##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31,
    2010Oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to     Commission file
    no. 1-33001
  ENOVA SYSTEMS, INC.
 (Exact name of registrant as
    specified in its charter)
  California

95-3056150(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification Number)   1560 West 190th Street, Torrance, California 90501
 (Address of principal executive
    offices, including zip code)
  Registrants telephone number, including area code:
 (310) 527-2800
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, no par value

The NYSE Amex   Securities registered pursuant to Section 12(g) of the
    Act:
   o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company þ   Rule 12b-2 o þ
    DOCUMENTS INCORPORATED BY REFERENCE




---



##### 





ENOVA
    SYSTEMS, INC.
  2010
    FORM 10-K
    ANNUAL REPORT
  TABLE OF
    CONTENTS
   
 PART IItem 1.


BUSINESS


3Item 1A.


RISK FACTORS


13Item 1B.


UNRESOLVED STAFF COMMENTS


15Item 2.


PROPERTIES


15Item 3.


LEGAL PROCEEDINGS


15Item 4.


[REMOVED AND RESERVED]


16PART IIItem 5.


MARKET FOR REGISTRANTS COMMON EQUITY,
    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES


16Item 6.


SELECTED FINANCIAL DATA


17Item 7.


MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


18Item 7A.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


25Item 8.


FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


26Item 9.


CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE


50Item 9A.


CONTROLS AND PROCEDURES


50Item 9B.


OTHER INFORMATION


50PART IIIItem 10.


DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
    GOVERNANCE


51Item 11.


EXECUTIVE COMPENSATION


54Item 12.


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


58Item 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
    AND DIRECTOR INDEPENDENCE


60Item 14.


PRINCIPAL ACCOUNTANT FEES AND SERVICES


60PART IVItem 15.


EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES


60EX-10.21EX-10.22EX-23.1EX-31.1EX-31.2EX-32   2




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##### Table of Contents



PART I  ITEM 1.
    BUSINESS  General
              up-to-date
     3




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##### Table of Contents



Customer

PercentSmith Electric Vehicles N.A. Inc.


45
%Navistar, Inc.


26
%First Auto Works Group Corporation


14
%     Climate
    Change Initiatives and Environmental Legislation
    S-01-07, 2
   4




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##### Table of Contents



Strategic
    Alliances, Partnering and Technology Developments
        
    Freightliner Custom Chassis Corporation (FCCC), a
    division of Daimler Trucks North America.  Enova
    and FCCC entered into the final phase of our all-electric
    commercial chassis development program. The development program
    included collaboration and involved the engineering and
    integration of Enovas 120kW all-electric drive system
    technology into the MT-45 walk-in van chassis.
    Freightliners highest volume MT-45 chassis is used by a
    range of customers, including UPS and Federal Express. Design,
    engineering, integration and testing activities were conducted
    at the FCCC plant in Gaffney, SC and the Enova facility in
    Torrance, CA. The resulting integration of our all-electric
    drive system into the MT-45 chassis branded a new, FCCC
    all-electric product offering: the FCCC MT-EV. The MT-EV (the
    FCCC model name) chassis boasts a GVWR of 14,000 to 19,500 lbs.
    The durable steel straight-rail chassis frame reduces flex and
    bowing to minimize stress while carrying heavy payloads. The
    quiet operation of the all-electric MT-EV also makes for an
    enjoyable driver experience. The MT-EV has a flat-leaf spring
    front and rear suspension, allowing for a smooth, solid ride
    that minimizes cargo shifts on uneven road surfaces.
    U.S. General Services Administration
    (GSA).  GSA extended its contract with
    Enova as the exclusive supplier contract of the all-electric
    step van. GSA procures vehicles for government agencies and the
    armed forces. Under this contract, Enova will coordinate the
    supply of MT-EV all-electric walk-in step vans to GSA under the
    Cargo Vans category. Enova continues to benefit from federal
    fleet penetration via GSA with the 5




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##### Table of Contents



Smith Newton product offering in the Medium and Heavy Duty
    vehicle category. The Smith Newton is another exclusive,
    all-electric medium and heavy duty truck offering on the GSA
    product menu. Moreover, Navistar continued to demonstrate its
    leadership in the American school bus market with its exclusive
    GSA contract to supply hybrid school buses. Enova is supplies
    hybrid electric drive systems to IC Bus, an affiliated division
    of Navistar.  
    Remy Inc (Remy).  Enova and Remy
    executed a letter of intent to develop a new electric drive
    system based on Enovas next generation Omni controller and
    Remy HVH motor. Remy is North Americas largest independent
    manufacturer of advanced electric propulsion motors. Remys
    patented design and assembly technology have been in production
    since 2006 and are currently powering vehicles around the world.
    The optimized controller-motor solution in development
    demonstrates the strong technology heritage and commitment to
    customers that Enova continues to bring to the hybrid and
    all-electric vehicle market.
    Smith Electric Vehicles N.A. Inc. (Smith)-
    As part of the American Recovery and Reinvestment Act of 2009,
    the U.S. Department of Energy announced funding
    opportunities in the form of cost-share grants for supporting
    the construction of U.S. based manufacturing plants to
    produce batteries and electric drive components, and to
    establish development, demonstration, evaluation, and education
    projects to accelerate the market introduction and penetration
    of advanced electric drive vehicles. Smith received a grant of
    $32 million under this program to accelerate the production
    plans at their new U.S. manufacturing facility. As
    production is ramps up, we anticipate the opportunity to
    continue to supply Smith with our all-electric vehicle drive
    systems that are used to power Smiths Newton trucks.  Class 3-6
    Omni Inverter. Omni-series 200kVA-capable ease-of-integration. plug-and-play
  
    Proprietary new liquid cooling strategy enabling leading power
    density;
    Software configurable control allowing common hardware to be
    used across many sizes of hybrid or electric vehicles;
    Compatible with a wide range of induction and permanent magnet
    motors;
    True continuous power output of 110 kW, with peak over 200 kVA
    making the Omni capable of powering the Enova P90, P120, and
    even P240 drive systems; and
    Heavy-duty cast aluminum chassis and robust design using minimal
    harnesses and interconnects allows flexible vehicle mounting in
    any orientation.  Omni On-Board Charger. ease-of-integration. plug-and-play
  
    Charger unit, single phase
    208-240V
    input @ 48A, single output, regulated
    250-450Vdc,
    CAN controlled (2 CAN lines), liquid cooled (as little as 4 lpm
    at 60 degrees C ambient temperature) 6




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##### Table of Contents




    Independent unit instead of module and compatible with any power
    inverter
    Compliant with SAE J1772 and CENELEC standards
    Ruggedized and environmentally tested to SAE J1455 standards/IP67
    Higher efficiency with reduced cooling requirements
    Higher power, accommodates US standard single phase outlets up
    to 60A for faster charging
    Integrated 600W DC/DC converter charges 12V or 24V battery
    configurations  Omni DC/DC Converter.
  
