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, 2002

                           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                  NASDAQ OTC Bulletin Board
          (Title of class)           (Name of each exchange on which registered)

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  28,  2002 was  $18,237,995.  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 $0.135 per share,
and the Series B Preferred  Stock is deemed to have a market  value of $0.27 per
share,  based on the  average of the bid and ask  prices of the Common  Stock on
June 28, 2002 (the last business day of the registrant's more recently completed
second quarter), 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 25,  2003 was
345,443,820.

<PAGE>

                               ENOVA SYSTEMS, INC.

                          2002 FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS

                                     PART I
<TABLE>
<CAPTION>

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

    Item 2.  Properties................................................................................11

    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 and Related Stockholder Matters.....................14

    Item 6.  Selected Financial Data...................................................................15

    Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.....16

    Item 7A. Quantitative and Qualitative Disclosures about Market Risk................................23

    Item 8.  Financial Statements and Supplementary Data...............................................23

    Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......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.  Controls and Procedures..................................................................31

                                PART IV

    Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.........................32


    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
commercial  digital power management  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 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.

     Enova develops and produces  advanced  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  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 the year ended  December  31,  2002,  we  continued  to develop  and
produce electric and hybrid electric drive systems and components for Ford Motor
Company   (Ford),   Hyundai  Motor  Company  (HMC)  and  several   domestic  and
international vehicle and bus manufacturers,  including Advanced Vehicle Systems
(AVS) of Tennessee,  Eco Power  Technology of Italy and Wright Bus of the United
Kingdom.  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 ChevronTexaco,
HMC and the U.S.  Department of  Transportation  (DOT) as well as developing new
programs with Hyundai Heavy Industries  (HHI), the federal  government and other
private sector  companies.  Finally,  we entered into a joint venture  agreement
with HHI, in early 2003,  subject to certain  final  documentation,  to create a
separate research and development corporation, domiciled in the U.S., which will
develop  new  technologies  for  mobile  and  stationary  applications  for both
developing markets for Enova and HHI.

Ford Motor Company

     The High Voltage  Energy  Converter  (HVEC)  development  program with Ford
Motor Company for their fuel cell vehicle continues to advance on schedule. This
converter  is a key  component  in Ford's  Focus  Fuel Cell  Vehicle,  which was
featured at the New York  International  Auto Show in February 2002. It converts
high voltage  power from the fuel cell into a lower voltage for use by the drive
system and electronic accessories.  The system is performing to our expectations
and is entering


                                       3
<PAGE>

the  advanced  testing  and final  prototype  phase prior to  production.  These
prototypes  are  being  delivered  to Ford in the  first  quarter  of  2003.  We
anticipate  receiving an order for limited production in mid 2003,  however,  we
can give no  assurance  at this time that such  sales will  occur.  For the year
ended  December  31,  2002,  we  billed  approximately  $536,000  from this Ford
program.

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.  Ford Motor Company
announced  that they have sold the  program  and its assets to  Kamkorp,  Ltd, a
United Kingdom company.  At this time, we do not anticipate working with Kamkorp
for the  development or  manufacture of components for this program.  Currently,
approximately  $450,000 of current  inventory  is  materials  purchased  for the
initial production of the drive system component.  Additionally, there are other
additional  material,  tooling and engineering  costs that may become due to our
suppliers as a result of the termination of this program. These additional costs
are approximately  $500,000,  of which $200,000 were expensed in 2002. Under the
terms of our agreement with Ballard and Ford, we believe full  reimbursement for
these costs is warranted at termination.  Ford and Ballard have commenced making
payments  against  these claims in 2003 of  approximately  $140,000;  however no
final  determination on the total  reimbursement  has been made. During 2002, we
had revenues of $1,008,000 from Ballard.

Hyundai Motor Company Programs

     Hyundai procured  several of our High Energy  Converter  modules for use in
their  hybrid  fuel cell  programs  during  2002.  These  systems are also being
analyzed  for  application  in their  mobile  fuel cell  programs.  We have also
delivered  advanced control  components for two other Hyundai Motor Company fuel
cell programs which are currently in the test and evaluation phase.

     In regards to the  parallel  hybrid  program,  Hyundai  has  completed  its
evaluation of the prototype  system and is reviewing other programs to which the
system could be applicable.

     Development programs with Hyundai generated approximately $631,000 in sales
for the twelve months ended December 31, 2002.

Light-Duty Drive Systems

     We also produce and market our proprietary Panther 90kW drive systems. This
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,  Hyundai  Heavy  Industries  produces the Panther 90kW
drive system for Enova.

     Advanced Vehicle Systems (AVS), a leading U.S. manufacturer of electric and
hybrid-electric  buses, is purchasing our Panther 90kW drive system,  in several
configurations,  for  their  22-foot  bus for  several  New York  City and other
customers.  Enova has modified the Panther 90kW to be used in a dual wheel motor
configuration,  expanding its potential  market  penetration  with AVS and other
vehicle  manufacturers.  These drive systems are performing above specifications
and have been introduced in several markets throughout the U.S. Our Panther 90kW
in its dual mode  configuration  is capable of providing a mid-range  heavy-duty
solution at 180kW of peak power for our current and prospective customers.

     The City of Honolulu  Hawaii has contracted  with Enova to upgrade  several
S-10 trucks in its electric vehicle fleet.  Initially,  we will upgrade 3 trucks
to our  Panther  90kW  drive  system.  This  program  is  expected  to  generate
approximately $100,000 for Enova and will be completed by mid 2003.

     We have also  received a purchase  order for Panther 90kW drive systems for
delivery in 2002 and 2003 from Phoenix Motor Cars of  California,  an integrator
of  specialty  vehicles.  We began  initial  delivery of these  systems in 2002;
however,  we can give no assurance at this time that any further  sales for 2003
will occur.

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

Heavy-Duty Drive Systems

     A major focus of Enova's is the heavy-duty  vehicle,  buses and trucks, for
urban  operators.  Our PantherTM  120kW and PantherTM 240kW drive systems are in
production and operating above performance expectations in global markets. Sales
of our  PantherTM  120kW and 240kW drive systems  continue to provide  increased
revenues for our company.  We have entered into supplier agreements with OEMs in
Europe and Japan,  as well as  domestically,  for sales of our heavy-duty  drive
systems. Hyundai


                                       4
<PAGE>

Heavy Industries has been selected as our outsource manufacturer for the Panther
120kW  controller,  as well as the  manufacturer of the motor and controller for
our  Panther  240kW  drive  systems.  This is a specific  strategy of Enova's to
minimize   capital  outlays  and  maximize   efficiencies  by  utilizing  proven
manufacturing partners.

     Eco Power  Technology  of Italy  purchased  and  received 27 Panther  120kW
electric and hybrid  electric drive systems in 2002.  The hybrid  electric drive
systems include the Capstone 30kW microturbine as their power source.  Eco Power
is one of the largest  integrators of medium size transit buses for the European
shuttle bus market,  with key customers in Turin and Genoa, Italy. We anticipate
additional  orders for both  electric and  hybrid-electric  120kW drive  systems
during 2003. At this time, however, there are no assurances that such additional
orders will be  forthcoming.  Total sales for the year ended  December  31, 2002
from Eco Power were $1,042,000.

     Wrights  Environment,  a  division  of  Wrights  Bus,  one of  the  largest
low-floor bus  manufacturers  in the United Kingdom,  has integrated into one of
its buses our hybrid  electric  PantherTM  120kW drive system,  which utilizes a
30kW Capstone  microturbine  as its power source.  The bus is currently in field
service and is performing to  specifications.  Wrights has integrated our hybrid
electric  120kW system into a second  midsize bus which is currently  completing
its evaluation phase.  Further,  we are in negotiations with Wrights to purchase
our 240kW  drive  system.  Although  we  anticipate  additional  orders for both
electric and hybrid-electric 120kW drive systems during 2003, at this time there
are no assurances that such additional orders will be forthcoming.

     Tomoe Electro-Mechanical  Engineering and Manufacturing,  Inc. of Japan has
purchased  several  of our  120kW  drive  systems  for  integration  into  their
industrial  vehicle platforms.  The vehicles are performing above  specification
and  Tomoe  is   reviewing   additional   applications   for  our  drive  system
configurations.  Although  we  anticipate  that  they will  purchase  additional
systems during 2003, there are no assurances that any such purchases will occur.

     The development of a utility  vehicle for Southern  California  Edison,  in
partnership with the South Coast Air Quality Management District,  utilizing our
120kW  drive  system  and  a  Capstone  Turbine  Corporation  30kW  microturbine
continues  to  progress.  Our system is intended to power the vehicle as well as
the auxiliary  utility  accessories  eliminating  the need for a separate diesel
generator normally trailered behind the vehicle. The systems are integrated into
the vehicle. The system development has entered an evaluation phase.

     In the high performance  heavy-duty drive system area, Enova's  proprietary
240kW  drive  system  has  been   successfully   integrated  into  a  heavy-duty
application. Its performance is exceeding our expectations. We are in production
of these systems.  Our initial  delivery,  to AVS, of six electric 240kW systems
for  their 38 foot  buses has been  completed.  We are  anticipating  additional
orders in 2003 although no such orders are  guaranteed.  AVS has also integrated
one of our 240kW systems into a Class 8 urban delivery truck which was displayed
at the Electric Drive Transportation  Association Symposium in Hollywood Florida
in December  2002.  The truck is currently is field service  evaluation  and, if
successful,  may provide additional sales for the 240kW drive system. This 240kW
drive system is capable of providing  3,000 ft-lbs of torque at the drive shaft.
Product  sales to AVS for the year ended  December 31, 2002 total  approximately
$370,000.

     Additionally,   we  are  in  discussions  with  other  bus   manufacturers,
industrial, commercial and military vehicle manufacturers regarding the purchase
of our heavy-duty,  high performance,  240kW drive systems in 2003. There are no
assurances,  however  that  these  discussions  will  result in any sales of the
Panther 240kW or 120kW drive systems.

Research and Development Programs

     We  completed  a  majority  of  our  contracts   with  the   Department  of
Transportation  and the State of Hawaii for electric and hybrid electric vehicle
applications in 2002. Programs, including the Wiki-Wiki Tram, the 120kW Trolley,
the HMC Santa Fe  vehicle  upgrade,  the first  Hickam  Bus 120kW  drive  system
upgrade and the 240kW drive system development,  were finalized and submitted in
2002.  Each of these programs has been invaluable to Enova in terms of knowledge
attained and products developed.

