as an account payable. Under the July 1995 amendment, and separate from
the debt restructuring  process,  a portion of anticipated  proceeds from future
sales of unsold  vehicles in which the vendor had a purchase  money interest was
to be paid to the vendor;  and the vendor was to ratably release its interest in
such vehicles as they were sold until the $803,000 was fully repaid. At July 31,
1999 and 1998, approximately $98,000 remained unpaid and was included in accrued
expenses.  Subsequent to July 31, 1999,  the vendor agreed to accept  $27,000 in
complete satisfaction of the outstanding liability.


NOTE 5 - PROPERTY, PLANT AND EQUIPMENT (in thousands)

                                                                1999        1998
                                                              ------      ------

Computers                                                     $  846      $  872
Machinery and equipment                                          267         267
Furniture and office equipment                                   196         196
Leasehold improvements                                            54          47
Automobiles and demonstration vehicles                           142        --
Construction in progress                                        --             7
                                                              ------      ------

                                                               1,505       1,389
Less accumulated depreciation and amortization                 1,223       1,071
                                                              ------      ------

                                                              $  282      $  318
                                                              ======      ======

--------------------------------------------------------------------------------
                                                                       Page F-11


<PAGE>

                                                          U. S. ELECTRICAR, INC.
                                       NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------


NOTE 6 - LONG-TERM DEBT (in thousands, except for share data)

                                                                 1999      1998
                                                                ------    ------

Convertible secured note under a Supplemental Loan
Agreement with ITOCHU Corporation, with interest at
12%; principal and interest were due in April 1998; the
debt was secured by the Company's personal property
and was acquired by the Company's President during 1999         $1,700    $3,000

Secured subordinated promissory note - Credit
Management Association of California (CMAC) as
exclusive agent for Non-Qualified Creditors, with
interest at 3% for the first five years, 6% for years
six and seven, and then at prime plus 3% through
date of maturity; interest payments are made upon
payment of principal, with principal and interest due
no later than April 2016; with an interest in a sinking
fund escrow with a balance of four thousand dollars
as of July 31, 1999 and 1998, the sinking fund escrow
requires the Company fund the account with 10% of
future equity financing, including convertible debt
converted to equity; payments on this note are
subordinated to payment in full on all principal and
accrued interest owed on the Qualified Creditors
promissory note                                                  3,332     3,332

Convertible secured notes under a Supplemental Loan
Agreement with ITOCHU Corporation, with interest at
12%; principal and interest were due in December 1997;
the debt was secured by the Company's personal property,
and was acquired by the Company's President during 1999          1,300     1,300

Convertible bonds with interest at 10%; principal and
interest were due in July 1997                                     800       800

Secured subordinated promissory note - CMAC, as
exclusive agent for Qualified Creditors, with interest
at 3%; principal and interest are due in August 1999;
secured with an interest in a sinking fund escrow                  307       307

Other                                                              320       320
                                                                ------    ------

                                                                 7,759     9,059
Less current maturities                                          4,427     5,727
                                                                ------    ------

                                                                $3,332    $3,332
                                                                ======    ======

--------------------------------------------------------------------------------
                                                                       Page F-12


<PAGE>

                                                          U. S. ELECTRICAR, INC.
                                       NOTES TO FINANCIAL STATEMENTS (Continued)

--------------------------------------------------------------------------------

NOTE 6 - LONG-TERM DEBT (Continued)

In September 1994, the Company issued 120 units of Series S secured  convertible
bonds totaling $12,000,000. Each of the units consisted of $100,000 in principal
and a warrant to purchase  10,000  common  shares.  Beginning  July 1995 through
March 1997, the Company converted the $12,000,000 in principal and $2,002,000 of
accrued  interest into 46,674,000  shares of common stock at $0.30 per share. Of
these amounts,  $3,217,000 of principal and accrued  interest was converted into
10,732,000 shares of common stock during the year ended July 31, 1997.

The Company and ITOCHU Corporation entered into a Supplemental Loan Agreement in
April 1995,  whereby ITOCHU agreed to lend $3,000,000 to the Company.  The notes
were secured by the personal property of the parent company and were convertible
at $0.30 per share into the Company's  common  stock.  The principal and accrued
interest due under the notes have not been paid, causing an event of default.


