SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                        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, 2003

                           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 or any
amendment to this Form 10-K. [ ]

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, 2003 (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, 2003, 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 22,  2004 was
378,341,000.
<PAGE>

                               ENOVA SYSTEMS, INC.

                          2003 FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                   PART I

<S>      <C>                                                                                                <C>
         Item 1   Business.................................................................................. 3

         Item 2.  Properties................................................................................12

         Item 3.  Legal Proceedings.........................................................................12

         Item 4.  Submission of Matters to a Vote of Security Holders.......................................12

                                                   PART II

         Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters and
                  Issuer Purchases of Equity Securities.....................................................12

         Item 6    Selected Financial Data..................................................................13

         Item 7    Management's Discussion and Analysis of Financial Condition
                   and Results of Operations................................................................14

         Item 7A.  Quantitative and Qualitative Disclosures about Market Risk...............................22

         Item 8.   Financial Statements and Supplementary Data..............................................22

         Item 9.   Changes in and Disagreements with Accountants
                   on Accounting and Financial Disclosure...................................................22

         Item 9A.  Controls and Procedures..................................................................23

                                                   PART III

         Item 10.  Directors and Executive Officers of the Registrant.......................................24

         Item 11.  Executive Compensation...................................................................26

         Item 12.  Security Ownership of Certain Beneficial Owners and
                   Management and Related Stockholder Matters...............................................29

         Item 13.  Certain Relationships and Related Transactions...........................................31

         Item 14.  Principal Accountant Fees and Services...................................................31

                                                   PART IV

         Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.........................33


         SIGNATURES.........................................................................................35
</TABLE>
                                       2
<PAGE>

                                     PART I

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

Item 1.  Business

General

         In July 2000, we changed our name to Enova  Systems,  Inc. Our company,
previously  known  as U.S.  Electricar,  Inc.,  a  California  corporation  (the
"Company"), was incorporated on July 30, 1976.

         Enova  believes it is a leader in the  development  and  production  of
proprietary,  commercial  digital power  management  systems for  transportation
vehicles and stationary  power  generation  systems.  Power  management  systems
control and monitor  electric  power in an automotive or commercial  application
such as an  automobile  or a  stand-alone  power  generator.  Drive  systems are
comprised  of an electric  motor,  an  electronics  control unit and a gear unit
which  power an  electric  vehicle.  Hybrid  systems,  which are similar to pure
electric drive systems, contain an internal combustion engine in addition to the
electric  motor,  eliminating  external  recharging  of the  battery  system.  A
hydrogen  fuel cell  based  system is similar to a hybrid  system,  except  that
instead of an internal  combustion  engine, a fuel cell is utilized as the power
source. A fuel cell is a system which combines hydrogen and oxygen in a chemical
process  to  produce  electricity.  Stationary  power  systems  utilize  similar
components  to those  which are in a mobile  drive  system in  addition to other
elements.  These  stationary  systems are effective as  power-assist  or back-up
systems,   alternative   power,  for  residential,   commercial  and  industrial
applications.

         A  fundamental  element of Enova's  strategy  is to develop and produce
advanced proprietary  software,  firmware and hardware for applications in these
alternative  power  markets.  Our  focus  is  digital  power  conversion,  power
management, and system integration,  for two broad market applications - vehicle
power generation and stationary power generation.

         Specifically,  we develop, design and produce drive systems and related
components  for electric,  hybrid-electric,  fuel cell and  microturbine-powered
vehicles.  We also  develop,  design  and  produce  power  management  and power
conversion components for stationary distributed power generation systems. These
stationary  applications  can employ  hydrogen  fuel  cells,  microturbines,  or
advanced  batteries for power storage and generation.  Additionally,  we perform
research  and  development  to augment and  support  others' and our own related
product development efforts.

         Our product  development  strategy is to design and introduce to market
successively advanced products,  each based on our core technical  competencies.
In each of our product / market  segments,  we provide  products and services to
leverage our core competencies in digital power management, power conversion and
system integration. We believe that the underlying technical requirements shared
among the market  segments  will allow us to more  quickly  transition  from one
emerging market to the next, with the goal of capturing early market share.

         During 2003, the Company  experienced a shift to more development work,
both  commercial and military,  as demand for drive systems  slowed.  Management
believes that this trend will continue in the first half of 2004; however,  many
of these development programs may lead to production programs beginning in 2005.

         The Company has received greater recognition from both governmental and
private industry with regards to U.S. military  applications of its hybrid drive
systems  and fuel cell  power  management  technologies.  Although  the  company
believes  that  current   negotiations   with  several  parties  may  result  in
development contracts in the first and second quarters of 2004 and beyond, there
are no assurances that such additional contracts will be signed.

         During the year ended  December 31, 2003, we completed  development  on
several new power  management and drive systems such as our High Voltage version
of our 120kW drive system, Dual 8kW inverter, 380V DC/DC converter,  Mobile Fuel
Cell Generator, a multi-functional processor, as well as upgrades to our Battery
Care Management  system,  Fuel Cell Management system and our High Voltage Power
Converter.  We  continued to develop and produce  electric  and hybrid  electric
drive systems and components for Ford Motor Company (Ford), Mack/Volvo, the City
of Honolulu and several domestic and international vehicle and bus manufacturers
in China,  Italy,  the United Kingdom,  Malaysia and Japan. Our various electric
and hybrid-electric drive systems, power management and power conversion systems
are being  used in  applications  including  Class 8 trucks,  monorail  systems,
transit buses and industrial  vehicles.  Enova has furthered its development and
production of systems for both mobile and stationary  fuel cell powered  systems
with major companies such as Ford,  ChevronTexaco and UTC Fuel Cells, a division
of United  Technologies.  We also are  continuing  on our current  research  and
development  programs with Mack/Volvo,  EDO Corporation,  the U.S. Air Force and
the U.S.  Navy,  as well as  developing  new programs with Hyundai Motor Company
(HMC),  the U.S.  government and other private  sector  companies for hybrid and
fuel cell systems.


                                       3
<PAGE>

         For the year ended December 31, 2003, the following customers accounted
for more than ten percent (10%) of the Company's total revenues:

        Customer                                            Percent
        -----------------------------------------------------------
        Advanced Vehicle Systems                             18.5%
        Ballard Power Systems                                16.9%
        Hawaii Electric Vehicle Development Project          13.4%
        ChevronTexaco                                        11.3%

Heavy-Duty Drive Systems - Buses and Truck for Urban operators

         Heavy-duty  drive system sales  continue to be a prime focus for Enova.
Although  this  market  sector  has  developed  more  slowly  than  anticipated,
management  believes  that this area will see  significant  growth over the next
several  years.  Our  PantherTM  120kW and  PantherTM  240kW drive  systems were
developed  completely  in-house and are in  production  and  operating in global
markets giving Enova a potential edge on other competitors in this sector. Sales
of our  PantherTM  120kW  drive  systems  continue to provide  revenues  for our
company.

         Eco Power  Technology  of Italy  purchased  components  for our Panther
120kW  hybrid  electric  drive  systems  during  2003 for both  revenue  service
operations  and as  service  and  maintenance  parts  for its  fleet of 42 buses
powered  by  Panther  120kw  drive  systems.  Eco  Power  is one of the  largest
integrators  of medium size transit  buses for the European  shuttle bus market,
with key customers in five Italian cities namely Turin, Genoa, Brescia,  Ferrara
and  Vicenza.  For the year ended  December 31,  2003,  we billed  approximately
$213,000 for these systems.

         Tomoe Electro-Mechanical  Engineering and Manufacturing,  Inc. of Japan
continues  to procure our 240kW,  120kW and 90kW drive  systems for  integration
into their industrial  vehicle  platforms.  During the year, Enova  successfully
integrated its Panther drive systems into a heavy-duty  Isuzu dump truck,  three
passenger trams and a mine tunnel  crawler.  The three Tomoe passenger trams are
currently  in service in  Okinawa.  Furthermore,  Tomoe and Enova are working on
other commercial and industrial applications for our drive systems. For the year
ended  December 31, 2003,  we billed  approximately  $146,000 for these  various
systems.  Although we anticipate additional orders for these systems in 2004 and
beyond, there are no assurances that such additional orders will be forthcoming.

         Wrights  Environment,  a division  of Wrights  Bus,  one of the largest
low-floor bus  manufacturers  in the United  Kingdom,  has integrated our hybrid
electric  PantherTM  120kW drive  system into two of its buses  utilizing a 30kW
Capstone  microturbine  as their  power  source.  These buses have been in field
service in several major cities throughout the United Kingdom and are performing
to  specifications.  Wrights has purchased  additional  production drive systems
which were  delivered  in early 2004  including  our 240kW drive  system and has
notified us of  additional  purchase  requirements  for the latter half of 2004.
Additionally,  Wright Bus has agreed to partially fund development of our diesel
generator  system for diesel  engines  compatible  with  their  driveline.  Such
development  is  scheduled  to commence in the second  quarter of 2004.  At this
time,  however,  there are no  assurances  that such  additional  orders will be
forthcoming.

         MTrans of Malaysia,  that  country's  leading  monorail  provider,  has
procured and integrated our high voltage Panther 120kW systems into its monorail
trains for service on new monorail  systems.  Each  monorail  train require four
drive systems which may be modified to operate as pure hybrids or connected to a
power rail system. Additionally,  MTrans has integrated a standard Panther 120kW
drive  system into a hybrid  10-meter  bus with a Capstone  microturbine  as its
power  source.  For the year ended  December 31, 2003,  we billed  approximately
$184,000  for these  various  systems.  MTrans has  discussed  the  potential of
utilizing Enova drive systems for all of its hybrid and monorail requirements in
2004 and  beyond.  At this  time,  however,  there are no  assurances  that such
additional orders will be forthcoming.

         Although   Advanced  Vehicle  Systems  no  longer  exists,   we  gained
immeasurable  experience  and  recognition  from the programs and vehicles  into
which we integrated  them.  Enova delivered  drive systems and integrated  these
into  both 30 and  38-foot  transit  buses  as well as a Class 8 urban  delivery
truck.  The  integration  of these  systems  into this wide  variety of vehicles
assisted Enova in developing more efficient and cost beneficial  integration and
maintenance programs for use with other customers.  Additionally,  the fleet and
transit  operators of these  vehicles are  beginning to provide Enova with a new
customer base for upgrades and service of the installed systems.

         Hyundai Heavy  Industries  has been selected as a major partner for our
outsource  manufacturer  for  the  Panther  120kW  controller,   the  motor  and
controller  for our  Panther  240kW drive  systems and many other Enova  digital
power management components. Enova's strategy is to minimize capital outlays and
maximize efficiencies by utilizing proven manufacturing partners.


                                       4
<PAGE>

Light-Duty Drive Systems - Automobiles and Delivery vehicles

         Our 90kW  controller,  motor and gear unit is  utilized  in light  duty
vehicles  such as midsize  automobiles  and  delivery  vehicles.  As part of our
corporate  strategy to outsource  manufacturing,  Enova  selected  Hyundai Heavy
Industries to produce the Enova developed Panther 90kW drive system.

         The City of Honolulu has contracted  with Enova to upgrade several S-10
trucks in its  electric  vehicle  fleet.  During the third  quarter of 2003,  we
completed  the  upgrade  of 3 trucks  to our  Panther  90kW  drive  system.  Two
additional vehicles are currently being upgraded for delivery in March 2004. For
the year ended December 31, 2003, this program generated $81,000 in revenues.

         We are  beginning to receive more  interest in our  light-duty  systems
from both European and Asian  customers.  Eneco of the United Kingdom,  a hybrid
vehicle  integrator  which has  purchased  our  Panther  120 for its  hybrid bus
applications,  has notified us of its intent to purchase  these  systems for its
light-duty vehicle conversions in 2004. Although we anticipate additional orders
for  these  systems  in 2004 and  beyond,  there  are no  assurances  that  such
additional orders will be forthcoming.

         We continue to cross-sell  our systems to new and current  customers in
the light and medium duty vehicle markets, both domestically and globally.

Fuel Cell Technologies

         The High Voltage Energy Converter (HVEC) development  program with Ford
Motor  Company for their fuel cell  vehicle was  essentially  completed in 2003.
This  converter  is a key  component  in Ford's  Focus Fuel Cell  Vehicle  which
utilizes the Ballard fuel cell system.  It converts  high voltage power from the
fuel  cell  into a lower  voltage  for use by the drive  system  and  electronic
accessories.  Enova  received a purchase  order for 36 production  system in the
third  quarter of 2003 for  delivery in late March 2004 valued at  approximately
$410,000.  There is a potential for  additional  production  orders from Ford in
2004;  however at this time, there are no assurances that such additional orders
will be forthcoming.

         Furthermore, we are applying the technology and components derived from
this program to other applications. The HVEC is a critical component of our Fuel
Cell bus  programs,  noted below in  development  programs,  and other fuel cell
powered systems such as the Hyundai fuel cell vehicle noted below under research
and development programs.  The Company will continue to explore new applications
for this versatile technology in both mobile and stationary systems.

         Enova's fuel cell management and control systems work with a variety of
fuel cells provided by such  manufacturers  as  Hydrogenics of Canada,  UTC Fuel
Cells, part of the UTC Power unit of United Technologies Corporation and Ballard
Power Systems of Canada.  Our strategy is to provide power  components  that are
impartial to the type of power  source,  therefore  allowing our systems to work
efficiently  with any alternative  source  available such as fuel cells,  diesel
generators, advanced batteries, microturbines,  in-line power and other advanced
energy sources.

         During 2003,  UTC Fuel Cells  purchased 32 Fuel Cell Care units from us
over the course of the year.  We will  continue to work with both UTC Fuel Cells
directly  and as a partner in our  alliance  development  programs for fuel cell
applications in the future.

Research and Development Programs

         We  are  aggressively  pursuing  several  government  and  commercially
sponsored  development  programs  for both  ground and marine  heavy-duty  drive
system applications.

         In the fourth  quarter of 2003,  we entered  into  several  development
contracts with major corporations for programs funded by the U.S. military. Many
of  these  programs  provide  for  dual-use   application  of  the  technologies
developed.

         Our  first  new  program  is in  conjunction  with  Mack  Truck,  Inc.,
Powertrain division - a unit of The Volvo Group, Sweden, for the development and
manufacture of a motor controller, electric motor and battery management systems
for a new parallel  hybrid  drive system using Mack Trucks' MD11 diesel  engine.
The new parallel  hybrid vehicle  program is part of the Air Force's  efforts to
improve  efficiency,  reduce fuel and maintenance costs,  provide  re-generative
brake energy and reduce emissions.  The refueler fleet consists of approximately
300 vehicles  and, upon  successful  completion  and  evaluation of the refueler
vehicle,  there is the potential for additional  upgrades to the parallel hybrid
drive  system.  As part of the  program,  Mack  Trucks  will also  evaluate  the
applicability  of the drive system to  commercial  vehicle  commencing  with its
Class 8 Refuse Hauler. Mack Trucks currently produces approximately 3,000 refuse
vehicles  per  annum  for  major  customers  such  as  Waste  Management.   This
development  program will be completed  in late 2004  followed by an  evaluation
period of approximately  three to six months.  The program  generated $75,000 in
revenues for us in the fourth quarter of 2003 with the remaining  $175,000 to be
billed in 2004. There is a potential for additional  production  orders for both
military and commercial  application of this  technology.  However at this time,
there are no assurances that such additional orders will be forthcoming.

         We also entered into a development contract with EDO Corporation of New
York for the design and  fabrication  of a high voltage  DC-DC power  conversion
system  utilizing a Capstone  microturbine  as the primary  power source for the
U.S. Navy unmanned  minesweeper  project.  The electronics  package will include
Enova's  advanced  power  components  including a new,  enhanced 50V,


                                       5
<PAGE>

700A DC-DC power converter,  our Battery Care Unit and Hybrid Control Unit which
will  power  the  minesweeper's  electromagnetic  detection  system.  Our  power
management and conversion system will be used to provide on-board power to other
accessories on the platform.  We believe that the aggregate value of the program
will be approximately $420,000 of which $75,000 was billed in the fourth quarter
of 2003.  Although  this program also has the potential  for  additional  system
sales  following the  demonstration  phase,  there are no  assurances  that such
additional orders will be forthcoming.

         Enova's  program  with the U.S.  Air  Force  and the State of Hawaii to
integrate a Panther 120kW hybrid drive system into a second  30-foot bus for the
Hickman  Air Force  base was  amended  to develop  this  propulsion  system as a
hydrogen  fuel cell  hybrid  vehicle  teaming  with  Hydrogenics  of Canada.  In
integrating this new system for Enova, our engineers developed several new power
management systems including our dual 8kW inverter, 380V DC/DC converter and our
Mobile Fuel Cell  Generator  that  utilizes  our HVEC from our Ford  development
program.  This latest fuel cell vehicle application  utilized a Hydrogenics 20kW
fuel cell power  generation  module  underscoring  our  technologies  ability to
optimize fuel cell performance across a range of fuel cell products. The program
was completed in the fourth quarter of 2003 and the bus has met all  performance
requirements. As a result of this program meeting schedule, cost and performance
benchmarks,  we are  experiencing  a  notable  increase  in  interest  from both
government and military organizations for our products and integration services.
For the year ended December 31, 2003, we billed approximately  $550,000 for this
program.

         The all-electric Hyundai Santa Fe SUV demonstration project in Honolulu
Hawaii  has been  extended  for  another  two years  for three of the  vehicles.
Fast-charging  capabilities  and  performance  will be the primary focus of this
continued evaluation.  This is a continuation of the State of Hawaii and Hyundai
Motor Company's program for pure electric vehicle performance.

         Enova  commenced  development  for Hyundai  Motor  Company of fuel cell
power management and conversion components for Hyundai's latest fuel cell hybrid
electric  vehicle,  the  Tucson,  which was  unveiled at the Geneva Auto Show in
March 2004. Enova will develop this next generation hybrid-electric drive-train,
motor and  control  unit based on its prior  development  work on both light and
heavy-duty power-trains for both electric and hybrid-electric vehicle platforms.
Enova is working in conjunction with UTC Fuel Cells,  part of the UTC Power unit
of United  Technologies  Corporation,  to develop the power electronics for this
vehicle.  For the year ended  December  31,  2003,  Enova  billed  approximately
$271,000 for this program. This program will continue through the second quarter
of 2004 and is  estimated  to generate  approximately  $400,000 in revenues  for
Enova.  Although we believe there is potential  for further  production of these
drive system  components in the future,  there can be no assurances at this time
that such orders will be realized.