     Enova and the State of Hawaii  continue to seek out and  contract  with the
Federal government for new and ground-breaking  projects in the alternative fuel
power industry.

     Due to the success of our first Hickam bus program,  the U.S. Air Force and
the State of Hawaii have  contracted with Enova to integrate a fuel cell powered
hybrid  drive  system into a second  30-foot bus for the Hickman Air Force base.
Our Hawaii team is integrating the Panther 120kW drive system with the fuel cell
components to be added in 2003.

     In conjunction with the State of Hawaii, the all-electric  Hyundai Santa Fe
SUV  demonstration  project  has  completed  its  second  year  of  testing  and
evaluation.  The  vehicles  are meeting  specifications  with the results of the
project, thus far, meeting the


                                       5
<PAGE>

expectations of the State of Hawaii,  Hyundai and Enova.  All three partners are
discussing  extending the program for an additional two years, however there can
be no assurance that such an extension will be granted.

     All of these  programs are funded in conjunction  with the Hawaii  Electric
Vehicle Development Project,  the U.S. DOT and the State of Hawaii.  Development
programs with these  agencies have  generated  revenues of $349,000 for the year
ended December 31, 2002.

     We intend to  establish  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.  There  are  no  assurances  however  that  we  will
successfully  develop such  applications or that any such applications will find
acceptance in the marketplace.

     In that regard, we recently entered into a development contract with Texaco
Energy Systems, Inc., a subsidiary of ChevronTexaco  Technology Ventures (CTTV),
to design a process  controller  for their fuel  reformer for a stationary  fuel
cell application. Initial review and analysis has commenced with the majority of
the development to be completed in 2003.  Anticipated  initial revenue from this
specific  contract is not anticipated to exceed $500,000 during 2003. Due to the
milestones met and technologies developed thus far in the initial development on
this  contract,  we are in  discussions  with CTTV  regarding  developing  other
components  for this  application  in the  areas of power  management  and power
processing;  however, we can make no assurances that these discussions will lead
to future contracts at this time.

     Our Fuel Cell Care (FCU) units are being  delivered  to UTC Fuel  Cells,  a
division of United  Technologies  Corp.,  for use in their  stationary fuel cell
systems. To date, UTC Fuel Cells and Hamilton Sundstrand,  an aerospace division
of United Technologies, have ordered approximately 30 fuel cell care units.

     The Hyundai  companies have also  expressed  interest in working with us on
the development of advanced fuel cell management technologies.

     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").  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 zero emission
and low emission vehicles.  Recently, CARB proposed additional amendments to the
regulation order.  Furthermore,  several car manufacturers have challenged these
mandates in court and have obtained  injunctions to delay these mandates.  There
can be no assurance,  however,  that further legislation will be enacted or that
current legislation or state mandates will not be repealed or amended, 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.


                                       6
<PAGE>

Strategic Alliances, Partnering and Technology Developments

     Our 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
drive-train  technology and related  systems.  Our recent joint venture alliance
with  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
agreement was finalized in March 2003 and we anticipate commencing operations in
the  second  quarter  of 2003.  The  advanced  technology  center  will focus on
leading-edge   technologies  in  power   management  and  power  conversion  for
industrial, commercial, residential and vehicle applications.

     Additionally,  Enova  has  begun  to  partner  with  Ford  and AVS on other
automotive  and  transit  programs  and is  looking  to  further  develop  these
relationships.   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 and national universities. We have
implemented our plans to outsource  manufacturing of our components to companies
such as Hyundai  Heavy  Industries,  Ricardo,  Hyundai  Autonet  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.

Products

     Enova's focus is digital power  management,  power  conversion,  and system
integration.  Our 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 and UTC Fuel Cells, 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.


                                       7
<PAGE>

     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 240kW diesel genset  powered  series-hybrid
drive system anticipated to be introduced in mid 2003.

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 rpm goes 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.

     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 system,  and many others. In all of these
examples,  Enova's battery  management  system provides the power  management to
allow for proper power control.


                                       8
<PAGE>

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.

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.


                                       9
<PAGE>

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 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  DARPA/DOT  and  Hyundai  Group
     Contracts

     *OEM Technical and Product development.


                                       10
<PAGE>

     For the year ended December 31, 2002,  2001 and 2000, we spent  $1,152,000,
$879,000  and  $626,000,  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 two U.S.  patents and has two patents  pending,  in
power  management  and control,  with an additional  patent in crash  management
safety,  which was originally issued in 1997. We also have several 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 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, 2002, we had 44 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 4 in  administration,  3 in sales,  29 in engineering  and
research and development, and 11 in production.

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.


                                       11
<PAGE>


Item 3. Legal Proceedings

     We may  from  time to time  become  a party to  various  legal  proceedings
arising in the ordinary  course of  business.  However,  we are not  currently a
party to any material legal proceedings.

     We settled a lawsuit  brought against us by Fontal  International,  Ltd. in
June 2000, which was filed in the United States District Court, Central District
of California as previously  disclosed in our March 31, 2000 Form 10-Q. The suit
alleged  breach of  contract  with  respect  to  certain  warrants  to  purchase
10,833,332  shares  of  our  common  stock.  The  conditions  subsequent  to the
settlement agreement which required us to issue 6,000,000 shares of common stock
to be  registered  and  freely  tradable  on, or  before,  March  31,  2002 were
satisfied on June 14, 2002.  We entered into an agreement  with Fontal  granting
them  additional  shares of our common  stock based upon the date upon which the
Form S-1 covering  the sales of such shares was  declared  effective on June 14,
2002. As a result of that  agreement,  we issued  Fontal an  additional  300,000
shares of common stock in 2002.

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

We held our annual  meeting of  stockholders  on December 5, 2002,  at which the
following matters were voted upon:

1.   Our stockholders voted upon and approved a proposal to approve an amendment
     to our  Articles of  Incorporation  to affect a reverse  stock split of our
     Common Stock in a ratio of one-for-twenty,  at the election of our Board of
     Directors at any time until the next Annual  Meeting of  Shareholders.  The
     results of the voting were as follows:

              Number of Shares voted FOR:                   295,196,804
              Number of Shares voted AGAINST:                 4,505,571
              Number of Shares ABSTAINING:                      196,659
              Number of Broker NON-VOTES:                             0

2.   Our stockholders voted upon and approved a proposal to approve an amendment
     to our  Articles of  Incorporation  to affect a reverse  stock split of our
     Common Stock in a ratio of one-for-fifteen, at the election of our Board of
     Directors at any time until the next Annual  Meeting of  Shareholders.  The
     results of the voting were as follows:

              Number of Shares voted FOR:                   294,553,175
              Number of Shares voted AGAINST:                 5,071,555
              Number of Shares ABSTAINING:                      274,304
              Number of Broker NON-VOTES:                             0

3.   Our stockholders voted upon and approved a proposal to approve an amendment
     to our  Articles of  Incorporation  to affect a reverse  stock split of our
     Common  Stock in a ratio of  one-for-ten,  at the  election of our Board of
     Directors at any time until the next Annual  Meeting of  Shareholders.  The
     results of the voting were as follows:

              Number of Shares voted FOR:                   295,848,977
              Number of Shares voted AGAINST:                 3,785,158
              Number of Shares ABSTAINING:                      263,899
              Number of Broker NON-VOTES:                             0

4.   Our stockholders voted upon and approved a proposal to approve an amendment
     to our  Articles of  Incorporation  to affect a reverse  stock split of our
     Common  Stock in a ratio of  one-for-five,  at the election of our Board of
     Directors at any time until the next Annual  Meeting of  Shareholders.  The
     results of the voting were as follows:

              Number of Shares voted FOR:                   296,086,555
              Number of Shares voted AGAINST:                 3,527,302
              Number of Shares ABSTAINING:                      285,177
              Number of Broker NON-VOTES:                             0

5.   Our stockholders voted upon and approved a proposal to approve an amendment
     to Article III,  Section 2 of the  Company's  Bylaws to change the variable
     authorized  number of directors  from a range of four (4) to seven (7) to a
     range of six (6) to nine (9) and to fix the exact  number of Board  members
     at eight (8) until changed by our Board of Directors within such range;

              Number of Shares voted FOR:                   297,544,308
              Number of Shares voted AGAINST:                 1,831,226
              Number of Shares ABSTAINING:                      523,500
              Number of Broker NON-VOTES:                             0


                                       12
<PAGE>

6.   Our stockholders  voted upon and elected eight (8) individuals to the Board
     of  Directors.  The  following  Directors  will serve until the next Annual
     Meeting of  Shareholders or until their  respective  successors are elected
     and qualified:

     Elected and Re-elected Directors:             FOR               WITHHELD
     --------------------------------              ---               --------

     Anthony N. Rawlinson                       272,934,164        25,644,120 a
     Carl D. Perry                              288,565,784        10,336,190 b
     Edwin O. Riddell                           298,256,994           321,290
     Malcolm R. Currie                          298,231,994           333,790
     James M. Strock                            298,246,994           331,290
     John R. Wallace                            298,256,994           321,290
     John J. Micek, III (Preferred B)               660,375                 0
     Donald H. Dreyer (Preferred B)                 660,375                 0

     a -  25,243,939  shares held by Anthony N.  Rawlinson  and  ineligible  for
     voting.
     b - 10,000,000 shares held by Carl D. Perry and ineligible for voting.


7.   Our stockholders voted upon and approved a proposal to ratify the action of
     the  Board  of  Directors  appointing  Moss  Adams  LLP as the  independent
     auditors for Enova for the year ended December 31, 2002. The results of the
     voting were as follows:

              Number of Shares voted FOR:                   247,788,267
              Number of Shares voted AGAINST:                   758,356
              Number of Shares ABSTAINING:                      725,262
              Number of Broker NON-VOTES:                             0


                                       13
<PAGE>


                                     PART II

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

     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 2001
   -------------
   First Quarter........................     $0.31      $0.17     237,760
   Second Quarter.......................     $0.31      $0.15     245,504
   Third Quarter........................     $0.26      $0.13     116,110
   Fourth Quarter.......................     $0.31      $0.13     197,554

   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

     On March 25, 2003, the last reported high bid price of the Common Stock was
$0.09 and the last  reported low asking  price was $0.09.  As of March 25, 2003,
there were  approximately  8,304  holders of record of our Common  Stock.  As of
March 25,  2003,  approximately  112  shareholders,  many of who are also Common
Stock  shareholders,  held  our  Series  A  Preferred  Stock.  Approximately  34
shareholders as of March 25, 2003 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

     During 2002,  we issued an  aggregate of 570,083  shares of Common Stock to
our  directors  in  consideration  for  attendance  at Board  meetings and Board
committee meetings during fiscal 2002. 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, 2002, Enova
had an accumulated deficit of approximately  $93,890,000 and, until this deficit
is eliminated,  will be prohibited  from paying  dividends on any class of stock
except out of net profits,  unless it meets  certain asset and other tests under
Section 500 et. seq. of the California Corporations Code.