In March 1999, this and all other notes and accrued  interest payable to ITOCHU,
totaling  $5,694,000,  were acquired by the Company's President in a transaction
outside the Company for $50,000.  During 1999, the Company's  President  forgave
debt totaling  $2,694,000.  Due to the related party nature of the  transaction,
this  forgiveness  was recorded as  additional  paid-in  capital.  The remaining
$3,000,000 in notes  continues to be in default and accrues  interest at 12% per
year.  The remaining  principal  and accrued  interest is  convertible  into the
Company's  common stock at $0.30 per share at a date  mutually  agreed to by the
Company and the President.


In April 1996,  and as amended in July 1996,  the Company  issued two promissory
notes,  due April 1999, for $256,000 and $560,000,  and one promissory  note due
April 2016 for $3,332,000, to CMAC, as the exclusive agent for certain unsecured
creditors who settled with the Company in connection with its Debt Restructuring
Plan. In May 1997 the Company  issued an additional  promissory  note, due April
1999 for $15,000 to CMAC, under the Debt Restructuring Plan. The April notes are
in default.


NOTE 7 - CAPITAL LEASE

Included in the  acquisition of certain assets and  liabilities of Systronix was
the assumption of a purchase contract for a high performance  dynamometer.  This
acquisition  was financed  through a capital lease.  The lease required  monthly
payments of $22,000  and was  scheduled  to mature in May 1998.  The Company was
unable to continue  making the monthly lease  payments and the  dynamometer  was
returned to the manufacturer, who was the holder of the lease. The excess of the
undepreciated  capital asset's cost over the remaining liability,  which totaled
$249,000, was charged to expense in 1998.


NOTE 8 - LEASE COMMITMENTS

The Company  assumed  the lease of its  Torrance  facility  when  Systronix  was
purchased.  The lease expires in February  2000.  Future  minimum lease payments
under this lease  agreement  are $56,000 for the year ended July 31, 2000.  Rent
expense was $144,400,  $164,500, and $225,000 for the years ended July 31, 1999,
1998, and 1997.

--------------------------------------------------------------------------------
                                                                       Page F-13



<PAGE>


                                                          U. S. ELECTRICAR, INC.
                                       NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------

NOTE 9 - INCOME TAXES (in thousands)

The Tax  Reform Act of 1986 and the  California  Conformity  Act of 1987  impose
restrictions  on the  utilization  of net  operating  losses  in the event of an
ownership  change,  as defined by Section 382 of the  Internal  Revenue  Code of
1986.  An  ownership  change  occurred  at the  time  of the  private  placement
memorandums  in 1991 and 1992,  at the time of the  common and  preferred  stock
issuances in 1993,  and upon  conversion of certain debt to equity in subsequent
years.  This  change  will  limit  future  availability  of net  operating  loss
carryforwards. The extent of the limitation has not been determined.

A valuation  allowance  is required  for those  deferred tax assets that are not
likely to be realized.  Realization is dependent upon future earnings during the
period  that  temporary   differences  and  carryforwards  are  expected  to  be
available. Because of the uncertain nature of their ultimate utilization,  based
upon the Company's  past  performance,  a full  valuation  allowance is recorded
against these deferred tax assets.

                                                            1999           1998
                                                          -------        -------
Deferred tax assets
     Federal tax loss carryforward                        $23,574        $23,558
     State tax loss carryforward                            2,325          2,705
     Basis difference                                       1,610          1,610
     Reserves and allowances                                  118            107
     Other, net                                               215            498
                                                          -------        -------

                                                           27,842         28,478
Less valuation allowance                                   27,842         28,478
                                                          -------        -------

Net deferred tax asset                                    $  --          $  --
                                                          =======        =======



Net operating losses expire as follows:

                                                 Net Operating Loss
                                     -------------------------------------------
         Date of expiration                Federal               California
         ------------------          --------------------    -------------------

                2000                                $ 51                $ 16,730
                2001                                  44                   4,541
                2002                                  11                   2,778
                2003                                  64                   1,541
                2004                                 322                     709
                2005                                 443                       -
                2006                                 680                       -
                2007                               2,552                       -
                2008                              24,221                       -
                2009                              33,460                       -
                2010                               9,083                       -
                2011                               5,557                       -
                2012                               2,998                       -
                2013                               1,418                       -
                                     --------------------    -------------------
                                                $ 80,904                $ 26,299
                                     ====================    ===================