         Several other  programs are in negotiation or discussion in conjunction
with Hyundai  Motor  Company,  the U.S. Air Force and several  other  government
agencies  and  private  corporations.  We  anticipate  commencing  work on these
contracts  during 2004. There can be no assurances at this time,  however,  that
any of such contracts will be realized.

         We anticipate  establishing  new  development  programs with the Hawaii
High  Technology  Development  Corporation in mobile and marine  applications as
well  as  other  state  and  federal  government  agencies  as  funding  becomes
available.

Stationary Power Applications

         Enova  continues to attract new partners and  customers  from both fuel
cell manufacturers and petroleum companies.  It is our belief that utilizing our
power  management  systems for stationary  applications for fuel cells will open
new markets for our Company.

         We completed the design and  fabrication of our process  controller for
ChevronTexaco   Technology  Ventures  (CTTV)  for  their  fuel  reformer  for  a
stationary fuel cell  application.  The first prototype of the controller  board
for this system performed to customer  requirements.  The process  controller is
now in final  integration  and test  phases at CTTV which will last  through the
first half of 2004. For the year ended December 31, 2003,  Enova has billed CTTV
$492,000  for  this  program.  We  believe  there  may be  additional  follow-on
development  and production for this program.  However , there are no assurances
that such orders or contracts will be realized.

         We believe  the  stationary  power  market  will play a key role in our
future. We continue to pursue alliances with leading manufacturers in this area.
There are,  however,  no assurances that this market will develop as anticipated
or that such alliances will occur.

Environmental Initiatives and Legislation

         Because   vehicles  powered  by  internal   combustion   engines  cause
pollution,  there has been  significant  public pressure in Europe and Asia, and
enacted or pending  legislation in the United States at the federal level and in
certain  states,  to promote or mandate  the use of  vehicles  with no  tailpipe
emissions  ("zero  emission  vehicles")  or  reduced  tailpipe  emissions  ("low
emission vehicles").  We believe legislation  requiring or promoting zero or low
emission  vehicles is  necessary  to create a  significant  market for  electric
vehicles. The California Air Resources Board (CARB) is continually modifying its
limits for low emission vehicles.  Recently, CARB proposed additional amendments
to the regulations. Furthermore, several car manufacturers have challenged


                                       6
<PAGE>

these mandates in court and have obtained  injunctions to delay these  mandates.
There can be no  assurance  that  further  legislation  will be  enacted or that
current legislation or state mandates will not be repealed or amended, or that a
different  form of zero  emission or low emission  vehicle will not be invented,
developed and produced,  and achieve  greater  market  acceptance  than electric
vehicles.  Extensions,  modifications or reductions of current federal and state
legislation,  mandates and potential tax incentives  could adversely  affect the
Company's business prospects if implemented.

         Our products are subject to federal,  state, local and foreign laws and
regulations,  governing,  among other things, emissions as well as laws relating
to  occupational  health and  safety.  Regulatory  agencies  may impose  special
requirements   for   implementation   and  operation  of  our  products  or  may
significantly  impact or even eliminate some of our target markets. We may incur
material  costs or  liabilities in complying  with  government  regulations.  In
addition,  potentially  significant  expenditures  could be required in order to
comply with evolving  environmental and health and safety laws,  regulations and
requirements that may be adopted or imposed in the future.

Strategic Alliances, Partnering and Technology Developments

         Our  continuing  strategy is to adapt  ourselves  to the  ever-changing
environment  of  alternative  power  markets  for  both  stationary  and  mobile
applications.  Originally focusing on pure electric drive systems, we believe we
are now  positioned as a global  supplier of drive systems for electric,  hybrid
and fuel cell applications.  Enova is now entering stationary power markets with
its power management systems and intends to develop other systems to monitor and
control the complex fuel cell and ancillary  device systems being  developed for
distributed generation and mobile applications.

         Enova  continues to seek and establish  alliances with major players in
the automotive, stationary power and fuel cell fields. For instance, the Hyundai
Group of Korea and Enova are partnering in the  development  of advanced  hybrid
and hydrogen fuel cell drive-train technology and related systems.

         Our recent joint venture  alliance with Hyundai Heavy  Industries (HHI)
is a prime example of our  partnering  strategy to maximize the  utilization  of
Enova's  knowledge and expertise in power  management and control.  Teaming with
HHI may lead to other additive  technologies and products which Enova can market
to  current  and   prospective   customers.   The  joint  venture   corporation,
Hyundai-Enova  Innovative  Technology Center (ITC),  commenced operations in the
second quarter of 2003. The advanced  technology  center focuses on leading-edge
technologies   in  power   management  and  power   conversion  for  industrial,
commercial,  residential and vehicle  applications.  The ITC's first development
program  focuses on an advanced  parallel  hybrid drive system for Hyundai Motor
Company  which is  currently in the initial  evaluation  phases.  Another  major
project for the ITC is the  commercialization  of Enova's diesel  genset.  Other
projects  slated for development  for the ITC include  commercial  inverters and
other power management systems which build on Enova's and HHI's technology base.
It is our intent to utilize the resources  provided  through the ITC to optimize
Enova's  current  product  line for  greater  performance  and  production  cost
efficiencies,  while we  continue  new  research  and  development  for the next
generation  of digital  power  management  systems  for  mobile  and  stationary
applications.

         Enova's  alliances  with other major OEMs in the  automotive,  transit,
commercial  and energy  sectors  continue to expand.  During 2003, we formed new
alliances with  Mack/Volvo,  EDO, MTrans of Malaysia,  CARTA  (Chattanooga  Area
Rapid Transit  Agency),  Eneco,  Hydrogenics of Canada and other  commercial and
industrial  intermediaries and OEMS to find new markets and applications for our
products and technologies. We continue our strategy as a "systems integrator" by
establishing relationships to utilize other independently developed technologies
such as  those  provided  by HHI,  UTC  Fuel  Cells,  Hydrogenics  and  national
universities.  We have  implemented our plans to outsource  manufacturing of our
components to companies such as HHI, Ricardo, and other Asian manufacturers.  We
believe  that one of our  competitive  advantages  is our  ability to  identify,
attract and  integrate the latest  technology  available to produce state of the
art products at competitive prices.

         Our products are "production-engineered,"  meaning they are designed so
they can be  commercially  produced  all  formats  and files are  designed  with
manufacturability  in mind from the  start.  For the  automotive  market,  Enova
designs its products to QS9000  manufacturing and quality standards.  We believe
that our  redundancy  of systems,  robustness  of design,  and rigorous  quality
standards result in higher performance and reduced risk. For every component and
piece of hardware, there are detailed performance specifications.  Each piece is
tested and evaluated against these  specifications,  which enhances the value of
the systems to OEM customers.

         Enova  performs   low-volume   production  in-house  and  assembly  and
out-sources  manufacturing for mass production.  Outsourcing  enables us to keep
our  capital  investment  to a  minimum,  reducing  expenditures  for  hardware,
installation  and  training,  to avoid the problems of  manufacturing  equipment
obsolescence.  Outsourcing  also  enables  Enova to  search  out and work with a
number of the best QS  9000-certified  manufacturers  worldwide.  We believe our
strategy  ensures that our OEM  customers  have  confidence  in our products and
receive quality products.


                                       7
<PAGE>

Products

         Enova's focus is digital power management, power conversion, and system
integration.  Our proprietary software, firmware and hardware manage and control
the power  that  drives a vehicle  or device.  They  convert  the power into the
appropriate forms required by the vehicle or device,  whether DC to AC, AC to DC
or DC to DC, and they manage the flow of this energy to protect the battery, the
vehicle or device, and the driver or operator.  Enova's systems work "from drive
train to drive wheel" for both vehicle and stationary applications.

         The latest state-of-the-art technologies, such as hybrid vehicles, fuel
cell and micro turbine based  systems,  and  stationary  power  generation,  all
require some type of power management and conversion mechanism. Enova, utilizing
our enabling technologies,  supplies these essential components.  We believe our
drive train systems will work with any kind of fuel/power source,  from electric
to  hybrid  to fuel  cell to  turbine.  They are  essential  components  for any
vehicle, system or device that uses power.

         Enova is moving to expand its product base into new markets  outside of
the traditional electric and hybrid-electric  automotive fields. Key areas which
Enova has begun to penetrate include energy management in distributed generation
in the utility industry,  and stand-by/backup power generation in the commercial
electronics  industry.  Both of these  markets can be served  with our  existing
energy management and power control products.  Enova has entered into agreements
or begun  discussions with various  alternative  power generation  manufacturers
such as Capstone  Turbine,  UTC Fuel Cells and Hydrogenics as well as others. We
believe  our  enabling  technologies  will prove  beneficial  to these  types of
companies   in  their   strategies   to  bring   these  new  power   systems  to
commercialization.

         Enova has  embraced  fuel  cell  technology  and has  begun to  develop
various power  management and control systems to enable fuel cell  manufacturers
and their  ancillary  industries  to  achieve  greater  efficiencies  from their
systems. These systems are also designed to provide added reliability and safety
by monitoring, adjusting and reporting on operation of the unit.

PantherTM Electric and Hybrid-Electric Drive Systems

         Enova's Panther  electric drive system  provides all the  functionality
one would find under the hood of an internal  combustion engine powered vehicle.
The Panther  system  consists of an enhanced  electric  motor and the electronic
controls  that  regulate the flow of  electricity  to and from the  batteries at
various  voltages and power to propel the vehicle.  In addition to the motor and
controller, the system includes a gear  reduction/differential  unit. The system
is designed to be installed in a "drop in," fully integrated turnkey fashion, or
on a modular, "as-needed" basis for OEMs.

         Enova's family of light-duty  drive systems  includes 30kW,  60kW, 90kW
all-electric drives, 90kW fuel cell powered series-hybrid drive and combinations
of these  systems  based on  customer  requirements.  Our  family of  heavy-duty
electric drive systems includes a 120kW  all-electric  drive, a 120kW turbine or
diesel genset  powered  series-hybrid  drive,  and a new 240kW  turbine  powered
series-hybrid  drive  system  with our  120kW and 240kW  diesel  genset  powered
series-hybrid drive systems anticipated to be introduced in mid 2004.

Electric Drive Motors

         The  electric   drive  unit  is  essentially  an  electric  motor  with
additional   features   and   functionality.   The   motor   is   liquid-cooled,
environmentally sealed,  designed to handle automotive shock and vibration,  and
includes parking pawl, which stops the vehicle when the driver parks the car. It
also  permits  regenerative  braking to  provide  power  recovery,  in which the
mechanical  energy of momentum is converted into electrical  energy as the motor
slows during braking or deceleration. The optional gear reduction unit takes the
electric  motor's  high rpm and gears it down to the lower rpm  required  by the
vehicle's conventional drive shaft. As the revolutions per minute (rpm) go down,
the torque of the electric motor increases.

         The Panther drive systems  exclusively  utilize induction AC motors for
their high  performance,  power  density,  robustness and low cost. The AC drive
system is scaleable and can be customized for different applications. Due to the
large operating range that these propulsion systems offer, all parameters can be
optimized;  the user will not have to  choose  between  acceleration,  torque or
vehicle speed.

Electric Motor Controllers

         The  controller  houses all the  components  necessary  to control  the
powering of a vehicle, in one easy-to-install  package. Our main component is an
inverter,  which converts DC electricity  to AC  electricity.  Enova also offers
optional  controllers  for the air  conditioning,  power steering and heat pump,
12VDC/24VDC  DC-to-DC converter for vehicle auxiliary loads such as cell phones,
radio, lights, and a 6.6kW AC-to-DC on-board conductive charger which allows for
direct  110 VAC or 220 VAC  battery  charging.  These  are  located  in the same
housing as the  controller,  thus extra  interconnects  are not  required.  This
approach simplifies the vehicle wiring harness and increases system reliability.


                                       8
<PAGE>

         Using our  proprietary  Windows(TM)  based  software  package,  vehicle
interfaces  and  control  parameters  can be  programmed  in-vehicle.  Real-time
vehicle performance parameters can be monitored and collected.

Hybrid Drive Systems

         The  Enova  Panther  hybrid-electric  drive  systems  are  based on the
component  building  blocks of the electric  drive family,  including the motor,
controller and optional  components.  As an example, the 120/30 kW series hybrid
system uses the 120kW electric drive components to propel the vehicle,  and uses
a 30kW  Capstone  micro-turbine  to  generate  power  while  the  vehicle  is in
operation. This synergy of design reduces the development cost of Enova's hybrid
systems by taking  advantage of existing  designs.  Accessories for these drives
include battery management, chargers and 12-volt power supplies for the electric
drive family.

         Enova's  hybrid  systems are  designed to work with a variety of hybrid
power  generation  technologies.  In our  120/60kW  hybrid  system,  an internal
combustion  engine connected to a motor and motor controller  performs the power
generation.  Other power options  include  liquid fueled  turbines,  such as the
Capstone system,  fuel cells, such as the UTC Fuel Cell,  Ballard or Hydrogenics
system,  and many others. In all of these examples,  Enova's battery  management
system provides the power management to allow for proper power control.

Battery Care Unit

         We  place a great  amount  of focus on our  power  management  systems.
Enova's Battery Care Unit "BCU" monitors,  manages,  protects,  and reports.  It
controls and manages battery  performance,  temperature,  voltage and current to
avoid harm to the batteries,  to the entire system, and to the driver,  operator
and  passengers.  It also allows for  monitoring  for service to the battery and
drive  system.   This  battery   management   system  is  capable  of  providing
communication  to both  inductive and  conductive  chargers  simultaneously  and
managing the on-board and off-board charging systems with multiple technologies.
The  versatility of this system allows us to adapt the hardware and software for
a variety of power sources such as batteries, turbines and fuel cells.

         The BCU monitors the battery pack voltage and 28 additional  individual
voltages  with a range  of 0 to  18vDC.  Optional  expansion  modules  allow  28
additional inputs per module, with up to 16 modules permitted. The BCU has eight
user-programmable  outputs  and four  user-programmable  inputs  to  allow  full
integration  into the vehicle.  These can be used to customize  input and output
parameters, and to provide for other custom monitoring and battery pack control.

         The BCU directly interfaces with the Panther family of drive systems as
well as others, and controls the Safety Disconnect Unit (see description below).
It is capable of supporting any battery technology,  and provides each type with
optimized charging and protection algorithms. An internal real-time clock allows
the BCU to wake up at user-specified  times to initiate battery charging or pack
monitoring.  A  precision  shunt  allows  it to offer a wide  dynamic  range for
monitoring  charging and motoring  current,  without errors commonly  associated
with other types of sensors.

         The  on-board  memory  allows the BCU to  update,  store and report key
battery pack parameters such as amp hours,  kilowatt-hours  and state of change.
Using Enova's proprietary Windows(TM)-based diagnostic software, the BCU control
parameters can be programmed in-vehicle.  Additionally,  battery performance can
be monitored in real-time. Reports can be output to a laptop computer.

Hybrid Control Unit

         We have  reconfigured  our BCU to perform the  critical  role of hybrid
controller. The Hybrid Control Unit "HCU" continuously monitors the condition of
the  battery  pack  through  communications  with the BCU,  monitors  the driver
commands through communications with the motor controller,  and the state of the
hybrid  generator.  Based upon the data  received,  the HCU provides  continuous
updates to the hybrid generator with instructions on mode of operation and power
level. The purpose of this innovative  control loop is to ensure that the entire
system is optimized to provide quick response to driver commands while providing
the best possible system efficiency.

Safety Disconnect Unit

         The Safety  Disconnect  Unit "SDU" is under the control of the BCU, and
allows vehicle  systems to seamlessly  connect and  disconnect  from the battery
pack when necessary to prevent damage or harm. It also  disconnects  the battery
pack during charging,  protects it from surges, and constantly verifies that the
battery  pack is  isolated  from  the  vehicle  chassis.  In the  event a ground
isolation  fault is  detected,  the BCU  commands  the SDU to break the  battery
connection. The SDU is available in two configurations to match the requirements
of the drive systems.


                                       9
<PAGE>

Fuel Cell Power Conditioning Unit

         Enova has  developed and is now  producing a 30kW  bi-directional  Fuel
Cell  Power  Conditioning  System.  This  system has been  designed  to meet the
demands of an automotive Fuel Cell propulsion system. This unique unit, not much
larger than a conventional  briefcase,  provides a transparent interface between
the Fuel Cell or Turbine,  the battery  pack,  accessory  loads,  and the output
load.  Fast  response  time  allows  the  output  load  to be  serviced  without
interruption while the Fuel Cell or Turbine ramps up.

         This unit is designed to interface  directly with the master controller
of the vehicle over a CAN bus. Other communications  protocols supported are SAE
J-1850,  RS-232, and RS-485.  This proprietary package allows all key parameters
of the Power Conditioner to be monitored and control boundaries to be adjusted.

50kW ICE Generator Unit

         Enova  provides a complete 50kW Internal  Combustion  Engine  Generator
Set. This unit is powered by a 4-cylinder  direct injection diesel engine and is
controlled  over the common CAN bus shared with the rest of the Panther  product
line.  The same HCU that  controls  the  Capstone  micro-turbine  in other Enova
series hybrid  configurations  provides power command,  start command,  and stop
commands.

Fuel Cell Management Unit

         Enova has added a Fuel Cell Control Unit "FCU" to broaden our market in
the power  management  field.  The FCU is designed  to manage fuel cell  powered
systems  whether  stationary  or  mobile,  such as  automobiles.  The FCU can be
adapted  to  regulate  the input and output to and from the fuel cell as well as
regulate  temperature  and  communications.  We  continue to develop our current
systems for new products and markets.

         Enova has  reconfigured  its  Battery  Management  Unit to perform  the
functions  required to monitor,  manage, and report on the status of a Fuel Cell
Stack.  This new unit,  the FCU, is currently  being used by UTC Fuel Cells as a
Fuel Stack Management System.

         An internal real-time clock allows the FCU to wake up at user-specified
times to initiate battery charging or pack monitoring.  A precision shunt allows
it to offer a wide dynamic range for monitoring  charging and motoring  current,
without errors  commonly  associated  with other types of sensors.  The built-in
memory  allows the FCU to update,  store and report key battery pack  parameters
such as amp hours, kilowatt-hours and state of change. Using Enova's proprietary
Windows(TM)-based  diagnostic  software,  the  FCU  control  parameters  can  be
programmed  in-system.  Additionally,  fuel cell performance can be monitored in
real-time. Reports can be output to a laptop computer.