                                       14
<PAGE>

Item 6. Selected Financial Data.

     The following  selected  financial data tables set forth selected financial
data for the year ended December 31, 2002,  2001 and 2000, the five month period
ended  December 31, 1999 and the fiscal years ended July 31, 1999 and 1998.  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 year ended  December 31, 2002,  2001 and 2000,  the
five month period ended  December 31, 1999 and the two years 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.

<TABLE>
<CAPTION>
As of and for the year ended                                             Five Months    Fiscal Years
December 31, (in thousands,                                              ended          ending
except per share data)                                                   Dec 31         July 31,

                                         2002       2001         2000         1999       1999       1998
                                         ----       ----         ----         ----       ----       ----
<S>                                   <C>         <C>          <C>         <C>         <C>        <C>
NET SALES                             $ 4,455     $ 3,780      $ 2,883     $   629     $ 2,774    $  1,938
COST OF SALES                           3,784       2,783        2,013         377       1,460       2,765
                                      ---------------------------------------------------------------------
GROSS MARGIN                              671         997          870         252       1,314        (827)
                                      ---------------------------------------------------------------------
OTHER COSTS AND EXPENSES
     Research and Development           1,152         879          626         262         499         445
     Selling, general and
     administrative                     2,918       2,894        1,999         796       1,141       1,697
     Interest and financing fees          199         113          174         244         724         665
     Other expense (income)                            (7)           6                     (41)        (67)
     Acquisition of research and
     development
     Gain on Warranty Reevaluations                                                       (474)
     Legal Settlements                                900          755         125
                                      ---------------------------------------------------------------------
     Total other costs and expenses     4,269       4,779        2,880       1,427       1,849       2,740
                                      ---------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS        (3,598)     (3,782)      (2,010)     (1,175)       (535)     (3,567)
GAIN ON DEBT RESTRUCTURING                            354        1,551         214         140          42
                                      ---------------------------------------------------------------------
NET LOSS                              $(3,598)    $(3,428)     $  (459)    $  (961)    $  (395)   $ (3,525)
                                      =====================================================================
PER COMMON SHARE:

     Loss from continuing operations              $ (0.01)     $ (0.01)    $ (0.01)    $ (0.01)   $  (0.02)

     Gain on debt restructuring                                   0.01
                                      ---------------------------------------------------------------------
     Net loss per common share        $ (0.01)    $ (0.01)     $  0.00     $ (0.01)    $ (0.01)   $  (0.02)
                                      =====================================================================
WEIGHTED AVERAGE NUMBER
COMMON SHARES OUTSTANDING             326,390     275,189      235,199     251,994     152,077     151,265
                                      =====================================================================
     Total Assets                     $ 6,224     $ 4,340      $ 3,094     $ 2,697     $ 3,940    $  1,658
                                      =====================================================================
     Long-term debt                   $ 3,332     $ 3,332      $ 3,332     $ 3,332     $ 3,332    $  3,332
                                      =====================================================================
     Shareholders' equity (deficit)   $   287     $  (232)     $(1,648)    $(5,015)    $(7,316)   $(12,615)
                                      =====================================================================
</TABLE>


                                       15
<PAGE>

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

     You should read this  Management's  Discussion  and  Analysis of  Financial
Condition  and Results of  Operations  in  conjunction  with our 2002  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  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,  2002 and 2001 and the results of  operations  and cash
flows for the year ended December 31, 2002, 2001 and 2000.

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:


                                       16
<PAGE>

     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

     Enova has experienced cash flow shortages due to operating losses primarily
attributable to research, development, marketing and other costs associated with
our  strategic  plan to become an  international  manufacturer  and  supplier of
electric  propulsion  and  power  management  systems  and  components.  Due  to
increased research and development spending, cash flows from operations have not
been  sufficient.  We therefore  have to raise funds through  private  financial
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.  We anticipate
that we will require  additional  outside financing for at least the next twelve
months.

     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.  In July 2002,
several private accredited investors purchased 42,100,000 shares of common stock
at $0.10 per share.

     During  2002,  we  expanded  our sales and  development  efforts to capture
additional global market share for our product line and our technical expertise.
Enova expanded into European and Asian markets with our heavy duty drive systems
and continued to progress on our development  programs with Ford,  AVS,  Hyundai
and the U.S. Department of Transportation.  Our balance sheet  strengthened,  we
are now focusing 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, 2002 were  financed by
development  contracts  and  product  sales,  as  well as an  additional  equity
infusion of an aggregate of $4,210,000 from a private placement for the purchase
of 42,100,000 shares of common stock, as previously reported.

     It is our  intention  to  continue  to seek  additional  financing  through
private  placements  and  other  means  to  increase  research  and  development
spending,  procure  inventory  and  seek  additional  alliances  to  market  our
products.  As of March 25,  2003,  we have no firm  commitments  for  additional
financing  unless  we  consummate  our  joint  venture  with  HHI as  previously
reported.

     During the year ended December 31, 2002, our operations required $2,700,000
more in cash then 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  $19,000  from  $1,237,000,  or less than 1% from the  balance  at
December  31,  2001.  We  continually  monitor  our  receivables  and  have  had
immaterial charge-offs during the years due to this policy.  Inventory increased
by $727,000 from $926,000 or 79% from December 31, 2001  balances.  During 2002,
products  sales  increased  resulting  in  a  requirement  to  stock  additional
inventory  for  customer  requirements.  Based  on past  sales  and  anticipated
customer  requirements,  we have  increased  finished  goods  inventory  to meet
demand. Additionally, included in this increase is approximately $450,000 in raw
materials  inventory on hand for the Ballard  Th!nk city program  which has been
terminated.  We anticipate  receiving full  reimbursement for these inventories,
however;  during 2002, we  additionally  charged-off  approximately  $150,000 in
obsolete or other inventory related to the Ballard program.

     Fixed assets increased by $613,000 or 61% before  depreciation for the year
ended December 31, 2002 from the prior year balance of $1,003,000 due to several
factors.  The three-car  tram which was developed and produced,  in  conjunction
with a DOT/State of Hawaii program,  was transferred to  demonstration  vehicles
from  inventory  during  2002.   Additionally,   we  purchased  test  equipment,
production  machinery,  software and tooling for programs and products developed
during the year.


                                       17
<PAGE>

     Other assets  decreased by $76,000  during 2002 from $574,000 in 2001 as we
amortized  the  asset  relating  to  the  Ford  Value  Participation  Agreement.
Intellectual  property assets,  including  patents and trademarks,  increased by
$28,554 in 2002 from $48,986 at December 31, 2001 as we continued to  capitalize
new patents 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, 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 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
$2,918,000  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


                                       18
<PAGE>


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 $220,000, 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.

Years Ended December 31, 2001 and 2000

     Net sales of  $3,780,000  for the twelve  months  ended  December  31, 2001
increased  $897,000 or 31% from  $2,883,000  during the same period in 2000. Our
further  expansion into  production  programs of our PantherTM  120kw systems as
well as new contracts with Ford and the DOT accounted for the increase in sales.
Cost of sales of  $2,783,000  for the year ended  December  31, 2001  reflect an
increase of $770,000,  or 38%, from  $2,013,000  for the year ended December 31,
2000.

     Cost of sales as a percentage  of sales  remained at  approximately  70% in
2001 which is  consistent  with 2000.  As our sales mix changes  from  primarily
development  contract  revenues to more  product  sales,  we believe  this gross
margin will remain the same or improve on a year-to-year basis.

     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.  Non-funded  development  costs are
reported as research and development  expense.  Research and development expense
increased  in 2001 to $879,000  from  $626,000  for the same period in 2000,  an
increase of $253,000,  or 40%. As part of our long-term  strategic plan, we will
continue to expend funds for research and  development  for new  technologies to
enhance existing products as well as develop new products in the areas of mobile
and stationary  power  management and conversion.  Examples of these  internally
funded  development  programs  include the 240kW drive  system and our  advanced
power management systems for fuel cells and turbines.

     Selling,  general and  administrative  expense  increased in the year ended
December 31, 2001 to $2,894,000  from $1,999,000 for the similar period in 2000.
Increased  legal and  accounting  fees for the  Fontal  matter of  approximately
$400,000,  as well  as  increased  regulatory  requirements,  accounted  for the
majority of the rise in expense.  Additionally,  we continue to increase  sales,
marketing and travel  expenses in relation to acquiring  new business,  creating
alliances  and  servicing  current  customers,  which has resulted in additional
sales for 2001 and we believe will facilitate  increasing sales for 2002. During
2001 and 2000, we continued to add employees to accommodate  our increased sales
and customer services.

     For the year ended December 31, 2001, interest and financing fees decreased
by  $61,000  to  $113,000,   a  decrease  of  35%.  The  reduction  was  due  to
restructuring of our long-term debt by forgiveness or conversion into equity.

     In 2001, we completed our  restructuring of the remainder of our antecedent
payables,  reducing those accounts to zero from $210,000 in 2000, which resulted
in  contributing  to an  extraordinary  gain  of  $354,000  for  the  year.  Our
liabilities  and long-term debt are now current.  During the year ended December
31, 2000,  several unsecured  creditors agreed to settle their trade debt claims
for amounts less than the original debt owed to them. Additionally,  other trade
debt,  which  has had no  activity  for  over  four  years  and  has now  become
uncollectible  pursuant to state statute of  limitations,  was  recaptured.  The
reductions from the original amounts owed and the settlement amounts resulted in
a gain on debt  restructuring  of $1,551,000  during the year ended December 31,
2000.