    Independent unit instead of module and compatible with any power
    electronics
    Compliant with SAE standards (environmental and electrical)  Battery
    Suppliers
  LG Chem Power Inc. (LGCPI).
      Electric
    and Hybrid-Electric Drive Products
       7




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##### Table of Contents



Hybrid
    and Electric Drive Configurations
    Series Hybrid
    with Diesel Generator
  
  and/or
  Post
    Transmission Parallel Hybrid
  
   8




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##### Table of Contents



Pre
    Transmission Parallel Hybrid
  
    All
    Electric Vehicle Drive System
  
    Definitions:
          Electric
    Drive Motors
     9




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##### Table of Contents



Motor
    Controllers
  easy-to-install DC-to-DC AC-to-DC
    Drive
    System Accessories
      Manufacturing
    Strategy
    Competitive
    Conditions
         10




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##### Table of Contents




    Providing a full product line of power management, power
    conversion, and system integration
    Providing products that allow the hardware to be software
    programmable and configurable
    Offering a product line designed for the most advanced new fuel
    systems: electric, hybrid, fuel cell and solar power applications
    Providing fully integrated, drop-in energy
    management and conversion system in one box
    Offering systems with reduced footprint and weight, high
    functionality and low cost  characteristics essential
    for all market applications
    Meeting changing and sophisticated requirements of emerging
    alternative power markets and applications.
    Positioning ourselves as a strategic ally with our global
    customer base, manufacturers and our R&D partners.    Research
    and Development
      Intellectual
    Property
     11




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##### Table of Contents



Employees
    Available
    and Additional Information
    Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330.
 12




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##### Table of Contents



ITEM 1A.
    RISK
    FACTORS  Form 10-K.
  This annual report on
    Form 10-K,
    including the documents that we incorporate by reference,
    contains statements indicating expectations about future
    performance and other forward-looking statements that involve
    risks and uncertainties. We usually use words such as
    may, will, should,
    expect, plan, anticipate,
    believe, estimate, predict,
    future, intend, potential,
    or continue or the negative of these terms or
    similar expressions to identify forward-looking statements.
    These statements appear throughout the
    Form 10-K
    and are statements regarding our current intent, belief, or
    expectation, primarily with respect to our operations and
    related industry developments. Examples of these statements
    include, but are not limited to, statements regarding the
    following: our expansion plans, our future operating expenses,
    our future losses, our future expenditures for research and
    development and the sufficiency of our cash resources. You
    should not place undue reliance on these forward-looking
    statements, which apply only as of the date of this annual
    report. Our actual results could differ materially from those
    anticipated in these forward-looking statements for many
    reasons, including the risks faced by us and described in this
    Risk Factors section and elsewhere in this annual
    report.
  We cannot guarantee that any forward-looking statement will
    be realized, although we believe we have been prudent in our
    plans and assumptions. Achievement of future results is subject
    to risks, uncertainties and potentially inaccurate assumptions.
    Should known or unknown risks or uncertainties materialize, or
    should underlying assumptions prove inaccurate, actual results
    could differ materially from past results and those anticipated,
    estimated or projected. You should bear this in mind as you
    consider forward-looking statements.
  We undertake no obligation to publicly update forward-looking
    statements, whether as a result of new information, future
    events or otherwise. You are advised, however, to consult any
    further disclosures we make on related subjects in our
    10-Q and
    8-K reports
    to the SEC. Also note that we provide the following cautionary
    discussion of risks, uncertainties and possibly inaccurate
    assumptions relevant to our businesses. These are factors that,
    individually or in the aggregate, we think could cause our
    actual results to differ materially from expected and historical
    results. We note these factors for investors as permitted by the
    Private Securities Litigation Reform Act of 1995. You should
    understand that it is not possible to predict or identify all
    such factors. Consequently, you should not consider the
    following to be a complete discussion of all potential risks or
    uncertainties.
  Our
    history of operating losses and our expectation of continuing
    losses may hurt our ability to reach profitability or continue
    operations.
    Because
    we depend upon sales to a limited number of customers, our
    revenues will be reduced if we lose a major
    customer
   13




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##### Table of Contents



Our
    future growth depends on consumers willingness to accept
    hybrid and electric vehicles
    
    perceptions about alternative fuel vehicles safety (in
    particular with respect to lithium-ion battery packs), design,
    performance and cost, especially if adverse events or accidents
    occur that are linked to the quality or safety of alternative
    fuel vehicles;
    volatility in the cost of oil and gasoline;
    consumers perceptions of the dependency of the United
    States on oil from unstable or hostile countries;
    improvements in fuel of the internal combustion engine;
    the environmental consciousness of consumers;
    government regulation
    macroeconomics  We
    extend credit to our customers, which exposes us to credit
    risk
    Our
    business is affected by current economic and financial market
    conditions in the markets we serve
    The
    nature of our industry is dependent on technological advancement
    and is highly competitive
  and/or
  Our
    industry is affected by political and legislative
    changes
   14




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We may
    be unable to effectively compete with other companies who have
    significantly greater resources than we have
    We may
    be exposed to product liability or tort claims if our products
    fail, which could adversely impact our results of
    operations
    We are
    highly dependent on a few key personnel and will need to retain
    and attract such personnel in a labor competitive
    market
    There
    are minimal barriers to entry in our market
      ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES  month-to-month
  ITEM 3.
    LEGAL
    PROCEEDINGS   15




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8-K
      ITEM 4.
    [REMOVED
    AND RESERVED] PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Common StockHigh Price