--------------------------------------------------------------------------------
                                                                       Page F-14


<PAGE>


                                                          U. S. ELECTRICAR, INC.
                                       NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------

NOTE 10 - STOCKHOLDERS' DEFICIT

Series A preferred  stock - Series A preferred  stock is currently  unregistered
and convertible  into common stock on a one-to-one  basis at the election of the
holder or automatically upon the occurrence of certain events,  including:  sale
of stock in an  underwritten  public  offering;  registration  of the underlying
conversion  stock; or the merger,  consolidation or sale of more than 50% of the
Company.  Holders of Series A  preferred  stock have the same  voting  rights as
common stockholders.  The stock has a liquidation  preference of $0.60 per share
plus any accrued and unpaid  dividends in the event of voluntary or  involuntary
liquidation  of the Company.  Dividends  are  non-cumulative  and payable at the
annual  rate of $0.036  per share if,  when,  and as  declared  by, the Board of
Directors. No dividends have been declared on the Series A preferred stock.

In July 1993,  the Board of Directors  approved a plan for the sale of shares of
Series A preferred  stock to certain  officers and directors  (Participants)  at
$0.60 per share. In general,  the Participants could purchase these shares for a
combination of cash,  promissory notes payable to the Company, and conversion of
debt and deferred compensation due to the Participants.  All shares issued under
this plan were  pledged to the  Company  as  security  for the notes.  The notes
provided for interest at 8% per annum payable annually,  with the full principal
amount and any  unpaid  interest  due on  January  31,  1997.  The notes  remain
outstanding at July 31, 1999. The likelihood of collecting the interest on these
notes is remote; therefore, beginning with the year ended July 31, 1998, accrued
interest has not been recorded.

Series B preferred  stock - Series B preferred  stock is currently  unregistered
and each share is convertible into shares of common stock at the election of the
holder. The Series B preferred stock has certain liquidation and dividend rights
prior and in preference to the rights of the common stock and Series A preferred
stock.

In 1999 and 1998,  49,000 shares of Series B preferred stock were converted each
year into common stock on a 3.33 and 6.66-to-one basis, respectively.

Other  significant  stock activity - In March 1997, the Company sold  12,000,000
unregistered  shares  of its  common  stock at $0.30  per  share  pursuant  to a
Regulation S  Subscription  Agreement  resulting in net proceeds of  $3,600,000.
Also in 1997, the Company  converted  $600,000 of  convertible  secured notes to
2,000,000 shares of common stock at $0.30 per share.

In conjunction with the acquisition of ITOCHU's debt (see Note 6), the Company's
President  purchased all of the outstanding common stock of ITOCHU  Corporation,
which totaled approximately 37,400,000 shares, for a purchase price of $1.

In July 1999,  the Company  sold  86,666,666  unregistered  shares of its common
stock at $0.03 per share  pursuant to a  Regulation  D  Subscription  Agreement,
resulting  in net  proceeds  of  $2,600,000.  Also in  July  1999,  the  Company
converted  $400,000 of convertible  secured notes to 13,333,000 shares of common
stock at $0.03 per share.

In July 1999, the Company's  shareholders  authorized an additional  200,000,000
shares of no par common stock.

--------------------------------------------------------------------------------
                                                                       Page F-15


<PAGE>


                                                          U. S. ELECTRICAR, INC.
                                       NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------

NOTE 11 - STOCK OPTIONS AND WARRANTS

In 1993,  stockholders  approved the 1993  Employee and  Consultant  Stock Plan,
which expires in 2003.  Under the 1993 Employee and  Consultant  Stock Plan, the
Company   reserved   10,000,000   shares  of  common  stock  for  incentive  and
nonstatutory stock options. The Company increased the number of shares of common
stock  reserved  under  the 1993  Plan to  15,000,000  in  November  1993 and to
30,000,000  in September  1995.  Options under the 1993 Plan expire over periods
not to exceed ten years from date of grant.  Options that expire or are canceled
may become available for future grants under the 1993 Plan.
In addition, the Company grants other nonstatutory stock options.