                                       19
<PAGE>

     During  2001,   we  settled  a  lawsuit   brought   against  us  by  Fontal
International  Ltd. The settlement  required us to issue,  and register by March
31, 2002,  6,000,000  shares of common  stock at a cost of  $900,000,  non-cash,
exclusive of our legal fees.  This expense is recorded as legal  settlements for
2001.  Legal  settlements  for 2000 were $75,000.  In the first half of 2002, we
issued an  additional  300,000  shares of  common  stock to Fontal  based on the
timing of the  effectiveness of our Form S-1  Registration  Statement filed with
the Securities and Exchange Commission.

     During 2001, we incurred  several  non-recurring  professional  expenses of
$400,000  and the legal  settlement  of  $900,000  with  respect  to the  Fontal
International  lawsuit  for an increase in  operating  expense of  approximately
$1,300,000.  Without  these  charges,  our net  loss  from  operations  would be
$2,382,000,  an  increase  of  $372,000  or 18% from our  $2,010,000  loss  from
operations  for the  same  period  in 2000.  We do not  believe  these  types of
expenses  will occur in 2002.  The  increase  in net loss is  attributable  to a
number of factors,  as discussed  previously,  including the increased legal and
accounting fees, the legal  settlement with respect to Fontal matter,  increased
research and  development  expenses and increased  marketing and  administrative
expenses  relating  to  further  establishing  ourselves  as a key player in the
mobile power  conversion and  management  markets and to develop new systems for
the  stationary  markets.  We  anticipate  continued  increases in  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 issued the following accounting pronouncements:

SFAS No.145.  Rescission of FASB Statements No. 4, 44 and 64,  Amendment of FASB
Statement  No.  13 and  Technical  Corrections.  This  Statement  rescinds  FASB
Statement No. 4, Reporting Gains and Losses from  Extinguishment of Debt, and an
amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made
to  Satisfy  Sinking-Fund  Requirements.   This  Statement  also  rescinds  FASB
Statement No. 44,  Accounting  for  Intangible  Assets of Motor  Carriers.  This
Statement amends FASB Statement No. 13,  Accounting for Leases,  to eliminate an
inconsistency  between the required  accounting for sale-leaseback  transactions
and the required  accounting for certain lease  modifications that have economic
effects that are similar to  sale-leaseback  transactions.  This  Statement also
amends other existing  authoritative  pronouncements  to make various  technical
corrections,  clarify meanings,  or describe their  applicability  under changed
conditions.  The  adoption  of SFAS No. 145 is not  expected  to have a material
effect on the Company's consolidated financial statements.

SFAS No.146,  Accounting for Costs Associated with Exit or Disposal  Activities.
This Statement addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, Liability  Recognition for Certain Employee Termination Benefits
and Other  Costs to Exit an  Activity  (including  Certain  Costs  Incurred in a
Restructuring).  The  provisions  of this  Statement  are  effective for exit or
disposal  activities  that are  initiated  after  December 31, 2002,  with early
application  encouraged.  The adoption of SFAS No. 146 is not expected to have a
material effect on the Company's consolidated financial statements.

SFAS  No.147,   Accounting  for  Certain   Acquisitions  of  Banking  or  Thrift
Institutions and FASB  Interpretation No. 9, Applying APB Opinions No. 16 and 17
When a Savings and Loan  Association  or a Similar  Institution is Acquired in a
Business  Combination  Accounted  for by the  Purchase  Method.  This  Statement
provides  guidance on the  application of the purchase method to acquisitions of
financial  institutions.  Except for  transactions  between  two or more  mutual
enterprises,  this Statement removes acquisitions of financial institutions from
the scope of both  Statement 72 and  Interpretation  9 and  requires  that those
transactions  be  accounted  for in  accordance  with FASB  Statements  No. 141,
Business  Combinations and No. 142, Goodwill and Other Intangible  Assets.  This
Statement is effective for  acquisitions  made on or after October 1, 2002.  The
adoption  of SFAS No.  147 is not  expected  to have a  material  effect  on the
Company's consolidated financial statements.

SFAS No.148, Accounting for Stock-Based  Compensation.  This Statement addresses
alternative methods of transition for a voluntary change to the fair value based
method of accounting  for  stock-based  employee  compensation.  This  statement
permits two additional  transition methods that avoid the ramp-up effect arising
from   prospective   application  of  the  fair  value  based  method  addresses
alternative. In addition, it amends the disclosure requirements of Statement 123
to require prominent disclosures in both annual and interim financial statements
about the method of accounting for  stock-based  employee  compensation  and the
effect of the method used on reported  results.  As of December  31,  2002,  the
Company has adopted the disclosure  requirements  of the Statement and continues
to follow  the  intrinsic  value  method to  account  for  stock-based  employee
compensation.

Financial Accounting Standards Board Interpretation  (FASBI) No. 45, Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of Others.  The  Interpretation  clarifies  that a
guarantor is required to recognize, at the inception of a guarantee, a liability
for the fair value of the  obligation  undertaken in issuing the  guarantee.  It
also  significantly  expands the  disclosures  guarantors  must include in their
financial  statements.  While the  Interpretation's  accounting  provisions  are
effective  prospectively  to guarantees  issued or modified  after  December 31,
2002,


                                       20
<PAGE>

its  disclosure  requirements  generally  apply  to all  guarantees  and must be
included in  financial  statements  of interim and annual  periods  ending after
December 15, 2002. The adoption of Interpretation No. 45 is not expected to have
a material effect on the Company's consolidated 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  $93,890,000  at December 31, 2002.  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, 2002 2001 and 2000, we had net
losses  of  $3,598,000,  $3,428,000  and  $459,000,  respectively,  on  sales of
$4,455,000, $3,780,000 and $2,883,000, 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 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.

Our  industry  is new and is subject to  technological  changes.  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  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.


                                       21
<PAGE>

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.

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 2001 and 2002 we spent in excess
of $2.0 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  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


                                       22
<PAGE>


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,  the loss 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.

None.


                                       23
<PAGE>


                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

     The  following  table sets forth  certain  information  with respect to the
Directors and executive officers of Enova as of December 31, 2002:


================================ ========== ====================================
Name                             Age        Position
-------------------------------- ---------- ------------------------------------
Anthony N. Rawlinson             47         Chairman of the Board
-------------------------------- ---------- ------------------------------------
Carl D. Perry                    70         Chief Executive Officer, President,
                                            Acting CFO, and Director
-------------------------------- ---------- ------------------------------------
Edwin O. Riddell (1)             60         Director
-------------------------------- ---------- ------------------------------------
Dr. Malcolm Currie (1)           72         Director
-------------------------------- ---------- ------------------------------------
John J. Micek, III (2)           49         Director
-------------------------------- ---------- ------------------------------------
Donald H. Dreyer (2)             65         Director
-------------------------------- ---------- ------------------------------------
James M. Strock                  46         Director
-------------------------------- ---------- ------------------------------------
John Wallace                     54         Director
================================ ========== ====================================

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

     Anthony N. Rawlinson,  Chairman of the Board.  Mr.  Rawlinson was appointed
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  currently
Chairman of Matrix Oil NL, an Australian publicly listed company.  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. 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.  Since 1994,  he has served as Chairman of Electric  Bicycle
Co., a developer of electric  bicycles.  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


                                       24
<PAGE>


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.

     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.

     James M. Strock,  Director. Mr. Strock was elected a Director in July 2000.
From  1991-1997,  Mr.  Strock  served  in  Governor  Pete  Wilson's  cabinet  as
California's   first  Secretary  for   Environmental   Protection.   He  led  an
organization  with an  annual  budget  of more  than  $800  million  with  4,000
employees.  The  Agency  includes  many  of the  world's  leading  environmental
improvement  programs  relating to air and water  quality,  toxics and pesticide
regulation,  and solid  waste.  From  1989  until  1991,  Mr.  Strock  served in
President Bush's subcabinet as Assistant  Administrator  for Enforcement  (chief
law enforcement officer) of the U.S. Environmental  Protection Agency. From 1997
to the  present,  he has  been the  principal  of James  Strock  and Co.,  a San
Francisco  firm  providing  management  consulting,  communications  and dispute
resolution services. Mr. Strock is a graduate of Harvard College and Harvard Law
School, and is a member of the Council on Foreign Relations. He is the author of
Reagan  on  Leadership:  Executive  Lessons  from the  Great  Communicator,  and
Theodore Roosevelt on Leadership: Executive Lessons from the Bully Pulpit.

     John R. Wallace,  Director. 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.

Relationships Among Directors or Executive Officers

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


                                       25
<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a)  of the  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.

     We  believe,  based  solely  on our  review of the  copies of such  reports
received or written  representations from certain Reporting Persons, that during
2002,  there was only one inadvertent late filing, a Form 3 required to be filed
by John Wallace in conjunction with his election as a Board member at our Annual
Shareholders  Meeting. This Form 3 has subsequently been filed with the SEC. Mr.
Wallace has timely filed all required form 4s in 2002.

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, 2002,  2001 and 2000  (collectively,  the "Named  Executive
Officers").  Mr.  Carl D. Perry is the sole  executive  officer  of Enova  whose
salary currently exceeds $100,000.

Name and Principal Position                   SUMMARY ANNUAL COMPENSATION TABLE
---------------------------                   ---------------------------------
Carl D. Perry (1)                                2002      150,000     --
  Chief Executive Officer, Chief Financial       2001      160,989  $30,000
  Officer and President                          2000      128,170     --


(1) Mr.  Perry was  elected as Chief  Executive  Officer in November  1997.  Mr.
Perry's current salary is $150,000 per year,  approved by the Board of Directors
in June, 2000.

Option/SAR Grants

     No grants of stock options or stock appreciation  rights ("SARs") were made
during 2002 to the Named Executive Officers.

Option Exercises and Option Values

     The following  table sets forth  information  concerning  option  exercises
during 2002, and the aggregate  value of unexercised  options as of December 31,
2002, held by each of the Named Executive Officers:
<TABLE>
<CAPTION>

                                           Aggregated Option/SAR Exercises in 2002
                                           and Option Values at December 31, 2002

                                                               Number of Securities
                                Aggregate                     Underlying Unexercised             Value of Unexercised
                                 Option                            Options at                  In-the-Money Options at
                             Exercises in 2002                 December 31, 2002 (#)           December 31, 2002 ($)(1)
                             -----------------              ----------------------------       ------------------------

                                 Shares         Value
                              Acquired on      Realized
  Name                        Exercise (#)       ($)        Exercisable     Unexercisable    Exercisable      Unexercisable
 ------                       ------------     --------     -----------     -------------    -----------      -------------
<S>                               <C>            <C>         <C>                 <C>             <C>              <C>
Carl D. Perry                      --             --         1,200,000           --              --(1)            N/A

</TABLE>

(1)  Calculated on the basis of $0.08  representing  the average of the high bid
     and low ask prices of the Common  Stock on  December  31, 2002 of $0.08 per
     share, minus the exercise price.