Low PriceCalendar 2010Fourth Quarter

$
1.47


$
0.64Third Quarter

$
1.05


$
0.60Second Quarter

$
1.57


$
0.89First Quarter

$
2.22


$
1.42Calendar 2009Fourth Quarter

$
1.94


$
1.00Third Quarter

$
1.45


$
0.51Second Quarter

$
1.08


$
0.60First Quarter

$
0.97


$
0.21  16




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##### Table of Contents



Dividend
    Policy
    ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K.
  For and as of the Years Ended December 31,2010


2009


2008(In thousands, except per share data)Statement of Operations DataNet revenues

$
8,572


$
5,622


$
6,443Cost of revenues


7,159



5,016



8,224Gross profit (loss)


1,413



606



(1,781
)Operating expensesResearch and development


1,838



1,228



2,505Selling, general and administrative


6,558



6,223



8,692Total operating expenses


8,396



7,451



11,197Other income and (expense)Interest and other income (expense), net


(437
)


(196
)


202Equity in losses of non-consolidated joint venture, net






(4
)


(118
)Total other income and (expense)


(437
)


(200
)


84Net loss

$
(7,420
)

$
(7,045
)

$
(12,894
)Per common share:Basic and diluted loss per share

$
(0.24
)

$
(0.33
)

$
(0.66
)Weighted average number of common shares outstanding


31,422



21,385



19,660Balance Sheet DataTotal assets

$
17,690


$
22,011


$
19,242Long-term debt

$
1,286


$
1,286


$
1,263Shareholders equity

$
10,646


$
17,247


$
14,143  17




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##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS    Overview
        
    Freightliner Custom Chassis Corporation (FCCC), a
    division of Daimler Trucks North America, and Enova entered into
    the final phase of our all-electric commercial chassis
    development program. The development program included
    collaboration and involved the engineering and integration of
    Enovas 120kW all-electric drive system technology into the
    MT-45 walk-in van chassis. Freightliners highest volume
    MT-45 chassis is used by a range of customers, including UPS and
    Federal Express. Design, engineering, integration and testing
    activities were conducted at the FCCC plant in Gaffney, SC and
    the Enova facility in Torrance, CA. The resulting integration of
    our all-electric drive system into the MT-45 chassis branded a
    new, FCCC all-electric product offering: the FCCC MT-EV. The
    MT-EV chassis boasts a GVWR of 14,000 to 19,500 lbs. The durable
    steel straight-rail chassis frame reduces flex and bowing to
    minimize stress while carrying heavy payloads. The quiet
    operation of the all-electric MT-EV also makes for an enjoyable
    driver experience. The MT-EV has a flat-leaf spring front and
    rear suspension, allowing for a smooth, solid ride that
    minimizes cargo shifts on uneven road surfaces.
    Navistar, one of the largest manufacturer and marketer of medium
    and heavy trucks and mid-range diesel engines, continued a
    relationship that started in 2005 by delivering systems in 2010
    as part of an intended large scale deployment to hybrid school
    buses to school districts. Enova supports this commitment by
    engineering a post-transmission hybrid drive system that
    integrates easily and non-invasively. Several states and school
    districts have indicated expressed interest in expanding their
    hybrid school bus fleets. As a result, Enova delivered 25 charge
    depleting systems to Navistar in 2010.
    Chinas FAW, the countrys oldest indigenous
    automaker, also continued its commercial relationship with Enova
    by integrating its pre-transmission hybrid drive systems for the
    Jiefang 103 passenger hybrid bus. These buses were first
    showcased at the 2008 Beijing Summer Olympics and then in 2010
    Worlds Expo in Shanghai. Enova delivered a total of 120
    pre-transmission hybrid drive systems to FAW in 2010.
    The U.S. General Services Administration (GSA)
    extended its contract with Enova as the exclusive supplier
    contract of the all-electric step van. GSA procures vehicles for
    government agencies and the armed forces. Under this contract,
    Enova will coordinate the supply of MT-EV all-electric walk-in
    step vans to GSA under the Cargo Vans category. Enova continues
    to benefit from federal fleet penetration via GSA with the 18




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##### Table of Contents



Smith Electric Vehicles (Smith) Newton product
    offering in the Medium and Heavy Duty vehicle category. The
    Smith Newton is another exclusive, all-electric medium and heavy
    duty truck offering on the GSA product menu. Moreover, Navistar
    continued to demonstrate its leadership in the American school
    bus market with its exclusive GSA contract to supply hybrid
    school buses. Enova is supplies hybrid electric drive systems to
    IC Bus, an affiliated division of Navistar.  
    Enova and Remy Inc. (Remy) entered into an agreement
    to develop a new electric drive system based on Enovas
    next generation Omni controller and Remy HVH motor. Remy is
    North Americas largest independent manufacturer of
    advanced electric propulsion motors. Remys patented design
    and assembly technology have been in production since 2006 and
    are currently powering vehicles around the world. The optimized
    controller-motor solution in development demonstrates the strong
    technology heritage and commitment to customers that Enova
    continues to bring to the hybrid and all-electric vehicle market.
    Smith Electric Vehicles N.A. Inc. (Smith) received a
    grant of $32 million as part of the American Recovery and
    Reinvestment Act of 2009, a U.S. Department of Energy
    program in the form of cost-share grants for supporting the
    construction of U.S. based manufacturing plants to produce
    batteries and electric drive components. The program seeks to
    establish development, demonstration, evaluation, and education
    projects to accelerate the market introduction and penetration
    of advanced electric drive vehicles. As production is ramps up,
    we anticipate the opportunity to continue to supply Smith with
    our all-electric vehicle drive systems that are used to power
    Smiths Newton trucks.
    The Company delivered a total of 369 full systems and 48
    additional motor controller units of Enova drive systems to its
    broad range of customers. Enova delivered 149 all-electric drive
    systems to Smith in 2010. Smiths Newton product offering
    carries a GVWR of 26,000 lbs. Enova also delivered 120
    pre-transmission hybrid drive systems to FAW for their Jiefang
    103 passenger hybrid bus and 25 charge depleting bus systems to
    Navistar during the year.    state-of-the-art
     19




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##### Table of Contents



Critical
    Accounting Policies
    Form 10-K.
  Revenue Recognition
  percentage-of-completion
  work-in-progress.
    Warranty
  Allowance for doubtful accounts
 20