Under the 1994 Director Stock Option Plan, the Company  reserved  150,000 shares
of common  stock for  nonstatutory  stock  options  for  nonemployee  directors.
Options  under this plan are fully  vested upon the  granting of the options and
expire  ten  years  from  the  date  of  grant  unless  terminated  sooner  upon
termination of the optionee's  status as a director.  Options that expire or are
canceled may become available for future grants under the Director Option Plan.

In 1997, in connection with the purchase of Systronix, stockholders approved the
1996 Stock Option Plan, which expires in 2006.  The Company,  during the term of
the 1996 Plan,  will at all times  reserve  and keep  available  such  number of
shares of common stock for incentive and non-qualified stock options as shall be
sufficient to satisfy the requirements of the plan.  Options under the 1996 Plan
expire  over a period  not to exceed  ten years.  In July  1999,  the  Company's
shareholders  authorized an increase in the number of shares available under the
Plan from 15,000,000 to 45,000,000.

<TABLE>
The following summarizes common stock option activity (shares in thousands):

<CAPTION>
                                                                                         Director
                                1996 Plan                     1993 Plan                Option Plan                       Other
                          ------------------------   -------------------------  -----------------------  ---------------------------
                            Shares       Price         Shares         Price      Shares        Price      Shares            Price
                          ----------   -----------   ----------   ------------  ---------  ------------  ----------   --------------
<S>                          <C>       <C>              <C>        <C>               <C>    <C>              <C>         <C>
Balance, July 31, 1996            -    $        -       17,269     $0.30-.060         20    $0.20-6.88       1,495       $0.60-2.80
Granted                      10,367          0.30            -              -          -             -           -                -
Canceled                       (445)         0.30       (1,135)          0.30          -             -           -                -
Exercised                         -             -            -              -          -             -           -                -
Expired                           -             -          (38)          0.30          -             -           -                -
                          ----------                 ----------                 ---------                ----------

Balance, July 31, 1997        9,922          0.30       16,096      0.30-0.60         20     0.20-6.88       1,495        0.60-2.80
Canceled                     (1,403)         0.30       (4,650)          0.30        (16)    0.20-6.88           -                -
Expired                         (80)         0.30          (63)          0.30          -             -           -                -
                          ----------                 ----------                 ---------                ----------

Balance, July 31, 1998        8,439          0.30       11,383      0.30-0.60          4          0.20       1,495        0.60-2.80
                          ----------                 ----------                 ---------                ----------

Granted                       1,765          0.10            -              -         21          0.20           -                -
Canceled                     (1,765)         0.30         (113)          0.30          -             -           -                -
Expired                         (49)         0.30         (159)          0.30          -             -           -                -
                          ----------                 ----------                 ---------                ----------

Balance, July 31, 1999        8,390    $0.10 - 0.30     11,111     $0.30-0.60         25        $ 0.20       1,495       $0.60-2.80
                          ==========                 ==========                 =========                ==========


<FN>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Page F-16
</FN>
</TABLE>

<PAGE>


                                                          U. S. ELECTRICAR, INC.
                                       NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------

NOTE 11 - STOCK OPTIONS AND WARRANTS (Continued)


The Company measures its employee  stock-based  compensation  arrangements under
the  provisions of APB No. 25. Had  compensation  costs for the Company's  stock
option  plans  been  determined  based upon the fair value at the grant date for
awards under these plans  consistent with the methodology  prescribed under SFAS
No. 123,  the  Company's  net loss would have been  increased  by  approximately
$640,700,  $549,900,  and $307,000 for the years ended July 31, 1999,  1998, and
1997.  The fair value of options  granted  were  estimated  on the date of grant
using the Black-Scholes option-pricing model with the following assumptions: (1)
dividend  yield of 0%, (2) expected  volatility of 164%,  (3) risk free interest
rate of 5.88% to 6.59%, and (4) an expected life of the options of 5 years.


In May 1996,  the Company  issued  13,333,000  warrants in exchange for services
performed.  The warrants were exercisable at $0.30 per share for an equal number
of shares of common  stock,  and expired on May 1, 1997.  At September 24, 1998,
negotiations  were  underway to extend the period of time in which the  warrants
could be  exercised.  If the market  value of the common stock of the Company is
equal to or  greater  than $0.60 per share on the date of  exercise,  and if the
average trading volume was in excess of 100,000 shares per day for the preceding
20 trading  days,  the warrants may be exercised  without  payment of cash.  The
warrants may not be exercised in the United States,  and the stock purchased may
not be  delivered  to the  United  States  unless  first  registered  under  the
Securities Act or receive an available exemption from registration.