                                       26
<PAGE>

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.  As of March 25 2003,  2,284,362  shares had been
issued under the above compensation plan for Directors.

James M. Strock

     The Company has entered  into a  consulting  agreement  with James Strock &
Company,  a  corporation  wholly owned by James M.  Strock,  wherein the Company
retains Mr.  Strock's  services  for a minimum  monthly  retainer of $3,000 plus
reasonable  expenses.  During 2002,  the Company paid Mr. Strock $58,901 in cash
and stock for consulting services, expenses and directors fees.

John R. Wallace

     The Company has entered  into a consulting  agreement  with John R. Wallace
wherein the Company will  compensate  Mr.  Wallace at the rate of $1,500 per day
plus reasonable expenses for consulting services rendered.  Mr. Wallace will not
be  compensated  per this agreement when acting in the capacity of a director of
the Company. During 2002, the Company paid Mr. Wallace $15,000 in cash and stock
for consulting services, expenses and directors fees.

Compensation Committee Interlocks and Insider Participation

     The Compensation Committee held two meetings in the year ended December 31,
2002. The Compensation Committee currently consists of Mr. Edwin Riddell and Dr.
Malcolm Currie, neither of whom have been officers of the Company. Its 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)


                                       27
<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, 1997,  and ends on December 31,
2002,  the end of our last fiscal year.  The graph assumes an investment of $100
on December 31, 1997 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.


                                [GRAPHIC OMITTED]


                     DECEMBER 31, 1997 TO DECEMBER 31, 2002

1)  Companies  included  in the peer  group  index are  Amerigon,  Inc.  (ARGN),
Electric Fuel Corp.  (EFCX),  Energy  Conversion  Devices,  Inc. (ENER),  Unique
Mobility (UQM), and Valence Technology, Inc. (VLNC).


                                       28
<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 December 31,
2002, 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 and
nominees for Director; (iii) the Chief Executive Officer and all other Executive
Officers of the Company; and (iv) all Executive Officers, Directors and nominees
for Director of the Company 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                         36.79%              41.35%
9 Oxford Street, South Ybarra 3141
Melbourne, Victoria Australia
--------------------------------------  ------------------------------  -----------------------------  ------------------
Carl D. Perry                                           11,200,500(4)                          2.84%               2.85%
c/o Enova Systems, Inc.
19850 South Magellan Drive
Torrance, CA 90502
--------------------------------------  ------------------------------  -----------------------------  ------------------
Citibank N.A.                                              31,405,754                          7.97%               8.96%
111 Wall Street, 8th Floor
New York, NY  10043
--------------------------------------  ------------------------------  -----------------------------  ------------------
Anthony N. Rawlinson                                       25,289,013                          6.42%               7.21%
c/o Enova Systems, Inc.
19850 South Magellan Drive
Torrance, CA 90502
--------------------------------------  ------------------------------  -----------------------------  ------------------
John J. Micek III                                        1,354,746(5)                              *                   *
--------------------------------------  ------------------------------  -----------------------------  ------------------
Edwin O. Riddell                                              527,760                              *                   *
--------------------------------------  ------------------------------  -----------------------------  ------------------
Dr. Malcolm Currie                                            417,130                              *                   *
--------------------------------------  ------------------------------  -----------------------------  ------------------
Donald H. Dreyer                                              315,009                              *                   *
--------------------------------------  ------------------------------  -----------------------------  ------------------
James M. Strock                                               136,260                              *                   *
--------------------------------------  ------------------------------  -----------------------------  ------------------
John R. Wallace                                                44,444                              *                   *
--------------------------------------  ------------------------------  -----------------------------  ------------------
Delphi Delco Electronics                                 1,278,720(6)                              *                   *
--------------------------------------  ------------------------------  -----------------------------  ------------------
Jean Schulz                                              1,329,111(7)                              *                   *
--------------------------------------  ------------------------------  -----------------------------  ------------------
All directors and executive officers                    38,907,084(8)                         10.02%              11.02%
as a group (8 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 25, 2003.

     (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;


                                       29
<PAGE>

          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 25, 2003.

     (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  1,200,000 shares of Common Stock issuable  pursuant to stock
          options  issued under an employee  stock option plan  exercisable at a
          price of $0.10 per share.  The option exercise price,  for Mr. Perry's
          and other  employees  under the 1996 Stock Option  Plan,  was reset to
          $0.10  per share  from  $0.30  per  share on  August  19,  1998 at the
          direction of the Board of Directors.

     (5)  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.

     (6)  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.

     (7)  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.

     (8)  Includes  1,400,000 shares of Common Stock issuable  pursuant to stock
          options  exercisable at price of $.10 and $.11 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, 2002.
<TABLE>
<CAPTION>

                      Equity Compensation Plan Information
=============================================================================================================
                                                                                       Number of securities
                                                                                       remaining available
                                                                                                for
                                                                                          Future issuance
                                                                 Weighted-average               under
                                     Number of securities to    exercise price of      equity compensation
                                     Ne issued upon exercise      outstanding             plans (excluding
                                     of outstanding options,        options,          securities reflected 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                28,380,256                $0.20               16,619,744
 Equity compensation plans not
 approved by security holders                        --                   --                       --
   Total                                     28,380,256                $0.20               16,619,744
</TABLE>

     Our board of  directors  adopted  the 1996  Employee  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


                                       30
<PAGE>


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

     Options  granted  under the amended 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, 2002, the Company had reserved  16,619,744  common shares for issuance under
the amended Plan.  Options to purchase 900,000 shares of Enova common stock were
granted to employees in 2002.

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, 2002.

Jagen Pty, Ltd. And Anthony N. Rawlinson

     In June 2002, Jagen Pty, Ltd.  purchased  20,000,000 shares of common stock
at $0.10 in a private  placement for a total cash purchase  price of $2,000,000.
Jagen  represented  that it was an accredited  investor under the definition set
forth by the Securities and Exchange Commission.  The Company relied on Rule 506
of Regulation D and Section 4(2) of the  Securities  Act for the exemption  from
registration of the sale of such shares.

     A fee of $205,500 was paid in conjunction with the funding of $4.21 million
previously  disclosed to The Global Value  Investment  Portfolio  Management Pte
Ltd, a Singapore Company which is substantially owned by two affiliated parties;
Anthony N. Rawlinson, Chairman of the Board of our Company and Borl partnership,
owned by Boris Liberman  Family Trusts,  which is also affiliated with Jagen Pty
Ltd., a large shareholder in Enova Systems.

John J. Micek III

     In June 2002, Silicon Prairie Partners,  LP, a limited partnership in which
John J. Micek III is the general partner,  purchased  1,000,000 shares of common
stock  at  $0.10 in a  private  placement  for a total  cash  purchase  price of
$100,000.  Silicon Prairie  represented that it was an accredited investor under
the definition set forth by the Securities and Exchange Commission.  The Company
relied on Rule 506 of  Regulation D and Section 4(2) of the  Securities  Act for
the exemption from registration of the sale of such shares.

Item 14. Controls and Procedures.

(a) Evaluation of Disclosure  Controls and  Procedures.  Enova's Chief Executive
Officer and Chief Financial  Officer have evaluated the effectiveness of Enova's
disclosure  controls and procedures (as such term is defined in Rules  13a-14(c)
and  15d-14(c)  under the  Securities  Exchange  Act of 1934,  as  amended  (the
"Exchange  Act")) as of a date  within 90 days prior to the filing  date of this
annual report (the "Evaluation Date").  Based on such evaluation,  such officers
have concluded that, as of the Evaluation Date, Enova's disclosure  controls and
procedures  are  effective  in  alerting  them on a  timely  basis  to  material
information  relating  to Enova  required  to be  included  in Enova's  periodic
filings  under  the  Exchange  Act.   Evaluation  of  Disclosure   Controls  and
Procedures.

(b) Changes in Internal Controls. Since the Evaluation Date, there have not been
any significant  changes in Enova's  internal  controls or in other factors that
could significantly affect such controls.


                                       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

          No reports on Form 8-K were filed by the Registrant during the quarter
          ended December 31, 2002

     (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).


                                       32
<PAGE>

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

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

10.9           Loan  Agreement  for $400,000  convertible  promissory  note with
               Fontal  International,  Ltd.,  dated  April  30,  1997  (filed as
               Exhibit 10.99 to the  Registrant's  Quarterly Report on Form 10-Q
               for fiscal  quarter ended April 30,  10997,  as filed on June 13,
               1997, and incorporated herein by reference).

10.10          Agreement  of Debt  Forgiveness  by and between Carl D. Perry and
               the Registrant dated July 30, 1999 (filed as Exhibit 10.10 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).

10.11          Agreement  of Terms by and  between  the  Registrant  and Carl D.
               Perry (filed as Exhibit 10.11 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).

10.12          Securities  Purchase  Agreement  dated as of June 1, 1999, by and
               between  the  Registrant  and Jagen  Pty,  Ltd.  and  Anthony  N.
               Rawlinson  (filed as  Exhibit  10.12 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).

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

10.14          Loan and  Security  Agreement  dated as of June 1,  1999,  by and
               among the  Registrant,  Jagen Pty, Ltd. and Anthony N.  Rawlinson
               (filed as Exhibit 10.14 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).

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

10.16          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).

10.17          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).

10.18          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).

10.19          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).

10.20          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).


                                       33
<PAGE>

10.21          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).

10.22          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).

10.23          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).

23.1*          Consent of Moss Adams, LLP, Independent Auditors

24*            Power of Attorney (included on signature page)

99.1*          CERTIFICATION  PURSUANT  TO 18 U.S.C.  SECTION  1350,  AS ADOPTED
               PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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


                                       34
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf of the undersigned, thereunto duly authorized, on March 28, 2002.

ENOVA SYSTEMS, INC.


