SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A

                        For Annual and Transition Reports
                     Pursuant to Sections 13 or 15(d) of the
                       Securities and Exchange Act of 1934


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

                   For the fiscal year ended December 31, 2004


                           Commission File No. 0-25184

                               ENOVA SYSTEMS, 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/A or any
amendment to this Form 10-K/A. [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates  of the  registrant as of June 30, 2004 (the last business day of
the registrant's  more recently  completed  second quarter) was $7,958,000.  For
purposes of this calculation only, (i) shares of Series A and Series B Preferred
Stock have been  included in the  calculation,  (ii) shares of Common  Stock and
Series A Preferred  Stock are deemed to have a market  value of $0.06 per share,
and the Series B Preferred  Stock is deemed to have a market  value of $0.12 per
share,  based on the  average of the bid and ask  prices of the Common  Stock on
June 30, 2004, and (iii) 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 March 30,  2005 was
416,473,000.

<PAGE>

                                EXPLANATORY NOTE

On March 29, 2005,  Enova Systems,  Inc. (the "Company") filed its Annual Report
on Form 10-K for its fiscal year ended  December  31, 2004.  The Company  hereby
amends its 2004 Form 10-K to include within it the audited financial  statements
of  the   Hyundai-Enova   Innovative   Technology  Center  (the  "ITC  Financial
Statements"), a 40% owned equity method investment of the Company, in compliance
with  Rule 3-09 of  Regulation  S-X.  Additionally,  we have  amended  `Note 1 -
Organization and Line of Business';  `Note 2 - Summary of Significant Accounting
Policies'; `Note 4 - Equity Method Investment'; and `Note 11 - Income Taxes' and
`Note 14 -  Geographic  Area  Data'  of the  Notes  to the  Company's  Financial
Statements  for the Years Ended  December 31, 2004,  2003 and 2002.  The amended
notes  reflect  the  addition  of  the  ITC  Financial  Statements  and  correct
computational errors which we believe are immaterial to the fair presentation of
the Company's financial  position,  results of operations and cash flows for the
year ended December 31, 2004. No other  amendments or changes are, or were, made
to the 2004 Form 10-K.



                                       2
<PAGE>
Item 8.  Financial Statements and Supplementary Data

         The response to this Item is  submitted  as a separate  section of this
         Form 10-K/A. See Item 15.

Item 15. Exhibits and Financial Statement Schedules

         (a)1.    Financial Statements

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

         (a)2.    Financial Statement Schedule

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

         (a)3.    Exhibits

                  See Item 15 (c) for Index of Exhibits.

         (b)      Reports on Form 8-K

                  On September 2, 2005,  Registrant  filed a Form 8-K, with date
                  of earliest  event  reported of September  1, 2005,  reporting
                  under items 8 and 9.

         (c)      Exhibits

Exhibit Number                             Description
--------------                             -----------

3.1      Amended and Restated Articles of Incorporation of the Registrant (filed
         as Exhibit 3.1 to the  Registrant's  Annual  Report on Form 10K for the
         year ended  December 31, 2000 filed on March 30, 2001 and  incorporated
         herein by reference).

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/A 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 Enova 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 Enova 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 Enova 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).

                                       3
<PAGE>
10.7     Amended  1996  Employee  and  Consultant  Stock  Option  Plan (filed as
         Exhibit  10.7 to the  Registrant's  Annual  Report on Form  10-K/A  for
         fiscal  year ended July 31,  1999,  as filed on October 29,  1999,  and
         incorporated herein by reference).

10.8     Stock  Purchase   Agreement  and  Technology  License  Agreement  dated
         February 27, 1997,  by and between  Enova 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).

10.9     Letter of Intent  between  Registrant  and a domestic  supplier,  dated
         December  9, 1999,  to design,  develop  and  manufacture  low  voltage
         electric  drive  system  components  (filed  as  Exhibit  10.16  to the
         Registrant's  Annual  Report  on Form  10-K/A  for  fiscal  year  ended
         December 31, 2000 and incorporated herein by reference).

10.10    Put/Call  Option to sell Itochu shares  between  Registrant and Carl D.
         Perry  dated   September  1,  1999  (filed  as  Exhibit  10.16  to  the
         Registrant's  Annual  Report  on Form  10-K/A  for  fiscal  year  ended
         December 31, 2000 and incorporated herein by reference).

10.11    Agreement  (redacted)  between the Registrant and a customer dated June
         14, 2001, to develop and produce power  management  systems.  (filed as
         Exhibit 10.1 to the Registrant's  Quarterly Report on Form 10-Q for Six
         Months ended June 30, 2001 and incorporated herein by reference).

10.12    Agreement  (redacted)  between the Registrant and Eco Power Technology,
         dated June 12, 2001, to produce and sell power drive systems  (filed as
         Exhibit  10.19  to  Amendment  No. 6 to the  Registrant's  Registration
         Statement  on Form  S-1,  No.  333-85308,  and  incorporated  herein by
         reference).

10.13    Agreement    (redacted)    between    the    Registrant    and    Tomoe
         Electro-Mechanical Engineering and Manufacturing,  Inc., dated November
         19,  2001,  to produce and sell power drive  systems  (filed as Exhibit
         10.20 to Amendment No. 6 to the Registrants  Registration  Statement on
         Form S-1, No. 333-85308, and incorporated herein by reference).

10.14    Agreement  (redacted)  between the Registrant  and Moriah  Corporation,
         dated January 22, 2002, to produce and sell power drive systems  (filed
         as Exhibit  10.21 to Amendment No. 6 to the  Registrant's  Registration
         Statement  on Form  S-1,  No.  333-85308,  and  incorporated  herein by
         reference).

10.15    Form of Stock Purchase  Agreement dated June 7, 2002 between Registrant
         and each of the selling  shareholders listed in a Prospectus dated July
         26, 2002 (filed as Exhibit 10.22 to Amendment No. 1 to the Registrant's
         Registration  Statement on Form S-1, No.  333-96829,  and  incorporated
         herein by reference).

10.16    Form of  Registration  Rights  Agreement  dated  June 7,  2002  between
         Registrant and each of the selling  shareholders listed in a Prospectus
         dated July 26, 2002 (filed as Exhibit  10.23 to Amendment  No. 1 to the
         Registrant's  Registration  Statement on Form S-1, No.  333-96829,  and
         incorporated herein by reference).

10.17    Joint Venture  Agreement  (redacted**)  to form  advanced  research and
         development corporation, dated as of March 18, 2003, by and between the
         Registrant  and Hyundai  Heavy  Industries  Co. Ltd.  (filed as Exhibit
         10.24 to the  Registrant's  Quarterly  Report  on Form  10-Q for  Three
         Months ended March 31, 2003 and incorporated herein by reference).

10.18    Securities  Purchase  Agreement  dated as of  March  18,  2003,  by and
         between the Registrant and Hyundai Heavy  Industries Co. Ltd. (filed as
         Exhibit  10.25 to the  Registrant's  Quarterly  Report on Form 10-Q for
         Three  Months  ended  March  31,  2003  and   incorporated   herein  by
         reference).

10.19    Form  of  Stock  Purchase   Agreement  dated  March  30,  2004  between
         Registrant  and  various  investors.  (filed  as  Exhibit  10.19 to the
         Registrant's Quarterly Report on Form 10-Q for Three Months ended March
         31, 2004 and incorporated herein by reference).

10.20    Form of  Registration  Rights  Agreement  dated March 30, 2004  between
         Registrant  and  various  investors.  (filed  as  Exhibit  10.20 to the
         Registrant's Quarterly Report on Form 10-Q for Three Months ended March
         31, 2004 and incorporated herein by reference).

10.21    Form of Finder's Fee agreement  dated April 1, 2004 between  Registrant
         and  The  Global  Value  Investment  Portfolio  Management  Pte  Ltd as
         disclosed in our Form 10-Q for the quarter ended March 31, 2004. (filed
         as Exhibit 10.21 to the Registrant's  Quarterly Report on Form 10-Q for
         Six Months ended June 30, 2004 and incorporated herein by reference).

                                       4
<PAGE>
23.1*    Consent  of  Singer  Lewak  Greenbaum  &  Goldstein  LLP,   Independent
         Registered Public Accounting Firm

23.2*    Consent of Moss Adams,  LLP,  Independent  Registered Public Accounting
         Firm

24*      Power of Attorney (included on signature page)

31.1*    Certification of Chief Executive Officer Pursuant to Section 302 of the
         Sarbanes-Oxley Act Of 2002

31.2*    Certification of Chief Financial Officer Pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002

32*      Certification Pursuant to 18 U.S.C. Section 1350

----------------------
* Filed herewith.


                                       5
<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 by the undersigned, thereunto duly authorized.

ENOVA SYSTEMS, INC.


By:      /s/   Larry B. Lombard
   --------------------------------
Larry B. Lombard, Chief Financial Officer

Dated: September 15, 2005

                                POWER OF ATTORNEY

         KNOW  ALL MEN BY THESE  PRESENTS,  that  each  person  whose  signature
appears below constitutes and appoints Larry B. Lombard,  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/A,
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.

         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.

<TABLE>
<CAPTION>
Signature                                               Title                             Date
---------                                               -----                             ----
<S>                                        <C>                                    <C>
  /s/   Larry B. Lombard                   Chief Financial Officer                September 15, 2005
----------------------------------         and Director
Larry B. Lombard                           (Principal Financial Officer)

  /s/   Edwin O. Riddell                   Chief Executive Officer                September 15, 2005
----------------------------------         and Director
Edwin O. Riddell                           (Principal Executive Officer)

  /s/   Anthony N. Rawlinson               Chairman                               September 15, 2005
----------------------------------
Anthony N. Rawlinson

  /s/ Malcolm Currie                       Director                               September 15, 2005
----------------------------------
Malcolm Currie

  /s/   Bjorn Ahlstrom                     Director                               September 15, 2005
----------------------------------
Bjorn Ahlstrom

  /s/   Donald H. Dreyer                   Director                               September 15, 2005
----------------------------------
Donald H. Dreyer

  /s/   John R. Wallace                    Director                               September 15, 2005
----------------------------------
John R. Wallace

</TABLE>

                                       6
<PAGE>







                                                             ENOVA SYSTEMS, INC.
                                                            FINANCIAL STATEMENTS
                                                             FOR THE YEARS ENDED
                                               DECEMBER 31, 2004, 2003, AND 2002





<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                                        CONTENTS
                                                               December 31, 2004

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


                                                                            Page

REPORT OF INDEPENDENT REGISTERED
           PUBLIC ACCOUNTING FIRM                                            1-2

FINANCIAL STATEMENTS

       Balance Sheets                                                        3-5

       Statements of Operations                                               6

       Statements of Stockholders' Equity (Deficit)                         7-8

       Statements of Cash Flows                                             9-10

       Notes to Financial Statements                                       11-28

SUPPLEMENTAL INFORMATION

       Report of Independent Registered Public
           Accounting Firm on Financial Statement Schedule                   1

       Valuation and Qualifying Accounts - Schedule II                       2

FINANCIAL STATEMENTS

        Hyundai-Enova Innovative Technology Center, Inc.                   1-12

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
Enova Systems, Inc.
Torrance, California

We have  audited the balance  sheets of Enova  Systems,  Inc. as of December 31,
2004  and  2003,  and  the  related  statements  of  operations,   stockholders'
equity/(deficit),  and cash flows for each of the two years in the period  ended
December 31, 2004.  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 the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit 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  that  our  audits  provided  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 Enova  Systems,  Inc. as of
December 31, 2004 and 2003, and the results of its operations and its cash flows
for each of the two years in the period ended  December 31, 2004,  in conformity
with accounting principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements,  the Company has suffered recurring losses from operations
and negative cash flows from  operations.  These  factors,  among others,  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these matters are also described in Note 2. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

As described in Note 2 to the financial statements, the Company has made certain
corrections  related to the previously  filed December 31, 2004 footnotes to the
financial statements.



SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 10, 2005


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Board of Directors
Enova Systems, Inc.


We have audited the statements of  operations,  stockholders'  equity,  and cash
flows of Enova  Systems,  Inc.,  for the year ended  December  31,  2002.  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 audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit 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 audit  provides a reasonable
basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the results of Enova Systems, Inc.'s, operations and cash
flows for the year ended  December  31,  2002,  in  conformity  with  accounting
principles generally accepted in the United States of America.