In July 1999, the Company  issued  50,000,000  warrants in conjunction  with the
sale of common  stock.  The warrants are  exercisable  at $0.06 per share for an
equal number of shares of common stock, and expire in June 2004.

The Company  determined  the fair value of the warrant to be  $406,000.  Factors
used in determining the fair value  included:  (1) the effect on the stock price
if the warrants were exercised,  (2) the thinly traded nature of the stock,  (3)
the market for the warrants,  (4) and the rate of return expected by the warrant
holders.

The following summarizes warrant activity (in thousands):

                                                        Debt
                                                     Conversion          Other
                                                      -------           -------
Balance, July 31, 1997                                   --              15,333
Granted                                                  --                --
Expired                                                  --                --
                                                      -------           -------

Balance, July 31, 1998                                   --              15,333
Granted                                                50,000              --
Expired                                                  --             (15,333)
                                                      -------           -------

Balance, July 31, 1999                                 50,000              --
                                                      =======           =======

--------------------------------------------------------------------------------
                                                                       Page F-17

<PAGE>


                                                          U. S. ELECTRICAR, INC.
                                       NOTES TO FINANCIAL STATEMENTS (Continued)
--------------------------------------------------------------------------------

NOTE 12 - RESEARCH AND DEVELOPMENT CONTRACTS

The Company was obligated to perform  research and development  activities under
development  and licensing  agreements.  The  agreements  require the Company to
design,  develop,  and test drive systems and deliver  working  prototypes.  The
Company retains all rights to the products  developed and will license their use
to the counter-party.  Compensation for the research and development services is
based on specified milestones set forth in each agreement.  As of July 31, 1999,
the Company had not performed all research and development  activities  required
by the agreements.

Revenue  received  under the  development  agreements  recognized for the period
ended July 31, 1999, was approximately $1,954,000. Related expenses are recorded
in cost revenues.


NOTE 13 - CONTINGENCIES

The Company is in the process of reviewing its software and hardware  components
to  identify  means to ensure  its  computers  and other  systems  are Year 2000
compliant.  Management  believes it will be able to resolve any Year 2000 issues
prior to the time  compliance  will  affect  the  Company's  financial  or other
processes. Cost of compliance, if any, is not expected to be material.

In connection  with the Company's  default on its debt  obligations to unsecured
creditors,  19 of these creditors have obtained judgments against the Company in
the aggregate amount of approximately $650,000.

The  Company is also  subject to other  legal  proceedings  and claims that have
arisen  during the period of  restructuring  both its debt and  operations.  The
ultimate  resolution of these  proceedings is not known,  but the final outcomes
are not expected to  significantly  influence  the Company's  current  financial
position.


In February  1999,  the  Company  became a  defendant  in a lawsuit  filed by an
individual  alleging  personal  injury  by a  vehicle  manufactured  by a  prior
subsidiary  of the Company,  Industrial  Electric  Vehicles,  Inc. The Company's
insurance  carrier has  assumed all  potential  liability  associated  with this
matter.

In April 1999,  the Company became a defendant in a lawsuit filed by the City of
Napa regarding certain electric vehicles sold by U.S.  Electricar to the City of
Napa.  The suit  alleges  that the  vehicles  did not meet  certain  performance
specifications  and seeks  damages.  The Company does not concur with the suit's
claims and believes it will ultimately be able to settle this matter.


--------------------------------------------------------------------------------
                                                                       Page F-18




<PAGE>




                                  EXHIBIT INDEX


Exhibit No.                     Description
--------------------------------------------------------------------------------
3.1*         Amended and Restated  Articles of  Incorporation of the Registrant,
             filed July 30, 1999.

3.2          Bylaws of  Registrant  (Filed as Exhibit  3.12 to the  Registration
             Statement on Form 10 filed on November 29, 1994,  and  incorporated
             herein by reference).

4.1          Cashless  Exercise Warrants dated October 25, 1996 issued to Fontal
             International,  Ltd.  (Filed as  Exhibit  4.1) to the  Registrant's
             Annual  Report on Form 10-K for the year  ended July 31,  1996,  as
             filed on November 12, 1996, and incorporated herein by reference).