Distributed   Power   Generation  for  Industrial  /  Commercial  /  Residential
Applications

         Enova's  distributed  generation  products are  virtually  identical in
system configuration to that of a series hybrid vehicle,  including a controller
and battery management.  For this market segment, we intend to provide DC-DC and
DC-AC power conversion  components to convert power supplied by batteries,  fuel
cells,  generators  and  turbines  to AC  power  that  will  be  used by the end
customer.  Additionally,  our BCU will  provide  power  management  functions to
control  the entire  system.  The main  difference  is that the 3-phase AC power
typically  supplied to the motor for propulsion  power is, in this case, sent to
the customer to supply power for their household or business.

Competitive Conditions

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

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

         Various  providers of electric vehicles have proposed products or offer
products  for sale in this  emerging  market.  These  products  encompass a wide
variety of  technologies  aimed at both  consumer and  commercial  markets.  The
critical  role of  technology  in this market is  demonstrated  through  several
product  offerings.  As the industry matures,  key technologies and capabilities
are  expected  to play  critical  competitive  roles.  Our  goal is to  position
ourselves as a long term  competitor  in this  industry by focusing on electric,
hybrid and fuel cell powered  drive  systems and related sub systems,  component
integration, technology application and strategic alliances. The addition of new
strategies to penetrate  stationary power markets with current technologies will
assist in


                                       10
<PAGE>

creating a more  diversified  product  mix. We believe that this  strategy  will
enhance our position as a power management and conversion components supplier to
both the mobile and stationary power markets.

Research and Development

         Enova  believes  that  timely   development  and  introduction  of  new
technology and products are essential to maintaining a competitive advantage. We
are currently focusing our development efforts primarily in the following areas:

         *Power Control and Drive Systems and related  technologies  for vehicle
          applications;

         *Stationary Power Management and Conversion and related technologies;

         *Heavy Duty Drive System  development  for Buses;  Trucks,  Industrial,
          Military and Marine applications

         *Fuel Cell Generation system power management and process control

         *Systems  Integration  of these  technologies;

         *Technical and product  development under DOE/DOT/DOD and Hyundai Group
          Contracts

         *OEM Technical and Product development.

         For the  years  ended  December  31,  2003,  2002  and  2001,  we spent
$799,000,  $1,152,000  and  $879,000,  respectively,  on internal  research  and
development  activities.  Enova  is  continually  evaluating  and  updating  the
technology  and  equipment  used in developing  each of its products.  The power
management and conversion  industry utilizes rapidly changing  technology and we
will endeavor to modernize  our current  products as well as continue to develop
new leading edge technologies to maintain our competitive edge in the market.

Intellectual Property

         Enova currently holds four U.S. patents and has one patent pending,  in
power  management  and control,  with an additional  patent in crash  management
safety,  which was originally issued in 1997. We also have trademarks or service
marks in the United  States and have been  filing for  international  patents as
well. We continually review and append our protection of proprietary technology.
We have placed renewed emphasis on the development and acquisition of patentable
technology in 2003 and will  continue to do so in future  years.  We maintain an
internal  review and  compensation  process to encourage our employees to create
new patentable  technologies.  The status of patents  involves complex legal and
factual questions, and the breadth of claims allowed is uncertain.  Accordingly,
there can be no assurance  that patent  applications  filed by us will result in
patents being  issued.  Moreover,  there can be no assurance  that third parties
will not assert claims against us with respect to existing and future  products.
Although we intend to vigorously  protect our rights,  there can be no assurance
that these measures will be successful.  In the event of litigation to determine
the  validity  of any  third  party  claims,  such  litigation  could  result in
significant  expense to Enova.  Additionally,  the laws of certain  countries in
which our products are or may be developed, manufactured or sold may not protect
our products and intellectual  property rights to the same extent as the laws of
the United States.

         Enova's  success  depends  in  part  on  its  ability  to  protect  its
proprietary technologies.  Enova's pending or future patent applications may not
be approved  and the claims  covered by such  applications  may be  reduced.  If
allowed,  patents  may  not be of  sufficient  scope  or  strength,  others  may
independently develop similar technologies or products, duplicate any of Enova's
products or design  around its  patents,  and the patents may not provide  Enova
with competitive advantages.  Further, patents held by third parties may prevent
the  commercialization of products  incorporating  Enova's technologies or third
parties may challenge or seek to narrow, invalidate or circumvent any of Enova's
pending  or future  patents.  Enova  also  believes  that  foreign  patents,  if
obtained,  and the  protection  afforded  by such  foreign  patents  and foreign
intellectual  property laws, may be more limited than that provided under United
States patents and intellectual property laws. Litigation, which could result in
substantial  costs and  diversion  of effort by Enova,  may also be necessary to
enforce any patents  issued or licensed to Enova or to  determine  the scope and
validity of third-party  proprietary rights. Any such litigation,  regardless of
outcome,  could be expensive and time-consuming,  and adverse  determinations in
any such litigation could seriously harm Enova's business.

         Enova  also  relies  on  unpatented  trade  secrets  and  know-how  and
proprietary  technological  innovation and expertise which are protected in part
by  confidentiality  and invention  assignment  agreements  with its  employees,
advisors  and  consultants  and  non-disclosure  agreements  with certain of its
suppliers and distributors. These agreements may be breached, Enova may not have
adequate remedies for any breach or Enova's unpatented proprietary  intellectual
property may otherwise become known or independently  discovered by competitors.
Further,  the laws of certain foreign countries may not protect Enova's products
or intellectual  property rights to the same extent as do the laws of the United
States.

Employees

         As of December 31, 2003, we had 28 full time  employees.  Additionally,
we employ three  individuals  as independent  contractors,  engaged on an hourly
basis, one of whom is domiciled in South Korea.  The  departmental  breakdown of
these individuals  includes 3 in  administration,  1 in sales, 20 in engineering
and research and development, and 7 in production.


                                       11
<PAGE>

Item 2.  Properties

         Enova's  corporate  offices are  located in  Torrance,  California,  in
leased office space of  approximately  20,000 square feet.  This facility houses
our various departments, including engineering,  operations, executive, finance,
planning,  purchasing,  investor  relations  and  human  resources.  This  lease
terminates in February  2008.  The monthly lease expense is $13,500.  Enova also
has a leased  office in Hawaii  which is  rented  on a  month-to-month  basis at
$1,500  per  month  and an  office  in South  Korea  which is also  rented  on a
month-to-month  basis at $500 per month.  We  believe  that  these  offices  are
suitable and adequate for our current and readily foreseeable needs.

Item 3.  Legal Proceedings

         We may from time to time  become a party to various  legal  proceedings
arising in the ordinary course of business.

         In April 2003, one of our customers,  Advanced Vehicle  Systems,  Inc.,
filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. At
the  time of  filing,  AVS had an  outstanding  account  balance  with  Enova of
approximately  $595,000,  of  which  approximately  $564,000  is for  components
delivered during the first quarter of 2003. During the second quarter, Enova was
informed  by  AVS  that  various  vehicle  manufacturing  contracts  which  were
anticipated  to be completed by AVS were  terminated  by AVS  customers  and was
therefore we were unable to collect on post-filing  offset  agreements.  Enova's
Audit Committee chairman has been appointed chairman of the creditor's committee
formed by the Bankruptcy Court.  Enova believes it will recover a portion of the
funds  now owed  Enova by AVS.  However,  there are no  assurances  that we will
recover any or all of the amounts owed to us. As of December  31, 2003,  we have
reserved  $595,000 against these balances owed as an allowance for uncollectible
receivables.

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

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of fiscal 2003.


                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)


                                       12
<PAGE>

                                     PART II

Item 5.  Market for Registrant's  Common Equity, Related Shareholder Matters and
         Issuer Purchases of Equity Securities

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

                                         Common Stock           Average Daily
                                  High Price       Low Price        Volume
                                  --------------------------    -------------
Calendar 2002
First Quarter ................     $   0.23        $   0.14        265,875
Second Quarter ...............     $   0.19        $   0.10        111,600
Third Quarter ................     $   0.15        $   0.09         38,861
Fourth Quarter ...............     $   0.13        $   0.07        146,977

Calendar 2003
First Quarter ................     $   0.09        $   0.06        172,237
Second Quarter ...............     $   0.09        $   0.06        119,057
Third Quarter ................     $   0.10        $   0.05        465,683
Fourth Quarter ...............     $   0.14        $   0.07        463,240

         On March 22, 2004, the last reported high bid price of the Common Stock
was $0.14 and the last  reported  low asking  price was  $0.14.  As of March 22,
2004, there were  approximately  9,600 holders of record of our Common Stock. As
of March 22, 2004,  approximately 111 shareholders,  many of who are also Common
Stock  shareholders,  held  our  Series  A  Preferred  Stock.  Approximately  34
shareholders as of March 22, 2004 held our Series B Preferred  Stock. The number
of holders of record  excludes  beneficial  holders whose shares are held in the
name of nominees or trustees.

Stock Issuances

         In September 2003, the Company issued 23,076,923 shares of common stock
to Hyundai  Heavy  Industries  Co.,  Ltd. in exchange  for  $1,500,000  in cash.
$1,000,000  of the  proceeds  from  this  issuance  was  used  to  fund  Enova's
$1,000,000 joint venture  interest in the  Hyundai-Enova  Innovative  Technology
Center as previously noted, with the $500,000 balance of proceeds to be used for
general  operations and working  capital.  The Company relied upon Regulation D,
Rule 506 promulgated by the Securities and Exchange  Commission as the exemption
from registration for the issuance of these shares.

         During 2003,  we issued an aggregate of 754,167  shares of Common Stock
to our directors in  consideration  for  attendance at Board  meetings and Board
committee meetings during fiscal 2003. We relied on Rule 506 of Regulation D and
Section 4(2) of the Securities  Act of 1933, as amended,  for the exemption from
registration  of the  sales  of such  shares.  See  Item  10,  "Compensation  of
Directors."

Dividend Policy

         To date, we have neither declared nor paid any cash dividends on shares
of our Common Stock or Series A or B Preferred  Stock.  We  presently  intend to
retain all future  earnings for our business and do not  anticipate  paying cash
dividends  on  our  Common  Stock  or  Series  A or B  Preferred  Stock  in  the
foreseeable  future.  We are  required  to pay  dividends  on our Series A and B
Preferred  Stock before  dividends may be paid on any shares of Common Stock. At
December 31, 2003, Enova had an accumulated deficit of approximately $97,077,415
and, until this deficit is eliminated,  will be prohibited from paying dividends
on any class of stock except out of net profits,  unless it meets  certain asset
and other tests under Section 500 et. seq. of the California Corporations Code.

Item 6.  Selected Financial Data

         The  following  selected  financial  data  tables  set  forth  selected
financial data for the years ended December 31, 2003,  2002,  2001 and 2000, the
five month  period  ended  December  31, 1999 and the fiscal year ended July 31,
1999. The five-month  period is related to a change in the fiscal year end which
was effective  December 31, 1999. The statement of income data and balance sheet
data for and as of the end of the years ended December 31, 2003,  2002, 2001 and
2000,  the five month period  ended  December 31, 1999 and the fiscal year ended
July 31, 1999 are derived from the audited  financial  statements of Enova.  The
following   selected   financial  data  should  be  read  in  conjunction   with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and the Financial Statements, including the notes thereto, appearing
elsewhere in this 10K.


                                       13
<PAGE>

<TABLE>
<CAPTION>

                                           As of and for the year ended December 31                              Fiscal Year
                                            (in thousands, except per share data),                 Five Months      Ended
                                            -------------------------------------                     Ended        July 31,
                                               2003          2002          2001         2000         Dec. 31,       1999
                                            ---------     ---------     ---------     ---------     ---------     ---------
<S>                                         <C>           <C>           <C>           <C>           <C>           <C>
NET SALES                                   $   4,310     $   4,455     $   3,780     $   2,883     $     629     $   2,774
COST OF SALES                                   3,304         3,784         2,783         2,013           377         1,460
                                            ---------     ---------     ---------     ---------     ---------     ---------
GROSS MARGIN                                    1,006           671           997           870           252         1,314
                                            ---------     ---------     ---------     ---------     ---------     ---------
OTHER COSTS AND EXPENSES
     Research and Development                     799         1,152           879           626           262           499
     Selling, general and administrative        2,919         2,837         2,894         1,999           796         1,141
     Interest and financing fees                  234           199           113           174           244           724
     Other expenses (income)                      200                          (7)            6                         (41)
     Gain on Warranty Reevaluations                                                                                    (474)
     Equity in losses                              40
                                            ---------     ---------     ---------     ---------     ---------     ---------
     Legal Settlements                                           81           900            75           125
                                            ---------     ---------     ---------     ---------     ---------     ---------
     Total other costs and expenses             4,192         4,269         4,779         2,880         1,427         1,849
                                            ---------     ---------     ---------     ---------     ---------     ---------
LOSS FROM CONTINUING OPERATIONS                (3,186)       (3,598)       (3,782)       (2,010)       (1,175)         (535)
GAIN ON DEBT RESTRUCTURING                                                    354         1,551           214           140
                                            ---------     ---------     ---------     ---------     ---------     ---------
NET LOSS                                    $  (3,186)    $  (3,598)    $  (3,428)    $    (459)    $    (961)    $    (395)
                                            =========     =========     =========     =========     =========     =========
PER COMMON SHARE:
     Loss from continuing operations        $   (0.01)    $   (0.01)    $   (0.01)    $   (0.01)    $   (0.01)    $   (0.01)
     Gain on debt restructuring                                                            0.01
                                            ---------     ---------     ---------     ---------     ---------     ---------
     Net loss per common share              $   (0.01)    $   (0.01)    $   (0.01)    $    0.00     $   (0.01)    $   (0.01)
                                            =========     =========     =========     =========     =========     =========
WEIGHTED AVERAGE NUMBER
COMMON SHARES OUTSTANDING                     334,840       326,390       275,189       235,199       251,994       152,077
     Total Assets                           $   4,870     $   6,224     $   4,340     $   3,094     $   2,697     $   3,940
                                            =========     =========     =========     =========     =========     =========
     Long-term debt                         $   3,347     $   3,332     $   3,332     $   3,332     $   3,332     $   3,332
                                            =========     =========     =========     =========     =========     =========
     Shareholder's equity (deficit)         $    (864)    $     287     $    (232)    $  (1,648)    $  (5,015)    $  (7,316)
                                            =========     =========     =========     =========     =========     =========
</TABLE>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         You should read this Management's  Discussion and Analysis of Financial
Condition  and Results of  Operations  in  conjunction  with our 2003  Financial
Statements  and  Notes  thereto.  The  matters  addressed  in this  Management's
Discussion and Analysis of Financial  Condition and Results of Operations,  with
the  exception  of  the  historical   information   presented  contains  certain
forward-looking statements involving risks and uncertainties. Our actual results
could  differ  materially  from  those  anticipated  in  these   forward-looking
statements as a result of certain  factors,  including those set forth under the
heading  "Certain  Factors That May Affect Future Results" and elsewhere in this
report.

Cautionary Note on Forward-looking Statements

         Some  of  the  matters   discussed  under  the  caption   "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations,"
"Business" and elsewhere in this Form 10-K include  forward-looking  statements.
We have based these  forward-looking  statements on our current expectations and
projections about future events.

         In  some  cases,  you  can  identify   forward-looking   statements  by
terminology such as "may," "will," "should," "could,"  "predicts,"  "potential,"
"continue," "expects,"  "anticipates," "future," "intends," "plans," "believes,"
"estimates" and similar  expressions.  These statements are based on our current
beliefs,  expectations  and assumptions and are subject to a number of risks and
uncertainties. Actual results, levels of activity, performance, achievements and
events  may  vary  significantly  from  those


                                       14
<PAGE>

implied by the forward-looking statements.  These forward-looking statements are
made as of the date of this Form 10-K, and, except as required under  applicable
securities law, we assume no obligation to update them or to explain the reasons
why actual results may differ.

OVERVIEW

         Enova Systems  develops and produces  advanced  software,  firmware and
hardware for applications in the growing  alternative power industry.  Our focus
is digital power conversion,  power management, and system integration,  for two
broad market  applications  - vehicle  power  generation  and  stationary  power
generation.

         Enova's  products and systems are the enabling  technologies  for power
systems.  Without  them,  power cannot be converted  into the  appropriate  form
required  by the  vehicle or device;  and without  them,  power is not  properly
managed to protect the battery, vehicle or device, and user.

         Specifically,  we develop, design and produce drive systems and related
components  for electric,  hybrid-electric,  fuel cell and  microturbine-powered
vehicles.  We also  develop,  design  and  produce  power  management  and power
conversion components for stationary power generation - both on-site distributed
power  and  on-site   telecommunications   back-up  power  applications.   These
stationary  applications  also  employ fuel cells,  microturbines  and  advanced
batteries  for  power  storage  and  generation.  Additionally,  Enova  performs
significant  research  and  development  to augment and support  others' and our
internal related product development efforts.

         The  financial  statements  present  the  financial  position  of Enova
Systems, Inc. as of December 31, 2003 and 2002 and the results of operations and
cash flows for the year ended December 31, 2003, 2002 and 2001.

Critical Accounting Policies

         Financial  Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 1 of the notes to the financial statements includes a
summary  of  the  significant  accounting  policies  and  methods  used  in  the
preparation of our financial statements.  The following is a brief discussion of
the more significant accounting policies and methods that we use.

          Our discussion  and analysis of our financial  condition and result of
operations  are based on our financial  statements,  which have been prepared in
conformity with accounting principles generally accepted in the United States of
America.  Our  preparation  of these  financial  statements  requires us to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities, the disclosure of contingent assets and liabilities at the dates of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  periods.  We based our estimates on historical  experience
and on various  other  assumptions  that we believe to be  reasonable  under the
circumstances.  The most significant estimates and assumptions relate to revenue
recognition and potential  allowances for doubtful accounts.  Actual amounts may
differ from such  estimates  under  different  assumptions  or  conditions.  The
following summarizes our critical accounting policies and significant  estimates
used in preparing our consolidated financial statements:

         o     The first-in, first-out (FIFO) method to value our inventories;

         o     The intrinsic value method, or APB Opinion No. 25, to account for
               our stock options;

         o     Review of  customers'  receivable  to  determine  the need for an
               allowance  for credit  losses based on  estimates  of  customers'
               ability to pay. If the financial  condition of our customers were
               to deteriorate, an allowance may be required.

         These  accounting  policies  are  applied  consistently  for all  years
presented.  Our operating  results would be affected if other  alternatives were
used.  Information  about the impact on our operating results is included in the
footnotes to our financial statements.