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##### Table of Contents



Inventory first-in,
  Inventory reserve
  Property and Equipment
    Impairment of Long-Lived Assets ASC 360-10-35-15,
  Intangible Assets
  Stock-Based Compensation
    Deferred Income Taxes
 21




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##### Table of Contents



Research and Development
  Recent
    Accounting Pronouncements
  No. 2010-17, Milestone Method of Revenue Recognition 2010-17. 2010-17 2010-17 2010-17 2010-17 2010-17
  2010-06
  No. 2009-14, Certain Revenue Arrangements That
    Include Software Elements  a consensus of the FASB
    EITF 2009-14. 2009-14
  No. 2009-13, Revenue Recognition (Topic 650): Multiple-Deliverable Revenue
    Arrangements  a consensus of the FASB EITF 2009-13. 2009-13
 22




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##### Table of Contents



Results
    of Operations
  Years
    Ended December 31, 2010 and 2009
  Net Revenues.
  Cost of Revenues.
  Gross Margin.
  Research and Development Expenses.
  Selling, General and Administrative
    Expenses.
 23




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##### Table of Contents



Interest and Other Income (Expense).
  Equity in losses of non-consolidated joint
    venture.
  Liquidity
    and Capital Resources
  and/or
           24




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   25




---



##### 



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  ENOVA
    SYSTEMS, INC.
  CONTENTS
 December 31,
    2010 and 2009
   
 PageREPORT OF INDEPENDENT REGISTERED PUBLIC
    ACCOUNTING FIRM


27FINANCIAL STATEMENTSBalance Sheets


28Statements of Operations


29Statements of Stockholders Equity


30Statements of Cash Flows


31Notes to Financial Statements


32   26




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           
     27




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##### Table of Contents



ENOVA
    SYSTEMS, INC.
  BALANCE
    SHEETS
  December 31,2010


2009ASSETSCurrent assets:Cash and cash equivalents

$
8,431,000


$
13,078,000Certificate of deposit, restricted


200,000



200,000Accounts receivable, net


2,850,000



1,442,000Inventories and supplies, net


4,455,000



5,605,000Prepaid expenses and other current assets


482,000



263,000Total current assets


16,418,000



20,588,000Long term accounts receivable


100,000



Property and equipment, net


1,172,000



1,363,000Intangible assets, net






60,000Total assets

$
17,690,000


$
22,011,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
1,847,000


$
415,000Deferred revenues


31,000



357,000Accrued payroll and related expenses


922,000



277,000Other accrued liabilities


1,739,000



1,287,000Current portion of notes payable


63,000



68,000Total current liabilities


4,602,000



2,404,000Accrued interest payable


1,156,000



1,074,000Notes payable, net of current portion


1,286,000



1,286,000Total liabilities


7,044,000



4,764,000Commitments and contingencies (Note 11)Stockholders equity:Series A convertible preferred stock  no par
    value, 30,000,000 shares authorized; 2,652,000 shares
    issued and outstanding; liquidating preference at $0.60 per
    share as of December 31, 2010 and 2009


530,000



530,000Series B convertible preferred stock  no par
    value, 5,000,000 shares authorized; 546,000 shares
    issued and outstanding; liquidating preference at $2 per share
    as of December 31, 2010 and 2009


1,094,000



1,094,000Common stock  no par value, 750,000,000 shares
    authorized; 31,479,000 and 31,404,000 shares issued and
    outstanding as of December 31, 2010 and 2009, respectively


144,110,000



143,995,000Additional paid-in capital


9,040,000



8,336,000Accumulated deficit


(144,128,000
)


(136,708,000
)Total stockholders equity


10,646,000



17,247,000Total liabilities and stockholders equity

$
17,690,000


$
22,011,000    28




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##### Table of Contents



ENOVA
    SYSTEMS, INC.
  STATEMENTS
    OF OPERATIONS
  For the Years EndedDecember 31,2010


2009Revenues

$
8,572,000


$
5,622,000Cost of revenues


7,159,000



5,016,000Gross income


1,413,000



606,000Operating expensesResearch and development


1,838,000



1,228,000Selling, general & administrative


6,558,000



6,223,000Total operating expenses


8,396,000



7,451,000Operating loss


(6,983,000
)


(6,845,000
)Other income and (expense)Interest and other income (expense)


(437,000
)


(196,000
)Equity in losses of non-consolidated joint venture, net






(4,000
)Total other income and (expense)


(437,000
)


(200,000
)Net loss

$
(7,420,000
)

$
(7,045,000
)Basic and diluted loss per share

$
(0.24
)

$
(0.33
)Weighted average number of common shares outstanding


31,422,000



21,385,000    29




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##### Table of Contents



ENOVA
    SYSTEMS, INC.
  STATEMENTS
    OF STOCKHOLDERS EQUITY
  Convertible Preferred Stock








Additional





TotalSeries A


Series B


Common Stock


Paid-in


Accumulated


StockholdersShares


Amount


Shares


Amount


Shares


Amount


Capital


Deficit


EquityBalance, December 31, 2008


2,652,000


$
530,000



546,000


$
1,094,000



20,817,000


$
134,233,000


$
7,949,000


$
(129,663,000
)

$
14,143,000Issuance of common stock upon exercise of stock options


















23,000



5,000











5,000Issuance of common stock for cash


















10,348,000



9,420,000











9,420,000Issuance of common stock for director services


















158,000



165,000











165,000Issuance of common stock for employee services


















58,000



172,000











172,000Stock option expense


























387,000







387,000Net loss






























(7,045,000
)


(7,045,000
)Balance, December 31, 2009


2,652,000


$
530,000



546,000


$
1,094,000



31,404,000


$
143,995,000


$
8,336,000


$
(136,708,000
)

$
17,247,000Issuance of common stock upon exercise of stock options


















50,000



20,000











20,000Issuance of common stock for employee services


















25,000



95,000











95,000Stock option expense


























704,000







704,000Net loss






























(7,420,000
)


(7,420,000
)Balance, December 31, 2010


2,652,000


$
530,000



546,000


$
1,094,000



31,479,000


$
144,110,000


$
9,040,000


$
(144,128,000
)