10.1**       Form of Stock Option  Agreement  under 1993 Employee and Consultant
             Stock Plan (Filed as Exhibit 10.15 to the Registration Statement on
             Form 10 filed on November  29,  1994,  and  incorporated  herein by
             reference).

10.2**       Form  of  Solar  Electric  Engineering,   Inc.  1993  Employee  and
             Consultant  Stock Plan (Filed as Exhibit 10.16 to the  Registration
             Statement on Form 10 filed on November 29, 1994,  and  incorporated
             herein by reference).

10.3         Form  of  Confidential   Private  Placement   Memorandum  and  Debt
             Restructuring Disclosure Statement of U.S. Electricar,  Inc., dated
             January  2,  1996,  delivered  by the  Company  to  certain  of its
             unsecured  trade  creditors,  including  exhibits (Filed as Exhibit
             10.91 to the  Registrant's  Quarterly  Report  on Form 10-Q for the
             quarter  ended  January 31, 1996,  as filed on March 18, 1996,  and
             incorporated herein by reference).

10.4         Form of Stock  Purchase,  Note and Debt  Exchange  Agreement  dated
             January 2, 1996  between the Company  and certain  unsecured  trade
             creditors  (Filed as Exhibit  10.92 to the  Registrant's  Quarterly
             Report on Form 10-Q for the  quarter  ended  January 31,  1996,  as
             filed on March 18, 1996, and incorporated herein by reference).

10.5         Form of  Indemnification  Agreement  (Filed as Exhibit 10.63 to the
             Registration  Statement on Form 10 filed on November 29, 1994,  and
             incorporated herein by reference).

10.6         Form of Security  Agreement  made as of May 31,  1995,  between the
             Company and Credit  Managers  Association  of  California,  Trustee
             (Filed as Exhibit  10.85 to the  Registrant's  Quarterly  Report on
             Form 10-Q for the quarter  ended April 30,  1996,  as filed on June
             14, 1996, and incorporated herein by reference).

10.7*        Amended 1996 Employee and Consultant Stock Option Plan.

10.8         Stock Purchase  Agreement and Technology  License  Agreement  dated
             February  27,  1997,  by and between the Company and Hyundai  Motor
             Company and Hyundai  Electronics  Industries  Co.,  Ltd.  (Filed as
             Exhibit 10.98 to the  Registrant's  Quarterly  Report on Form 10- Q
             for fiscal  quarter  ended  January 31, 1997, as filed on March 14,
             1997, and incorporated herein by reference).

                                       E-1

<PAGE>


                                  EXHIBIT INDEX


Exhibit No.                     Description
--------------------------------------------------------------------------------
10.9         Loan Agreement for $400,000 convertible promissory note with Fontal
             International, Ltd., dated April 30, 1997(Filed as Exhibit 10.99 to
             the  Registrant's  Quarterly Report on Form 10-Q for fiscal quarter
             ended April 30, 10997, as filed on June 13, 1997, and  incorporated
             herein by reference).

10.10*       Agreement of Debt  Forgiveness by and between Carl D. Perry and the
             Registrant dated July 30, 1999.

10.11*       Agreement of Terms by and between the Registrant and Carl D. Perry.

10.12*       Securities  Purchase  Agreement  dated as of June 1,  1999,  by and
             between the Company and Jagen Pty, Ltd. and Anthony Rawlinson.

10.13*       Shareholders'  Agreement  dated as of June 1,  1999,  by and  among
             Jagen  Pty,  Ltd.  and  Anthony  Rawlinson,  Carl D.  Perry and the
             Registrant.

10.14*       Loan and Security  Agreement dated as of June 1, 1999, by and among
             the Registrant, Jagen Pty, Ltd. and Anthony Rawlinson.

10.15*       Convertible  Secured  Promissory  Note  dated  June 1,  1999 by the
             Registrant in favor of Jagen Pty,  Ltd. in the principal  amount of
             $400,000.

21*          Subsidiaries of the Registrant.

24*          Power of Attorney (included on signature page)

27*          Financial Data Schedule.


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*            Filed herewith.
**           Indicates management contract or compensatory plan or arrangement.



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