LIQUIDITY AND CAPITAL RESOURCES

            We have  experienced  cash flow  shortages  due to operating  losses
primarily  attributable  to  research,  development,  marketing  and other costs
associated with our strategic plan as an international developer and supplier of
electric propulsion and power management systems and components. Cash flows from
operations have not been sufficient to meet our obligations.  Therefore, we have
had to raise funds through  several  financing  transactions.  At least until we
reach  breakeven  volume in sales and develop  and/or  acquire the capability to
manufacture and sell our products  profitably,  we will need to continue to rely
on cash from external financing sources. Enova is seeking new investment capital
to fund research and development and create new market  opportunities.  In order
to fuel our  growth in the  stationary  power  market,  we will need  additional
capital to further  these  development  programs  and augment  our  intellectual
properties.  The


                                       15
<PAGE>

Company  believes  that at least  through  fiscal  2004,  assuming  there are no
unanticipated   material  adverse  developments  and  no  material  decrease  in
revenues,  its cash flows from operations and through credit  facilities will be
sufficient  to enable  the  Company  to pay its debts  and  obligations  as they
mature.  The Company will benefit in fiscal 2004 from expense reductions through
reduced  number of  employees  and other  expenses  undertaken  in fiscal  2003.
However,  the Company's  current  sources of funds are not sufficient to provide
the working  capital  for  material  growth,  and it would be required to obtain
additional  debt or equity  financing to support  such  growth.  As of March 22,
2004, we continue to seek private accredited  investors to purchase Enova common
stock. Currently, we are seeking up to $10 million in new investment funding. As
of March 30,  2004,  Enova  has  entered  into  three and  received  one  verbal
commitment  for $700,000 to enter into Stock  Purchase  Agreements  with several
accredited investors to purchase 15,833,333 shares of our common stock through a
private  placement  offering  at $0.12 per share for a total  cash  purchase  of
$1,900,000.  These investors represented that they were accredited investors. We
relied on Rule 506 of  Regulation  D and Section 4(2) of the  Securities  Act of
1933,  as  amended,  for the  exemption  from  registration  of the sale of such
shares.  Although  we  believe  that we will  execute a written  Stock  Purchase
Agreement with respect to the one verbal  commitment,  there can be no assurance
that  such an  Agreement  will be  executed  and that  such  funds  will be made
available.  Enova  continues to seek additional  investment  capital to fund its
operations, development and expansion plans. As of March 30, 2004, there were no
other firm  commitments  than those  noted.  Enova  also has a  commitment  from
Hyundai Heavy  Industries to invest,  in June 2004, an additional  $1,500,000 in
Enova  under the same terms as the  initial  investment,  subject to stock price
adjustments,  in  accordance  with the terms of the Joint  Venture  Agreement as
noted below.

         Throughout 2003, management reassessed its current resource allocations
and  overhead  costs.  Due to the loss of the  Advanced  Vehicle  Systems  (AVS)
programs - please refer to Part II, Item 1, Legal  Proceedings  - and an overall
slowdown in  heavy-duty  drive system  purchases,  Enova's  management  analyzed
current  processes and budgets for potential  targets for cost  reduction.  As a
result of this analysis,  management implemented several cost reduction programs
including personnel reductions, work-week modifications and other cost restraint
endeavors  to achieve  these  goals.  Personnel  levels have been  reduced to 28
employees at December 31, 2003 from 45 at December  31, 2002.  In early  October
2003,  management  discontinued  its modified  compensation  plan for  full-time
salaried  employees as well as work-week  reductions for other employees.  These
employees have had their prior pay levels re-instated. Management believed these
pay  level   reinstatements   appropriate  based  on  increasing   research  and
development  business.  Because  of the  workforce  reductions  and  other  cost
containment  policies,  the Company  continues to realize a reduction in monthly
cash outlays of approximately  $120,000 via these cost reductions  compared with
the  monthly  average  for the first six  months of 2003  without  impact to our
current operations.

         In 2003,  we  expanded  our sales and  development  efforts  to capture
additional global market share for our product line and our technical expertise.
Enova expanded further into U.S., European and Asian markets with our heavy duty
drive systems and added to our development  programs with Ford,  Hyundai and the
U.S.  Department of  Transportation  with major  customers  such as Mack Truck /
Volvo,  EDO  Corporation,  MTrans of  Malaysia,  the U.S.  Navy and  others.  We
continue to focus on building our product line,  increasing our market share and
developing  the next  generation of advanced  power  management  and  conversion
systems.

         Our operations during the year ended December 31, 2003 were financed by
development  contracts  and  product  sales,  as well as  from  working  capital
reserves.

         During  the year ended  December  31,  2003,  our  operations  required
$1,378,000 more in cash than was generated. Enova continues to increase research
and  development   spending,   as  well  as  increased   sales,   marketing  and
administrative  expenses  necessary  for  expansion  to  meet  customer  demand.
Accounts receivable increased by $142,000 from $1,256,000,  or approximately 11%
from the balance at December  31, 2002 (net of  write-offs).  Including  the AVS
write-off,  accounts  receivable were $803,000 at December 31, 2003 or 36% lower
than comparable  balances at December 31, 2002. To a large extent,  the decrease
is due to write-offs  caused by the  bankruptcy of AVS, as noted below,  and the
overall slowdown in new business in the third and fourth quarters of 2003. Enova
began  several  new  development  contracts  in the  fourth  quarter,  as  noted
throughout  this Form 10-K,  which we anticipate  will increase  receivables  in
future  quarters.  During the twelve months ending December 31, 2003, we charged
off approximately  $595,000 primarily for sales made to AVS in 2002 and 2003. We
continually  monitor our receivables and have had immaterial  charge-offs during
the years, other than AVS, due to this policy.  Inventory  decreased slightly by
$46,000 from $1,652,000 or less than 3% from December 31, 2002 balances.  During
late 2002, we increased our inventory stock to meet  forecasted  customer demand
from AVS and other heavy-duty drive systems customers. In 2003, several of these
customers  experienced  slower demand than  anticipated  which resulted in fewer
purchases  from Enova.  We have been selling these systems  throughout  2003 and
anticipate  additional  sales of such in  2004.  Additionally,  included  in our
inventory are raw materials and equipment related to the Ballard/Ford Th!nk city
program, as noted below under Ballard Power Systems,  which have a book value of
approximately  $180,000 based on our negotiated  settlement with Ballard.  These
materials have an original cost value of over  $700,000.  It is our intention to
resell these materials during 2004.

         Fixed assts  increased  by $112,000 or 7%,  before  depreciation  and a
write-down  of $200,000 for our Hawaii  demonstration  tram,  for the year ended
December  31,  2003 from the prior year  balance  of  $1,668,000  primarily  due
purchases  of test  equipment,  production  machinery,  software and tooling for
programs and products  developed during the year. The Hawaii tram was originally
booked  as an asset  at a value of  $350,000  based  on then  applicable  market
conditions for such pure electric  vehicles.  Management  has  determined  that,
after allowing for depreciation of $100,000, the tram has a net realizable value
in the range between $50,000 and $100,000.  It is our intent to sell the tram in
2004.

         Investments  increased  by $960,000  during  2003,  net of our pro-rata
share of losses attributable to the investment, which reflects our forty percent
(40%)  interest  in the  Hyundai-Enova  Innovative  Technology  Center  as noted
elsewhere  in this Form 10-K.  For the year ended  December  31,  2003,  the ITC
generated a net loss of approximately  $100,000,  resulting in a charge to Enova
of $40,000  utilizing the equity  method of  accounting  for our interest in the
ITC.  Based on  contractual  obligations  of our Joint  Venture  Agreement  with
Hyundai Heavy  Industries  Co., such  investment is  anticipated  to increase by
$1,000,000 in 2004.


                                       16
<PAGE>

         Other assets decreased by $105,000 during 2003 from $542,000 in 2002 as
we  continued  to amortize  the asset  relating to the Ford Value  Participation
Agreement.  Intellectual  property  assets,  including  patents and  trademarks,
increased  by $11,000 in 2003 from  $78,000 at December 31, 2002 as we continued
to capitalize new intellectual property rights on our technology.

         The future  unavailability  or  inadequacy  of financing to meet future
needs could force us to delay,  modify,  suspend or cease some or all aspects of
our planned operations.

RESULTS OF OPERATIONS

Years Ended December 31, 2003 and 2002

         Net sales of $4,310,000  for the twelve months ended  December 31, 2003
decreased  $145,000 or 3% from  $4,455,000  during the same period in 2002.  Our
sources of revenue for 2003 came primarily from product sales.  Product sales as
a  percentage  of total  revenues  of 56% in 2003  were  consistent  to the 2002
product sales to total  revenues  percentage of 59%.  Sales of our Panther 120kW
drive systems  accounted for a majority of our product sales in 2003. We believe
this trend will continue over the next several  years.  However we will continue
to seek out and  contract  for new  development  programs  with both our current
partners such as Ford,  Mack/Volvo,  UTC,  Hyundai and our other U.S., Asian and
European  alliance  partners,  as well as with new alliances  with other vehicle
manufacturers and energy companies.

         Cost of sales  consists of component and material  costs,  direct labor
costs,  integration  costs and overhead related to  manufacturing  our products.
Product development costs incurred in the performance of engineering development
contracts for the U.S.  Government and private  companies are charged to cost of
sales  for this  contract  revenue.  During  2003,  we  continued  our  trend of
establishing new customers and  strengthening  current alliances with customers,
such as Tomoe and MTrans in the  heavy-duty  drive  system  market.  Because the
market is relatively nascent,  our customers require additional  integration and
support services to customize,  integrate and evaluate our products.  We believe
these costs to be initial,  one-time  costs for these  customers and  anticipate
similar costs to be incurred with respect to new customers as we gain additional
market  share.  Cost of sales for the year ended  December  31,  2003  decreased
$438,000,  or 12%, from  $3,784,000 for the year ended  December 31, 2002.  This
decrease is attributable to follow-on orders from existing customers such as EPT
and  MTrans,  which no longer  require  as much  integration  support,  and from
decreased pricing from our contract  manufacturers as our order quantities rise.
As  we  increase  our  sales  volume,  we  believe  the  costs  associated  with
manufacturing  and  integrating  these  products  should  continue to  decrease,
improving our gross margins.

         Research and  development  expenses  consist  primarily  of  personnel,
facilities,  equipment and supplies for our research and development activities.
Non-funded  development costs are reported as research and development  expense.
Research and development  expense  decreased in 2003 to $799,000 from $1,152,000
for the same period in 2002, a decrease of  $352,000,  or 31%.  During 2003,  we
reduced  non-essential  expenses for internal  research and development  without
sacrificing that  development  necessary to maintain our competitive edge in our
markets.  We supplemented  this reduction by teaming with other companies in our
sector such as Mack/Volvo,  Hyundai, and the U.S. Government to offset the costs
of  development  for new  products in the areas of mobile and  stationary  power
management  and  conversion.  Programs  included our advanced  power  management
systems  for fuel  cells,  our  diesel  generation  engine/motor  system for our
heavy-duty drive systems, a dual 8kW inverter,  and upgrades and improvements to
our  current  power  conversion  and  management  components.  Additionally,  we
continue to enhance our  technologies  to be more  universally  adaptable to the
requirements of our current and prospective customers. By modifying our software
and  firmware,  we believe  we should be able to  provide a more  comprehensive,
adaptive and effective  solution to a larger base of customers and applications.
We will continue to research and develop new  technologies  and  products,  both
internally and in conjunction with our alliance partners and other manufacturers
as we deem beneficial to our global growth strategy.

         Selling,  general and  administrative  expenses  consist  primarily  of
personnel and related costs of sales and marketing  employees,  consulting  fees
and expenses for travel,  trade shows and  promotional  activities and personnel
and  related  costs  for  general  corporate   functions,   including   finance,
accounting,  strategic  and business  development,  human  resources  and legal.
Selling,  general and administrative  expenses were further reduced in 2003 from
2002 levels  continuing  a trend from prior  years.  Net of the $595,000 AVS bad
debt  write-off,  our selling,  general and  administrative  expenses  decreased
$515,000 in the year ended December 31, 2003, to $2,322,000  from $2,837,000 for
the similar period in 2002.  This  represents an 18% reduction in these expenses
as a result of management's cost reduction programs implemented  throughout 2003
including  workforce  cutbacks,   elimination  of  non-essential   expenses  and
exercising tighter constraint over overhead costs in general. We are continually
reviewing   operations  to  lower  overhead   costs  and  increase   operational
efficiencies

         For the year ended  December 31,  2003,  interest  and  financing  fees
increased  by $22,000 to  $242,000,  an increase of 10%.  The  increase  was due
solely to an  increase in 2003 in the  interest  rate on the Note due the Credit
Managers Association of California for $3.2 million per the terms of the Note.


                                       17
<PAGE>

         Our  $3,186,000  net loss  for the  year  ended  December  31,  2003 is
$411,000 less than the loss incurred in 2002 of  $3,598,000,  a decrease of 11%.
Excluding  the bad  debt  charge  of  $595,000  for the AVS  bankruptcy  and the
write-down  of the  Hawaii  tram of  $200,000,  our loss  for the year  would be
$1,206,000  less, or $2,392,000 for the year ended  December 31, 2003,  over 34%
lower than that incurred in 2002.  This  decrease is a significant  milestone in
Enova's goal to break-even in the near future.  Management will continue to seek
operational  efficiencies and methods to reduce manufacturing and overhead costs
as well as increase revenues to achieve this goal of profitability.

Ballard Power Systems

         Our development  and production  program with Ballard Power Systems for
low voltage 30kW electric drive system components for use in Ford's Global Th!nk
City was  terminated  by Ford and Th!nk  Nordic  in early  2003,  as  previously
reported.  Under  the terms of the  contract,  Ballard  is liable  for all costs
incurred by Enova which are normally  associated  with the production  including
inventory and other  development or production  costs.  We invoiced  Ballard for
approximately  $952,000  for  work-in-process  inventory  and  other  additional
material,  tooling and engineering costs for the initial production of the drive
system  component.  Of this amount,  Ballard remitted $580,400 during the second
quarter of 2003. In October 2003,  Enova and Ballard reached a settlement on all
remaining  balances due wherein Enova will receive $198,125 in cash and title to
all inventory,  raw materials,  tooling and equipment in its possession  that is
associated  with the  program.  The  Company  intends to sell such in the resale
markets.  The Company believes that the resale market value of the inventory and
equipment  will  amount to at least the value of the  remainder  balance  of the
receivable of approximately $173,000.

Hyundai-Enova Innovative Technology Center

         In September 2003, Enova and Hyundai Heavy  Industries,  Co. Ltd. (HHI)
funded the Hyundai-Enova  Innovative  Technology Center (HEITC) to be located at
Enova's Torrance  headquarters.  In connection with the Joint Venture  Agreement
entered into between the two parties in March 2003, HHI purchased  $1,500,000 of
common stock of Enova Systems, Inc. HHI purchased 23,076,923 shares representing
a 6.2% ownership in Enova, Inc. Of this amount, Enova invested $1,000,000 in the
HEITC for a forty percent (40%) ownership  interest.  HHI invested an additional
$1,500,000  for  a  sixty  percent  (60%)  ownership   interest  in  the  HEITC.
Furthermore,  in June of 2004, HHI will invest an additional $3,000,000 in Enova
and HEITC under the same terms as the initial investment, subject to stock price
adjustments,  in accordance with the Joint Venture Agreement.  The joint venture
company  officially  opened in November  2003 to pursue  advanced  research  and
development  in hybrid  automotive  and  stationary  applications  for fuel cell
technologies.

Years Ended December 31, 2002 and 2001

         Net sales of $4,455,000  for the twelve months ended  December 31, 2002
increased  $675,000 or 18% from  $3,780,000  during the same period in 2001. Our
revenue base is shifting to higher  concentration  in product sales as we expand
our  market  penetration  in  these  areas.  Accordingly,  we  have  added  this
delineation  in our financial  statement  representation  for sales and costs of
sales.  Product sales as a percentage of total revenues increased to 59% in 2002
as  compared  with 26% of total  revenues in 2001.  Sales of our Panther  240kW,
120kW and 90kW drive systems  accounted for a majority of our product sales.  We
believe this trend will  continue  over the next several  years.  We continue to
seek out and  contract  for new  development  programs  with  both  our  current
partners  such as Ford,  the DOT and Hyundai,  as well as creating new alliances
with other vehicle manufacturers and energy companies.  Furthermore,  we believe
that markets are  developing  for our  stationary  process and power control and
conversion systems in which we intend to gain market share.

         Cost of sales  consists of component and material  costs,  direct labor
costs,  integration  costs and overhead related to  manufacturing  our products.
Product development costs incurred in the performance of engineering development
contracts for the U.S.  Government and private  companies are charged to cost of
sales for this  contract  revenue.  During  2002,  we  established  several  new
customers,  such as AVS,  Tomoe and MMT, in the  heavy-duty  drive system market
which  required  additional  integration  and  support  services  to  customize,
integrate  and  evaluate  our  products.  We believe  these costs to be initial,
one-time costs for these  customers and anticipate  similar costs to be incurred
as we gain additional market share.  During the year ended December 31, 2002, we
charged off approximately  $200,000 in obsolete  inventory and other engineering
costs related to the cancellation of the Ballard/Ford  Th!nk program.  A portion
of these costs may be recoverable in 2003 from Ballard,  however, we can give no
assurance at this time that such  reimbursement  will occur. Due to the increase
in net sales, the  aforementioned  costs,  the Ballard program  cancellation and
other  inventory  adjustments,  cost of sales of  $3,784,000  for the year ended
December 31, 2002 reflect an increase of $1,001,000, or 36%, from $2,783,000 for
the year ended  December 31, 2001. Our product line is well  established.  As we
increase our sales volume,  we believe the costs  associated with  manufacturing
and integrating these products should continue to decrease,  improving our gross
margins.