$
10,646,000




---



##### Table of Contents





ENOVA
    SYSTEMS, INC.
  STATEMENTS
    OF CASH FLOWS
  For the Years EndedDecember 31,2010


2009Cash flows from operating activitiesNet loss

$
(7,420,000
)

$
(7,045,000
)Adjustments to reconcile net loss to net cash used in operating
    activitiesDepreciation and amortization


539,000



605,000Loss on asset disposal






58,000Loss on impairment


55,000



Inventory reserve


232,000



714,000Loss on litigation settlement


328,000



Equity in losses of non-consolidated joint venture






10,000Gain from dissolution of non-consolidated joint venture






(6,000
)Issuance of common stock for director services






165,000Issuance of common stock for employee services


95,000



172,000Stock option expense


704,000



387,000(Increase) decrease in:Certificate of deposit, restricted






1,800,000Accounts receivable


(1,408,000
)


(644,000
)Inventories and supplies


918,000



2,509,000Prepaid expenses and other current assets


(219,000
)


(48,000
)Long term accounts receivable


(100,000
)


Increase (decrease) in:Accounts payable


1,432,000



(100,000
)Deferred revenues


(326,000
)


357,000Accrued payroll and related expenses


645,000



(18,000
)Other accrued liabilities


124,000



(607,000
)Accrued interest payable


82,000



82,000Net cash used in operating activities


(4,319,000
)


(1,609,000
)Cash flows from investing activitiesProceeds from the dissolution of non-consolidated joint venture






137,000Purchases of property and equipment


(317,000
)


(135,000
)Net cash provided by (used in) investing activities


(317,000
)


2,000Cash flows from financing activitiesPayments on notes payable


(31,000
)


(64,000
)Net proceeds from sales of common stock






9,420,000Proceeds from the exercise of stock options


20,000



5,000Net cash provided by (used in) financing activities


(11,000
)


9,361,000Net increase (decrease) in cash and cash equivalents


(4,647,000
)


7,754,000Cash and cash equivalents, beginning of period


13,078,000



5,324,000Cash and cash equivalents, end of period

$
8,431,000


$
13,078,000Supplemental disclosure of cash flow informationInterest paid

$
5,000


$
7,000Assets acquired through financing arrangements

$
26,000


$
57,000Net assets acquired in exchange for Enovas interest in
    joint venture:Inventory

$



$
1,179,000Reduction of related party payable, net of receivable

$



$
32,000    31




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##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS
  1.
    Description
    of Business  General
    Liquidity
      2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation
    Reclassifications
   32




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##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Revenue
    Recognition
      
    Persuasive evidence of an arrangement exists;
    Delivery has occurred or services have been rendered;
    The fee for the arrangement is fixed or determinable; and
    Collectibility is reasonably assured.  Persuasive Evidence of an Arrangement
  Delivery Has Occurred or Services Have Been
    Rendered
  The Fee for the Arrangement is Fixed or
    Determinable
  Collectibility is Reasonably Assured customer-by-customer
    percentage-of-completion
 33




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  work-in-progress.
  Deferred
    Revenues
    Warranty
    Costs
    Shipping
    and Handling Costs
    Cash
    and Cash Equivalents
    Certificate
    of deposit, restricted
    Accounts
    Receivable and Allowance for Doubtful Accounts
   34




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Inventory
  work-in-progress, first-in,
  Inventory
    reserve
    Property
    and Equipment
      Impairment
    of Long-Lived Assets
    Patents
   35




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Impairment
    of Intangible Assets
    Fair
    Value of Financial Instruments
      Stock-Based
    Compensation
          Research
    and Development
   36




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Income
    Taxes
      Loss
    Per Share
      Fiscal Years EndedDecember 31,2010


2009Options to purchase common stock


1,393,000



1,410,000Series A and B preferred shares conversion


84,000



84,000Potential equivalent shares excluded


1,477,000



1,494,000   Commitments
    and Contingencies
   37




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Estimates
    Concentration
    of Credit Risk
    Recent
    Accounting Pronouncements
  No. 2010-17, Milestone Method of Revenue Recognition 2010-17. 2010-17 2010-17 2010-17 2010-17 2010-17
  2010-06
  No. 2009-14, Certain Revenue Arrangements That
    Include Software Elements  a consensus of the FASB
    EITF 2009-14. 2009-14
 38




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    No. 2009-13, Revenue Recognition (Topic 650): Multiple-Deliverable Revenue
    Arrangements  a consensus of the FASB EITF 2009-13. 2009-13
    3.
    Inventory  (first-in,
  2010


2009Raw materials

$
3,898,000


$
6,341,000Work-in-process


872,000



132,000Finished goods


314,000



111,000Reserve for obsolescence


(629,000
)


(979,000
)$
4,455,000


$
5,605,000    39




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  4.
    Property
    and Equipment    2010


2009Computers and software

$
601,000


$
556,000Machinery and equipment


958,000



795,000Furniture and office equipment


98,000



98,000Demonstration vehicles and buses


650,000



507,000Leasehold improvements


1,348,000



1,348,000Construction in progress






8,0003,655,000



3,312,000Less accumulated depreciation and amortization


(2,483,000
)


(1,949,000
)Total

$
1,172,000


$
1,363,000     5.
    Other
    Accrued Liabilities    2010


2009Accrued inventory received

$
54,000


$
334,000Accrued professional services


540,000



395,000Accrued warranty


510,000



558,000Accrued litigation settlement


525,000



Other


110,000



Total

$
1,739,000


$
1,287,000     2010


2009Balance at beginning of year

$
558,000


$
545,000Accruals for warranties issued during the period


427,000



383,000Warranty claims


(475,000
)


(370,000
)Balance at end of year

$
510,000


$
558,000   6.
    Investment
    in Non-Consolidated Joint Venture  ITC     40




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      AmountCash received at settlement

$
137,000Inventory received in settlement of purchase orders with HHI for
    Enovas share in joint venture


1,179,000Related party receivables and payables settled for Enovas
    share in joint venture


32,000Settlement amount


1,348,000Less: Joint venture investment balance as of April 6, 2009


(1,342,000
)Net gain resulting from dissolution of the joint venture

$
6,000     7.
    Intangible
    Assets      2010


2009Patents

$
93,000


$
93,000Less accumulated amortization and impairment


(93,000
)