                                              /s/ MOSS ADAMS LLP

Santa Rosa, California
February 24, 2003


                                       2
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                                                      BALANCE SHEETS
                                                                                                                        December 31,
------------------------------------------------------------------------------------------------------------------------------------

                                                               ASSETS



                                                                                                      2004                2003
                                                                                                ---------------     ---------------
<S>                                                                                             <C>                 <C>
Current assets
      Cash and cash equivalents                                                                 $     1,575,000     $       530,000
      Accounts receivable                                                                               522,000             803,000
      Inventories and supplies                                                                        1,036,000           1,606,000
      Note receivable - related party                                                                      --                 8,000
      Prepaid expenses and other current assets                                                         304,000              78,000
                                                                                                ---------------     ---------------

              Total Current Assets                                                                    3,437,000           3,025,000

Property and equipment, net                                                                             387,000             481,000
Equity method investment                                                                              1,768,000             960,000
Other assets                                                                                            296,000             404,000
                                                                                                ---------------     ---------------
Total assets                                                                                    $     5,888,000     $     4,870,000
                                                                                                ===============     ===============
<FN>

                             The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 3

<PAGE>
<TABLE>
<CAPTION>
                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                                                      BALANCE SHEETS
                                                                                                                        December 31,
------------------------------------------------------------------------------------------------------------------------------------

                                           LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


                                                                                                       2004              2003
                                                                                                  ---------------   ---------------
<S>                                                                                               <C>               <C>
Current liabilities
      Accounts payable                                                                            $        66,000   $       768,000
      Deferred revenues                                                                                   392,000              --
      Line of credit                                                                                      229,000           120,000
      Accrued payroll and related expense                                                                 194,000           120,000
      Other accrued expenses                                                                               13,000            98,000
      Current portion of notes payable                                                                    166,000           131,000
      Current portion of capital lease obligations                                                          6,000            23,000
                                                                                                  ---------------   ---------------

              Total current liabilities                                                                 1,066,000         1,260,000

Accrued interest payable                                                                                1,378,000         1,122,000
Capital lease obligations, net of current portion                                                            --               5,000
Notes payable, net of current portion                                                                   3,341,000         3,347,000
                                                                                                  ---------------   ---------------

              Total liabilities                                                                   $     5,785,000   $     5,734,000
                                                                                                  ---------------   ---------------


Commitments and contingencies

<FN>

                             The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 4

<PAGE>
<TABLE>
<CAPTION>
                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                                                      BALANCE SHEETS
                                                                                                                        December 31,
------------------------------------------------------------------------------------------------------------------------------------

                                     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) (continued)


                                                                                                    2004                 2003
                                                                                               ---------------      ---------------
<S>                                                                                            <C>                  <C>
Stockholders' equity (deficit)
      Series A convertible preferred stock - no par value
        30,000,000 shares authorized
        2,748,000 and 2,820,000 shares issued and
        outstanding
        Liquidating preference at $0.60 per share, aggregating
        $1,648,507 and $1,692,000                                                              $     1,774,000      $     1,837,000
      Series B convertible preferred stock - no par value
        5,000,000 shares authorized
        1,217,000 and 1,217,000 shares issued and outstanding
        Liquidating preference at $2 per share aggregating $2,434,000                                2,434,000            2,434,000
      Common Stock, no par value
        500,000,000 shares authorized
        415,265,000 and 378,341,000 shares issued and
        outstanding                                                                                 90,465,000           86,054,000
      Common stock subscribed                                                                          165,000               60,000
      Stock notes receivable                                                                        (1,176,000)          (1,203,000)
      Additional paid-in capital                                                                     6,900,000            7,031,000
      Accumulated deficit                                                                         (100,459,000)         (97,077,000)
                                                                                               ---------------      ---------------
              Total stockholders' equity (deficit)                                                     103,000             (864,000)
                                                                                               ---------------      ---------------
Total liabilities and stockholders' equity (deficit)                                           $     5,888,000      $     4,870,000
                                                                                               ===============      ===============
<FN>

                             The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 5

<PAGE>
<TABLE>
<CAPTION>

                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                                            STATEMENTS OF OPERATIONS
                                                                                                    For the Years Ended December 31,

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

                                                                            2004                   2003                   2002
                                                                        -------------          -------------          -------------
<S>                                                                     <C>                    <C>                    <C>
Net revenues
      Research and development contracts                                $   1,070,000          $   1,889,000          $   1,843,000
      Production                                                            1,484,000              2,421,000              2,612,000
                                                                        -------------          -------------          -------------
            Total net revenues                                              2,554,000              4,310,000              4,455,000
                                                                        -------------          -------------          -------------

Cost of revenues
      Research and development contracts                                      499,000              1,326,000              1,288,000
      Production                                                            1,627,000              1,978,000              2,496,000
      Writedown Ford Think program inventory                                  113,000                   --                     --
                                                                        -------------          -------------          -------------
            Total cost of revenues                                          2,239,000              3,304,000              3,784,000
                                                                        -------------          -------------          -------------
Gross profit                                                                  315,000              1,006,000                671,000
                                                                        -------------          -------------          -------------

Other costs and expenses
      Research & development                                                  925,000                799,000              1,152,000
      Selling, general & administrative                                     2,325,000              2,919,000              2,837,000
      Interest and financing fees, net                                        255,000                234,000                199,000
      Equity in losses of equity method investee                              192,000                 40,000                   --
      Asset impairment                                                           --                  200,000                   --
      Legal settlements                                                          --                     --                   81,000
                                                                        -------------          -------------          -------------
            Total other costs and expenses                                  3,697,000              4,192,000              4,269,000
                                                                        -------------          -------------          -------------

Net loss                                                                $  (3,382,000)         $  (3,186,000)         $  (3,598,000)
                                                                        =============          =============          =============


Basic loss and diluted loss per share                                   $       (0.01)         $       (0.01)         $       (0.01)
                                                                        =============          =============          =============

Weighted-average number of
    shares outstanding                                                    397,435,175            334,839,700            326,390,422
                                                                        =============          =============          =============
<FN>

                             The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 6
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                                  STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                                                    For the Years Ended December 31,

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

                                                       Convertible Preferred Stock
                                       ---------------------------------------------------------
                                              Series A                         Series B                        Common Stock
                                       -------------------------       -------------------------       -----------------------------
                                        Shares          Amount          Shares          Amount           Shares             Amount
                                       --------       ----------       --------       ----------       -----------       -----------
<S>                                    <C>            <C>              <C>            <C>              <C>               <C>
Balance, December 31,
    2000                               2,844,00       $1,867,000       1,217,00       $2,434,000       244,249,000       $75,680,000
Issuance of common
    stock for
        Exercise of warrants                --               --             --              --          50,000,000         3,000,000
        Exercise of options                 --               --             --              --           1,805,000           181,000
        Services                            --               --             --              --             448,000            98,000
        Legal settlement                    --               --             --              --           6,000,000           900,000
Warrants issued for
    value participation
    agreement                               --               --             --              --                 --               --
Net loss                                    --               --             --              --                 --               --
                                       --------       ----------       --------       ----------       -----------       -----------

Balance, December 31,
    2001                              2,844,000        1,867,000      1,217,000        2,434,000       302,502,000        79,859,000
Conversion of Series
    A preferred stock                   (20,000)         (25,000)           --              --              20,000            25,000
Issuance of common
    stock for
        Cash, net of offering
           costs of $206,000                --               --             --              --          41,100,000         3,904,000
        Exercise of options                 --               --             --              --              30,000             3,000
        Services                            --               --             --              --           1,242,000           190,000
        Legal settlement                    --               --             --              --             300,000            45,000
Stock notes receivable                      --               --             --              --                 --               --
Net loss                                    --               --             --              --                 --               --
                                       --------       ----------       --------       ----------       -----------       -----------

</TABLE>
<TABLE>
<CAPTION>

                                             Common Stock
                                              Subscribed               Stock         Additional
                                      --------------------------       Notes           Paid-In        Accumulated
                                        Shares           Amount     Receivable         Capital          Deficit             Total
                                      ---------        ---------   ------------      -----------     -------------        ---------
<S>                                   <C>              <C>         <C>               <C>             <C>                  <C>
Balance, December 31,
    2000                                 45,000          $13,000   $ (1,149,000)      $6,372,000     $ (86,865,000)    $ (1,648,000)
Issuance of common
    stock for
        Exercise of warrants                --               --             --              --                 --         3,000,000
        Exercise of options                 --               --         (59,000)            --                 --           122,000
        Services                        955,000          147,000            --              --                 --           245,000
        Legal settlement                    --               --             --              --                 --           900,000
Warrants issued for
    value participation
    agreement                               --               --             --           577,000               --           577,000
Net loss                                    --               --             --              --          (3,428,000)      (3,428,000)
                                      ---------        ---------   ------------      -----------     -------------        ---------

Balance, December 31,
    2001                              1,000,000          160,000     (1,208,000)       6,949,000       (90,293,000)        (232,000)
Conversion of Series
    A preferred stock                       --               --             --              --                 --               --
Issuance of common
    stock for
        Cash, net of offering
           costs of $206,000          1,000,000          100,000            --              --                 --         4,004,000
        Exercise of options                 --               --             --              --                 --             3,000
        Services                       (628,000)        (130,000)           --              --                 --            60,000
        Legal settlement                    --               --             --              --                 --            45,000
Stock notes receivable                      --               --           5,000             --                 --             5,000
Net loss                                    --               --             --              --          (3,598,000)      (3,598,000)
                                      ---------        ---------   ------------      -----------     -------------        ---------
<FN>

                             The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 7
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                                  STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                                                    For the Years Ended December 31,

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

                                                       Convertible Preferred Stock
                                       ---------------------------------------------------------
                                              Series A                         Series B                        Common Stock
                                       -------------------------       -------------------------       -----------------------------
                                        Shares          Amount          Shares          Amount           Shares             Amount
                                       --------       ----------       --------       ----------       -----------       -----------
<S>                                    <C>            <C>              <C>            <C>              <C>               <C>
Balance, December 31,
    2002                              2,824,000      $ 1,842,000      1,217,000      $ 2,434,000       345,194,000       $84,026,000
Conversion of Series
    A preferred stock                    (4,000)          (5,000)           --              --               4,000             5,000
Issuance of common
    stock for
        Cash                                                                                            23,077,000         1,500,000
        Issuance of subscribed
           common stock                     --               --             --              --           1,000,000           100,000
        Exercise of options                 --               --             --              --           8,694,000           389,000
        Stock option                        --               --             --              --                 --               --
        Services                                                                                           372,000            34,000
Net loss                                    --               --             --              --                 --               --
                                       --------       ----------       --------       ----------       -----------       -----------

Balance, December 31,
    2003                              2,820,000      $ 1,837,000      1,217,000      $ 2,434,000       378,341,000       $86,054,000
    ====                              =========      ===========      =========      ===========       ===========       ===========
Conversion of Series
    A preferred stock                   (73,000)         (63,000)           --              --              73,000            63,000
Issuance of common
    stock for
        Cash                                --               --             --              --          27,585,000         3,450,000
        Issuance of subscribed
           common stock                     --               --             --              --             367,000            60,000
        Exercise of options                 --               --             --              --           8,464,000           783,000
        Stock option conversions            --               --             --              --             321,000            39,000
        Services                            --               --             --              --             114,000            16,000
Net loss                                    --               --             --              --                 --               --
                                       --------       ----------       --------       ----------       -----------       -----------

Balance, December 31,
    2004                              2,747,000      $ 1,774,000      1,217,000      $ 2,434,000       415,265,000       $90,465,000
                                      =========      ===========      =========      ===========       ===========       ===========
</TABLE>
<TABLE>
<CAPTION>

                                             Common Stock
                                              Subscribed               Stock         Additional
                                      --------------------------       Notes           Paid-In        Accumulated
                                        Shares           Amount     Receivable         Capital          Deficit             Total
                                      ---------        ---------   ------------      -----------     -------------        ---------
<S>                                   <C>              <C>         <C>               <C>             <C>                  <C>
Balance, December 31,
    2002                              1,372,000        $ 130,000   $ (1,203,000)     $ 6,949,000      $(93,891,000)       $ 287,000
Conversion of Series
    A preferred stock                       --               --             --              --                 --               --
Issuance of common
    stock for
        Cash                                --               --             --              --                 --         1,500,000
        Issuance of subscribed
           common stock              (1,000,000)        (100,000)           --              --                 --               --
        Exercise of options                 --               --             --              --                 --           389,000
        Stock option                        --               --             --            82,000               --            82,000
        Services                        754,000           30,000            --              --                 --            64,000
Net loss                                    --               --             --              --          (3,186,000)      (3,186,000)
                                      ---------        ---------   ------------      -----------     -------------        ---------