         Research and  development  expenses  consist  primarily  of  personnel,
facilities,  equipment and supplies for our research and development activities.
Non-funded  development costs are reported as research and development  expense.
Research and development  expense  increased in 2002 to $1,152,000 from $879,000
for the same period in 2001,  an increase of $273,000,  or 31%.  During 2002, we
continued to expend funds for research and development  for new  technologies to
enhance


                                       18
<PAGE>

existing  products  as well as develop  new  products in the areas of mobile and
stationary  power management and conversion.  Programs  included our 240kW drive
system,  advanced power  management  systems for fuel cells, a Panther 90kW Dual
Motor drive system, a diesel generation  engine/motor  system for our heavy-duty
drive systems,  a 18kW on-board  charger system and upgrades and improvements to
our current power  conversion and management  components.  Additionally,  we are
enhancing our technologies to be more universally  adaptable to the requirements
of our  current  and  prospective  customers.  By  modifying  our  software  and
firmware, we believe we should be able to provide a more comprehensive, adaptive
and effective  solution to a larger base of customers and  applications.  During
2002,  we expended  additional  resources  toward  these  types of programs  and
therefore modified our allocation of engineering costs to reflect this shift. We
will  continue to  research  and develop new  technologies  and  products,  both
internally and in conjunction with our alliance partners and other manufacturers
as we deem beneficial to our global growth strategy.  Our joint venture advanced
technology  center with HHI, as previously  reported,  is a specific  example of
this strategy.

         Selling,  general and  administrative  expenses  consist  primarily  of
personnel and related costs of sales and marketing  employees,  consulting  fees
and expenses for travel,  trade shows and  promotional  activities and personnel
and  related  costs  for  general  corporate   functions,   including   finance,
accounting,  strategic  and business  development,  human  resources  and legal.
Selling, general and administrative expense decreased in the year ended December
31, 2002 to $2,837,000  from  $2,894,000  for the similar period in 2001. We are
continually   reviewing  operations  to  lower  over  head  costs  and  increase
operational   efficiencies.   During  2002,   legal  and   accounting   fees  of
approximately $318,000 in conjunction with two Form S-1 Registration Statements,
required quarterly, annual and other periodic SEC filings, as well as compliance
with the Sarbanes-Oxley  Act of 2002 and other legal matters,  accounted for the
majority  of these  expenses.  We believe  these  professional  fees  should not
increase  significantly  in  2003,  however  due  to  the  increased  regulatory
oversight of public  companies and additional  legal and accounting  obligations
mandated by  Sarbanes-Oxley,  we can make no assurance  that  increases will not
occur.

         For the year ended  December 31,  2002,  interest  and  financing  fees
increased  by $86,000 to  $199,000,  an increase of 76%.  The  increase  was due
primarily  to an  increase  in the  rate on the  Note  due the  Credit  Managers
Association of California  for $3.2 million per its terms and  additional  lease
financings for equipment during 2002.

         Our net loss for the year ended  December  31,  2002 of  $3,598,000  is
comparable  to the loss incurred in 2001 of  $3,428,000,  however we believe the
components  of the 2002 net loss should  provide much greater near and long-term
benefits to Enova.  Certain factors,  such as the Ballard program  cancellation,
could not be anticipated and did contribute  substantially  to the net loss from
operations.  Other elements  however,  such as the increased  funding levels for
development of new systems and enhancement of current systems, we believe,  will
provide  opportunities  for increased sales and market share capture in 2003 and
beyond.  Depending  on the  level of  externally  funded  engineering  programs,
additional   internal   funds  may  be  expended  to  maintain  or  improve  our
technologies to remain competitive in the market.

         Our basic strategy  continues toward increased research and development
and  increased  marketing  and  administrative  operations  relating  to further
establishing  ourselves as one of the key players in the mobile power conversion
and management  markets and to develop new systems for the  stationary  markets.
During 2002, we experienced increased demand and recognition of our products and
expertise in theses  markets,  thus  increasing  our revenue base,  and we shall
continue to increase engineering,  production,  and support personnel as we deem
necessary to meet our current and prospective customer needs.

Recent  accounting  pronouncements  - The Financial  Accounting  Standards Board
(FASB) has not issued any new accounting pronouncements that will have an impact
on our financial statements.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

         This Form 10-K  contains  forward  looking  statements  concerning  our
existing  and  future  products,   markets,   expenses,   revenues,   liquidity,
performance  and  cash  needs  as  well  as  our  plans  and  strategies.  These
forward-looking  statements  involve  risks and  uncertainties  and are based on
current  management's  expectations  and we are not  obligated  to  update  this
information.  Many  factors  could  cause  actual  results  and events to differ
significantly from the results  anticipated by us and described in these forward
looking statements including, but not limited to, the following risk factors.

Net Operating Losses.  We have experienced  recurring losses from operations and
had an  accumulated  deficit of  $97,078,000  at December 31, 2003.  There is no
assurance, however, that any net operating losses will be available to us in the
future as an offset against future profits for income tax purposes.

Continued  Losses.  For the year ended December 31, 2003,  2002 and 2001, we had
net losses of $3,186,000, $3,598,000, and $3,428,000,  respectively, on sales of
$4,310,000, $4,455,000, and $3,780,000, respectively.

Nature of Industry. The mobile and stationary power markets,  including electric
vehicle  and  hybrid  electric  vehicles,   continue  to  be  subject  to  rapid
technological  change.  Most  of  the  major  domestic  and  foreign  automobile
manufacturers:  (1) have already produced  electric and hybrid vehicles,  and/or
(2) have developed  improved electric  storage,  propulsion and control systems,
and/or (3) are now entering or have entered into production, while continuing to
improve  technology or incorporate newer


                                       19
<PAGE>

technology.  Various  companies are also developing  improved  electric storage,
propulsion and control  systems.  In addition,  the  stationary  power market is
still in its infancy.  A number of established  energy  companies are developing
new technologies.  Cost-effective  methods to reduce price per kilowatt have yet
to be established and the stationary power market is not yet viable.

Our current products are designed for use with, and are dependent upon, existing
technology.  As  technologies  change,  and  subject  to our  limited  available
resources,  we plan to upgrade or adapt our  products  in order to  continue  to
provide products with the latest technology. We cannot assure you, however, that
we will be able to avoid  technological  obsolescence,  that the  market for our
products will not  ultimately be dominated by  technologies  other than ours, or
that we will be able to adapt to changes in or create "leading-edge" technology.
In  addition,  further  proprietary  technological  development  by others could
prohibit us from using our own technology.

Our industry is affected by political and legislative  changes.  In recent years
there has been  significant  public pressure to enact  legislation in the United
States and abroad to reduce or eliminate automobile  pollution.  Although states
such as  California  have enacted such  legislation,  we cannot  assure you that
there will not be further legislation  enacted changing current  requirements or
that current  legislation or state mandates will not be repealed or amended,  or
that a different  form of zero  emission  or low  emission  vehicle  will not be
invented,  developed and produced,  and achieve  greater market  acceptance than
electric or hybrid electric vehicles. Extensions, modifications or reductions of
current  federal and state  legislation,  mandates and potential tax  incentives
could also adversely affect our business prospects if implemented.

Changed  legislative  climate.  Because vehicles powered by internal  combustion
engines cause pollution,  there has been  significant  public pressure in Europe
and Asia, and enacted or pending legislation in the United States at the federal
level and in certain  states,  to promote or mandate the use of vehicles with no
tailpipe  emissions  ("zero emission  vehicles") or reduced  tailpipe  emissions
("low  emission  vehicles").  Legislation  requiring  or  promoting  zero or low
emission  vehicles is  necessary  to create a  significant  market for  electric
vehicles.  The California Air Resources Board (CARB) is continuing to modify its
regulations  regarding its  mandatory  limits for zero emission and low emission
vehicles. Furthermore,  several car manufacturers have challenged these mandates
in court and have obtained injunctions to delay these mandates.

There are substantial risks involved in the development of unproven products. In
order to remain competitive,  we must adapt existing products as well as develop
new products and technologies.  In fiscal years 2002 and 2003 we spent in excess
of $1.9 million on research  and  development  of new  products and  technology.
Despite our best efforts a new product or technology may prove to be unworkable,
not cost effective, or otherwise unmarketable. We can give you no assurance that
any new product or  technology  we may  develop  will be  successful  or that an
adequate market for such product or technology will ever develop.

We  may  be  unable  to  effectively  compete  with  other  companies  who  have
significantly  greater  resources than we have. Many of our competitors,  in the
automotive,  electronic  and other  industries,  are  larger,  more  established
companies  that  have  substantially  greater  financial,  personnel,  and other
resources  than we do. These  companies may be actively  engaged in the research
and  development of power  management and conversion  systems.  Because of their
greater resources,  some of our competitors may be able to adapt more quickly to
new or emerging technologies and changes in customer requirements,  or to devote
greater  resources to the promotion and sales of their  products than we can. We
believe that  developing  and  maintaining a competitive  advantage will require
continued investment in product development,  manufacturing capability and sales
and  marketing.  We cannot  assure  you  however  that we will  have  sufficient
resources to make the necessary  investments to do so. In addition,  current and
potential competitors may establish collaborative relationships among themselves
or with third parties,  including third parties with whom we have relationships.
Accordingly,  new  competitors  or  alliances  may  emerge and  rapidly  acquire
significant market share.

Future equity  financings  may dilute your  holdings in our company.  We need to
obtain  additional  funding  through public or private equity or debt financing,
collaborative  agreements or from other sources. If we raise additional funds by
issuing equity  securities,  current  shareholders  may  experience  significant
dilution of their  holdings.  We may be unable to obtain  adequate  financing on
acceptable  terms,  if at all. If we are unable to obtain adequate funds, we may
be  required  to reduce  significantly  our  spending  and delay,  scale back or
eliminate  research,  development  or marketing  programs,  or cease  operations
altogether.

Potential intellectual property, shareholder or other litigation could adversely
impact  our  business.  Because  of the  nature  of our  business,  we may  face
litigation  relating to intellectual  property matters,  labor matters,  product
liability  or  shareholder  disputes.  Any  litigation  could be costly,  divert
management attention or result in increased costs of doing business. Although we
intend to vigorously  defend any future  lawsuits,  we cannot assure you that we
would ultimately prevail in these efforts.  An adverse judgment could negatively
impact the price of our common stock and our ability to obtain future  financing
on favorable terms or at all.

We may be exposed to product  liability  or tort  claims if our  products  fail,
which could  adversely  impact our results of  operations.  A malfunction or the
inadequate  design of our products  could  result in product  liability or other
tort claims.  Accidents  involving our products could lead to personal injury or
physical damage.  Any liability for damages resulting from malfunctions could be
substantial and could  materially  adversely  affect our business and results of
operations.  In addition,  a


                                       20
<PAGE>

well-publicized  actual or perceived problem could adversely affect the market's
perception  of our  products.  This could  result in a decline in demand for our
products,  which would materially  adversely affect our financial  condition and
results of operations.

We are highly subject to general economic  conditions.  The financial success of
our company is sensitive to adverse changes in general economic conditions, such
as inflation,  unemployment, and consumer demand for our products. These changes
could cause the cost of supplies,  labor, and other expenses to rise faster than
we can raise prices. Such changing  conditions also could  significantly  reduce
demand in the marketplace for our products. We have no control over any of these
changes.

We are an early  growth  stage  company.  Although  our Company  was  originally
founded in 1976,  many  aspects of our  business  are still in the early  growth
stage development,  and our proposed  operations are subject to all of the risks
inherent in a start-up or growing business enterprise,  including the likelihood
of continued  operating losses.  Enova is relatively new in focusing its efforts
on electric  systems,  hybrid  systems  and fuel cell  management  systems.  The
likelihood of our success must be considered in light of the problems, expenses,
difficulties,  complications,  and delays  frequently  encountered in connection
with the growth of an existing  business,  the  development  of new products and
channels of  distribution,  and current  and future  development  in several key
technical fields, as well as the competitive and regulatory environment in which
we operate.

We operate in a highly regulated business  environment and changes in regulation
could impose costs on us or make our products less economical.  Our products are
subject to federal,  state,  local and foreign laws and regulations,  governing,
among other things,  emissions as well as laws relating to  occupational  health
and  safety.   Regulatory   agencies  may  impose   special   requirements   for
implementation and operation of our products or may significantly impact or even
eliminate some of our target markets. We may incur material costs or liabilities
in complying with government regulations.  In addition,  potentially significant
expenditures  could be required in order to comply with  evolving  environmental
and health and safety laws,  regulations and requirements that may be adopted or
imposed in the future.

We are  highly  dependent  on a few key  personnel  and will need to retain  and
attract such  personnel in a labor  competitive  market.  Our success is largely
dependent on the  performance  of our key  management  and technical  personnel,
including Carl Perry,  our Chief Executive  Officer,  Larry Lombard,  our Acting
Chief Financial Officer, Edward Moore, our Chief Operating Officer and Don Kang,
our  Vice  President  of  Engineering  the  loss of one or  more  of whom  could
adversely affect our business.  Additionally, in order to successfully implement
our anticipated  growth,  we will be dependent on our ability to hire additional
qualified personnel. There can be no assurance that we will be able to retain or
hire other necessary personnel. We do not maintain key man life insurance on any
of our key  personnel.  We believe  that our future  success will depend in part
upon our continued ability to attract,  retain,  and motivate  additional highly
skilled personnel in an increasingly competitive market.

There are minimal barriers to entry in our market.  We presently  license or own
only certain proprietary  technology and,  therefore,  have created little or no
barrier to entry for  competitors  other than the time and  significant  expense
required to assemble and develop similar production and design capabilities. Our
competitors may enter into exclusive  arrangements with our current or potential
suppliers,  thereby  giving them a competitive  edge which we may not be able to
overcome, and which may exclude us from similar relationships.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

None.

Item 8.  Financial Statements and Supplementary Data

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

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

         On November 21, 2003, Enova Systems,  Inc.  ("Company")  dismissed Moss
Adams LLP ("Moss Adams") as its independent auditors and engaged Singer,  Lewak,
Greenbaum  &  Goldstein  ("SLGG")  as its  independent  auditors  to  audit  its
financial  statements for its year ending  December 31, 2003.  This decision was
approved by the Board of Directors of the Company. Prior to such engagement, the
Company  did not consult  with SLGG  regarding  the  application  of  accounting
principles to a specific,  completed or contemplated transaction, or the type of
audit opinion that might be rendered on the Company's financial statements.

         During the fiscal  years  ended  December  31,  2001 and 2002,  and the
subsequent interim period through the date of Moss Adams dismissal, November 21,
2003, there have been no disagreements on any matter of accounting principles or
practices,  financial statement disclosure or auditing scope or procedure, which
disagreements,  if not resolved to the  satisfaction  of Moss Adams,  would have
caused  it to make  reference  to the  subject  matter of the  disagreements  in
connection with its reports, except the following:


                                       21
<PAGE>

         In connection with the audit of the Company's financial  statements for
         the year ended December 31, 2002,  Moss Adams had a  disagreement  with
         the Company over the valuation of inventory.

         In connection with the review of the Company's financial statements for
         the quarter  ended  September 30, 2003,  Moss Adams had a  disagreement
         with the Company over the allowance for uncollectible receivables.

         The audit committee of the Board of Directors and the management of the
Company discussed each of these  disagreements  with Moss Adams and resolved the
matters to each party's  satisfaction  prior to the filing of the Company's Form
10-K for the year ended  December  31, 2002 and Form 10-Q for the quarter  ended
September  30,  2003,  respectively.  The Company has  authorized  Moss Adams to
respond fully to inquiries from SLGG  concerning  the matters  described in this
section.

Item 9A.   Controls and Procedures

         An evaluation  was carried out by Carl D. Perry,  the  Company's  Chief
Executive Officer and then Acting Chief Financial Officer,  of the effectiveness
of the  Company's  disclosure  controls  and  procedures  (as  defined  in  Rule
13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of December
31,  2003.  Based upon that  evaluation,  the Chief  Executive  Officer and then
Acting Chief  Financial  Officer  concluded that these  disclosure  controls and
procedures were effective.  During the period covered by this report, there have
been no changes in the Company's internal control over financial  reporting that
have  materially  affected or are  reasonably  likely to  materially  affect the
Company's internal control over financial reporting.


                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)


                                       22
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

         The following table sets forth certain  information with respect to the
current Directors and executive officers of Enova:


Name                          Age         Position
----                          ---         --------
Anthony N. Rawlinson          48          Chairman of the Board

Carl D. Perry                 71          Chief Executive Officer,
                                          President and Director

Edwin O. Riddell (1)          61          Director

Dr. Malcolm Currie (1)        77          Director

John J. Micek, III (2)        51          Director

Donald H. Dreyer (2)          66          Director

John Wallace                  55          Director

Larry B. Lombard              43          Acting Chief Financial Officer

Edward M. Moore               42          Chief Operating Officer

(1)    Member of the Compensation Committee.
(2)    Member of the Audit Committee.

         Anthony  N.  Rawlinson,  Chairman  of  the  Board.  Mr.  Rawlinson  was
appointed  non-executive  Chairman of the Board in July 1999.  Since  1996,  Mr.
Rawlinson has been Managing  Director of the Global Value  Investment  Portfolio
Management Pte. Ltd., a Singapore based  International  Fund Management  Company
managing  discretionary  equity portfolios for  institutions,  pension funds and
clients  globally.  Mr.  Rawlinson  has more than  twenty  years  experience  in
international  fund  management.  Mr.  Rawlinson is a specialist in analysis and
investment in high technology  companies.  From 1996 to 1999, Mr.  Rawlinson was
Chairman  of  IXLA  Ltd.,  an  Australian  public  company  in the  field  of PC
photography  software and its  wholly-owned  subsidiary,  photohighway.com.  Mr.
Rawlinson  is also a Chairman of  Cardsoft,  Inc.,  a high  technology  software
company with secure java based solutions for mobile phones and handheld devices.

         Carl D. Perry,  Chief Executive  Officer,  President and Director.  Mr.
Perry  served as a Director and as an  Executive  Vice  President of the Company
from July 1993 until  November  1997. In November 1997, Mr. Perry was elected as
Chairman  of the Board and  Chief  Executive  Officer  of the  Company,  and was
elected President in June 1999. In July 1999, Mr. Perry resigned his position as
Chairman of the Board to allow Mr. Anthony N. Rawlinson to become Chairman.  Mr.
Perry continues as Chief Executive  Officer and President and as a Director.  He
served as Acting Chief  Financial  Officer of the Company from  November 1997 to
March 2004. Prior to joining the Company, he was an international  aerospace and
financial  consultant  from 1989 to 1993.  Mr. Perry  served as  Executive  Vice
President of Canadair Ltd. (now known as Bombadier),  Canada's largest aerospace
corporation, from 1984 to 1989, where he conducted strategic planning, worldwide
marketing, and international joint ventures. From 1979 to 1983, Mr. Perry served
as Executive Vice President of the Howard Hughes Helicopter  Company,  now known
as Boeing Helicopter  Company,  where he was responsible for general management,
worldwide business development, and international operations.