(33,000
)Total

$



$
60,000    41




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##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  8.
    Notes
    Payable    2010


2009Secured note payable to Credit Managers Association of
    California, bearing interest at prime plus 3% (6.25% as of
    December 31, 2010), and is adjusted annually in April
    through maturity. Principal and unpaid interest due in April
    2016. A sinking fund escrow may be funded with 10% of future
    equity financing, as defined in the Agreement

$
1,238,000


$
1,238,000Secured note payable to a financial institution in the original
    amount of $23,000, bearing interest at 11.70%, payable in 36
    equal monthly installments of principal and interest through
    October 1, 2010






8,000Secured note payable to a Coca Cola Enterprises in the original
    amount of $40,000, bearing interest at 10% per annum. Principal
    and unpaid interest due on demand


40,000



40,000Secured note payable to a financial institution in the original
    amount of $39,000, bearing interest at 4.99% per annum, payable
    in 48 equal monthly installments of principal and interest
    through September 1, 2011


8,000



18,000Secured note payable to a financial institution in the original
    amount of $38,000, bearing interest at 8.25% per annum, payable
    in 60 equal monthly installments of principal and interest
    through February 19, 2014


25,000



32,000Secured note payable to a financial institution in the original
    amount of $19,000, bearing interest at 10.50% per annum, payable
    in 60 equal monthly installments of principal and interest
    through August 25, 2014


15,000



18,000Secured note payable to a financial institution in the original
    amount of $26,000, bearing interest at 7.91% per annum, payable
    in 60 equal monthly installments of principal and interest
    through April 9, 2015


23,000



1,349,000



1,354,000Less current portion of notes payable


(63,000
)


(68,000
)Notes payable, net of current portion

$
1,286,000


$
1,286,000    42




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##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  :
  Year Ending

PrincipalDecember 31

Amounts2011


63,0002012


17,0002013


19,0002014


10,0002015


2,000Thereafter


1,238,000Total

$
1,349,000   9.
    Revolving
    Credit Agreement      10.
    Deferred
    Revenues    11.
    Commitments
    and Contingencies  Leases
  month-to-month
 43




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##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Year Ending

OperatingDecember 31

Leases2011

$
439,0002012


439,000Total

$
878,000   12.
    Stockholders
    Equity  Common
    Stock
            Series A
    Preferred Stock
  1 45
 44




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##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Series B
    Preferred Stock
  2 45
  13.
    Stock
    Options  Stock
    Option Program Description
         45




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    WeightedWeighted


AverageNumber of


Average


Remaining


AggregateShare


Exercise


Contractual


IntrinsicOptions


Price


Life


Value(1)Outstanding at December 31, 2008


623,000


$
4.02



7.09


$
Granted


903,000


$
0.89



8.60


$
Exercised


(23,000
)

$
0.23






$
13,000Forfeited or Cancelled


(93,000
)

$
3.67






$
Outstanding at December 31, 2009


1,410,000


$
2.10



7.65


$
Granted


104,000


$
1.34



9.94


$
Exercised


(50,000
)

$
0.41






$
42,000Forfeited or Cancelled


(71,000
)

$
2.93






$
Outstanding at December 31, 2010


1,393,000


$
2.06



6.92


$
267,000Exercisable at December 31, 2010


958,000


$
2.48



6.62


$
177,000Vested and expected to vest(2)


1,304,000


$
2.13



6.99


$
241,000     (1)
    
    Aggregate intrinsic value represents the value of the closing
    price per share of our common stock on the last trading day of
    the fiscal period in excess of the exercise price multiplied by
    the number of options outstanding or exercisable, except for the
    Exercised line, which uses the closing price on the
    date exercised.(2)
    
    Number of shares includes options vested and those expected to
    vest net of estimated forfeitures.      Unvested


Weighted-AverageNumber of


Grant Date FairOptions


ValueUnvested balance at December 31, 2009


879,000


$
0.98Granted


104,000


$
1.22Vested


(517,000
)

$
1.10Forfeited


(31,000
)

$
1.22Unvested balance at December 31, 2010


435,000


$
0.93  46




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Years EndedDecember 31,2010


2009Total intrinsic value of stock options exercised

$
42,000


$
13,000Cash received from stock option exercises

$
20,000


$
5,000Gross income tax benefit from the exercise of stock options

$



$
   Valuation
    and Expense Information
      Years EndedDecember 31,2010

2009Expected life (in years)


5.5


2-3Average risk-free interest rate


2
%

2%Expected volatility


143
%

120 - 194%Expected dividend yield


0
%

0%Forfeiture rate


3
%

3%     Restricted
    Stock
   47




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  14.
    Income
    Taxes    2010


2009Deferred tax assetsNet operating loss carry-forwards

$
28,186,000


$
25,440,000Stock based compensation


488,000



248,000Other, net


(598,000
)


(421,000
)28,076,000



25,267,000Less valuation allowance


(28,076,000
)


(25,267,000
)Net deferred tax assets

$



$
         December 31,


December 31,2010


2009Tax benefit computed at 34%

$
(2,523,000
)

$
(2,395,000
)Change in valuation allowance


2,809,000



(9,247,000
)State tax (net of Federal benefit)


(431,000
)


(389,000
)Change in carryovers and tax attributes


145,000



12,031,000Net tax benefit

$



$
     15.
    Employee
    Benefit Plan   48




---



##### Table of Contents



ENOVA
    SYSTEMS, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    16.
    Geographic
    Area Data    2010


2009United States

$
6,752,000


$
1,660,000China


1,187,000



3,142,000United Kingdom


427,000



534,000Italy


206,000



161,000Korea






111,000Canada






14,000Total

$
8,572,000


$
5,622,000   17.
    Concentration    18.
    Subsequent
    Events  8-K
     49




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##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURES    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(b) Rule 13a-15(e)
  Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f)
        Changes
    in Internal Control over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION   50




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    Name

Age

PositionRichard Davies(3)(5)


42


DirectorJohn Micek


58


Chief Financial Officer and DirectorJohn Mullins


46


Chief Operating OfficerEdwin O. Riddell(1)


69


DirectorRoy Roberts(2)(4)(5)


71


DirectorMichael Staran


50


Chief Executive Officer and DirectorJohn Wallace(2)(4)(5)