Balance, December 31,
    2003                              1,126,000         $ 60,000   $ (1,203,000)     $ 7,031,000      $(97,077,000)      $ (864,000)
Conversion of Series
    A preferred stock                      --                --             --              --                 --               --
Issuance of common
    stock for
        Cash                               --                --          27,000             --                 --         3,477,000
        Issuance of subscribed
           common stock              (1,126,000)         (60,000)           --              --                 --               --
        Exercise of options                --                --             --              --                 --           783,000
        Stock option conversions           --                --             --           (39,000)              --               --
        Services                      1,196,000          165,000            --           (92,000)              --            89,000
Net loss                                   --                --             --              --          (3,382,000)      (3,382,000)
                                      ---------        ---------   ------------      -----------     -------------        ---------

Balance, December 31,
    2004                              1,196,000        $ 165,000   $ (1,176,000)     $ 6,900,000     $(100,459,000)       $ 103,000
                                      =========        =========   ============      ===========     =============        =========

<FN>

                             The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 8
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                                            STATEMENTS OF CASH FLOWS
                                                                                                    For the Years Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                               2004                 2003                 2002
                                                                          ---------------      ---------------      ---------------
<S>                                                                       <C>                  <C>                  <C>
Cash flows from operating activities
    Net loss                                                              $    (3,382,000)     $    (3,186,000)     $    (3,598,000)
    Adjustments to reconcile net loss
     to net cash used by operating activities
     Depreciation and amortization                                                376,000              351,000              134,000
     Provision for asset impairment                                                  --                200,000                 --
     Equity in losses                                                             192,000               40,000                 --
     Issuance of common stock for services                                         89,000               34,000               60,000
     Issuance of common stock for
       legal settlement                                                              --                   --                 45,000
     (Increase) decrease in
         Accounts receivable                                                      281,000              457,000              (19,000)
         Inventory  and supplies                                                  570,000               48,000             (727,000)
         Note receivable - related party                                            8,000               24,000               25,000
         Prepaid expenses and other current assets                               (226,000)              29,000              (20,000)
         Other assets                                                                --                (14,000)              76,000
     Increase (decrease) in
         Accounts payable                                                        (702,000)            (424,000)           1,025,000
         Accrued expenses                                                         (11,000)            (112,000)              87,000
         Deferred revenues                                                        392,000                 --                   --
         Accrued interest payable                                                 256,000              234,000              212,000
                                                                          ---------------      ---------------      ---------------
Net cash used by operating activities                                          (2,157,000)          (2,319,000)          (2,700,000)
                                                                          ---------------      ---------------      ---------------

Cash flows from investing activities
    Purchases of property and equipment                                   $      (174,000)     $      (113,000)     $      (613,000)
                                                                          ---------------      ---------------      ---------------
Net cash used in investing activities                                            (174,000)            (113,000)            (613,000)
                                                                          ---------------      ---------------      ---------------

Cash flows from financing activities
       Net increase from line of credit                                   $       109,000      $       106,000      $        14,000
       Payment on notes payable and
             capital lease obligations                                            (33,000)              (1,000)             (24,000)
       Proceeds from notes payable                                                 40,000                 --                   --
       Proceeds from sales of common stock                                      2,450,000              600,000            4,210,000
       Offering costs                                                                --                   --               (206,000)
       Proceeds from exercise of stock options                                    783,000              389,000                3,000
       Payments on stock notes receivable                                          27,000                 --                  5,000
                                                                          ---------------      ---------------      ---------------
Net cash provided by financing activities                                       3,376,000            1,094,000            4,002,000
                                                                          ---------------      ---------------      ---------------

Net increase (decrease) in cash and                                             1,045,000           (1,338,000)             689,000
       cash equivalents

Cash and cash equivalents,
       beginning of year                                                          530,000            1,868,000            1,179,000
                                                                          ---------------      ---------------      ---------------

Cash and cash equivalents,
       end of year                                                        $     1,575,000      $       530,000      $     1,868,000
                                                                          ===============      ===============      ===============
<FN>

                             The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 9
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                                            STATEMENTS OF CASH FLOWS
                                                                                                    For the Years Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                               2004                 2003                 2002
                                                                          ---------------      ---------------      ---------------
<S>                                                                       <C>                  <C>                  <C>
Supplemental disclosure of cash
flow information

       Interest paid                                                      $        10,000      $         9,000      $         8,000
                                                                          ===============      ===============      ===============

       Income taxes paid                                                  $          --        $          --        $          --
                                                                          ===============      ===============      ===============

Supplemental schedule of non- cash
investing and financing activities

       Equipment acquired under capital
           lease agreements                                               $          --        $          --        $        52,000
                                                                          ===============      ===============      ===============

       Conversion of preferred stock
            to common stock                                               $        63,000      $        (5,000)     $        25,000
                                                                          ===============      ===============      ===============

       Acquired investment under
            common stock purchase                                         $     1,000,000      $     1,000,000      $          --
                                                                          ===============      ===============      ===============

       Offering costs on
            common stock purchases                                        $        92,500      $          --        $          --
                                                                          ===============      ===============      ===============

       Common stock issued
            for purchase of options                                       $        39,000      $          --        $          --
                                                                          ===============      ===============      ===============


<FN>

                             The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>

                                                                 10
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS

         General
         -------
         Enova Systems,  Inc. (the "Company") is a California  corporation  that
         develops  drive  trains and related  components  for  electric,  hybrid
         electric, and fuel cell systems for mobile and stationary applications.
         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  develops  and  sells
         components  in the United  States  and Asia,  and sells  components  in
         Europe.

         Liquidity
         ---------
         At  December  31,  2004,  the  Company  had a net  working  capital  of
         approximately  $2,371,000  as compared to  $1,765,000  at December  31,
         2003,  representing  an  increase  of  $606,000.  This  increase is due
         primarily  to  capital  raised  during the year  offset by losses  from
         operations.  Operating  and  investing  activities  used  approximately
         $2,157,000  and  $174,000,  respectively,  while  financing  activities
         provided  $3,376,000.  During the year ended  December  31,  2004,  the
         Company increased its headcount minimally to control expenses and still
         maintain  its  competitive  edge  in  power  management  systems.   The
         Company's  business  plan  for 2005  provides  for  raising  additional
         capital in order to continue  with the  Company's  operations  until it
         becomes profitable.  The Company will also continue to search for areas
         in which to further reduce expenses and increase sales.

         Stock Purchase Agreement
         ------------------------
         The Company has entered into a joint venture  agreement (the Agreement)
         with  Hyundai  Heavy  Industries  of Korea  ("HHI")  to  create a joint
         venture corporation,  Hyundai-Enova  Innovative  Technology Center (the
         "ITC") to be domiciled in Torrance,  California.  In  conjunction  with
         this  Agreement,  HHI and the  Company  entered  into a stock  purchase
         agreement  in which HHI agreed to make a $3 million  investment  in the
         Company through the purchase of shares of the Company's  authorized and
         unissued common stock pursuant to Regulation D of the Securities Act of
         1933.  This  investment  was made in two  installments  of $1.5 million
         each. The first installment was made in June 2003 upon incorporation of
         the ITC and in consideration  for the issuance to HHI by the Company of
         23,076,923 shares of common stock at $0.065 per share.

         The second  installment was made in September 2004 in consideration for
         the issuance to HHI by the Company of 11,335,315 shares of common stock
         at $0.1323 per share.

         The  Company  invested $1 million of each  installment  into the ITC in
         consideration  for the issuance to the Company of a 40% equity interest
         in the ITC (the balance of the installments,  in the amount of $500,000
         each, is to be retained by Enova).  HHI acquired a 60% equity  interest
         in ITC by investing $3 million in the ITC in two  installments  of $1.5
         million each, to be made concurrently with the two installment payments
         to be paid by HHI for the Company's  common stock.  HHI and the Company
         have invested an aggregate of $5 million in the ITC.


                                       11
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Amendments to Previously Filed Financial Statements
         ---------------------------------------------------
         The  Company  has  amended its 2004 Form 10-K to include as the audited
         financial statements of Hyundai-Enova  Innovative  Technology Center, a
         40% owned equity method  investment of the Company.  Additionally,  the
         Company has made certain  corrections to the previously  filed December
         31,  2004   footnotes  to  the  financial   statements  in  regards  to
         disclosures  related to segment reporting,  deferred taxes, and certain
         other footnote disclosures for computational  errors. These corrections
         did not have any impact on the Company's reported  financial  position,
         results of  operations,  or cash flows for the year ended  December 31,
         2004.

         Management's Plans Related to Liquidity and Capital Needs
         ---------------------------------------------------------
         The Company has incurred significant losses from operations. During the
         year  ended  December  31,  2004,  the  Company  incurred a net loss of
         $3,382,000,   and  it  had  negative  cash  flows  from  operations  of
         $2,157,000. At December 31, 2004 the Company had an accumulated deficit
         of  $100,459,000.  Such losses have resulted  principally from research
         and  development  costs,  sales and  marketing  costs and  general  and
         administrative  costs  associated with the development of the Company's
         technologies and products and expanding its level of operations.

         The  Company is subject to all of the many risks  inherent in growing a
         new  enterprise,  and  the  development  and  commercialization  of new
         products,  including changing technologies,  competition from companies
         offering  the same or  similar  products,  managing  growth and lack of
         financial  resources.  As with any growing enterprise,  there can be no
         assurance  that the Company  will achieve or sustain  profitability  or
         positive cash flow from operations.

         The  accompanying  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.  Over the
         next few years the Company  expects to incur losses from  operations as
         it  continues  to  develop  future  products  and  market  its  current
         products.  The Company will need to raise  additional  capital  through
         debt or equity  financings or collaborative  arrangements with industry
         partners to continue its business operations.

         The  Company's  ability to continue as a going  concern is dependent on
         its success at  obtaining  additional  capital  sufficient  to meet its
         obligations on a timely basis, and to ultimately attain  profitability.
         Management  is  actively  engaged in seeking to raise  capital  through
         product licensing,  co-promotional  arrangements,  or public or private
         equity financing.  The Company believes it has demonstrated the ability
         to raise the necessary  funds for the Company's  growth and development
         activities.  However, there is no assurance that the Company will raise
         capital  sufficient  to enable the Company to continue  its  operations
         through the end of the fiscal year.

         In the event the Company is unable to  successfully  obtain  additional
         capital,  it is unlikely  that the Company  will have  sufficient  cash
         flows and  liquidity  to finance its business  operations  as currently
         contemplated.  Accordingly,  in the  event  additional  capital  is not
         obtained,  the Company will likely further  downsize the  organization,

                                       12
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Management's Plans Related to Liquidity and Capital Needs (continued)
         ---------------------------------------------------------------------
         defer marketing  programs,  reduce general and administrative  expenses
         and delay or reduce  the scope of  research  and  development  projects
         until it is able to obtain sufficient financing to do so. These factors
         could  significantly limit the Company's ability to continue as a going
         concern.  The balance sheets do not include any adjustments relating to
         recoverability  and  classification  of recorded  asset  amounts or the
         amounts of classification of liabilities that might be necessary should
         the Company be unable to continue in existence.

         Contract Services Revenue and Cost Recognition
         ----------------------------------------------
         The Company manufactures  proprietary products and other products based
         on design specifications provided by its customers.  Revenue from sales
         of products are generally recognized at the time title to the goods and
         the  benefits and risks of  ownership  passes to the customer  which is
         typically  when products are shipped based on the terms of the customer
         purchase agreement.

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

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

         Contract  costs  include all direct  materials,  subcontract  and labor
         costs and other indirect costs.  General and  administrative  costs are
         charged  to  expense  as  incurred.  At the  time a loss on a  contract
         becomes known, the entire amount of the estimated loss is accrued.

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

         Comprehensive Income
         --------------------
         The  Company  utilizes  Statement  of  Financial  Accounting  Standards
         ("SFAS") No. 130,  "Reporting  Comprehensive  Income."  This  statement
         establishes  standards  for  reporting  comprehensive  income  and  its
         components in a financial  statement.  Comprehensive  income as defined
         includes  all  changes  in equity  (net  assets)  during a period  from
         non-owner  sources.  Examples of items to be included in  comprehensive
         income,  which are excluded from net income,  include foreign  currency
         translation  adjustments,  minimum pension liability  adjustments,  and
         unrealized   gains  and   losses  on   available-for-sale   securities.
         Comprehensive  income  is  not  presented  in the  Company's  financial
         statements  since the  Company  did not have any changes in equity from
         non-owner sources.