         Malcolm R. Currie,  Ph.D,  Director.  Dr. Currie was  re-elected to the
Board of Directors in 1999.  Dr.  Currie had served as a Director of the Company
from 1995 through 1997.  From 1986 until 1992, Dr. Currie served as Chairman and
Chief Executive Officer of Hughes Aircraft Co., and from 1985 until 1988, he was
the Chief Executive Officer of Delco Electronics.  His career in electronics and
management  has included  research with many patents and papers in microwave and
millimeter wave electronics,  laser,  space systems,  and related fields. He has
led major programs in radar,  commercial satellites,  communication systems, and
defense  electronics.  He served as  Undersecretary  of Defense for Research and
Engineering,  the Defense Science Board,  and currently  serves on the Boards of
Directors of LSI Logic,  Inamed Corp.,  Innovative Micro Technology,  Regal One,
and Currie  Technologies.  He is past  president  of the  American  Institute of
Aeronautics  and  Astronautics,  and is a Member of the Board of Trustees of the
University of Southern California.


                                       23
<PAGE>

         Edwin O. Riddell, Director. Mr. Riddell has served as a Director of the
Company since June 1995.  From March 1999 to the present,  Mr.  Riddell has been
President of CR  Transportation  Services,  a consultant to the electric vehicle
industry.  From January 1991 to March 1999, Mr. Riddell has served as Manager of
the  Transportation  Business Unit in the Customer Systems Group at the Electric
Power Research Institute in Palo Alto, California,  and from 1985 until November
1990,  he  served  with  the  Transportation  Group,  Inc.  as  Vice  President,
Engineering,  working on electric public  transportation  systems.  From 1979 to
1985,  he was Vice  President and General  Manager of Lift U, Inc.,  the leading
manufacturer  of  handicapped  wheelchair  lifts for the transit  industry.  Mr.
Riddell has also worked with Ford,  Chrysler,  and General Motors in the area of
auto design  (styling),  and has worked as a member of senior  management  for a
number of public transit vehicle manufacturers. Mr. Riddell has been a member of
the  American  Public  Transportation   Association's  (APTA)  Member  Board  of
Governors for over 15 years,  and has served on APTA's Board of  Directors.  Mr.
Riddell was also Managing Partner of the U.S. Advanced Battery Consortium.

         John R. Wallace, Director. Mr. Wallace was elected as a Director of the
Company in 2002. Mr. Wallace retired from the Ford Motor Company in 2002, and is
currently  serving  as a  consultant  to the  Company  for fuel cell and  hybrid
electric vehicle strategy. Prior to his retirement, he was executive director of
TH!NK Group. He has been active in Ford Motor Company's alternative fuel vehicle
programs  since  1990,  serving  first  as:  Director,   Technology  Development
Programs;  then as Director,  Electric Vehicle Programs;  Director,  Alternative
Fuel Vehicles and finally Director,  Environmental Vehicles. He is past Chairman
of the Board of Directors  of TH!NK  Nordic;  he is past  chairman of the United
States  Advanced  Battery  Consortium;   Co-Chairman  of  the  Electric  Vehicle
Association  of the  Americas,  and past  Chairman of the  California  Fuel Cell
Partnership.  He  served  as  Director  of Ford's  Electronic  Systems  Research
Laboratory,  Research  Staff,  from 1988  through  1990.  Prior to joining  Ford
Research  Staff,  he was president of Ford  Microelectronics,  Inc., in Colorado
Springs.  His other  experience  includes  work as  program  manager  with Intel
Corporation.  He also  served  as  Director,  Western  Development  Center,  for
Perkin-Elmer Corporation and as President of Precision Microdesign, Inc.

         Donald H. Dreyer,  Director.  Mr.  Dreyer was elected a Director of the
Company in January  1997.  Mr.  Dreyer is President and CEO of Dreyer & Company,
Inc., a consultancy in credit,  accounts  receivable  and  insolvency  services,
which he founded in 1990.  Mr.  Dreyer  has served as  Chairman  of the Board of
Credit  Managers  Association  of  California  during  the 1994 to 1995 term and
remains a current member. Mr. Dreyer is also a member of the American Bankruptcy
Institute and the National Advisory Committee of Dun & Bradstreet, Inc.

         John J. Micek III,  Director.  Mr.  Micek was elected a Director of the
Company in April 1999. Mr. Micek served as the Company's Vice President, General
Counsel and  Secretary  from March 1994 to March 1997.  From June 1997 to August
1998, Mr. Micek was COO of Pelion Systems,  Inc. Mr. Micek is currently Managing
Director  of Silicon  Prairie  Partners,  LP. He also is a  practicing  attorney
specializing in corporate finance and business  development in Palo Alto, CA. He
is a Board  Member of  Universal  Warranty  and also sits on the  boards of UTEK
Corp.,  Pelion Systems,  Inc.,  Universal  Assurors  Agency,  Inc., and Armanino
Foods.

         Larry B.  Lombard,  Acting Chief  Financial  Officer.  Mr.  Lombard was
appointed  Acting  Chief  Financial  Officer  in March  2004.  He has  served as
Director of Finance and  Administration  at Enova Systems,  Inc. since 1998. Mr.
Lombard has over twenty years  experience in  management  and finance for a wide
range of companies  including  software  development,  insurance,  petroleum and
banking. He received his BA in Business  Economics,  University of California at
Los Angeles and his MBA in Global Management from the University of Phoenix.

         Edward M. Moore, Chief Operating Officer. Mr. Moore was appointed Chief
Operating Officer in March 2004. He has served as Vice President,  Marketing and
Sales at Enova Systems, Inc. since 2000. Mr. Moore was vice president, sales for
E-Bus from 1999 to 2000. Mr. Moore has  experience in creating and  implementing
strategic marketing plans for both domestic and international markets. He has an
extensive background in the alternative fuels and drive system industry,  having
worked  with GM Hughes,  AeroEnvironment  and E-Bus in both the  technology  and
marketing  fields.  He received his BS,  Occupational  Education  from  Southern
Illinois University and his MBA from the University of Phoenix.

Relationships Among Directors or Executive Officers

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

Section 16(a) Beneficial Ownership Reporting Compliance

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


                                       24
<PAGE>

         We believe,  based  solely on our review of the copies of such  reports
received or written representations from certain Reporting Persons, that each of
Messrs. Rawlinson, Riddell, Currie, Micek, Wallace and Dreyer, each of whom is a
Director of Enova,  and James M. Strock (who  resigned as a Director of Enova in
March 2004),  failed to file on a timely basis three  separate  Form 4s, each of
which Form 4 reported one  transaction,  namely the issuance of shares of Common
Stock in partial  payment of  directors'  fees for August and November  2003 and
February 2004.

Code of Ethics

         Enova has  adopted  a code of  ethics  that  applies  to its  principal
executive officer,  principal financial officer, principal accounting officer or
controller and all persons performing similar functions, if any. We will provide
to any  person  without  charge,  upon  request,  a copy of such code of ethics.
Requests should be made in writing to:

         Enova Systems, Inc.
         Larry Lombard, Acting Chief Financial Officer
         19850 S. Magellan Drive
         Torrance, CA  90502

Item 11. Executive Compensation

Summary Compensation Table

         The  following  table sets forth all  compensation  earned by our Chief
Executive  Officer  and each of the  other  most  highly  compensated  executive
officers of Enova whose annual salary and bonus exceeded  $100,000 for the years
ended  December  31, 2003,  2002 and 2001  (collectively,  the "Named  Executive
Officers").  Mr.  Carl D. Perry was the sole  executive  officer of Enova  whose
salary currently exceeded $100,000 as of December 31, 2003.

Name and Principal Position
<TABLE>
<CAPTION>
                                                    SUMMARY COMPENSATION TABLE
                                                        ANNUAL COMPENSATION
                                            ------------------------------------------
                                            Year     Salary             Bonus
                                            ----     ------             -----
<S>                                         <C>     <C>       <C>
Carl D. Perry (1)                           2003    139,615              --
   Chief Executive Officer, Acting Chief    2002    150,000   $30,000 (earned in 2000)
   Financial Officer and President          2001    160,989              --
</TABLE>

 (1) Mr.  Perry was elected as Chief  Executive  Officer in November  1997.  Mr.
Perry's  current  salary is $120,000 per year, a 20%  voluntary  reduction  from
prior year's salary.  Mr. Perry served as Acting Chief Financial  Officer during
the periods reflected in the above chart and through March 6, 2004.

Option/SAR Grants

              No grants of stock options or stock  appreciation  rights ("SARs")
were made during 2003 to the Named Executive Officer.

Option Exercises and Option Values

         The Named  Executive  Officer did not exercise  any options  during the
year ended December 31, 2003. All options of the Named Executive Officer expired
prior to December 31, 2003 without exercise.

Compensation of Directors

         In  September  1999,  our Board of  Directors  unanimously  approved  a
compensation package for outside directors consisting of the following: for each
meeting  attended in person,  each outside director is to receive $1,000 in cash
and  $2,000 of stock  valued on the date of the  meeting  at the  average of the
closing ask and bid prices;  for each  telephonic  Board  meeting,  each outside
director is to receive  $250 in cash and $250 of stock valued on the date of the
meeting at the average of the closing ask and bid prices;  for each meeting of a
Board committee attended in person, the committee chairperson is to receive $500
in cash and $500 of stock  valued on the date of the  meeting at the  average of
the closing ask and bid prices.  As of January 2002, this package was amended to
include  like  compensation  of $500 in cash and $500 in stock to all  committee
members  in  attendance  at each  committee  meeting.  All  Directors  are  also
reimbursed  for  out-of-pocket  expenses  incurred in connection  with attending
Board and  committee  meetings.  For and with  respect to fiscal  2003,  754,167
shares of Common  Stock  were  issued  under  the  above  compensation  plan for
Directors.  As of March 22, 2004,  an  aggregate  of 2,938,529  shares have been
issued under the above  compensation  plan for Directors  since its inception in
September 1999.


                                       25
<PAGE>

James M. Strock

         The Company has entered into a consulting agreement with James Strock &
 Company,  a corporation wholly owned by James M. Strock. Mr. Strock served as a
 Director of the  Company  from July 2000 until his  resignation  in March 2004.
 Under the terms of that consulting agreement, the Company retained Mr. Strock's
 services for a minimum  monthly  retainer of $3,000 plus  reasonable  expenses.
 This  consulting  agreement  was  terminated  in April 2003.  During 2003,  the
 Company paid Mr. Strock  $17,000 in cash for  consulting  services and expenses
 and $12,000 for directors fees (which latter amount  includes the cash paid and
 the  value of the  stock  issued  to him  pursuant  to the  outside  directors'
 compensation package described above).

John R. Wallace

         The  Company  has  entered  into a  consulting  agreement  with John R.
 Wallace  wherein the Company  compensates Mr. Wallace at the rate of $1,500 per
 day plus reasonable expenses for consulting  services rendered.  Mr. Wallace is
 not compensated per this agreement when acting in the capacity of a director of
 the Company.  During  2003,  the Company  paid Mr.  Wallace  $6,000 in cash for
 consulting  services and expenses and $12,000 for directors  fees (which latter
 amount includes the cash paid and the value of the stock issued to him pursuant
 to the outside directors' compensation package described above).

Donald Dreyer

         The Company  utilizes the  consulting  service of Donald Dreyer wherein
 the Company compensates Mr. Dreyer at the rate of $150 per hour plus reasonable
 expenses for consulting  services rendered.  Mr. Dreyer is not compensated when
 acting in the  capacity of a director of the Company  other than the fees noted
 above.  During 2003, the Company paid Mr. Dreyer $10,000 in cash for consulting
 services and  expenses  and $12,000 for  directors  fees (which  latter  amount
 includes the cash paid and the value of the stock issued to him pursuant to the
 outside directors' compensation package described above).

 Compensation Committee Interlocks and Insider Participation

         The Compensation Committee held two meetings in the year ended December
31, 2003. The Compensation Committee currently consists of Mr. Edwin Riddell and
Dr.  Malcolm  Currie,  neither of who have been  officers  of the  Company.  The
Compensation  Committee's  functions  are to establish  and apply the  Company's
compensation  policies with respect to the Company's Executive Officers,  and to
administer the Company's stock option plans.


                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)


                                       26
<PAGE>

Stock Performance Graph

         The graph below compares the cumulative total shareholder return on our
Common  Stock with the  cumulative  total  return on the Standard & Poor's Small
Capitalization  600 Index and an index of peer companies selected by us. A group
of five other electric vehicle companies comprise the peer group index.(1)

         The period shown  commences on December 31, 1998,  and ends on December
31, 2003,  the end of our last fiscal year.  The graph  assumes an investment of
$100 on December 31, 1998 and the reinvestment of any dividends. The comparisons
in the graph below are based upon historical data and are not indicative of, nor
intended to forecast, future performance of our Common Stock.


  [The following table was depicted as a line graph in the printed material.]


ENOVA SYSTEMS INC
                                      Cumulative Total Return
                     -------------------------------------------------------
                      12/98     12/99     12/00     12/01     12/02    12/03
ENOVA SYSTEMS, INC.  100.00   1048.39    548.39    483.87    258.06   435.48
S & P SMALLCAP 600   100.00    112.40    125.67    133.89    114.30   158.63
PEER GROUP           100.00    179.53    157.93    100.05     48.78    75.62


* $100  invested  on  12/31/98  in  stock  or  index-including  reinvestment  of
dividends.  Fiscal year ending  December 31. 1 - Companies  included in the peer
group index are Amerigon,  Inc.  (ARGN),  Electric Fuel Corp.  (EFCX) - Electric
Fuel Corp changed it's name to Arotech Corp. (ARTX),  Energy Conversion Devices,
Inc. (ENER), Unique Mobility (UQM), and Valence Technology, Inc. (VLNC).


Copyright(c)  2002 Standard & Poor's,  a division of The McGraw-Hill  Companies,
Inc. All rights reserved. www.researchdatagroup.com/S&P.htm


                                       27
<PAGE>

Item 12. Security Ownership  of  Certain  Beneficial  Owners  and Management and
         Related Stockholder Matters

The  following  table sets forth certain  information  known to the Company with
respect to beneficial  ownership of the  Company's  Common Stock as of March 22,
2004, by (i) each shareholder known to the Company to own beneficially more than
5% of the Company's Common Stock;  (ii) each of the Company's  Directors;  (iii)
the Named Executive Officer;  and (iv) all Executive Officers and Directors as a
group.  Except as  indicated  in the  footnotes  to this  table and  subject  to
applicable  community  property laws,  the persons named in the table,  based on
information provided by such persons, have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
                Name                           Shares         Percentage of Shares       Voting
                                      Beneficially Owned (1)   Beneficially Owned (2)  Percentage (3)
<S>                                         <C>                       <C>                 <C>
Jagen, Pty., Ltd.                           145,000,000               34.54%              37.81%
9 Oxford Street, South Ybarra 3141
Melbourne, Victoria Australia

Hyundai Heavy Industries, Co.                23,076,923                5.50%               6.02%
1 Cheona-Dong, Dong-Ku
Ulsan, Korea

Citibank N.A.                                31,405,754                7.48%               8.19%
111 Wall Street, 8th Floor
New York, NY  10043

Carl D. Perry                                10,000,500                2.38%               2.61%
c/o Enova Systems, Inc.
19850 South Magellan Drive
Torrance, CA 90502

Anthony N. Rawlinson                         25,389,806                6.05%               6.62%
c/o Enova Systems, Inc.
19850 South Magellan Drive
Torrance, CA 90502

John J. Micek III                          1,473,596(4)                    *                   *

Edwin O. Riddell                                634,803                    *                   *

Dr. Malcolm Currie                              524,174                    *                   *

Donald H. Dreyer                                433,858                    *                   *

John R. Wallace                                 145,238                    *                   *

Delphi Delco Electronics                   1,278,720(5)                    *                   *

Jean Schulz                                1,329,111(6)                    *                   *

Larry B. Lombard                           1,800,000(7)                    *                   *

Edward M. Moore                            2,063,923(8)                    *                   *

All directors and executive officers      42,465,442(9)               10.12%              10.42%
as a group (9 persons)
</TABLE>

*        Indicates less than 1%

(1)      Number of Common Stock shares includes Series A Preferred Stock, Series
         B Preferred  Stock and Common Stock shares  issuable  pursuant to stock
         options,  warrants and other  securities  convertible into Common Stock
         beneficially  held by the  person  or class in  question  which  may be
         exercised or converted within 60 days after March 22, 2004.

(2)      The  percentages  are based on the  number  of shares of Common  Stock,
         Series A  Preferred  Stock and Series B  Preferred  Stock  owned by the
         shareholder  divided  by  the  sum  of:  (i)  the  total  Common  Stock
         outstanding,   (ii)  the  Series  A  Preferred   Stock  owned  by  such
         shareholder;   (iii)  the  Series  B  Preferred  Stock  owned  by  such
         shareholder;  and (iv) Common  Stock  issuable  pursuant  to  warrants,
         options and other convertible  securities exercisable or convertible by
         such shareholder within sixty (60) days after March 22, 2004.


                                       28
<PAGE>

(3)      The  percentages  are based on the  number  of shares of Common  Stock,
         Series A Preferred  Stock and/or Series B Preferred  Stock owned by the
         shareholder  divided  by  the  sum  of:  (i)  the  total  Common  Stock
         outstanding,  (ii) the total Series A Preferred  Stock  outstanding and
         (iii) the total Series B Preferred Stock  outstanding.  This percentage
         calculation has been included to show more accurately the actual voting
         power of each of the  shareholders,  since the  calculation  takes into
         account  the fact that the  outstanding  Series A  Preferred  Stock and
         Series B Preferred  Stock are entitled to vote together with the Common
         Stock as a single  class on  certain  matters  to be voted  upon by the
         shareholders.

(4)      Includes  1,000,000  shares of Common Stock  issued to Silicon  Prairie
         Partners, LP, a limited partnership in which John J.
         Micek III is the general partner.

(5)      The number of shares shown  represents  the ownership of 639,360 shares
         of Series B  Preferred  Stock,  each of which is  convertible  into two
         shares of Common Stock.  These 639,360 shares represent more than 5% of
         the outstanding shares of Series B Preferred Stock.

(6)      The number of shares shown represents the ownership of 1,329,111 shares
         of Series A  Preferred  Stock,  each of which is  convertible  into one
         share of Common Stock. These 1,329,111 shares represent more than 5% of
         the outstanding shares of Series A Preferred Stock.

(7)      Includes  1,000,000  shares of Common Stock issuable  pursuant to stock
         options exercisable at a price of $.16.