62


Director     (1)
    
    Audit Committee Chairman(2)
    
    Audit Committee Member(3)
    
    Compensation Committee Chairman(4)
    
    Compensation Committee Member(5)
    
    Nomination and Governance Committee  Richard Davies.
  John J. Micek.
  John Mullins.
 51




---



##### Table of Contents



Edwin O. Riddell.
  Roy S. Roberts.
  Michael Staran.
  John R. Wallace.
 52




---



##### Table of Contents



Board of
    Directors and its Committee
  Audit Committee.
  Compensation Committee.
  Nominating and Governance Committee.
  Code of
    Ethics
  www.enovasystems.com
  Section 16(a)
    Beneficial Ownership Reporting Compliance
   53




---



##### Table of Contents



ITEM 11.
    EXECUTIVE
    COMPENSATION    SUMMARY
    COMPENSATION TABLE
  Non-EquityOptions

Incentive Plan

All otherFiscal

Salary

Bonus

Awards

Compensation

Compensation

TotalName and Principal Position

Year

($)

($)(A)(F)

($)(B)

($)(C)

($)(D)

($)Michael Staran


2010


$
265,000


$
60,000


$



$
96,200


$
66,931


$
488,131Chief Executive Officer


2009


$
250,000


$
140,000


$
162,261


$



$
76,850


$
629,111Jarett Fenton(E)


2010


$
196,350


$



$



$
48,444


$
17,519


$
262,313Chief Financial Officer


2009


$
185,050


$
60,000


$
95,687


$



$
16,174


$
356,911John Mullins


2010


$
200,000


$
50,000


$



$
61,444


$
8,817


$
320,061Chief Operating Officer


2009


$
175,346


$
50,000


$
72,306


$



$
277


$
297,929     (A)
    
    For the 2009 year, the Board of Directors awarded
    discretionary bonuses to the companys officers in December
    2009 based on several factors, predominately due to the
    negotiation of the equity raise with the payment of minimal
    investment banking fees in December 2009.(B)
    
    The valuation of option awards issued to employees are
    calculated in accordance with SEC rules as the grant date fair
    value in accordance with FASB ASC 718 consistent with the
    assumptions set forth in Note 13 to the financial
    statements in this Annual Report on
    Form 10-K.(C)
    
    For the 2010 year, Messrs. Staran, Mullins, and Fenton
    earned compensation based on the Board of Directors
    March 22, 2010 establishment of executive compensation
    where the amount of compensation paid was dependent on achieving
    a gross margin and cash balance target for the year ended
    12/31/2010. Mr. Staran earned $80,000 and $16,000;
    Mr. Fenton earned $40,000 and $8,000; Mr. Mullins
    earned $50,000 and $11,000, for achieving certain cash and gross
    margin targets, respectively.(D)
    
    For Mr. Staran, the amount shown attributable to 2010
    includes (i) $36,406 for lease of apartment and related
    insurance; (ii) $10,147 for auto allowance and insurance;
    (iii) $216 value of life insurance premiums paid; and
    (iv) $16,183 in medical insurance premiums. In 2009, the
    amounts shown attributable for Mr. Staran include:
    (i) $34,314 for lease of apartment and related insurance;
    (ii) $18,418 for auto allowance and insurance;
    (iii) $2,218 value of life insurance premiums paid; and
    (iv) $15,505 in medical insurance premiums. For
    Mr. Fenton, the amount shown attributable to 2010 includes
    (i) $216 value of life insurance premiums paid;
    (ii) $3,858 in medical insurance premiums paid; and
    iii) $11,612 in auto allowance and insurance. In 2009, the
    amounts shown attributable for Mr. Fenton include:
    (i) $2,218 value of life insurance premiums paid;
    (ii) $3,436 in medical insurance premiums paid; and
    iii) $8,828 in auto allowance and insurance. For
    Mr. Mullins, the amount shown attributable to 2010 includes
    (i) $7,504 in medical insurance premiums and (ii) $216
    value of life insurance premiums.(E)
    
    Mr. Fenton resigned as an officer of Enova and his
    employment ended as of December 31, 2010.(F)
    
    For the 2010 year, Messrs. Staran and Mullins earned
    bonus compensation based on the Board of Directors
    March 22, 2010 establishment of executive compensation
    where the amount of discretionary bonus paid was influenced on
    several discretionary factors, including, but not limited to
    gross margin and cash flow targets, amongst other discretionary
    factors as of
    12/31/2010.  Employment
    Agreement
   54




---



##### Table of Contents



Outstanding
    Equity Awards at Fiscal Year-Ended December 31,
    2010
  Option Awards

Stock AwardsNumber of

Number of





Number of

Market Value ofSecurities

Securities





Shares or

Shares orUnderlying

Underlying





Units of

Units ofUnexercised

Unexercised

Option

Option

Stock That

Stock ThatOptions (#)

Options (#)

Exercise

Expiration

Have Not

Have NotName

Exercisable

Unexercisable

Price

Date

Vested (#)

Vested ($)Michael Staran


41,667



58,333
(A)

$
1.26



12/18/2019




(F)


33,333



66,667
(B)

$
0.80



4/13/2014







100,000




(C)

$
3.81



3/23/2018







23,000






$
4.35



9/21/2015







Jarett Fenton


20,833



29,167
(A)

$
1.26



12/18/2019







23,333



46,667
(B)

$
0.80



4/13/2014







70,000




(C)

$
3.81



3/23/2018







John Mullins


20,833



29,167
(A)

$
1.26



12/18/2019







30,000




(C)

$
3.81



3/23/2018







17,500



12,500
(D)

$
0.80



4/13/2019







30,000




(E)

$
0.21



3/11/2019







     (A)
    
    The options were granted on December 18, 2009 and vest over
    three years on a quarterly basis on the last day of each
    calendar quarter provided the option holder is then an officer
    of Enova as of such date. The first 1/12 or 8.33% of the shares
    under each option vested on January 1, 2010. In the event
    there is a change of control of Enova, the options will become
    fully vested.(B)
    
    The options were granted on April 14, 2009 and vest over
    three years on an annual basis on the anniversary of the grant
    date provided the option holder is then an officer of Enova as
    of such date. The first 1/3 or 33.33% of the shares under each
    option vested on April 14, 2010. In the event there is a
    change of control of Enova, the options will become fully vested.(C)
    