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

Dated: March 31, 2003

                                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 31, 2003
----------------------------------     Officer and Director
Carl D. Perry                          (Principal Executive Officer)


  /s/   Anthony N. Rawlinson           Chairman                            March 31, 2003
---------------------------------
Anthony N. Rawlinson


  /s/ s  Malcolm Currie                Director                            March 31, 2003
---------------------------------
Malcolm Currie


  /s/   Edwin O. Riddell               Director                            March 31, 2003
---------------------------------
Edwin O. Riddell


  /s/   John J. Micek, III             Director                            March 31, 2003
---------------------------------
John J. Micek, III


  /s/   Donald H. Dreyer               Director                            March 31, 2003
---------------------------------
Donald H. Dreyer


  /s/   James M. Strock                Director                            March 31, 2003
---------------------------------
James M. Strock


  /s/   John R. Wallace                Director                            March 31, 2003
---------------------------------
John R. Wallace

</TABLE>
                                       35

<PAGE>
                                 CERTIFICATIONS

I, Carl D. Perry, certify that:

1. I have reviewed this annual report on Form 10-K of Enova Systems, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I  am  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this annual report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

     c) presented in this annual report our conclusions  about the effectiveness
of the  disclosure  controls and  procedures  based on our  evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether there were significant  changes in internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of our most recent  evaluation,  including any corrective  actions with
regard to significant deficiencies and material weaknesses.

Date:  March 31, 2003

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


                                       36



<PAGE>

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

                              [LOGO] ENOVA SYSTEMS

                          INDEPENDENT AUDITOR'S REPORT
                                       AND
                              FINANCIAL STATEMENTS

                           DECEMBER 31, 2002 AND 2001


--------------------------------------------------------------------------------
<PAGE>

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

                                    CONTENTS

                                                                            PAGE

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

FINANCIAL STATEMENTS

     Balance sheets..........................................................F-2

     Statements of operations................................................F-3

     Statements of stockholders' equity......................................F-4

     Statements of cash flows................................................F-5

     Notes to financial statements...........................................F-6


--------------------------------------------------------------------------------
<PAGE>

INDEPENDENT AUDITOR'S REPORT

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

We have audited the  accompanying  balance sheets of Enova Systems,  Inc., as of
December 31, 2002 and 2001,  and the  statements  of  operations,  stockholders'
equity,  and cash flows for each of the three years  ended  December  31,  2002.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our 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 2001, and the results of its operations and cash flows for
each of the three years ended December 31, 2002, in conformity  with  accounting
principles generally accepted in the United States of America.


                                /s/  MOSS ADAMS LLP

Santa Rosa, California
February 24, 2003


                                                                        Page F-1
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                                  BALANCE SHEETS
                                                      December 31, 2002 and 2001
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                     ASSETS
                                                                                  2002            2001
                                                                              ------------    ------------
<S>                                                                           <C>             <C>
CURRENT ASSETS
     Cash and cash equivalents                                                $  1,868,000    $  1,179,000
     Accounts receivable                                                         1,256,000       1,237,000
     Inventories and supplies                                                    1,652,000         926,000
     Current maturities of related party receivable                                 32,000          25,000
     Prepaids and other current assets                                             107,000          87,000
                                                                              ------------    ------------

            Total current assets                                                 4,915,000       3,454,000

PROPERTY AND EQUIPMENT                                                             811,000         280,000

RELATED PARTY RECEIVABLE, less current maturities                                     --            32,000

OTHER ASSETS                                                                       498,000         574,000
                                                                              ------------    ------------

            Total assets                                                      $  6,224,000    $  4,340,000
                                                                              ============    ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                                         $  1,192,000    $    167,000
     Line of credit                                                                 14,000            --
     Accrued payroll and related expenses                                          240,000         194,000
     Other accrued expenses                                                         95,000          53,000
     Current maturities of long-term debt                                          120,000         120,000
     Current maturities of capital lease obligations                                28,000           9,000
                                                                              ------------    ------------

            Total current liabilities                                            1,689,000         543,000

ACCRUED INTEREST PAYABLE                                                           889,000         677,000

CAPITAL LEASE OBLIGATIONS, less current maturities                                  27,000          20,000

LONG-TERM DEBT, less current maturities                                          3,332,000       3,332,000
                                                                              ------------    ------------

            Total liabilities                                                    5,937,000       4,572,000
                                                                              ------------    ------------

STOCKHOLDERS' EQUITY
     Series A convertible preferred stock - no par value; 30,000,000 shares
         authorized; 2,824,000 and 2,844,000 shares issued and outstanding;
         liquidating preference at $0.60 per share aggregating $1,695,000
         and $1,706,000                                                          1,842,000       1,867,000
     Series B convertible preferred stock - no par value; 5,000,000 shares
         authorized; 1,217,000 shares issued and outstanding; liquidating
         preference at $2.00 per share aggregating $2,434,000                    2,434,000       2,434,000
     Common stock - no par value; 500,000,000 shares authorized;
         345,194,000 and 302,502,000 shares issued and outstanding              84,026,000      79,859,000
     Common stock subscribed                                                       130,000         160,000
     Stock notes receivable                                                     (1,203,000)     (1,208,000)
     Additional paid-in capital                                                  6,949,000       6,949,000
     Accumulated deficit                                                       (93,891,000)    (90,293,000)
                                                                              ------------    ------------

            Total stockholders' equity                                             287,000        (232,000)
                                                                              ------------    ------------

            Total liabilities and stockholders' equity                        $  6,224,000    $  4,340,000
                                                                              ============    ============
</TABLE>


See accompanying notes.
--------------------------------------------------------------------------------
                                                                        Page F-2
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                        STATEMENTS OF OPERATIONS
                                   Years Ended December 31, 2002, 2001, and 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                      2002              2001             2000
                                                  -------------    -------------    -------------
<S>                                               <C>              <C>              <C>
NET REVENUES
     Research and development contracts           $   1,843,000    $   2,813,000    $   2,483,000
     Production                                       2,612,000          967,000          400,000
                                                  -------------    -------------    -------------
                                                      4,455,000        3,780,000        2,883,000
                                                  -------------    -------------    -------------

COST OF REVENUES
     Research and development contracts               1,288,000        2,149,000        1,653,000
     Production                                       2,496,000          634,000          360,000
                                                  -------------    -------------    -------------
                                                      3,784,000        2,783,000        2,013,000
                                                  -------------    -------------    -------------

GROSS PROFIT                                            671,000          997,000          870,000
                                                  -------------    -------------    -------------

OTHER COSTS AND EXPENSES
     Research and development                         1,152,000          879,000          626,000
     Selling, general, and administrative             2,837,000        2,894,000        1,999,000
     Interest and financing fees                        199,000          113,000          174,000
     (Gain) loss on disposition of fixed assets            --             (7,000)           6,000
     Legal settlements                                   81,000          900,000           75,000
                                                  -------------    -------------    -------------

                                                      4,269,000        4,779,000        2,880,000
                                                  -------------    -------------    -------------

LOSS FROM CONTINUING OPERATIONS                      (3,598,000)      (3,782,000)      (2,010,000)

EXTRAORDINARY ITEM - GAIN ON DEBT
     RESTRUCTURING                                         --            354,000        1,551,000
                                                  -------------    -------------    -------------

NET LOSS                                          $  (3,598,000)   $  (3,428,000)   $    (459,000)
                                                  =============    =============    =============

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

                                                  $       (0.01)   $       (0.01)   $        --
                                                  =============    =============    =============

WEIGHTED AVERAGE OF COMMON
     SHARES OUTSTANDING                             326,390,422      275,188,979      235,199,406
                                                  =============    =============    =============
</TABLE>


See accompanying notes.
--------------------------------------------------------------------------------
                                                                        Page F-3
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                              STATEMENTS OF STOCKHOLDERS' EQUITY
                                   Years Ended December 31, 2002, 2001, and 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                             Preferred Stock
                               ---------------------------------------------                                Common Stock
                                     Series A               Series B               Common Stock              Subscribed
                               ---------------------- ---------------------- ------------------------- ----------------------
                                Shares      Amount     Shares       Amount      Shares       Amount      Shares      Amount
                               ----------  ---------- ---------- ----------- ------------ ------------ ---------- ----------- -
<S>                             <C>        <C>         <C>        <C>         <C>         <C>           <C>        <C>
Balance, December 31, 1999      3,239,000  $2,166,000  1,242,000  $ 2,486,000 252,012,000 $ 71,526,000  5,563,000  $ 1,445,000

Common Stock Transactions
   Conversion of Series A
     preferred stock             (395,000)   (299,000)      --           --       395,000      299,000       --           --
   Conversion of Series B
     preferred stock                 --          --      (25,000)     (52,000)     71,000       52,000       --           --
   Stock options exercised           --          --         --           --     3,315,000      392,000       --           --
   Sale of stock                     --          --         --           --     6,667,000    2,000,000       --           --
   Stock issued for services         --          --         --           --     5,722,000    1,497,000 (5,518,000)  (1,432,000)
   Conversion of debt                --          --         --           --        37,000       14,000       --           --
   Repurchase of stock from
     stockholder                     --          --         --           --   (23,970,000)    (100,000)      --           --
Debt forgiveness by stockholder      --          --         --           --          --           --         --           --
Net loss                             --          --         --           --          --           --         --           --
                                ---------  ----------  ---------  ----------- ----------- ------------ ----------  -----------

 Balance, December 31, 2000     2,844,000   1,867,000  1,217,000    2,434,000 244,249,000   75,680,000     45,000       13,000

Common Stock Transactions
   Stock issued on exercise
     of warrants                     --          --         --           --    50,000,000    3,000,000       --           --
   Stock options exercised           --          --         --           --     1,805,000      181,000       --           --
   Stock issued for services         --          --         --           --       448,000       98,000    955,000      147,000
   Stock issued in 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  1,000,000      160,000
Common Stock Transactions
   Conversion of Series A
     preferred stock              (20,000)    (25,000)      --           --        20,000       25,000       --           --
   Sale of stock, net of
     issuance
     costs of $206,000               --          --         --           --    41,100,000    3,904,000  1,000,000      100,000
   Stock options exercised           --          --         --           --        30,000        3,000       --           --
   Stock issued for services         --          --         --           --     1,242,000      190,000   (628,000)    (130,000)
   Stock issued in 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  1,372,000  $   130,000
                                =========  ==========  =========  =========== =========== ============ ==========  ===========