(8)      Includes  2,033,467  shares of Common Stock issuable  pursuant to stock
         options exercisable at prices from $.051 to $.20.

(9)      Includes  3,033,467  shares of Common Stock issuable  pursuant to stock
         options  exercisable  at  prices  from  $.051  to $.20  per  share  and
         1,000,000  shares of Common Stock issued to Silicon  Prairie  Partners,
         LP, a limited  partnership  in which John J.  Micek III is the  general
         partner.

Equity Compensation Plan Information

The following table provides information regarding our equity compensation plans
as of December 31, 2003:
<TABLE>
<CAPTION>
                                     Equity Compensation Plan Information
                                                                                        Number of securities
                                                                                        remaining available
                                                                                                for
                                                                                        uture issuance under
                                                                                        equity compensation
                                        Number of securities to    Weighted-average       plans (excluding
                                        be issued upon exercise    exercise price of    securities reflected
                                        of outstanding options,   utstanding options,            in
                                          warrants and rights     warrants and rights        column (a))
  Plan category                                   (a)                     (b)                   (c)
<S>                                            <C>                       <C>                 <C>
  Equity compensation plans approved
  by security holders                          21,156,000                $0.14               23,844,000

  Equity compensation plans not
  approved by security holders                         --                   --                       --
    Total                                      21,156,000                $0.14               23,844,000
</TABLE>


         Our board of directors  adopted the 1996 Employee and Consultant  Stock
Option Plan in October 1996 which was subsequently  approved by our shareholders
in May 1997. A total of 15,000,000  shares were reserved for issuance  under the
1996 Plan.  Options  granted under the 1996 Plan may be either  incentive  stock
options,  as defined in Section 422 of the  Internal  Revenue  Code of 1986,  or
nonstatutory  stock options.  The 1996 Plan provides that options may be granted
to  employees  (including  officers  and  directors  who  are  also  employees),
directors  and  consultants.  Incentive  stock  options  may only be  granted to
employees.  In 1999,  our  board  of  directors  and  shareholders  approved  an
amendment  to the 1996 Plan to  increase  the  number of shares of common  stock
reserved for issuance thereunder by 30,000,000 shares, bringing the total number
of shares issuable under the 1996 Plan to 45,000,000.  The share increase to the
1996 Plan  assured that a  sufficient  reserve of common stock are  available to
provide us with the  continuing  opportunity  to utilize  equity  incentives  to
attract and retain the services of employees


                                       29
<PAGE>

essential to our long-term  growth and financial  success.  A copy of the actual
1996 Plan  document  was  previously  filed  with the  Securities  and  Exchange
Commission.

         Options granted under the amended 1996 Plan will vest over such periods
as may be  determined  by the  board of  directors  and will  generally  have an
exercise  price  equal to the  closing  price  for our stock on the  NASDAQ  OTC
Bulletin Board on the last trading day  immediately  prior to the date of grant.
As of December 31, 2003, the Company had reserved  23,844,000  common shares for
issuance under the 1996 Plan, as amended.  Options to purchase  9,998,000 shares
of Enova common stock were granted to employees in 2003.

         In  September  1999,  our Board of  Directors  unanimously  approved  a
compensation package for outside directors consisting of the following: for each
meeting  attended in person,  each outside director is to receive $1,000 in cash
and  $2,000 of stock  valued on the date of the  meeting  at the  average of the
closing ask and bid prices;  for each  telephonic  Board  meeting,  each outside
director is to receive  $250 in cash and $250 of stock valued on the date of the
meeting at the average of the closing ask and bid prices;  for each meeting of a
Board committee attended in person, the committee chairperson is to receive $500
in cash and $500 of stock  valued on the date of the  meeting at the  average of
the closing ask and bid prices.  As of January 2002, this package was amended to
include  like  compensation  of $500 in cash and $500 in stock to all  committee
members in attendance at each committee meeting.  For and with respect to fiscal
2003,  754,167  shares of Common Stock were issued under the above  compensation
plan for Directors.  As of March 22, 2004, an aggregate of 2,938,529 shares have
been issued under the above  compensation plan for Directors since its inception
in September  1999.  Shares of common stock are not  specifically  allocated for
this program other than those issued after each meeting.

Item 13. Certain Relationships and Related Transactions

         The following are certain  transactions  entered into between Enova and
its officers,  directors and principal  shareholders  and their affiliates since
January 1, 2003.

         During 2003, Hyundai Heavy Industries,  Co. (HHI) purchased  23,076,923
shares representing a 6.2% ownership in Enova, Inc.  Additionally,  during 2003,
we  purchased  from HHI  approximately  $599,000 in  components,  materials  and
services for  manufacture  of our drive  systems and power  management  systems.
These  purchases were made on terms and  conditions  equal to or better than our
standard  commercial  terms with other  vendors.  At the year ended December 31,
2003, our outstanding payables balance due HHI was approximately $395,000.

Item 14. Principal Accountant Fees and Services

         Singer, Lewak,  Greenbaum & Goldstein were engaged on November 21, 2003
to audit our financial  statements  for the fiscal year ended December 31, 2003.
Moss Adams,  LLP served as our  auditors  prior to November 21, 2003 and audited
our financial statements for the fiscal year ended December 31, 2002.

Audit Fees

         The aggregate  fees billed for the fiscal year ended  December 31, 2003
for professional services rendered by Singer,  Lewak,  Greenbaum & Goldstein for
the audit of Enova's financial statements for that fiscal year were $7,500.

         The  aggregate  fees  billed  during  the last  two  fiscal  years  for
professional  services  rendered  by Moss  Adams,  LLP for the audit of  Enova's
financial  statements  for the fiscal year ended  December  31, 2002 and for its
review of financial  statements  included in Enova's Form 10-Q-s during the last
two fiscal years and other services that are normally  provided by an accountant
in connection with statutory and regulatory  filings or engagements  during such
fiscal years were $87,210 for fiscal 2003 and $82,916 for fiscal 2002.

Audit-Related Fees

         Singer,  Lewak,  Greenbaum  &  Goldstein  did not perform for Enova any
assurance and related  services that were reasonably  related to the performance
of the audit of our financial  statements for the fiscal year ended December 31,
2003.

         Moss  Adams,  did not  perform  for Enova  any  assurance  and  related
services that were  reasonably  related to the  performance  of the audit of our
financial statements for the fiscal year ended December 31, 2003.

Tax Fees

         Since November 21, 2003, Singer,  Lewak,  Greenbaum & Goldstein did not
perform for Enova any tax compliance, tax advice and tax planning services.


                                       30
<PAGE>

         Moss  Adams,  LLP did not  perform  for Enova any tax  compliance,  tax
advice and tax planning services in fiscal 2002 or fiscal 2003.

All Other Fees

         Neither  Singer,  Lewak,  Greenbaum  & Goldstein  nor Moss  Adams,  LLP
performed  any other  services  for fees other than audit fees in fiscal 2002 or
2003.


                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)


                                       31
<PAGE>

                                     PART IV

Item 15.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)1.      Financial Statements

           The  financial  statements  filed  as  a  part  of  this  report  are
           identified in the Index to 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  December  1,  2003,  Registrant  filed a Form  8-K,  with date of
           earliest event reported of November 21, 2003, reporting under items 4
           and 7.

(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 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).

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 for fiscal
         year  ended  July  31,  1999,  as  filed  on  October  29,  1999,   and
         incorporated herein by reference).


                                       32
<PAGE>

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 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 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).

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 Acting 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.


                                       33
<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/   Carl D. Perry
   -----------------------------------
Carl D. Perry, Chief Executive Officer

Dated: March 30, 2004

                                POWER OF ATTORNEY

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

         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/   Carl D. Perry                  Chief Executive                         March 30, 2004
-------------------------------         Officer and Director
Carl D. Perry                           (Principal Executive Officer)

   /s/   Larry B. Lombard               Acting Chief Financial Officer
-------------------------------         (Principal Financial Officer)
Larry B. Lombard                                                                March 30, 2004

   /s/   Anthony N. Rawlinson            Chairman                               March 30, 2004
-------------------------------
Anthony N. Rawlinson

   /s/ Malcolm Currie                    Director                               March 30, 2004
-------------------------------
Malcolm Currie

   /s/   Edwin O. Riddell                Director                               March 30, 2004
-------------------------------
Edwin O. Riddell

   /s/   John J. Micek, III              Director                               March 30, 2004
-------------------------------
John J. Micek, III

   /s/   Donald H. Dreyer                Director                               March 30, 2004
-------------------------------
Donald H. Dreyer

   /s/   John R. Wallace                 Director                               March 30, 2004
-------------------------------
John R. Wallace
</TABLE>

                                       34

<PAGE>



                                                             ENOVA SYSTEMS, INC.
                                                            FINANCIAL STATEMENTS
                                                             FOR THE YEARS ENDED
                                               DECEMBER 31, 2003, 2002, AND 2001

<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                                        CONTENTS
                                                               December 31, 2003

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


                                                                          Page

INDEPENDENT AUDITOR'S REPORTS                                            1 - 2

FINANCIAL STATEMENTS

       Balance Sheets                                                    3 - 4

       Statements of Operations                                            5

       Statements of Stockholders' Equity                                  6

       Statements of Cash Flows                                          7 - 8

       Notes to Financial Statements                                     9 - 23

SUPPLEMENTAL INFORMATION

       Independent Auditor's Report on Financial Statement Schedule       24

       Valuation and Qualifying Accounts - Schedule II                    25

<PAGE>

             [Letterhead of SINGER LEWAK GREENBAUM & GOLDSTEIN LLP]

                          INDEPENDENT AUDITOR'S REPORT

Board of Directors and Stockholders Enova Systems, Inc.

We have audited the  accompanying  balance  sheet of Enova  Systems,  Inc. as of
December 31,  2003,  and the related  statements  of  operations,  stockholders'
equity, and cash flows for the year then ended.  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 auditing standards  generally accepted
in the  United  States of  America.  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  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the 2003 financial statements referred to above present fairly,
in all material respects,  the financial  position of Enova Systems,  Inc. as of
December 31, 2003,  and the results of its operations and its cash flows for the
year then ended in conformity with accounting  principles  generally accepted in
the United States of America.


/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 25, 2004


                                        1
<PAGE>

INDEPENDENT AUDITOR'S REPORT

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

We have audited the  accompanying  balance  sheet of Enova  Systems  Inc., as of
December 31, 2002, and the statements of operations,  stockholders'  equity, and
cash flows for the two years then  ended.  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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain  reasonable  assurance  about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.  We believe our audits  provide a reasonable
basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of Enova  Systems,  Inc., as of
December 31, 2002,  and the results of its operations and cash flows for the two
years then ended, 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>

                                                             ENOVA SYSTEMS, INC.
                                                                  BALANCE SHEETS
                                                                    December 31,
--------------------------------------------------------------------------------

                                     ASSETS

                                                         2003            2002
                                                      ----------      ----------
Current assets
     Cash and cash equivalents                        $  530,000     $1,868,000
     Accounts receivable                                 803,000      1,256,000
     Inventories and supplies                          1,606,000      1,652,000
     Note receivable - related party                       8,000         32,000
     Prepaid expenses and other current assets            78,000        107,000
                                                      ----------     ----------
         Total current assets                          3,025,000      4,915,000

Property and equipment, net                              481,000        811,000
Investment                                               960,000           --
Other assets                                             404,000        498,000
                                                      ----------     ----------
Total assets                                          $4,870,000     $6,224,000
                                                      ==========     ==========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                         2003            2002
                                                      ----------      ----------
Current liabilities
     Accounts payable                                 $  768,000     $1,192,000
     Line of credit                                      120,000         14,000
     Accrued payroll and related expenses                120,000        240,000
     Other accrued expenses                               98,000         95,000
     Current portion of notes payable                    131,000        120,000
     Current portion of capital lease obligations         23,000         28,000
                                                      ----------      ----------
         Total current liabilities                     1,260,000      1,689,000

Accrued interest payable                               1,122,000        889,000
Capital lease obligations, net of current portion          5,000         27,000
Notes payable, net of current portion                  3,347,000      3,332,000
                                                      ----------      ----------
            Total liabilities                          5,734,000      5,937,000
                                                      ----------      ----------
Commitments and contingencies

   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                                  BALANCE SHEETS
                                                                    December 31,
--------------------------------------------------------------------------------

                LIABILITIES AND STOCKHOLDERS' EQUITY (Continued)

<TABLE>
<CAPTION>
                                                                                2003              2002
                                                                            ------------      ------------
<S>                                                                         <C>                  <C>
Stockholders' equity
     Series A convertible preferred stock, no par value
         30,000,000 shares authorized
         2,820,000 and 2,824,000 shares issued and
            outstanding
         Liquidating preference at $0.60 per share, aggregating
            $1,692,000 and $1,706,000                                       $  1,837,000         1,842,000
     Series B convertible preferred stock, no par value
         5,000,000 shares authorized
         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
         378,341,000 and 345,194,000 shares issued and
            outstanding                                                       86,054,000        84,026,000
     Common stock subscribed                                                      60,000           130,000
     Stock notes receivable                                                   (1,203,000)       (1,203,000)
     Additional paid-in capital                                                7,031,000         6,949,000
     Accumulated deficit                                                     (97,077,000)      (93,891,000)
                                                                            ------------      ------------

                Total stockholders' equity                                      (864,000)          287,000
                                                                            ------------      ------------

 Total liabilities and stockholders' equity                                 $  4,870,000      $  6,224,000
                                                                            ============      ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>

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


<TABLE>
<CAPTION>
                                                                         2003                     2002                     2001
                                                                    -------------            -------------            -------------
<S>                                                                 <C>                      <C>                      <C>
Net revenues
     Research and development contracts                             $   1,889,000            $   1,843,000            $   2,813,000
     Production                                                         2,421,000                2,612,000                  967,000
                                                                    -------------            -------------            -------------
         Total net revenues                                             4,310,000                4,455,000                3,780,000
                                                                    -------------            -------------            -------------

Cost of revenues
     Research and development contracts                                 1,326,000                1,288,000                2,149,000
     Production                                                         1,978,000                2,496,000                  634,000
                                                                    -------------            -------------            -------------
         Total cost of revenues                                         3,304,000                3,784,000                2,783,000
                                                                    -------------            -------------            -------------

Gross profit                                                            1,006,000                  671,000                  997,000
                                                                    -------------            -------------            -------------

Other costs and expenses
     Research and development                                             799,000                1,152,000                  879,000
     Selling, general, and administrative                               2,919,000                2,837,000                2,894,000
     Interest and financing fees,  net                                    234,000                  199,000                  113,000
     Loss on disposal of property and equipment                              --                       --                     (7,000)
     Equity in losses                                                      40,000                     --                       --
     Asset impairement                                                    200,000                     --                       --
     Legal settlements                                                       --                     81,000                  900,000
                                                                    -------------            -------------            -------------

             Total other costs and expenses                             4,192,000                4,269,000                4,779,000
                                                                    -------------            -------------            -------------

Loss from continuing operations                                        (3,186,000)              (3,598,000)              (3,782,000)

Extraordinary item
     Gain on debt restructuring                                              --                       --                    354,000
                                                                    -------------            -------------            -------------

Net loss                                                            $  (3,186,000)           $  (3,598,000)           $  (3,428,000)
                                                                    =============            =============            =============

Basic loss and diluted per share
     Loss from continuing operations                                $       (0.01)           $       (0.01)           $       (0.01)
     Gain on debt restructuring                                              --                       --                       --
                                                                    -------------            -------------            -------------

Total basic and diluted loss per share                              $       (0.01)           $       (0.01)           $       (0.01)
                                                                    =============            =============            =============

Weighted-average number of
     shares outstanding                                               334,839,700              326,390,422              275,188,979
                                                                    =============            =============            =============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                               STATEMENT OF STOCKHOLDERS' EQUITY
                                                For the Years Ended December 31,
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                      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         2,844,000      $  1,867,000      1,217,000      $  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
                                   ---------      ------------      ---------      ------------     -----------      ------------
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
                                   ---------      ------------      ---------      ------------     -----------      ------------
</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)
                                     ---------     ------------    ------------    ------------     ------------      ------------
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)
                                     ---------     ------------    ------------    ------------     ------------      ------------
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       6

<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                         STATEMENT OF CASH FLOWS
                                                For the Years Ended December 31,
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                   2003             2002             2001
                                               -----------      -----------      -----------
<S>                                            <C>              <C>              <C>
Cash flows from operating activities
     Net loss                                  $(3,186,000)     $(3,598,000)     $(3,428,000)
     Adjustments to reconcile net loss
         to net cash used in operating
         activities
            Depreciation and amortization          351,000          134,000          205,000
            Bad debt expense                       595,000             --               --
            Provision for asset impairment         200,000             --               --
            Equity in losses                        40,000             --               --
            Gain on debt restructuring                --               --           (210,000)
            Issuance of common stock for
                services                            34,000           60,000          245,000
            Issuance of common stock for
                legal settlement                      --             45,000          900,000
            (Increase) decrease in
                Accounts receivable               (138,000)         (19,000)        (233,000)
                Inventories and supplies            48,000         (727,000)        (520,000)
                Related party receivable            24,000           25,000           25,000
                Prepaid expenses and other
                    current assets                  29,000          (20,000)         (19,000)
                Other assets                       (14,000)          76,000          (39,000)
            Increase (decrease) in
                Accounts payable and
                    accrued expenses              (536,000)       1,112,000         (112,000)
                Accrued interest payable           234,000          212,000          163,000
                                               -----------      -----------      -----------
Net cash used in operating activities           (2,319,000)      (2,700,000)      (3,023,000)
                                               -----------      -----------      -----------
Cash flows from investing activities
     Purchase of property and equipment           (113,000)        (613,000)        (219,000)
                                               -----------      -----------      -----------
Net cash used in investing activities             (113,000)        (613,000)        (219,000)
                                               -----------      -----------      -----------
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       7

<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                         STATEMENT OF CASH FLOWS
                                                For the Years Ended December 31,
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                  2003             2002             2001
                                              -----------      -----------      -----------
<S>                                           <C>              <C>              <C>
Cash flows from financing activities
     Net increase from line of credit         $   106,000      $    14,000      $      --
     Payments on notes payable and
         capital lease obligations                 (1,000)         (24,000)         (11,000)
     Proceeds from sale of common stock           600,000        4,210,000             --
     Offering costs                                  --           (206,000)            --
     Proceeds from exercise of warrants
         and options                              389,000            3,000        3,122,000
     Payments on stock notes receivable              --              5,000             --
                                              -----------      -----------      -----------
Net cash provided by financing activities       1,094,000        4,002,000        3,111,000
                                              -----------      -----------      -----------

Net increase (decrease) in cash and
     cash equivalents                          (1,338,000)         689,000         (131,000)

Cash and cash equivalents,
     beginning of year                          1,868,000        1,179,000        1,310,000
                                              -----------      -----------      -----------
Cash and cash equivalents,
     end of year                              $   530,000      $ 1,868,000      $ 1,179,000
                                              ===========      ===========      ===========

Supplemental disclosures of cash
flow information
     Interest paid                            $     9,000      $     8,000      $     5,000
                                              ===========      ===========      ===========
     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                      $    (5,000)     $    25,000      $      --
                                              ===========      ===========      ===========
     Acquired investment under
         common stock purchase                $ 1,000,000      $      --        $      --
                                              ===========      ===========      ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       8

<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

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,  2003,  the  Company  had a net  working  capital  of
         approximately  $1,765,000  as compared to  $3,226,000  at December  31,
         2002,  representing  a decrease  of  $1,461,000.  This  decrease is due
         mostly to losses from  operations.  Operating and investing  activities
         used  approximately  $2,306,000  and  $113,000,   respectively,   while
         financing activities provided $1,094,000.