                                       13
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Cash and Cash Equivalents
         -------------------------
         Highly liquid  investments with an original maturity of three months or
         less are considered cash equivalents.

         Accounts Receivable
         -------------------
         Receivables  are reported at net  realizable  value and are  considered
         past due when  payments have not been received for 90 days. In general,
         receivables  are  charged  off as  uncollectible  upon  exhausting  all
         avenues of collection.  Receivables older than 90 days totaled $165,000
         (without  reserve) and $678,000  (of which  $595,000 had been  reserved
         for) at December 31, 2004 and 2003, respectively.  The Company believes
         the  $165,000  will  be  collected  in its  entirety  in  2005  pending
         resolution of various customer requests.

         Allowance for Doubtful Accounts
         -------------------------------
         The Company  maintains  allowances for doubtful  accounts for estimated
         losses  resulting  from the inability of its customers to make required
         payments.  A  considerable  amount of judgment is required in assessing
         the ultimate  realization of accounts receivable  including the current
         credit-worthiness  of each customer.  If the financial condition of the
         Company's customers were to deteriorate,  resulting in an impairment of
         their ability to make payments,  additional allowances may be required.
         As of December  31, 2004,  the Company did not maintain any  allowances
         for doubtful  accounts as all prior  uncollectible  balances  have been
         charged to bad debt expense.

         Inventories and Supplies
         ------------------------
         Inventories  and supplies are comprised of materials used in the design
         and  development  of  electric,  hybrid  electric,  and fuel cell drive
         systems,  and other power and ongoing management and control components
         for production and ongoing development contracts,  and is stated at the
         lower of cost (first-in, first-out) or market. During 2004, the Company
         charged off $113,000 of inventory  related to a prior project with Ford
         Th!nk program which was terminated in 2003.  Additionally,  the Company
         charged-off   approximately   $162,000  for  obsolete  or   slow-moving
         inventory  for a total of $275,000  during the year ended  December 31,
         2004.

         Property and Equipment
         ----------------------
         Property 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
         indicate  the sum of expected  cash flows from use of the asset is less
         than its carrying value.  Long-lived assets that management  commits to
         sell or abandon are  reported  at the lower of carrying  amount or fair
         value less cost to sell.

         Equity Method Investment
         ------------------------
         Investment in joint venture (see Note 1) is accounted for by the equity
         method.   The  audited  financial   statements  for  the  Hyundai-Enova
         Innovative  Technology Center,  Inc. are attached following these Notes
         to the Financial Statements.


                                       14
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Fair Value of Financial Instruments
         -----------------------------------
         The carrying amount of financial  instruments,  including cash and cash
         equivalents,   accounts   receivable,   accounts  payable  and  accrued
         expenses,  approximate  fair value due to the short  maturity  of these
         instruments.  The carrying value of all other financial  instruments is
         representative of their fair values.  The Company's short 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
         ------------------------
         SFAS No. 123,  "Accounting for Stock-Based  Compensation,"  establishes
         and encourages the use of the fair value based method of accounting for
         stock-based compensation  arrangements under which compensation cost is
         determined using the fair value of stock-based  compensation determined
         as of the date of grant and is recognized over the periods in which the
         related services are rendered.  The statement also permits companies to
         elect to continue using the current  implicit value  accounting  method
         specified  in  Accounting  Principles  Board  ("APB")  Opinion  No. 25,
         "Accounting  for Stock Issued to Employees," to account for stock-based
         compensation. Summary of Statement

         SFAS No. 148 "Accounting for Stock-Based  Compensation--Transition  and
         Disclosure"  amends  SFAS No.  123 to  provide  alternative  methods of
         transition  for a voluntary  change to the fair value  based  method of
         accounting for stock-based  employee  compensation.  In addition,  this
         Statement  amends  the  disclosure  requirements  of  Statement  123 to
         require  prominent  disclosures  in both annual and  interim  financial
         statements  about the method of  accounting  for  stock-based  employee
         compensation and the effect of the method used on reported results.

         The Company has elected to use the intrinsic value based method and has
         disclosed  the pro forma effect of using the fair value based method to
         account for its stock-based compensation.  The Company has adopted only
         the  disclosure  provisions of SFAS No. 123. It applies APB Opinion No.
         25 and related interpretations in accounting for its plans and does not
         recognize  compensation expense for its stock-based  compensation plans
         other than for  restricted  stock and options  issued to outside  third
         parties.

         For  purposes of adjusted pro forma  disclosures,  the  estimated  fair
         value of the options is amortized to expense over the vesting period.


                                       15
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Stock-Based Compensation (continued)
         ------------------------------------
         If the Company had elected to recognize compensation expense based upon
         the fair value at the grant date for awards under this plan  consistent
         with the methodology prescribed by SFAS No. 123, the Company's net loss
         and loss per share would be reduced to the pro forma amounts  indicated
         below for the years ended December 31, 2004, 2003, and 2002:

<TABLE>
<CAPTION>
                                                           2004               2003               2002
                                                       -----------        -----------        -----------
<S>                                                    <C>                <C>                <C>
         Loss applicable to common stockholders        $(3,382,000)       $(3,186,000)       $(3,598,000)

         Stock-based employee compensation
             expense determined under fair value
             presentation for all options                  (76,000)          (315,000)          (197,000)

         Pro forma net loss                            $(3,458,000)       $(3,501,000)       $(3,795,000)

         Basic and diluted loss per
                common share
                    As reported                        $     (0.01)       $     (0.01)       $     (0.01)
                    Pro forma                          $     (0.01)       $     (0.01)       $     (0.01)
</TABLE>

         For purposes of computing  the pro forma  disclosures  required by SFAS
         No.  123,  the fair  value of each  option  granted  to  employees  and
         directors is estimated  using the  Black-Scholes  option-pricing  model
         with the  following  weighted-average  assumptions  for the years ended
         December 31, 2004,  2003, and 2002:  dividend yields of 0%, 0%, and 0%,
         respectively;  expected volatility of 73%, 88%, and 83%,  respectively;
         risk-free interest rates of 4%, 4%, and 4%, respectively;  and expected
         lives of one, three, and five years, respectively. The weighted-average
         fair value of options  granted  during the year ended December 31, 2004
         for which the exercise  price equals the market price on the grant date
         was $0, and the weighted-average exercise price was $0.115.

         The  Black-Scholes  option  valuation  model was  developed  for use in
         estimating the fair value of traded options,  which do not have vesting
         restrictions and are fully transferable.  In addition, option valuation
         models require the input of highly  subjective  assumptions,  including
         the expected  stock price  volatility.  Because the Company's  employee
         stock options have characteristics  significantly  different from those
         of  traded  options,  and  because  changes  in  the  subjective  input
         assumptions  can  materially   affect  the  fair  value  estimate,   in
         management's  opinion, the existing models do not necessarily provide a
         reliable  single  measure  of the  fair  value  of its  employee  stock
         options.

         Advertising Expense
         -------------------
         The Company expenses all advertising  costs,  including direct response
         advertising,  as they are incurred.  Advertising  expense for the years
         ended  December 31, 2004,  2003,  and 2002 was  $12,000,  $21,000,  and
         $20,000, respectively.


                                       16
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Research and Development
         ------------------------
         Costs of researching  and  developing  new technology or  significantly
         altering existing technology is expensed as incurred.

         Income Taxes
         ------------
         The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which
         requires the recognition of deferred tax assets and liabilities for the
         expected  future tax  consequences of events that have been included in
         the financial  statements or tax returns.  Under this method,  deferred
         income taxes are recognized for the tax consequences in future years of
         differences  between the tax bases of assets and  liabilities and their
         financial  reporting amounts at each year-end based on enacted tax laws
         and  statutory  tax  rates  applicable  to the  periods  in  which  the
         differences are expected to affect taxable income. Valuation allowances
         are established,  when necessary,  to reduce deferred tax assets to the
         amount expected to be realized.

         Loss Per Share
         --------------
         The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per
         share is computed by dividing loss available to common  stockholders by
         the weighted-average number of common shares outstanding.  Diluted loss
         per share is computed  similar to basic loss per share  except that the
         denominator  is  increased to include the number of  additional  common
         shares that would have been  outstanding if the potential common shares
         had been issued and if the  additional  common  shares  were  dilutive.
         Common  equivalent  shares are excluded from the  computation  if their
         effect is anti-dilutive. The Company's common share equivalents consist
         of stock options.

         Estimates
         ---------
         The  preparation of financial  statements  requires  management to make
         estimates and  assumptions  that affect the reported  amounts of assets
         and liabilities and disclosure of contingent  assets and liabilities at
         the  date of the  financial  statements  and the  reported  amounts  of
         revenue and expenses during the reporting period.  Actual results could
         differ from those estimates.

         Concentrations of Credit Risk
         -----------------------------
         Financial   instruments  which  potentially   subject  the  Company  to
         concentrations  of credit risk consist of cash and cash equivalents and
         accounts  receivable.  The Company places its cash and cash equivalents
         with high credit, quality financial  institutions.  At times, such cash
         and cash equivalents may be in excess of the Federal Deposit  Insurance
         Corporation   insurance   limit  of  $100,000.   The  Company  has  not
         experienced  any losses in such accounts and believes it is not exposed
         to any  significant  credit  risk on cash  and cash  equivalents.  With
         respect to accounts  receivable,  the Company  routinely  assesses  the
         financial  strength of its customers  and, as a  consequence,  believes
         that the receivable credit risk exposure is limited.


                                       17
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Major Customers
         ---------------
         During the year ended December 31, 2004, the Company conducted business
         with five customers  whose sales  comprised 16%, 13%, 10%, 9% and 8% of
         total revenues.  As of December 31, 2004, these customers accounted for
         0%, 9%, 33%, 0% and 13%, respectively, of total accounts receivable.

         In addition,  one of the Company's  stockholders accounted for 10%, 1%,
         and 16% of total  revenues  during the years ended  December  31, 2004,
         2003, and 2002,  respectively.  This stockholder  holds less than 5% of
         the total issued and  outstanding  common  stock.  Demand  deposits are
         placed with known, creditable financial institutions.

         Recently Issued Pronouncements
         ------------------------------
         In November 2004, the FASB issued SFAS No. 151,"Inventory  Costs". SFAS
         No. 151 amends the  accounting  for abnormal  amounts of idle  facility
         expense,  freight, handling costs, and wasted material (spoilage) under
         the guidance in ARB No. 43, Chapter 4, "Inventory Pricing". Paragraph 5
         of ARB No. 43,  Chapter  4,  previously  stated  that ". . . under some
         circumstances, items such as idle facility expense, excessive spoilage,
         double freight,  and rehandling  costs may be so abnormal as to require
         treatment as current period  charges.  . . ." This  statement  requires
         that those items be recognized as current-period  charges regardless of
         whether they meet the  criterion of "so  abnormal."  In addition,  this
         statement requires that allocation of fixed production overheads to the
         costs of conversion be based on the normal  capacity of the  production
         facilities.  This  statement is effective for inventory  costs incurred
         during fiscal years beginning after June 15, 2005.  Management does not
         expect adoption of SFAS No. 151 to have a material  impact,  if any, on
         the Company's financial position or results of operations.

         In December  2004, the FASB issued SFAS No. 152,  "Accounting  for Real
         Estate Time-Sharing Transactions".  The FASB issued this statement as a
         result of the guidance  provided in AICPA  Statement of Position  (SOP)
         04-2, "Accounting for Real Estate Time-Sharing Transactions".  SOP 04-2
         applies  to all real  estate  time-sharing  transactions.  Among  other
         items, the SOP provides  guidance on the recording of credit losses and
         the  treatment  of  selling  costs,  but does not  change  the  revenue
         recognition  guidance  in SFAS No.  66,  "Accounting  for Sales of Real
         Estate", for real estate time-sharing transactions. SFAS No. 152 amends
         Statement No. 66 to reference the guidance  provided in SOP 04-2.  SFAS
         No. 152 also  amends  SFAS No. 67,  "Accounting  for Costs and  Initial
         Rental  Operations  of Real  Estate  Projects",  to state that SOP 04-2
         provides the relevant guidance on accounting for incidental  operations
         and costs related to the sale of real estate time-sharing transactions.
         SFAS No. 152 is effective for years beginning after June 15, 2005, with
         restatements  of previously  issued  financial  statements  prohibited.
         Management  does not expect adoption of SFAS No. 152 to have a material
         impact,  if any,  on the  Company's  financial  position  or results of
         operations.