<CAPTION>
                               Additional     Stock
                                Paid-In       Notes     Accumulated
                                 Capital    Receivable    Deficit        Total
                               ----------- ----------- -------------  -----------
<S>                             <C>        <C>          <C>           <C>
Balance, December 31, 1999      $4,917,000 $(1,149,000) $(86,406,000) $(5,015,000)

Common Stock Transactions
   Conversion of Series A
     preferred stock                  --          --            --           --
   Conversion of Series B
     preferred stock                  --          --            --           --
   Stock options exercised            --          --            --        392,000
   Sale of stock                      --          --            --      2,000,000
   Stock issued for services          --           --           --         65,000
   Conversion of debt                 --          --            --         14,000
   Repurchase of stock from
     stockholder                      --          --            --       (100,000)
Debt forgiveness by stockholder  1,455,000        --            --      1,455,000
Net loss                              --          --        (459,000)    (459,000)
                                ---------- -----------  ------------  -----------

 Balance, December 31, 2000      6,372,000  (1,149,000)  (86,865,000)

Common Stock Transactions
   Stock issued on exercise
     of warrants                      --          --            --      3,000,000
   Stock options exercised            --       (59,000)         --        122,000
   Stock issued for services          --          --            --        245,000
   Stock issued in legal
     settlement                       --          --            --        900,000
Warrants issued for value
   participation agreement         577,000        --            --        577,000
Net loss                              --          --      (3,428,000)
                                ---------- -----------  ------------  -----------

Balance, December 31, 2001       6,949,000  (1,208,000)  (90,293,000)    (232,000)
Common Stock Transactions
   Conversion of Series A
     preferred stock                  --          --            --           --
   Sale of stock, net of
     issuance
     costs of $206,000                --          --            --      4,004,000
   Stock options exercised            --          --            --          3,000
   Stock issued for services          --          --            --         60,000
   Stock issued in legal
     settlement                       --          --            --         45,000
   Stock notes receivable             --         5,000          --          5,000
Net loss                              --          --      (3,598,000)  (3,598,000)
                                ---------- -----------  ------------  -----------

Balance, December 31, 2002      $6,949,000 $(1,203,000) $(93,891,000) $   287,000
                                ========== ===========  ============  ===========
</TABLE>


See accompanying notes.
--------------------------------------------------------------------------------
                                                                        Page F-4
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                        STATEMENTS OF CASH FLOWS
                                     Years Ended December 31, 2002,2001 and 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                  2002           2001           2000
                                                               -----------    -----------    -----------
<S>                                                            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                  $(3,598,000)   $(3,428,000)   $  (459,000)
     Adjustments to reconcile net loss to net cash from
         operating activities:
            Depreciation and amortization                          134,000        205,000        136,000
            Loss on disposition of fixed assets                       --             --            6,000
            Gain on debt restructuring and extinguishment             --         (210,000)    (1,551,000)
            Stock issued for services                               60,000        245,000         66,000
            Stock issued for legal settlement                       45,000        900,000           --
            Accrued interest forgiven                                 --             --          156,000
         Change in operating assets and liabilities:
            Accounts receivable                                    (19,000)      (233,000)      (432,000)
            Inventories                                           (727,000)      (520,000)      (151,000)
            Related party receivable                                25,000         25,000         25,000
            Prepaids and other current assets                      (20,000)       (19,000)        (7,000)
            Other assets                                            76,000        (39,000)          --
            Accounts payable and accrued expenses                1,112,000       (112,000)      (120,000)
            Accrued interest payable                               212,000        163,000         75,000
            Customer deposits                                         --             --         (102,000)
                                                               -----------    -----------    -----------

                Net cash from operating activities              (2,700,000)    (3,023,000)    (2,358,000)
                                                               -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Equipment acquisitions                                       (613,000)      (219,000)       (88,000)
                                                               -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net change from line of credit                                 14,000           --             --
     Payments on stock notes receivable                              5,000           --             --
     Proceeds from exercise of warrants and options                  3,000      3,122,000           --
     Proceeds from sale of stock                                 4,210,000           --        2,392,000
     Stock issuance costs                                         (206,000)          --             --
     Purchase of common stock                                         --             --         (100,000)
     Payments on notes payable and capital lease obligations       (24,000)       (11,000)        (1,000)
                                                               -----------    -----------    -----------

                Net cash from financing activities               4,002,000      3,111,000      2,291,000
                                                               -----------    -----------    -----------

NET CHANGE IN CASH AND CASH EQUIVALENTS                            689,000       (131,000)      (155,000)

CASH AND CASH EQUIVALENTS, beginning of year                     1,179,000      1,310,000      1,465,000
                                                               -----------    -----------    -----------

CASH AND CASH EQUIVALENTS, end of year                         $ 1,868,000    $ 1,179,000    $ 1,310,000
                                                               ===========    ===========    ===========

SUPPLEMENTAL CASH-FLOW INFORMATION
     Cash paid during the year for interest                    $     8,000    $     5,000    $    40,000
     Non-cash investing and financing activities:
         Conversion of preferred stock to common stock         $    25,000    $      --      $   351,000
         Conversion of debt and accrued interest to equity     $      --      $      --      $ 1,470,000
         Equipment acquired under capital lease                $    52,000    $      --      $    41,000
</TABLE>


See accompanying notes.
--------------------------------------------------------------------------------
                                                                        Page F-5
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1 -  DESCRIPTION  OF  OPERATIONS  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING
          POLICIES

Description  of operations - Enova  Systems,  Inc., 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.

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

Inventory  -  Inventory  is  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.

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

Revenue  recognition  - Revenue 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.

Loss per common  share - Loss per common  share is computed  using the  weighted
average  number  of common  shares  outstanding.  Since a loss  from  operations
exists,  a diluted  earnings  per  share  number is not  presented  because  the
inclusion of common stock  equivalents in the computation would be antidilutive.
Common stock equivalents  associated with Series A and B preferred stock,  stock
options,  and warrants,  which are exercisable into 37,230,000  shares of common
stock, could potentially dilute earnings per share in future years.

Concentrations  of  risk -  Financial  instruments  potentially  subjecting  the
Company to  concentrations of credit risk consist primarily of trade receivables
and bank  demand  deposits  that may,  from  time to time,  be in excess of FDIC
insurance  thresholds.  Two customers accounted for approximately 46% and 37% of
total revenues for the years ended  December 31, 2002 and 2001, and  represented
24% and 52% of total receivables at the respective year-ends.  Another customer,
Hyundai,  is a  stockholder  that holds less than 5% of the  outstanding  common
stock.  Hyundai accounted for approximately  16%, 13%, and 56% of total revenues
for the years ended  December  31, 2002,  2001,  and 2000.  Demand  deposits are
placed with known creditable financial institutions

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  $365,200  and
$242,200 at December 31, 2002, and 2001.

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


--------------------------------------------------------------------------------
                                                                        Page F-6
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Shipping  costs - Shipping  and  handling  costs are  included in costs of goods
sold.

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

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

<TABLE>
<CAPTION>
                                             2002           2001            2000
                                          -----------    -----------    -----------
<S>                                       <C>            <C>            <C>
Net loss for the year                     $(3,598,000)   $(3,428,000)   $  (459,000)
Compensation expense, net of tax effect       197,000        776,500         88,000
                                          -----------    -----------    -----------

Proforma net loss                         $(3,795,000)   $(4,204,500)   $  (547,000)
                                          ===========    ===========    ===========

Proforma loss per common share            $     (0.01)   $     (0.01)   $     (0.01)
                                          ===========    ===========    ===========
</TABLE>

The  fair  value  of  each  option  is  estimated  on date of  grant  using  the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions:

                                              2002        2001        2000
                                            --------    --------    --------

Dividends                                        0%          0%          0%
Expected volatility                             83%        125%        124%
Risk-free interest rate                          4%          5%          5%
Expected life                               5 years     5 years     5 years

Recent  accounting  pronouncements  - The Financial  Accounting  Standards Board
(FASB) has issued the following accounting pronouncements:

SFAS No.145,  Rescission of FASB Statements No. 4, 44 and 64,  Amendment of FASB
Statement  No.  13 and  Technical  Corrections.  This  Statement  rescinds  FASB
Statement No. 4, Reporting Gains and Losses from  Extinguishment of Debt, and an
amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made
to  Satisfy  Sinking-Fund  Requirements.   This  Statement  also  rescinds  FASB
Statement No. 44,  Accounting  for  Intangible  Assets of Motor  Carriers.  This
Statement amends FASB Statement No. 13,  Accounting for Leases,  to eliminate an
inconsistency  between the required  accounting for sale-leaseback  transactions
and the required  accounting for certain lease  modifications that have economic
effects that are similar to  sale-leaseback  transactions.  This  Statement also
amends other existing  authoritative  pronouncements  to make various  technical
corrections,  clarify meanings,  or describe their  applicability  under changed
conditions.  The  adoption  of SFAS No. 145 is not  expected  to have a material
effect on the Company's financial statements.


--------------------------------------------------------------------------------
                                                                        Page F-7
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

SFAS No.146,  Accounting for Costs Associated with Exit or Disposal  Activities.
This Statement addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues Task Force (EITF)
Issue No. 94-3, Liability  Recognition for Certain Employee Termination Benefits
and Other  Costs to Exit an  Activity  (including  Certain  Costs  Incurred in a
Restructuring).  The  provisions  of this  Statement  are  effective for exit or
disposal  activities  that are  initiated  after  December 31, 2002,  with early
application  encouraged.  The adoption of SFAS No. 146 is not expected to have a
material effect on the Company's financial statements.

SFAS  No.147,   Accounting  for  Certain   Acquisitions  of  Banking  or  Thrift
Institutions and FASB  Interpretation No. 9, Applying APB Opinions No. 16 and 17
When a Savings and Loan  Association  or a Similar  Institution is Acquired in a
Business  Combination  Accounted for by the Purchase Method. This Statement will
not have an impact on the Company's financial statements.

SFAS No.148, Accounting for Stock-Based  Compensation.  This Statement addresses
alternative methods of transition for a voluntary change to the fair value based
method of accounting  for  stock-based  employee  compensation.  This  statement
permits two additional  transition methods that avoid the ramp-up effect arising
from   prospective   application  of  the  fair  value  based  method  addresses
alternative. In addition, it amends the disclosure requirements of Statement 123
to require prominent disclosures in both annual and interim financial statements
about the method of accounting for  stock-based  employee  compensation  and the
effect of the method used on reported  results.  As of December  31,  2002,  the
Company has adopted the disclosure  requirements  of the Statement and continues
to follow  the  intrinsic  value  method to  account  for  stock-based  employee
compensation.