         During the year ended  December  31,  2003,  the  Company  reduced  its
         headcount and other  administrative  expenses.  The Company anticipates
         realizing the full impact of expense  reductions in 2004. The Company's
         business plan for 2004 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.

         In  addition,  additional  payment of $500,000 is expected in June 2004
         from HHI under the stock purchase  agreement  (Note 1), which will help
         the Company to fund its operations.

         See Note 15 for additional information.

         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 to be  made  in two  installments  of $1.5
         million each. The first installment was made 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 in June 2003.

                                       9
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS (Continued)

         Stock Purchase Agreement (Continued)

         The second  installment of $1.5 million will be made one year after the
         first   installment  in  consideration  for  the  issuance  to  HHI  of
         additional  shares of the  Company's  common stock at a price per share
         equal  to the  average  daily  volume  weighted  closing  price  of the
         Company's  common  stock,  as  quoted  on the  NASDAQ  OTC  market  (or
         successor  trading  market) for the three month  period  preceding  the
         closing date of the second installment.

         The Company  agreed to invest $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 will  acquire 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.
         At the conclusion of these transactions,  HHI and the Company will have
         invested an aggregate of $5 million in the ITC.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Revenue Recognition

         Revenue on  engineering  and  research  and  development  contracts  is
         recognized  at the  completion  of  specified  engineering  or  billing
         milestones,  as set forth in each  agreement.  Revenues  from  sales of
         components  are  recognized  when  shipped  and  title  passes  to  the
         customer.

         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.

         Cash and Cash Equivalents

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

                                       10
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         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 $678,000
         (of which $595,000 have been reserved for) and $365,000 at December 31,
         2003 and 2002, respectively.

         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.

         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.

         Investment

         Investment in joint venture (see Note 1) is accounted for by the equity
         method.

         Fair Value of Financial Instruments

         The Company's financial  instruments include cash and cash equivalents,
         accounts  receivable and accounts payable.  The book value of all other
         financial  instruments  are  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.  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.

                                       11
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Advertising Expense

         The Company expenses all advertising  costs,  including direct response
         advertising,  as they are incurred.  Advertising  expense for the years
         ended  December 31, 2003,  2002,  and 2001 was  $21,000,  $20,000,  and
         $32,000, respectively.

         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.

                                       12
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Major Customers

         During the year ended December 31, 2003, the Company conducted business
         with four  customers  whose sales  comprised  18%, 17%, 13%, and 11% of
         total revenues.  As of December 31, 2003, these customers accounted for
         5%, 0%, 23%, and 3%, respectively, of total accounts receivable.

         During the year ended December 31, 2002, the Company conducted business
         with two customers whose sales  comprised 46% of total revenues.  As of
         December 31, 2002, these customers accounted for 24%, of total accounts
         receivable.

         In addition,  one of the Company's  stockholders accounted for 1%, 16%,
         and 13% of total  revenues  during the years ended  December  31, 2003,
         2002, and 2001,  respectively.  This stockholder  holds less than 5% of
         the total issued and  outstanding  common  stock.  Demand  deposits are
         placed with known, creditable financial institutions.


NOTE 3 - PROPERTY AND EQUIPMENT

         Property and  equipment at December 31, 2003 and 2002  consisted of the
         following:

                                                          2003           2002
                                                       ----------     ----------
Computers                                              $  213,000     $  177,000
Machinery and equipment                                   715,000        643,000
Furniture and office equipment                            192,000        189,000
Demonstration vehicles and buses                          297,000        497,000
Equipment under capital lease obligations                  94,000         94,000
Leasehold improvements                                     68,000         68,000
                                                       ----------     ----------

                                                        1,579,000      1,668,000
Less accumulated depreciation and amortization          1,098,000        857,000
                                                       ----------     ----------

    Total                                              $  481,000     $  811,000
                                                       ==========     ==========

         Depreciation  and  amortization  expense was  $241,000,  $134,000,  and
         $205,000  for the  years  ended  December  31,  2003,  2002,  and 2001,
         respectively.


NOTE 4 - INVESTMENT

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

                                       13
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 4 - INVESTMENT (Continued)

         The  following  is the  condensed  financial  position  and  results of
         operations of ITC, as of and for the year ended December 31, 2003:

Financial position
    Current assets                                                  $ 2,413,000
    Property and equipment, net                                          12,000
    Liabilities                                                         (27,000)
                                                                    -----------

         Equity                                                     $ 2,398,000
                                                                    ===========

Operations
    Net revenues                                                    $     6,000
    Expenses                                                           (107,000)
                                                                    -----------

         Net loss                                                   $  (101,000)
                                                                    ===========

Company's proportionate share of net loss                           $   (40,000)
                                                                    ===========


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
         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.

                                                         2003             2002
                                                       --------         --------
Patents                                                $ 92,000         $ 78,000
Valuation Participation Agreement                       577,000          577,000
                                                       --------         --------

                                                        669,000          655,000
Less accumulated amortization                           265,000          157,000
                                                       --------         --------

    Total                                              $404,000         $498,000
                                                       ========         ========

                                       14
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

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 it's maturity has been extended
         until April 2004.


NOTE 7 - NOTES PAYABLE

         Notes payable at December 31, 2003 consisted of the following:

<TABLE>
<CAPTION>
                                                                    2003               2002
                                                              ---------------    ----------------
<S>                                                           <C>                <C>
Secured note payable to Credit Managers Association of
    California, bearing interest at 6% per annum during 2003
    and 2002 and at prime plus 3% per annum through maturity.
    Principal and unpaid interest at 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 financial institution in the
    original amount of $33,000, bearing interest at 8% per
    annum, payable in 36 equal monthly installments.                   26,000                   -
                                                              ---------------    ----------------

                                                                    3,478,000           3,452,000
Less current portion                                                  131,000             120,000
                                                              ---------------    ----------------

         Long-term portion                                    $     3,347,000    $      3,332,000
                                                              ===============    ================
</TABLE>

                                       15
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 7 - NOTES PAYABLE (Continued)

         Future minimum principal payments of notes payable at December 31, 2003
consisted of the following:

 Year Ending
 December 31,
 ------------
    2004                                                     $        131,000
    2005                                                               12,000
    2006                                                                3,000
    2007                                                                    -
    2008                                                                    -
    Thereafter                                                      3,332,000
                                                             ----------------

       Total                                                 $      3,478,000
                                                             ================


NOTE 8 - COMMITMENTS AND CONTINGENCIES

         Leases

         The Company leases its facilities  under an operating lease  agreement,
         which  requires  monthly  payments  of $11,000  and expires in February
         2008. 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, 2003 were as follows:

               Year Ending           Operating               Capital
               December 31,           Leases                 Leases
                                     --------               --------
                  2004               $ 97,000               $ 23,000
                  2005                155,000                  8,000
                  2006                166,000                   --
                  2007                168,000                   --
                  2008                 28,000                   --
                                     --------               --------
                                     $614,000                 31,000
                                     ========
                  Less amount representing interest            3,000
                                                            --------
                                                              28,000

                  Less current portion                        23,000
                                                            --------
                      Long-term portion                     $  5,000
                                                            ========

         Rent expense was $150,000, $206,000, and $210,000 for the years ended
         December 31, 2003, 2002, and 2001, respectively.

                                       16
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)

         Contingency

         Ballard Power Systems cancelled its development and production  program
         for low voltage 30kw electric drive system components that were for use
         in Ford's  Th!nk City  vehicle.  At  December  31,  2002,  included  in
         inventories  and  supplies  was  approximately  $450,000  of  materials
         related  to this  program.  Approximately  $300,000  of  materials  and
         engineering  costs have been incurred by a subcontractor  for which the
         Company may be liable for payment.

         In  October  2003,  Enova  and  Ballard  reached  a  settlement  on all
         remaining  balances due whereas  Enova will receive  $198,125  cash and
         title to all  inventory,  raw  materials,  tooling and equipment in its
         possession that is associated with the program.  The Company intends to
         sell this  equipment and recover at least the remaining  balance of the
         receivable of approximately $173,000.


NOTE 9 - STOCKHOLDERS' EQUITY

         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.

                                       17
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 9 - STOCKHOLDERS' EQUITY (Continued)

         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.

         Common Stock

         The Company settled an outstanding lawsuit in 2001 by agreeing to issue
         6,000,000 shares of common stock,  with a fair market value on the date
         of issuance of  $900,000.  Delays in issuing the stock  resulted in the
         Company issuing an additional 300,000 shares of stock in 2002. The fair
         market value of these additional shares was $45,000.

         Stock Options and Warrants

         The 1993  Employee  and  Consultant  Stock Plan expired in 2003 and all
         outstanding stock options were forfeited.

         The  Company  grants  other  non-statutory  stock  options.  Under  the
         Director Stock Option Plan, the Company  reserved  1,500,000  shares of
         common  stock  for   non-statutory   stock  options  for   non-employee
         directors.  Options  under this Plan are fully vested upon the granting
         of the  options  and  expire  ten years  from the date of grant  unless
         terminated  sooner or upon  termination of the  optionee's  status as a
         director.  Options that expire or are canceled may become available for
         future   grants  under  the  Director   Option  Plan.  No  options  are
         outstanding under this Plan.

         The 1996 Stock Option Plan reserves 45,000,000 shares for incentive and
         non-statutory  stock  options  during  the  period of the  Plan,  which
         expires in 2006.  Options  under the 1996 Plan expire over a period not
         to exceed ten years.

                                       18
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 9 - STOCKHOLDERS' EQUITY (Continued)

         Stock Options and Warrants (Continued)

         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, 2000         20,465,000  $ 0.10 - 0.30       9,654,000  $ 0.10 - 0.60      1,495,000  $  0.60 - 2.80
         Granted             7,472,000  $ 0.11 - 0.18               -  $           -              -  $            -
         Exercised          (1,805,000) $ 0.06 - 0.11               -  $           -              -  $            -
         Forfeited          (5,266,000) $ 0.11 - 0.30               -  $           -              -  $            -
                         -------------                 --------------                 -------------

         Outstanding,
           December
           31, 2001         20,866,000  $ 0.10 - 0.30       9,654,000  $ 0.10 - 0.60      1,495,000  $  0.60 - 2.80
         Granted               900,000  $        0.10               -  $           -              -  $            -
         Exercised                   -  $           -         (35,000) $        0.10              -  $            -
         Forfeited            (439,000) $ 0.11 - 0.18      (2,565,000) $        0.10              -  $            -
                         -------------                 --------------                 -------------

         Outstanding,
           December
           31, 2002         21,327,000  $ 0.10 - 0.30       7,054,000  $ 0.10 - 0.60      1,495,000  $  0.60 - 2.80
         Granted             9,998,000  $        0.05               -  $           -              -  $            -
         Exercised          (8,638,000) $ 0.05 - 0.11               -  $           -              -  $            -
         Forfeited          (1,556,000) $ 0.11 - 0.18      (7,054,000) $ 0.10 - 0.60     (1,495,000) $  0.60 - 2.80
                         -------------                 --------------                 -------------

         Outstanding,
           December
           31, 2003         21,131,000  $        0.14               -  $           -              -  $            -
                         =============                 ==============                 =============

         Exercisable,
           December
           31, 2003         20,898,000  $        0.14               -  $           -              -  $            -
                         =============                 ==============                 =============
</TABLE>

         The  weighted-average   remaining   contractual  life  of  the  options
         outstanding at December 31 2003 was 1.8 years.  The exercise  prices of
         the  options  outstanding  at  December  31,  2003 ranged from $0.05 to
         $0.30. Options exercisable were 20,898,000,  28,304,228, and 26,293,358
         at December 31, 2003, 2002 and 2001.

         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.

                                       19
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 9 - STOCKHOLDERS' EQUITY (Continued)

         Stock Options and Warrants (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, 2003, 2002, and 2001:

                                    2003            2002             2001
                               ------------    -------------    -------------
Net loss
  As reported                  $ (3,186,000)   $  (3,598,000)   $  (3,428,000)
  Pro forma                    $ (3,501,000)   $  (3,795,000)   $  (4,204,500)
Basic and diluted loss per
  common share
    As reported                $      (0.01)   $        (0.01)  $       (0.01)
    Pro forma                  $      (0.01)   $        (0.01)  $       (0.01)

         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, 2003,  2002, and 2001:  dividend yields of 0%, 0%, and 0%,
         respectively;  expected volatility of 88%, 83%, and 125%, respectively;
         risk-free interest rates of 4%, 4%, and 5%, respectively;  and expected
         lives   of   three,   five,   and   five   years,   respectively.   The
         weighted-average  fair value of options  granted  during the year ended
         December 31, 2003 for which the exercise  price equals the market price
         on the grant date was $0, and the  weighted-average  exercise price was
         $0.051.

         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.

         The  agreement  with Ford Motor  Company (see Note 4) included  issuing
         warrants to Ford to purchase 4.6% of the fully diluted  common stock of
         Enova  Systems  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.  Initially,
         the  exercise  price of the warrants is equal to the price of the stock
         on the date of issuance,  with the  exercise  price  adjusted  when the
         aggregate number of shares is adjusted.

                                       20
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE 9 - STOCKHOLDERS' EQUITY (Continued)

         Stock Options and Warrants (Continued)

         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
         2002 and 2003.


NOTE 10 - INCOME TAXES

         Significant  components  of  the  Company's  deferred  tax  assets  and
         liabilities  for federal and state income taxes as of December 31, 2003
         and 2002 consisted of the following:

                                                       2003              2002
                                                   -----------       -----------
Deferred tax assets
    Federal tax loss carry-forward                 $31,286,000       $30,513,000
    State tax loss carry-forward                       712,000           404,000
    Basis difference                                 1,610,000         1,610,000
    Other, net                                         555,000           433,000
                                                   -----------       -----------

                                                    34,163,000        32,960,000
Less valuation allowance                            34,163,000        32,960,000
                                                   -----------       -----------

         Net deferred tax assets                   $      --         $      --
                                                   ===========       ===========

         As of December  31,  2003,  the Company  had net  operating  loss carry
         forwards  for federal and state  income tax  purposes of  approximately
         $92,867,000 and $8,589,000,  respectively. The net operating loss carry
         forwards began expiring in 2003.


NOTE 11 - RELATED PARTY TRANSACTIONS

         During  2003,   the  Company   purchased   approximately   $599,000  in
         components,  materials and services from HHI. The  outstanding  balance
         owed to HHI at December 31, 2003 was approximately $395,000.

         During  2003,  the  Company  paid a total  of  $33,000  to three of its
         directors in consulting fees.

                                       21
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
                                                               December 31, 2003
--------------------------------------------------------------------------------

NOTE  12 - 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,  2003,  2002,  and  2001  the  Company  did not  make any
         contributions to the plan.


NOTE 13 - 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:

                                     2003              2002              2001
                                  ----------        ----------        ----------
United States                     $2,672,000        $2,478,000        $2,854,000
Italy                                213,000         1,040,000           359,000
Korea                                297,000           726,000           483,000
Japan                                146,000            87,000              --
Malaysia                             184,000            65,000              --
Ireland                                 --              59,000              --
Canada                               738,000              --                --
England                               60,000              --              84,000
                                  ----------        ----------        ----------

  Total                           $4,310,000        $4,455,000        $3,780,000
                                  ==========        ==========        ==========


NOTE 14 - EXTRAORDINARY ITEM

         During  the year  ended  December  31,  2000,  the  Company  negotiated
         repayment  of  long-term  trade  payables  for less  than  the  amounts
         originally  recorded.  The  gain  from  these  negotiated  payments  is
         reflected as an extraordinary item.

         In consultation with legal counsel,  certain payables were extinguished
         under a provision of the  California  Code of Civil  Procedure in which
         the  statute of  limitations  precluded  the  ability of a creditor  to
         commence  an action to recover  stale  account  balances.  The  Company
         determined that  conditions  surrounding the application of the statute
         of  limitations   had  been  met;   accordingly,   the  2001  and  2000
         extraordinary item includes the gain from these extinguishments.

NOTE 15 - Subsequent Events

         As of March 30, 2004, the Company has obtained several commitments from
         investors to purchase  approximately  15,000,000 shares of common stock
         at  $0.12  per  share  for  a  total  cash  purchase  of  approximately
         $1,800,000.

                                       22
<PAGE>



                            SUPPLEMENTAL INFORMATION



<PAGE>

Independent Auditor's Report on Financial Statement Schedule

             [Letterhead of SINGER LEWAK GREENBAUM & GOLDSTEIN LLP]

                          INDEPENDENT AUDITOR'S REPORT

Board of Directors and Stockholders Enova Systems, Inc.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial statements taken as a whole. The supplemental schedule II for the year
ended  December  31,  2003 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 the 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.


/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 25,2004


                                       24
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                 VALUATION AND QUALIFYING ACCOUNTS - SCHEDULE II
                                                For the Years Ended December 31,
--------------------------------------------------------------------------------

                                    Balance      Additions   Deductions Balance,
                                   Beginnin     Charged to      from      End
                                    of Year     Operations    Reserve   of Year
                                    -------     ----------    -------   -------
Allowance for doubtful accounts

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

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

      December 31, 2001            $   --        $   --        $--      $   --
                                   ========      ========      ======   ========

Reserve for obsolete inventories

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

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

      December 31, 2001            $ 80,000      $   --        $--      $ 80,000
                                   ========      ========      ======   ========

   The accompanying notes are an integral part of these financial statements.

                                       25