                                       18
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Recently Issued Pronouncements (continued)
         ------------------------------------------
         In  December  2004,  the  FASB  issued  SFAS  No.  153,  "Exchanges  of
         Nonmonetary  Assets," an amendment to Opinion No. 29,  "Accounting  for
         Nonmonetary Transactions".  SFAS No. 153 eliminates certain differences
         in the guidance in Opinion No. 29 as compared to the guidance contained
         in standards issued by the  International  Accounting  Standards Board.
         The amendment to Opinion No. 29 eliminates the fair value exception for
         nonmonetary exchanges of similar productive assets and replaces it with
         a general  exception  for exchanges of  nonmonetary  assets that do not
         have commercial substance. Such an exchange has commercial substance if
         the  future   cash  flows  of  the  entity  are   expected   to  change
         significantly  as a result of the  exchange.  SFAS No. 153 is effective
         for nonmonetary  asset exchanges  occurring in periods  beginning after
         June 15, 2005.  Earlier  application is permitted for nonmonetary asset
         exchanges  occurring  in periods  beginning  after  December  16, 2004.
         Management  does not expect adoption of SFAS No. 153 to have a material
         impact,  if any,  on the  Company's  financial  position  or results of
         operations.  In  December  2004,  the  FASB  issued  SFAS  No.  123(R),
         "Share-Based Payment". SFAS 123(R) amends SFAS No. 123, "Accounting for
         Stock-Based  Compensation",  and APB  Opinion No. 25,  "Accounting  for
         Stock Issued to Employees".  SFAS  No.123(R)  requires that the cost of
         share-based  payment  transactions  (including those with employees and
         non-employees)  be  recognized in the  financial  statements.  SFAS No.
         123(R)  applies to all  share-based  payment  transactions  in which an
         entity acquires goods or services by issuing (or offering to issue) its
         shares,  share options,  or other equity instruments  (except for those
         held by an ESOP) or by incurring liabilities (1) in amounts based (even
         in  part)  on the  price  of  the  company's  shares  or  other  equity
         instruments,  or (2) that  require (or may require)  settlement  by the
         issuance  of a  company's  shares  or other  equity  instruments.  This
         statement is effective (1) for public companies qualifying as SEC small
         business  issuers,  as of the  first  interim  period  or  fiscal  year
         beginning  after  December  15,  2005,  or (2)  for  all  other  public
         companies,  as of the first  interim  period or fiscal  year  beginning
         after June 15, 2005, or (3) for all nonpublic entities, as of the first
         fiscal year beginning after December 15, 2005.  Management is currently
         assessing the impact of this  statement on its  financial  position and
         results of operations.

         Fourth Quarter Adjustments
         --------------------------
         During the fourth quarter of fiscal 2004, the Company:

         o     wrote-down  inventory  by a net  of  $275,000  for  obsolete  and
               slow-moving  inventory.  The Company  charged  off  approximately
               $113,000  of  this  reduction  for  inventory   relating  to  raw
               materials  for the  Ballard/Ford  Th!nk  city  program  which was
               terminated in 2003.  This was inventory  specific to that program
               which the Company believed may be useable in other components, or
               would  be  purchased  by  third  parties,  but was not due to the
               Company's  increased focus on the heavy-duty hybrid markets.  The
               Company  also  charged off an additional $162,000 in  obsolete or


                                       19
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Fourth Quarter Adjustments (continued)
         --------------------------------------

               slow moving  inventory  during 2004. This resulted in an increase
               of cost of sales by $275,000 for the year.

         o     allocated  certain  expenses  to cost of  sales,  which  had been
               charged  to  general  and  administrative  expense,  based on the
               Company's  improved  method  of  apportioning  such  costs.  This
               resulted  in an  increase  in  cost  of  sales  of  approximately
               $147,000 in the fourth quarter,  a portion of which may have been
               attributable  to prior quarters in 2004 but none that the Company
               believes  would have a  material  impact on the  presentation  of
               those quarters.

               The above two adjustments (i) increased cost of sales by $422,000
         in the fourth  quarter,  (ii) reduced  gross profit by $422,000,  (iii)
         increased loss from operations by $275,000 and (iv) reduced net loss by
         $275,000.

NOTE 3 - PROPERTY AND EQUIPMENT

         Property and  equipment at December 31, 2004 and 2003  consisted of the
         following:

<TABLE>
<CAPTION>
                                                                              2004                   2003
                                                                           ----------             ----------
               <S>                                                         <C>                    <C>
               Computers                                                   $  229,000             $  213,000
               Machinery and equipment                                        709,000                715,000
               Furniture and office equipment                                 192,000                192,000
               Demonstration vehicles and buses                               461,000                297,000
               Equipment under capital lease obligations                       94,000                 94,000
               Leasehold improvements                                          68,000                 68,000
                                                                           ----------             ----------
                                                                            1,753,000              1,579,000
               Less accumulated depreciation and amortization               1,366,000              1,098,000
                                                                           ----------             ----------

                   Total                                                   $  387,000             $  481,000
                                                                           ==========             ==========
               </TABLE>

         Depreciation  and  amortization  expense was  $376,000,  $351,000,  and
         $134,000  for the  years  ended  December  31,  2004,  2003,  and 2002,
         respectively.


                                       20
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 4 - EQUITY METHOD INVESTMENT

         During  the  year  ended  December  31,  2004,  the  Company   invested
         $1,000,000  of the proceeds  received  from sale of common stock to HHI
         into a  joint  venture  formed  with  HHI in 2003  (see  Note  1).  The
         Company's share of income and losses is 40% as stated in the agreement.
         During the year ended December 31, 2004, the Company recorded  $192,000
         as its proportionate share of losses in the joint venture.

         The  financial  statements  of the ITC were  audited for the year ended
         December  31,  2004,  the  period  from June 11,  2003  (Inception)  to
         December 31,  2003,  and the period from June 11, 2003  (Inception)  to
         December 31, 2004 and have been included in the  Company's  Form 10-K/A
         for the year ended  December 31, 2004.  The  following is the condensed
         financial  position and results of operations of ITC  (audited),  as of
         and for the year ended  December  31, 2004 and the period from June 11,
         2003 (Inception) to December 31, 2003:

<TABLE>
<CAPTION>
                                                                                        Period from June 11,
                                                                   Year ended            2003 (Inception) to
                                                               December 31, 2004          December 31, 2003
                                                               -----------------          -----------------
<S>                                                                  <C>                        <C>
                  Financial position
                      Current assets                                 $ 4,406,000                $ 2,413,000
                      Property and equipment, net                         13,000                     12,000
                      Liabilities                                         (3,000)                   (27,000)
                                                                     -----------                -----------

                      Equity                                         $ 4,419,000                $ 2,425,000
                                                                     ===========                ===========

                  Operations
                      Expenses                                          (481,000)                  (106,000)
                                                                     -----------                -----------

                  Net loss                                           $  (481,000)               $  (106,000)
                                                                     ===========                ===========

                  Company's proportionate
                     share of net loss                               $  (192,000)               $   (42,000)
                                                                     ===========                ===========
</TABLE>


NOTE 5 - OTHER ASSETS

         During the year ended  December 31, 2002,  the Company  incurred  legal
         costs of $78,000  associated with two patents.  These patents have been
         capitalized and are being amortized over their estimated useful lives.

         In June 2001,  a  strategic  relationship  with Ford Motor  Company was
         entered  into to develop and  manufacture  a high power,  high  voltage
         conversion module for Ford's fuel cell vehicle. Warrants were issued to
         Ford Motor  Company in exchange for Ford's  commitment  to enter into a
         five-year  agreement.  The  issuance of the  warrants was recorded as a
         non-current  asset (Value  Participation  Agreement) at its fair market

                                       21
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 5 - OTHER ASSETS (continued)

         value of $577,000,  which was determined using the Black-Scholes option
         pricing model, and is being amortized on a straight-line basis over the
         life of the contract.

<TABLE>
<CAPTION>
                                                                         2004                2003
                                                                       --------            --------
<S>                                                                    <C>                 <C>
               Patents                                                 $ 92,000            $ 92,000
               Valuation Participation Agreement                        577,000             577,000
                                                                       --------            --------

                                                                        669,000             669,000
               Less accumulated amortization                            373,000             265,000
                                                                       --------            --------

                   Total                                               $296,000            $404,000
                                                                       ========            ========
</TABLE>

NOTE 6 - LINE OF CREDIT

         The Company has available $250,000 revolving line of credit from a bank
         with interest  payable monthly at 3.25%.  The line of credit is secured
         by $250,000  Certificate  of Deposit and its maturity has been extended
         until April 2005.

NOTE 7- DEFERRED REVENUES - Tomoe LTA Long-Term Contract

       The Company has entered into a development  and production  contract with
       Tomoe  Electro-Mechanical  Engineering and Manufacturing,  Inc. for eight
       battery-electric  locomotives for the Singapore Land Transport  Authority
       for service  vehicles for the Singapore  Mass Rapid  Transit  Circle Line
       system for  maintenance,  repair,  shunting  and  recovery  of  passenger
       trains.  The  contract  commenced  in August 2004 and  completion  of the
       contract  will  take   approximately   15-18  months  and  is  valued  at
       approximately  $3,100,000.  The Company is  recording  revenues  for this
       long-term,    fixed    price    contract    on   the    basis    of   the
       percentage-of-completion    method.   The   contract   contains   several
       deliverables  over its life and  therefore  the Company will divide these
       deliverables  into separate  units of  accounting  based on relative fair
       values. Revenue recognition criteria will be assessed separately for each
       separate  unit of  accounting.  As of  December  31,  2004,  the  Company
       recorded  revenues of $68,000 related to the development  portion of this
       contract.

                                       22
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 8- NOTES PAYABLE

<TABLE>
         Notes payable at December 31, consisted of the following:
<CAPTION>
                                                                                      2004               2003
                                                                                ---------------    ----------------
<S>                                                                             <C>                <C>
                Secured  note  payable  to  Credit   Managers   Association
                   of California, bearing interest at 6% per annum during
                   2003 and at prime plus 3% per annum in 2004 and through
                   maturity. Principal and unpaid interest due in April
                   2016. A sinking fund escrow is required to be funded
                   with 10% of future equity financing,
                   as defined in the agreement.                                 $     3,332,000    $      3,332,000

                Unsecured note payable, bearing interest at 10%
                   per annum.  This note payable is in default.                         120,000             120,000

                Secured note payable to a Coca Cola Enterprises
                   in the original amount of $40,000, bearing
                   interest at 5% per annum.  Principal and
                   unpaid interest due in July 2005.                                     40,000                  --

                Secured note payable to a financial  institution in the
                   original amount of $33,000,  bearing interest at 8% per
                   annum, payable in 36 equal monthly installments.                      15,000              26,000
                                                                                ---------------    ----------------

                                                                                      3,507,000           3,478,000
                Less current portion                                                    166,000             131,000
                                                                                ---------------    ----------------

                         Long-term portion                                      $     3,341,000    $      3,347,000
                                                                                ===============    ================
</TABLE>


         Future minimum principal payments of notes payable at December 31, 2004
consisted of the following:

                   Year Ending
                  December 31,
                  ------------
                        2005                                     $       166,000
                        2006                                               9,000
                        2007                                                  --
                        2008                                                  --
                        2009                                                  --
                        Thereafter                                     3,332,000
                                                                 ---------------

                           Total                                 $     3,507,000
                                                                 ===============


                                    23
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 9- COMMITMENTS AND CONTINGENCIES

         Leases
         ------
         The Company leases its facilities  under an operating lease  agreement,
         which  requires  monthly  payments  of $13,250  and expires in February
         2008. At March 2005, the monthly  payments will increase to $13,700 per
         the  terms of the lease  agreement.  In  addition,  the  Company  rents
         manufacturing   and  office   equipment  under  various  capital  lease
         agreements.

         Future minimum lease payments under these non-cancelable  operating and
         capital lease obligations at December 31, 2004 were as follows:

<TABLE>
<CAPTION>

                   Year Ending                                          Operating                    Capital
                  December 31,                                           Leases                      Leases
                  ------------                                          --------                    --------
<S>                                                                     <C>                         <C>
                     2005                                               $164,000                    $  6,000
                     2006                                                155,000                        --
                     2007                                                166,000                        --
                     2008                                                 28,000                        --
                                                                        --------                    --------
                                                                        $513,000                       6,000
                                                                        ========
               Less amount representing interest                                                         --
                                                                                                    --------

               Less current portion                                                                    6,000
                                                                                                    --------

                   Long-term portion                                                                $    --
                                                                                                    ========
</TABLE>

         Rent expense was $140,000,  $150,000,  and $206,000 for the years ended
         December 31, 2004, 2003, and 2002, respectively.