Financial Accounting Standards Board Interpretation  (FASBI) No. 45, Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of Others.  The  Interpretation  clarifies  that a
guarantor is required to recognize, at the inception of a guarantee, a liability
for the fair value of the  obligation  undertaken in issuing the  guarantee.  It
also  significantly  expands the  disclosures  guarantors  must include in their
financial  statements.  While the  Interpretation's  accounting  provisions  are
effective  prospectively  to guarantees  issued or modified  after  December 31,
2002, its disclosure  requirements generally apply to all guarantees and must be
included in  financial  statements  of interim and annual  periods  ending after
December 15, 2002. The adoption of Interpretation No. 45 is not expected to have
a material effect on the Company's financial statements.

NOTE 2 - PROPERTY AND EQUIPMENT

                                                    2002        2001
                                                 ----------   ----------

Computers                                        $  177,000   $  154,000
Machinery and equipment                             643,000      407,000
Furniture and office equipment                      189,000      186,000
Demonstration vehicles and buses                    497,000      147,000
Leasehold improvements                               68,000       68,000
Equipment under capital lease                        94,000       41,000
                                                 ----------   ----------

                                                  1,668,000    1,003,000
Less accumulated depreciation and amortization      857,000      723,000
                                                 ----------   ----------

                                                 $  811,000   $  280,000
                                                 ==========   ==========


--------------------------------------------------------------------------------
                                                                        Page F-8
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 3 - RELATED-PARTY RECEIVABLE

Hyundai, a stockholder,  acquired certain  technology  licensing rights from the
Company in 1997. Part of the  consideration  for these rights included  periodic
installment  payments of $25,000 per year for six years,  with the final payment
expected in February 2003.

NOTE 4 - OTHER ASSETS

Legal  costs  of  $78,000  that  are  associated  with  two  patents  have  been
capitalized  and will be amortized  over the life of the  patents,  beginning in
2003.

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 noncurrent 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.

                                                          2002            2001
                                                        --------        --------

Patents                                                 $ 78,000        $ 49,000
Valuation Participation Agreement                        577,000         577,000
                                                        --------        --------

                                                         655,000         626,000
Less accumulated  amortization                           157,000          52,000
                                                        --------        --------

                                                        $498,000        $574,000
                                                        ========        ========

NOTE 5 - LINE OF CREDIT

The Company has available a bank line of credit that provides for  borrowings of
up to $250,000,  with  interest  payable  monthly at 3.25%.  The line matures in
October 2003 and is secured by the Company's assets.

NOTE 6 - LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                                    2002            2001
                                                                                ------------    ------------
<S>                                                                             <C>             <C>
Secured promissory note to Credit Managers Association of
California, with interest at 3% for the first five years beginning
June 1996, 6% for years six and seven, and then at prime plus
3% through maturity; interest payments are made upon payment
of principal, which is due no later than 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 promissory note with interest at 10%; note is past due                    120,000         120,000
                                                                                ------------    ------------

                                                                                  3,452,000       3,452,000
Less current maturities                                                             120,000         120,000
                                                                                ------------    ------------

                                                                                $ 3,332,000     $ 3,332,000
                                                                                ============    ============
</TABLE>


--------------------------------------------------------------------------------
                                                                        Page F-9
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 7 - CAPITAL LEASE OBLIGATIONS

The Company rents manufacturing and office equipment under various capital lease
agreements  that expire  beginning in 2003.  Future minimum lease payments under
these capital lease agreements are as follows:

                                    Year Ending December 31,
                                    ------------------------

                                              2003                 $ 36,000
                                              2004                   27,000
                                              2005                    8,000
                                              2006                    1,000
                                                                   ---------

                                                                     72,000
                Less amounts representing interest                   17,000
                                                                   ---------

                Present value of minimum lease payments              55,000
                Less current maturities                              28,000
                                                                   ---------

                                                                   $ 27,000
                                                                   =========

NOTE 8 - OPERATING LEASES

The Company's lease on its Torrance,  California,  facility  expires in February
2008.  Rent  expense was  $206,000,  $210,000,  and $177,000 for the years ended
December 31, 2002, 2001, and 2000. Future minimum lease payments are as follows:

                         Year Ending December 31,
                         ------------------------

                                   2003                 $111,000
                                   2004                  161,000
                                   2005                  163,000
                                   2006                  166,000
                                   2007                  168,000
                                Thereafter                28,000
                                                        --------

                                                        $797,000
                                                        ========

NOTE 9 - STOCKHOLDERS' DEFICIT

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

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.


--------------------------------------------------------------------------------
                                                                       Page F-10
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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.

Stock issued for legal  settlement - 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.

NOTE 10 - STOCK OPTIONS AND WARRANTS

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

Under the Director Stock Option Plan, the Company  reserved  1,500,000 shares of
common stock for nonstatutory stock options for nonemployee  directors.  Options
under this Plan are fully vested upon the granting of the options and expire ten
years from the date of grant unless terminated sooner 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
nonstatutory 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.

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

<TABLE>
<CAPTION>
                                                  1996 Plan                   1993 Plan                     Other
                                          --------------------------- --------------------------- --------------------------
                                             Shares        Price         Shares          Price      Shares         Price
                                          ------------- ------------- ------------- ------------- ------------ -------------
<S>                                         <C>             <C>         <C>             <C>         <C>           <C>
Options outstanding at December 31, 1999    20,495,000      0.10-0.30   11,111,000      0.10-0.60   1,495,000     0.60-2.80
Granted                                      3,600,000      0.17-0.30           --            --           --            --
Exercised                                   (3,286,000)     0.10-0.30           --            --           --            --
Forfeited                                     (344,000)     0.10-0.30   (1,457,000)           --           --            --
                                          -------------               -------------               ------------

Options outstanding at 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           --            --           --            --
                                          -------------               -------------               ------------

Options outstanding at 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               --            --
                                          -------------               -------------               ------------

Options outstanding at December 31, 2002    21,327,000      0.10-0.30    7,054,000      0.10-0.60   1,495,000     0.60-2.80
                                          =============               =============               ============

Weighted average remaining
     contractual life                       1.9 years                   .5 years                   .5 years
                                          =============               =============               ============
</TABLE>


--------------------------------------------------------------------------------
                                                                       Page F-11
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Options exercisable were 28,304,228,  26,293,358, and 24,106,626 at December 31,
2002, 2001, and 2000.

The agreement with Ford Motor Company,  as discussed in 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 agreements.  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.  Warrants may not be exercised
until July 2003.  The fair value of warrants  granted were estimated on the date
of grant  using  the  Black-Scholes  option-pricing  model  with  the  following
assumptions:  (1) dividend  yield of 0%, (2) expected  volatility  of 102%,  (3)
risk-free interest rate of 4.76%, and (4) 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.

NOTE 11 - INCOME TAXES

The California  Revenue and Taxation Code has suspended the deductibility of net
operating  loss  carryovers  for the tax years 2002 and 2003.  Federal and state
income tax regulations  impose  restrictions on the utilization of net operating
losses in the event of an  ownership  change,  as defined by Section  382 of the
Internal Revenue Code of 1986. Ownership changes have occurred, with the changes
limiting the future availability of net operating loss carryforwards. The extent
of the limitation has not been determined.

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

                                                      2002               2001
                                                   -----------       -----------

Deferred tax assets
     Federal tax loss carryforward                 $30,513,000       $25,692,000
     State tax loss carryforward                       404,000           674,000
     Basis difference                                1,610,000         1,610,000
     Other, net                                        433,000           290,000
                                                   -----------       -----------

                                                    32,960,000        28,266,000
Less valuation allowance                            32,960,000        28,266,000
                                                   -----------       -----------

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


--------------------------------------------------------------------------------
                                                                       Page F-12
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

Net operating losses expire as follows:

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

                                 2003             $     64,000    $ 1,541,000
                                 2004                  322,000        709,000
                                 2005                  443,000        655,000
                                 2006                  680,000             --
                                 2007                2,552,000             --
                                 2008               24,221,000             --
                                 2009               33,460,000             --
                                 2010                9,083,000        177,000
                                 2011                5,557,000      1,770,000
                                 2012                2,998,000             --
                                 2013                1,418,000             --
                                 2014                1,965,000      2,065,000
                              2015-2022              6,982,000             --
                                                  -------------   ------------

                                                  $ 89,745,000    $ 6,917,000
                                                  =============   ============

NOTE 12 - EXTRAORDINARY ITEM

In 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 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:

                                     2002             2001             2000
                                  ----------        ----------      ----------

United States                     $2,478,000        $2,854,000      $1,003,000
Korea                                726,000           483,000       1,670,000
England                                 --              84,000            --
Malaysia                              65,000              --              --
Japan                                 87,000              --              --
Ireland                               59,000              --              --
Canada                                  --                --           110,000
Italy                              1,040,000           359,000         100,000
                                  ----------        ----------      ----------
                                  $4,455,000        $3,780,000      $2,883,000
                                  ==========        ==========      ==========


--------------------------------------------------------------------------------
                                                                       Page F-13
<PAGE>

                                                             ENOVA SYSTEMS, INC.
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 14 - CONTINGENCIES

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.  Included  in the 2002  inventory  is  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.  Under the terms of the  agreement  with Ballard and
Ford, the Company believes full reimbursement will be made.

NOTE 15 -     SUBSEQUENT EVENTS

The Company has entered into a joint  venture  agreement  (the  Agreement)  with
Hyundai  Heavy  Industries  of Korea  (HHI) to  create  an  advanced  technology
corporation (the ATC) to be domiciled in Torrance, California.

In conjunction  with this  Agreement,  HHI and the Company  entered into a stock
purchase agreement in which HHI will 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
will be made in two  installments  of $1.5 million each.  The first  installment
will be made upon incorporation of the ATC and in consideration for the issuance
to HHI by the Company of 23,076,923  shares of common stock at $0.065 per share.
The second  installment  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 will invest $1 million
of each  installment  into  the ATC in  consideration  for the  issuance  to the
Company of a 40% equity interest in the ATC (the balance of the installments, in
the amount of $500,000 each, will be retained by Enova).  HHI will acquire a 60%
equity interest in ATC by investing $3 million in the ATC 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 ATC.


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