NOTE 10 - STOCKHOLDERS' EQUITY (DEFICIT)

         Common Stock
         ------------

         During the year ended December 31, 2004, the Company issued  27,585,000
         shares of common stock for cash totaling $3,450,000.  In addition,  the
         Company   issued  481,000  shares  of  common  stock  to  directors  as
         compensation totaling $47,000.

         Common Stock Subscribed
         -----------------------

         At December 31,  2004,  the Company was  committed  to issue  1,196,000
         shares  of  common  stock  totaling  $165,000  as  compensation  and as
         finder's fees to its directors.

         In the prior  year,  the  Company  incorrectly  reported  the number of
         subscribed  common stock.  The actual shares  subscribed as of December
         31, 2003 totaling 367,000 shares differed from the previously  reported
         number of shares by 760,000  shares,  totaling  $29,000.  The effect of
         this error was not material to the reported  results.  This  difference
         has been corrected in the current year's financial statements.

                                    24
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 10 - STOCKHOLDERS' EQUITY (DEFICIT) (Continued)

         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.

         Substantially  all of the stock notes  receivable  stem from a Board of
         Directors  plan for the sale of shares of Series A  preferred  stock in
         1993 to certain officers and directors (Participants).  In general, the
         Participants  could  purchase the preferred  stock 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.  The likelihood of collecting the
         interest on these notes is remote; therefore,  accrued interest has not
         been recorded since the fiscal year ended July 31, 1997.

         Series B Preferred Stock
         ------------------------

         Series B preferred  stock is currently  unregistered  and each share is
         convertible  into shares of common stock on a two-for-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, if
         the offering results in net proceeds of $10,000,000,  and the per share
         price of common stock is at least $2.00; and the merger, consolidation,
         or sale of common stock or sale of  substantially  all of the Company's
         assets in which gross proceeds received are at least $10,000,000.

         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.  The stock has a  liquidation  preference of
         $2.00 per share together with an amount equal to, generally,  $0.14 per
         share compounded annually at 7% per year from the filing date, less any
         dividends  paid.   Dividends  on  the  Series  B  preferred  stock  are
         non-cumulative  and  payable at the annual  rate of $0.14 per share if,
         when,  and as declared by, the Board of  Directors.  No dividends  have
         been declared on the Series B preferred stock.

                                       25
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 10 - STOCKHOLDERS' EQUITY (DEFICIT) (Continued)

         Stock Options and Warrants
         --------------------------

         During the year ended December 31, 2004,  the Company issued  8,464,000
         shares  of  common  stock  from the  exercise  of  options  by  certain
         employees in exchange for cash totaling $783,000.

         During 2004, the  stockholders  of the Company  approved an increase of
         20,000,000  shares for the 1996 Stock  Option  Plan for  incentive  and
         non-statutory  stock  options  during  the  period of the  Plan,  which
         expires in 2006.  The Plan now  reserves  65,000,000  shares  under the
         plan.  Options  under the 1996 Plan  expire over a period not to exceed
         ten years. The following summarizes common stock option activity:

<TABLE>
<CAPTION>
                                    1996 Plan                     1993 Plan                        Other
                         ----------------------------  -----------------------------  -----------------------------
                                          Weighted-                      Weighted-                     Weighted-
                                           Average                        Average                       Average
                                           Exercise                       Exercise                      Exercise
                             Shares         Price          Shares          Price        Shares           Price
                         -------------  -------------  --------------  -------------  -------------  --------------
<S>                         <C>             <C>             <C>            <C>            <C>            <C>
         Outstanding,
           December
           31, 2001         20,866,000      $    0.10       9,654,000      $    0.52      1,495,000      $     1.70

         Granted               900,000      $    0.10              --      $      --             --      $       --
         Exercised                  --      $      --         (35,000)     $    0.10             --      $       --
         Forfeited            (439,000)     $    0.10      (2,565,000)     $    0.52             --      $       --
                         -------------                 --------------                 -------------

         Outstanding,
           December
           31, 2002         21,327,000      $    0.11       7,054,000      $    0.52      1,495,000      $     1.70

         Granted             9,998,000      $    0.05              --      $      --             --      $       --
         Exercised          (8,638,000)     $    0.05              --      $      --             --      $       --
         Forfeited          (1,556,000)     $    0.11      (7,054,000)     $    0.52     (1,495,000)     $     1.70
                         -------------                 --------------                 -------------

         Outstanding,
           December
           31, 2003         21,131,000      $    0.12              --      $      --             --      $       --

         Granted             2,000,000      $    0.12              --      $      --             --      $       --
         Exercised         (10,981,000)     $    0.10              --      $      --             --      $       --
         Forfeited          (4,795,000)     $    0.12              --      $      --             --      $       --
                         -------------                 --------------                 -------------

         Outstanding,
           December
           31, 2004          7,355,000      $    0.12              --      $      --             --      $       --
                         =============                 ==============                 =============

         Exercisable,
           December
           31, 2004          6,418,000      $    0.12              --      $      --             --      $       --
                         =============                 ==============                 =============
</TABLE>

         The  weighted-average   remaining   contractual  life  of  the  options
         outstanding at December 31 2004 was 1.2 years.  The exercise  prices of
         the  options  outstanding  at  December  31,  2004 ranged from $0.11 to
         $0.30.  Options exercisable were 6,418,000,  20,898,000,  28,304,228 at
         December 31, 2004, 2003 and 2002.

                                       26
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 10 - STOCKHOLDERS' EQUITY (DEFICIT) (Continued)

         Stock Options and Warrants (Continued)
         --------------------------------------

         The  agreement  with Ford Motor  Company (see Note 5) included  issuing
         warrants to Ford to purchase 4.6% of the fully diluted  common stock of
         the Company over a 66 month period. The number of shares to be acquired
         will be adjusted from time to time for increases in the Company's fully
         diluted  common stock.  The vesting of these warrants is dependent upon
         Ford meeting specific purchase requirements.

         The fair value of warrants  granted were estimated on the date of grant
         using  the  Black-Scholes   option-pricing  model  with  the  following
         assumptions:  dividend  yield  of  0%,  expected  volatility  of  102%,
         risk-free  interest  rate of 4.76% and an expected life of the warrants
         of 66 months.  Warrants issued and vested under this agreement  totaled
         2,500,000 at an exercise price of $0.29 per share during the year ended
         December 31, 2001.  No warrants  were vested under this program  during
         2004 and 2003.  As of June 30,  2004,  Ford is no longer  eligible  for
         further   vesting  of  its   warrants   per  the  terms  of  the  Value
         Participation Agreement.

NOTE 11 - INCOME TAXES

         Significant  components  of  the  Company's  deferred  tax  assets  and
         liabilities  for federal and state income taxes as of December 31, 2004
         and 2003 consisted of the following:
<TABLE>
<CAPTION>
                                                                                      2004               2003
                                                                                ---------------    ----------------
                  Deferred tax assets
<S>                                                                             <C>                <C>
                      Federal tax loss carry-forward                            $    31,542,000    $     31,286,000
                      State tax loss carry-forward                                      893,000             712,000
                      Basis difference                                                1,610,000           1,610,000
                      Other, net                                                        (96,000)            555,000
                                                                                ----------------   ----------------

                                                                                     33,949,000          34,163,000
                  Less valuation allowance                                          (33,949,000)        (34,163,000)
                                                                                ----------------   -----------------

                           Net deferred tax assets                              $            --    $             --
                                                                                ===============    ================
</TABLE>

         As of December  31,  2004,  the Company  had net  operating  loss carry
         forwards  for federal and state  income tax  purposes of  approximately
         $95,571,000 and $9,393,000,  respectively. The net operating loss carry
         forwards began expiring in 2003.

NOTE 12 - RELATED PARTY TRANSACTIONS

         During  2004,   the  Company   purchased   approximately   $246,000  in
         components,  materials and services from HHI. The  outstanding  balance
         owed to HHI at December 31, 2004 was approximately $2,000.

                                       27
<PAGE>
                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2004

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

NOTE 12 - RELATED PARTY TRANSACTIONS (continued)

         During  2004,  the  Company  paid a  total  of  $101,000  to two of its
         directors in consulting fees.

         During 2004,  pursuant to a written agreement  approved by the Board of
         Directors  and its Audit  Committee,  a  finder's  fee of  $92,500  was
         accrued to be paid, through the issuance of restricted shares of common
         stock in Enova,  totaling 608,553 shares at a price of $0.15 per share,
         in conjunction with a private placement funding in the first quarter of
         2004 to The Global Value  Investment  Portfolio  Management  Pte Ltd, a
         Singapore  Company  which  is  substantially  owned  by two  affiliated
         parties:  Anthony  Rawlinson,  Chairman of the Board of our Company and
         Borl partnership,  owned by Boris Liberman Family Trusts, which is also
         affiliated with Jagen Pty Ltd., a large affiliate shareholder in Enova.
         Said shares were subsequently issued in the first quarter of 2005.

NOTE  13 - EMPLOYEE BENEFIT PLAN

         The Company has a 401(k) profit sharing plan covering substantially all
         employees.  Eligible  employees may elect to contribute a percentage of
         their annual  compensation,  as defined,  to the plan.  The Company may
         also elect to make  discretionary  contributions.  For the years  ended
         December  31,  2004,  2003,  and  2002  the  Company  did not  make any
         contributions to the plan.


NOTE 14 - GEOGRAPHIC AREA DATA

         The Company  operates  as a single  reportable  segment and  attributes
         revenues to countries based upon the location of the entity originating
         the sale. Revenues by geographic area are as follows:
<TABLE>
<CAPTION>

                                                                      2004              2003             2002
                                                                ----------------  ---------------  ----------------

<S>                                                             <C>               <C>              <C>
                  United States                                 $      1,465,000  $     2,672,000  $      2,478,000
                  Italy                                                   30,000          213,000         1,040,000
                  Korea                                                  258,000          297,000           726,000
                  Japan                                                  176,000          146,000            87,000
                  China                                                  256,000                -                 -
                  Malaysia                                                     -          184,000            65,000
                  Ireland                                                166,000                -            59,000
                  Canada                                                       -          738,000                 -
                  England                                                203,000           60,000                 -
                                                                ----------------  ---------------  ----------------

                    Total                                       $      2,554,000  $     4,310,000  $      4,455,000
                                                                ================  ===============  ================

</TABLE>

                                                         28
<PAGE>








                            SUPPLEMENTAL INFORMATION


<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
Enova Systems, Inc.
Torrance, California

Our audits were conducted in accordance with the standards of the Public Company
Accounting  Oversight  Board  (United  States)  and were made for the purpose of
forming an  opinion  on the basic  financial  statements  taken as a whole.  The
supplemental  schedule  II is  presented  for  purposes  of  complying  with the
Securities  and  Exchange  Commission's  rules  and is not a part  of the  basic
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures  applied in our audits of the basic financial  statements and, in our
opinion,  is fairly  stated in all  material  respects  in relation to the basic
financial statements taken as a whole.



SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 10, 2005


                                        1

<PAGE>
<TABLE>
<CAPTION>

                                                                                                                 ENOVA SYSTEMS, INC.
                                                                                     VALUATION AND QUALIFYING ACCOUNTS - SCHEDULE II

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

                                                                Balance,            Additions         Deductions
                                                              Beginning of         Charged to            from           Balance, End
                                                                  Year             Operations           Reserve            of Year
                                                              ------------        ------------       ------------       ------------
<S>                                                           <C>                 <C>                <C>                <C>
Allowance for doubtful accounts

   December 31, 2004                                          $    595,000        $       --         $    595,000       $       --
                                                              ============        ============       ============       ============

   December 31, 2003                                          $       --          $    595,000       $       --         $    595,000
                                                              ============        ============       ============       ============

   December 31, 2002                                          $       --          $       --         $       --         $       --
                                                              ============        ============       ============       ============

Reserve for obsolete inventories

   December 31, 2004                                          $     80,000        $       --         $       --         $     80,000
                                                              ============        ============       ============       ============

   December 31, 2003                                          $     80,000        $       --         $       --         $     80,000
                                                              ============        ============       ============       ============

   December 31, 2002                                          $     80,000        $       --         $       --         $     80,000
                                                              ============        ============       ============       ============

<FN>
                             The accompanying notes are an integral part of these financial statements
</FN>
</TABLE>
                                                                 2
<PAGE>






                                HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                            FINANCIAL STATEMENTS
                                        FOR THE YEAR ENDED DECEMBER 31, 2004 AND
          FOR THE PERIOD FROM JUNE 11, 2003 (INCEPTION) TO DECEMBER 31, 2003 AND
              FOR THE PERIOD FROM JUNE 11, 2003 (INCEPTION) TO DECEMBER 31, 2004



<PAGE>

                                HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                                        CONTENTS
                                                               December 31, 2004

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


                                                                            Page

REPORT OF INDEPENDENT REGISTERED
           PUBLIC ACCOUNTING FIRM                                            1

FINANCIAL STATEMENTS

       Balance Sheets                                                        2

       Statements of Operations                                              3

       Statements of Stockholders' Equity                                    4

       Statements of Cash Flows                                              5

       Notes to Financial Statements                                        6-12





<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
Hyundai-Enova Innovative Technology Center, Inc.
Torrance, California

We have  audited  the  balance  sheets of  Hyundai-Enova  Innovative  Technology
Center, Inc. (a development stage company) as of December 31, 2004 and 2003, and
the related statements of operations,  stockholders'  equity, and cash flows for
the year ended December 31, 2004,  the period from June 11, 2003  (inception) to
December 31, 2003, and the period from June 11, 2003 (inception) to December 31,
2004.  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 the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit 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  that  our  audits  provided  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  Hyundai-Enova  Innovative
Technology Center, Inc. as of December 31, 2004 and 2003, and the results of its
operations  and its cash flows for the year ended  December 31, 2004, the period
from June 11, 2003  (inception)  to December 31, 2003,  and the period from June
11, 2003  (inception)  to December  31,  2004,  in  conformity  with  accounting
principles generally accepted in the United States of America.


SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
July 1, 2005


                                       1

<PAGE>
<TABLE>
                                                                                    HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                                                                       (A DEVELOPMENT STAGE COMPANY)
                                                                                                                      BALANCE SHEETS
                                                                                                                        December 31,

------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>

                                                               ASSETS

                                                                                                     2004                 2003
                                                                                               ---------------      ---------------
<S>                                                                                            <C>                  <C>
Current assets
      Cash and cash equivalents                                                                $     4,405,623      $     2,412,977
                                                                                               ---------------      ---------------
              Total current assets                                                                   4,405,623            2,412,977

Property and equipment, net                                                                             13,718               12,178
                                                                                               ---------------      ---------------
Total assets                                                                                   $     4,419,341      $     2,425,155
                                                                                               ===============      ===============



                                                LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities
      Accounts payable                                                                         $           162      $        26,074
      Credit cards payable                                                                               1,280                  670
      Accrued payroll and related expenses                                                               1,342                 --
                                                                                               ---------------      ---------------

              Total current liabilities                                                                  2,784               26,744
                                                                                               ---------------      ---------------


Commitments and contingencies
Stockholders' equity
      Common Stock, no par value
        5,000,000 shares authorized
        5,000,000 and 2,500,000 shares issued and
        outstanding, respectively                                                                    5,000,000            2,500,000
      Deficit accumulated during the development stage                                                (583,443)            (101,589)
                                                                                               ---------------      ---------------
              Total stockholders' equity                                                             4,416,557            2,398,411
                                                                                               ---------------      ---------------
Total liabilities and stockholders' equity                                                     $     4,419,341      $     2,425,155
                                                                                               ===============      ===============
<FN>

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

<PAGE>
<TABLE>

                                                                                    HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                                                                       (A DEVELOPMENT STAGE COMPANY)
                                                                                                            STATEMENTS OF OPERATIONS
                                                                                            For the Year Ended December 31, 2004 and
                                                              For the Period from June 11, 2003 (Inception) to December 31, 2003 and
                                                                  For the Period from June 11, 2003 (Inception) to December 31, 2004
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                      Period From               Period From
                                                              For the Year            June 11, 2003             June 11, 2003
                                                                  Ended              (Inception) to             (Inception) to
                                                              December 31,             December 31,               December 31,
                                                                   2004                   2003                       2004
                                                          ----------------------------------------------------------------------

Operating expenses
<S>                                                       <C>                     <C>                      <C>
      Research & development                              $           32,796      $              8,598     $             41,394
      Selling, general & administrative                              501,676                    97,154                  598,830
                                                          -------------------     ---------------------    ---------------------
            Total operating expenses                                 534,472                   105,752                  640,224
                                                          -------------------     ---------------------    ---------------------

Loss from operations                                                 534,472                   105,752                  640,224
                                                          -------------------     ---------------------    ---------------------
Other income
      Interest income                                                (52,618)                   (4,163)                 (56,781)
                                                          -------------------     ---------------------    ---------------------
            Total other income                                       (52,618)                   (4,163)                 (56,781)
                                                          -------------------     ---------------------    ---------------------

Net loss                                                  $         (481,854)     $           (101,589)    $           (583,443)
                                                          ===================     =====================    =====================


Basic and diluted loss per share                          $            (0.17)     $              (0.07)    $              (0.25)
                                                          ===================     =====================    =====================

Basic and diluted weighted-average
    number of shares outstanding                                   2,916,667                 1,428,571                2,368,421
                                                          ===================     =====================    =====================

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

<PAGE>
<TABLE>

                                                                                    HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                                                                       (A DEVELOPMENT STAGE COMPANY)
                                                                                                  STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                                            For the Year Ended December 31, 2004 and
                                                              For the Period from June 11, 2003 (Inception) to December 31, 2003 and
                                                                  For the Period from June 11, 2003 (Inception) to December 31, 2004
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                                 Deficit
                                                                                               Accumulated
                                                        Common Stock                            During the
                                            ----------------------------------------           Development
                                                Shares                  Amount                    Stage                  Total
                                            ----------------        ----------------       ------------------       ----------------
<S>                                               <C>               <C>                    <C>                      <C>
Balance, June 11, 2003
     (Inception)                                         --         $            --        $              --        $            --
                                            ----------------        ----------------       ------------------       ----------------

Issuance of common
     stock for cash                               2,500,000               2,500,000                       --              2,500,000

Net loss                                                 --                      --                 (101,589)              (101,589)
                                            ----------------        ----------------       ------------------       ----------------

Balance, December 31,
     2003                                         2,500,000         $     2,500,000        $        (101,589)       $     2,398,411
                                            ================        ================       ==================       ================

Issuance of common
     stock for cash                               2,500,000               2,500,000                       --              2,500,000

Net loss                                                 --                      --                 (481,854)              (481,854)
                                            ----------------        ----------------       ------------------       ----------------

Balance, December 31,
     2004                                         5,000,000         $     5,000,000        $       (583,443)        $    4,416,557
                                            ================        ================       ==================       ================


<FN>
                             The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
                                                                 4
<PAGE>
<TABLE>
                                                                                    HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                                                                       (A DEVELOPMENT STAGE COMPANY)
                                                                                                            STATEMENTS OF CASH FLOWS
                                                                                            For the Year Ended December 31, 2004 and
                                                              For the Period from June 11, 2003 (Inception) to December 31, 2003 and
                                                                  For the Period from June 11, 2003 (Inception) to December 31, 2004
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                                 For the Period      For the Period
                                                                                                  from June 11,       from June 11,
                                                                              For the Year            2003                2003
                                                                                 Ended          (Inception) to       (Inception) to
                                                                              December 31,        December 31,        December 31,
                                                                                  2004                2003               2004
                                                                            ---------------     ---------------     ---------------
<S>                                                                         <C>                 <C>                 <C>
Cash flows from operating activities
    Net loss                                                                $      (481,854)    $      (101,589)    $      (583,443)
    Adjustments to reconcile net loss
     to net cash used by operating activities
     Depreciation and amortization                                                    4,111                --                 4,111
     Increase (decrease) in
         Accounts payable                                                           (25,912)             26,074                 162
         Accrued expenses                                                             1,952                 670               2,622
                                                                            ---------------     ---------------     ---------------
Net cash used by operating activities                                              (501,703)            (74,845)           (576,548)
                                                                            ---------------     ---------------     ---------------

Cash flows from investing activities
    Purchases of property and equipment                                              (5,651)            (12,178)            (17,829)
                                                                            ---------------     ---------------     ---------------
Net cash used in investing activities                                                (5,651)            (12,178)            (17,829)
                                                                            ---------------     ---------------     ---------------

Cash flows from financing activities
       Proceeds from sales of common stock                                        2,500,000           2,500,000           5,000,000
                                                                            ---------------     ---------------     ---------------
Net cash provided by financing activities                                         2,500,000           2,500,000           5,000,000
                                                                            ---------------     ---------------     ---------------

Net increase (decrease) in cash and                                               1,992,646           2,412,977           4,405,623
       cash equivalents

Cash and cash equivalents,
       beginning of year                                                          2,412,977                --                  --
                                                                            ---------------     ---------------     ---------------

Cash and cash equivalents,
       end of year                                                          $     4,405,623     $     2,412,977     $     4,405,623
                                                                            ===============     ===============     ===============


Supplemental disclosure of cash
flow information

       Interest paid                                                        $          --       $          --       $          --
                                                                            ===============     ===============     ===============

       Income taxes paid                                                    $          --       $          --       $          --
                                                                            ===============     ===============     ===============
<FN>
                             The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
                                                                 5


<PAGE>


                                HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               DECEMBER 31, 2004

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS

         General
         -------
         Hyundai-Enova  Innovative  Technology Center, Inc. (the "Company") is a
         development stage,  California  corporation that develops  technologies
         and components for electric, hybrid electric, and fuel cell systems for
         mobile and stationary applications. The Company retains development and
         manufacturing  rights to many of the technologies  created. The Company
         develops technologies primarily for its two shareholders, Hyundai Heavy
         Industries  Co.,  Ltd.  and Enova  Systems,  Inc.  For the years  ended
         December 31, 2004 and 2003, the Company did not have any revenues.

         Liquidity
         ---------
         At  December  31,  2004,  the  Company  had a net  working  capital  of
         $4,402,839 as compared to $2,386,233 at December 31, 2003, representing
         an increase of  $2,016,606.  This  increase is due primarily to capital
         raised  during the year ended  December  31, 2004 offset by losses from
         operations.  Operating  and  investing  activities  used  $501,703  and
         $5,651,  respectively,  while financing  activities provided $2,500,000
         for the year ended  December 31, 2004.

         During the year ended  December 31,  2004,  the Company  increased  its
         headcount to five employees as it commenced development on new programs
         in power management systems.

         Management's Plans Related to Liquidity and Capital Needs
         ---------------------------------------------------------
         The Company has incurred losses from operations since inception. During
         the year ended  December 31, 2004,  the Company  incurred a net loss of
         $481,854,  and it had negative cash flows from  operations of $501,703.
         At  December  31,  2004  the  Company  had an  accumulated  deficit  of
         $583,443.  Such losses have  resulted  principally  from  research  and
         development   costs,   sales  and  marketing  costs,  and  general  and
         administrative  costs  associated with the development of the Company's
         technologies and products and expanding its level of operations.

         The  Company is subject to all of the many risks  inherent in growing a
         new  enterprise,  and  the  development  and  commercialization  of new
         products,  including changing technologies,  competition from companies
         offering  the same or  similar  products,  managing  growth and lack of
         financial  resources.  As with any growing enterprise,  there can be no
         assurance  that the Company  will achieve or sustain  profitability  or
         positive cash flow from operations.



                                       6
<PAGE>
                                HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               DECEMBER 31, 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Development Stage Enterprise
         ----------------------------
         The Company is a  development  stage company as defined in Statement of
         Financial   Accounting   Standards  ("SFAS")  No.  7,  "Accounting  and
         Reporting by Development  Stage  Enterprises."  The Company is devoting
         all of its present efforts to its formation and to fundraising, and its
         planned  principal  operations  have  not  yet  commenced.  All  losses
         accumulated  since  inception  have  been  considered  as  part  of the
         Company's development stage activities.

         Comprehensive Income
         --------------------
         The  Company  utilizes  Statement  of  Financial  Accounting  Standards
         ("SFAS") No. 130,  "Reporting  Comprehensive  Income."  This  statement
         establishes  standards  for  reporting  comprehensive  income  and  its
         components in a financial  statement.  Comprehensive  income as defined
         includes  all  changes  in equity  (net  assets)  during a period  from
         non-owner  sources.  Examples of items to be included in  comprehensive
         income,  which are excluded from net income,  include foreign  currency
         translation  adjustments,  minimum pension liability  adjustments,  and
         unrealized   gains  and   losses  on   available-for-sale   securities.
         Comprehensive  income  is  not  presented  in the  Company's  financial
         statements  since the Company  did not have any items of  comprehensive
         income in any period presented.

         Cash and Cash Equivalents
         -------------------------
         Highly liquid  investments with an original maturity of three months or
         less are considered cash equivalents.

         Property and Equipment
         ----------------------
         Property 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
         indicate  the sum of expected  cash flows from use of the asset is less
         than its carrying value.  Long-lived assets that management  commits to
         sell or abandon are  reported  at the lower of carrying  amount or fair
         value less cost to sell.

         Fair Value of Financial Instruments
         -----------------------------------
         The carrying amount of financial  instruments,  including cash and cash
         equivalents,  accounts payable and accrued  expenses,  approximate fair
         value due to the short  maturity  of these  instruments.  The  carrying
         value of all other  financial  instruments is  representative  of their
         fair values.

         Research and Development
         ------------------------
         Costs of researching  and  developing  new technology or  significantly
         altering existing technology are expensed as incurred.


                                       7
<PAGE>

                                HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               DECEMBER 31, 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Income Taxes
         ------------
         The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which
         requires the recognition of deferred tax assets and liabilities for the
         expected  future tax  consequences of events that have been included in
         the financial  statements or tax returns.  Under this method,  deferred
         income taxes are recognized for the tax consequences in future years of
         differences  between the tax bases of assets and  liabilities and their
         financial  reporting amounts at each year-end based on enacted tax laws
         and  statutory  tax  rates  applicable  to the  periods  in  which  the
         differences are expected to affect taxable income. Valuation allowances
         are established,  when necessary,  to reduce deferred tax assets to the
         amount expected to be realized.

         Loss Per Share
         --------------
         The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per
         share is computed by dividing loss available to common  stockholders by
         the weighted-average number of common shares outstanding.  Diluted loss
         per share is computed  similar to basic loss per share  except that the
         denominator  is  increased to include the number of  additional  common
         shares that would have been  outstanding if the potential common shares
         had been issued and if the  additional  common  shares  were  dilutive.
         Common  equivalent  shares are excluded from the  computation  if their
         effect  is  anti-dilutive.  The  Company  does  not have  common  share
         equivalents.

         Estimates
         ---------
         The  preparation of financial  statements  requires  management to make
         estimates and  assumptions  that affect the reported  amounts of assets
         and liabilities and disclosure of contingent  assets and liabilities at
         the  date of the  financial  statements  and the  reported  amounts  of
         revenue and expenses during the reporting period.  Actual results could
         differ from those estimates.

         Concentrations of Credit Risk
         -----------------------------
         Financial   instruments  which  potentially   subject  the  Company  to
         concentrations of credit risk consist of cash and cash equivalents. The
         Company places its cash and cash equivalents with high credit,  quality
         financial institutions. At times, such cash and cash equivalents may be
         in excess of the Federal Deposit Insurance  Corporation insurance limit
         of  $100,000.  The  Company  has not  experienced  any  losses  in such
         accounts and believes it is not exposed to any significant  credit risk
         on cash and cash equivalents.


                                       8
<PAGE>

                                HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               DECEMBER 31, 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Recently Issued Pronouncements
         ------------------------------
         In November 2004, the FASB issued SFAS No. 151,"Inventory  Costs". SFAS
         No. 151 amends the  accounting  for abnormal  amounts of idle  facility
         expense,  freight, handling costs, and wasted material (spoilage) under
         the guidance in ARB No. 43, Chapter 4, "Inventory Pricing". Paragraph 5
         of ARB No. 43,  Chapter  4,  previously  stated  that ". . . under some
         circumstances, items such as idle facility expense, excessive spoilage,
         double freight,  and rehandling  costs may be so abnormal as to require
         treatment as current period  charges.  . . ." This  statement  requires
         that those items be recognized as current-period  charges regardless of
         whether they meet the  criterion of "so  abnormal."  In addition,  this
         statement requires that allocation of fixed production overheads to the
         costs of conversion be based on the normal  capacity of the  production
         facilities.  This  statement is effective for inventory  costs incurred
         during fiscal years beginning after June 15, 2005.  Management does not
         expect adoption of SFAS No. 151 to have a material  impact,  if any, on
         the Company's financial position or results of operations.

         In December  2004, the FASB issued SFAS No. 152,  "Accounting  for Real
         Estate Time-Sharing Transactions".  The FASB issued this statement as a
         result of the guidance  provided in AICPA  Statement of Position  (SOP)
         04-2, "Accounting for Real Estate Time-Sharing Transactions".  SOP 04-2
         applies  to all real  estate  time-sharing  transactions.  Among  other
         items, the SOP provides  guidance on the recording of credit losses and
         the  treatment  of  selling  costs,  but does not  change  the  revenue
         recognition  guidance  in SFAS No.  66,  "Accounting  for Sales of Real
         Estate", for real estate time-sharing transactions. SFAS No. 152 amends
         Statement No. 66 to reference the guidance  provided in SOP 04-2.  SFAS
         No. 152 also  amends  SFAS No. 67,  "Accounting  for Costs and  Initial
         Rental  Operations  of Real  Estate  Projects",  to state that SOP 04-2
         provides the relevant guidance on accounting for incidental  operations
         and costs related to the sale of real estate time-sharing transactions.
         SFAS No. 152 is effective for years beginning after June 15, 2005, with
         restatements  of previously  issued  financial  statements  prohibited.
         Management  does not expect adoption of SFAS No. 152 to have a material
         impact,  if any,  on the  Company's  financial  position  or results of
         operations.

         In  December  2004,  the  FASB  issued  SFAS  No.  153,  "Exchanges  of
         Nonmonetary  Assets," an amendment to Opinion No. 29,  "Accounting  for
         Nonmonetary Transactions".  SFAS No. 153 eliminates certain differences
         in the guidance in Opinion No. 29 as compared to the guidance contained
         in standards issued by the  International  Accounting  Standards Board.
         The amendment to Opinion No. 29 eliminates the fair value exception for
         nonmonetary exchanges of similar productive assets and replaces it with
         a general  exception  for exchanges of  nonmonetary  assets that do not
         have commercial substance. Such an exchange has commercial substance if
         the  future   cash  flows  of  the  entity  are   expected   to  change
         significantly  as a result of the  exchange.  SFAS No. 153 is effective
         for nonmonetary  asset exchanges  occurring in periods  beginning after
         June 15, 2005.  Earlier  application is permitted for nonmonetary asset
         exchanges  occurring  in periods  beginning  after  December  16, 2004.
         Management  does not expect adoption of SFAS No. 153 to have a material
         impact,  if any,  on the  Company's  financial  position  or results of
         operations.

                                       9
<PAGE>

                                HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               DECEMBER 31, 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Recently Issued Pronouncements (continued)
         ------------------------------------------
         In  December  2004,  the  FASB  issued  SFAS No.  123(R),  "Share-Based
         Payment".  SFAS 123(R) amends SFAS No. 123, "Accounting for Stock-Based
         Compensation",  and APB Opinion No. 25, "Accounting for Stock Issued to
         Employees".  SFAS  No.123(R)  requires  that  the  cost of  share-based
         payment transactions (including those with employees and non-employees)
         be recognized in the financial  statements.  SFAS No. 123(R) applies to
         all share-based payment  transactions in which an entity acquires goods
         or  services  by  issuing  (or  offering  to issue) its  shares,  share
         options, or other equity instruments (except for those held by an ESOP)
         or by incurring  liabilities (1) in amounts based (even in part) on the
         price of the company's shares or other equity instruments,  or (2) that
         require  (or may  require)  settlement  by the  issuance of a company's
         shares or other equity instruments. This statement is effective (1) for
         public companies  qualifying as SEC small business  issuers,  as of the
         first interim period or fiscal year beginning  after December 15, 2005,
         or (2) for all other public  companies,  as of the first interim period
         or fiscal year beginning  after June 15, 2005, or (3) for all nonpublic
         entities,  as of the first  fiscal year  beginning  after  December 15,
         2005. Management is currently assessing the impact of this statement on
         its financial position and results of operations.

         In May 2005, the FASB issued  Statement of Accounting  Standards (SFAS)
         No. 154,  "Accounting  Changes and Error  Corrections"  an amendment to
         Accounting  Principles  Bulletin  (APB)  Opinion  No.  20,  "Accounting
         Changes",  and SFAS No. 3,  "Reporting  Accounting  Changes  in Interim
         Financial  Statements" though SFAS No. 154 carries forward the guidance
         in APB No. 20 and SFAS No. 3 with respect to accounting  for changes in
         estimates,  changes in reporting entity,  and the correction of errors.
         SFAS No. 154  establishes  new standards on  accounting  for changes in
         accounting  principles,  whereby all such changes must be accounted for
         by  retrospective  application  to the  financial  statements  of prior
         periods unless it is  impracticable to do so. SFAS No. 154 is effective
         for  accounting  changes  and error  corrections  made in fiscal  years
         beginning  after December 15, 2005,  with early adoption  permitted for
         changes and  corrections  made in years  beginning  after May 2005. The
         adoption  of  this  interpretation  did  not  have  any  impact  on our
         financial statements



                                       10
<PAGE>

                                HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               DECEMBER 31, 2004

NOTE 3 - PROPERTY AND EQUIPMENT

         Property and  equipment at December 31, 2004 and 2003  consisted of the
         following:
<TABLE>
<CAPTION>
                                                                                      2004               2003
                                                                                ---------------    ----------------
<S>                                                                             <C>                <C>
                  Computers                                                     $        15,087    $         11,190
                  Tooling                                                                 1,405                 517
                  Furniture and office equipment                                          1,337                 471
                                                                                ---------------    ----------------
                                                                                         17,829              12,178
                  Less accumulated depreciation and amortization                          4,111                  --
                                                                                ---------------    ----------------

                      Total                                                     $        13,718    $         12,178
                                                                                ===============    ================
</TABLE>

         Depreciation and amortization expense was $4,111, $0 and $4,111 for the
         year ended December 31, 2004, the period from June 11, 2003 (inception)
         to December 31, 2003, and the period from June 11, 2003  (inception) to
         December 31, 2004, respectively.

NOTE 4 - STOCKHOLDERS' EQUITY

         Common Stock
         ------------
         During the year ended December 31, 2004,  the Company issued  2,500,000
         shares of common stock for cash totaling $2,500,000.  During the period
         from June 18, 2003  (inception)  to December 31, 2003, the Company also
         issued 2,500,000 shares of common stock for cash totaling $2,500,000.


                                       11
<PAGE>

                                HYUNDAI-ENOVA INNOVATIVE TECHNOLOGY CENTER, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               DECEMBER 31, 2004

NOTE 5 - INCOME TAXES

         Significant components of the Company's deferred tax assets for federal
         and state income  taxes as of December  31, 2004 and 2003  consisted of
         the following:

<TABLE>
<CAPTION>

                                                                                      2004               2003
                                                                                ---------------    ----------------
<S>                                                                             <C>                <C>
                  Deferred tax assets
                      Federal tax loss carry-forward                            $       482,000    $        102,000
                      State tax loss carry-forward                                      482,000              51,000
                                                                                ---------------    ----------------

                                                                                        964,000             153,000
                  Less valuation allowance                                              964,000             153,000
                                                                                ---------------    ----------------

                           Net deferred tax assets                              $            --    $             --
                                                                                ===============    ================
</TABLE>

         As of December  31,  2004,  the Company  had net  operating  loss carry
         forwards  for federal and state  income tax  purposes of  approximately
         $584,000 and  $533,000,  respectively.  During the period from June 11,
         2003  (inception)  to December 31, 2003,  the Company had net operating
         loss carry  forwards  for  federal  and state  income tax  purposes  of
         approximately  $102,000 and $51,000,  respectively.  The net  operating
         loss carry forwards begin expiring in 2024.

NOTE 6 - RELATED PARTY TRANSACTIONS

         During 2004,  the Company  purchased  $85,420 in services from and paid
         rent expense of $6,577 to Enova  Systems,  Inc.  During the period from
         June 11, 2003  (inception) to December 31, 2003, the Company  purchased
         $36,945  in  services  from and paid  rent  expense  of $1,210 to Enova
         Systems,  Inc.  During the period  from June 11,  2003  (inception)  to
         December 31, 2004, the Company purchased  $122,365 in services from and
         paid rent  expense of $7,787 to Enova  Systems,  Inc.  The  outstanding
         balances owed to Enova Systems,  Inc. at December 31, 2004 and December
         31, 2003 were $0.



                                       12