    The options were granted on March 24, 2008 and vest over
    three years on an annual basis on December 31st of each
    year, provided the option holder is then an officer of Enova as
    of such date. The final 1/3 or 33.33% of the shares under each
    option vested on December 31, 2010.(D)
    
    The options were granted on April 14, 2009 and vest over
    three years on a quarterly basis on the last day of each
    calendar quarter provided the option holder is then an officer
    of Enova as of such date. The first 1/12 or 8.33% of the shares
    under each option vested on June 30, 2009. In the event
    there is a change of control of Enova, the options will become
    fully vested.(E)
    
    The options were granted on March 12, 2009 and vest over
    two years on a quarterly basis on the last day of each calendar
    quarter provided the option holder is then an officer of Enova
    as of such date. The first 1/8 or 12.5% of the shares under each
    option vested on March 31, 2009. In the event there is a
    change of control of Enova, the options will become fully vested.(F)
    
    Equity shares totaling 75,000 shares were granted on
    April 4, 2008 and vested over three years on an annual
    basis on December 31st of each year, as the holder was then
    an officer of Enova as of such date. 55




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Current
    Equity Incentive Plans
    Change
    of Control and Retirement Arrangements
           56




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##### Table of Contents



Director
    Compensation
    FeesEarned orPaid in

OptionNon-Executive

Cash

Awards

TotalDirector Name

($)

($)

($)Richard Davies(A)










John Micek(D)

$
30,000






$
30,000Edwin Riddell(B)

$
20,000


$
42,000


$
62,000Roy Roberts(B)(C)

$
25,000


$
42,000


$
67,000John Wallace(B)(C)

$
25,000


$
42,000


$
67,000     (A)
    
    Mr. Davies elected not to receive compensation for his
    services in the year ended December 31, 2010.
    Mr. Davies did not receive anything in return for not
    receiving compensation in the year ended December 31, 2010.(B)
    
    In 2010, Messrs. Riddell, Roberts and Wallace received
    equity options with a grant date fair value of $42,000 for each
    director, that vest over one year on a quarterly basis on the
    last date of each calendar quarter. The options will become
    fully vested on December 31, 2011.(C)
    
    In 2010, Messrs. Roberts and Wallace were entitled to cash
    compensation of $5,000 each for their services as members of the
    audit committee.(D)
    
    In 2010, Mr. Micek was entitled to cash compensation of
    $10,000 for his services as chairman of the audit committee.    out-of-pocket
 57




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##### Table of Contents



ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Regulation 13D-G.
  Percent of Common Stock,Series A and Series BNumber of

Percent of

Preferred Stock,Shares of

Common

and Common StockOwner

Common Stock

Stock

Voting TogetherJagen, Pty., Ltd.(1)


3,222,222



10.3
%


10.2
%9 Oxford Street, South Ybarra 3141 Melbourne,
    Victoria AustraliaShell Asset Management BV(2)


6,054,960



19.3
%


19.2
%Sir Winston Churchillaan 366H, 2285 SJ Rijswijk ZH,
    The NetherlandsJ O Hambro Capital Management Group Limited(3)


2,227,500



7.1
%


7.1
%Ground Floor, Ryder Court 14 Ryder Street London,
    United Kingdom SW1Y 6QB
    Klaustrasse 10 8008 Zurich, SwitzerlandSpecial Situation Fund, L.P.(4)


4,413,622



14.0
%


14.0
%527 Madison Avenue, Suite 2600, New York, NY 10022Swiss Global Asset Management AG(5)


1,771,750



5.6
%


5.6
%69, route dEsch, L-1470, LuxembourgJarett Fenton(6)


119,166



*



*Michael Staran(7)


335,167



1.1
%


1.1
%John Mullins(8)


80,000



*



*Richard Davies(1)


3,222,222



10.3
%


10.2
%John J. Micek(9)


218,408



*



*Roy S. Roberts(9)


85,745



*



*John R. Wallace(9)


106,438



*



*Edwin O. Riddell(10)


144,167



*



*All Executive Officers and Directors as a group


4,311,313



13.7
%


13.7
%     (1)
    
    Jagen Pty. Ltd. (Jagen) shares beneficial ownership with
    Jagens controlling shareholder, the B. Liberman Family
    Trust and its trustee, Jagen Nominees, Pty. Ltd. Mr. Davies
    is Managing Director for Jagen. Boris and Helen Liberman possess
    ultimate voting and discretionary authority over the shares.(2)
    
    Based on a Form 3 filed December 15, 2009. Shell Asset
    Management Company BV manages assets of The Shell Group and its
    subsidiaries and affiliates, including certain pension plans
    organized for the benefit of employees of The Shell Group. As
    such, The Shell Group and such subsidiaries and affiliates,
    including such pension plans, have the right to the receipt of
    dividends from, and the proceeds from the sale of, the shares of
    common stock. 58




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##### Table of Contents



(3)
    
    Based upon a Holding(s) in Company filed on August 19, 2008
    via the Regulatory News Service (RNS) on the London
    Stock Exchange.(4)
    
    Based on a Schedule 13G filed February 11, 2011. MGP
    Advisors Limited (MGP) is the general partner of the
    Special Situations Fund III, QP, L.P. AWM Investment
    Company, Inc. (AWM) is the general partner of MGP
    and the general partner of and investment adviser to the Special
    Situations Cayman Fund, L.P. Austin W. Marxe and David M.
    Greenhouse are the principal owners of MGP and AWM. Through
    their control of MGP and AWM, Messrs. Marxe and Greenhouse
    share voting and investment power over the portfolio securities
    of each of the funds listed above.(5)
    
    Based on a Schedule 13G filed February 11, 2011. SAM
    Sustainable Asset Management AG (SAM), as investment
    adviser of the Julius Bar Multipartner SAM Smart Energy Fund
    (part of the Julius Barr Multipartner SICAV), holds
    investment power over the shares listed above. The voting power
    of the shares listed above is held by the Julius Barr
    Multipartner SICAV fund administrator, Swiss & Global
    Asset Management Ltd. Zurich, which has delegated such voting
    power over the shares listed above to SAM which in turn, has
    delegated such voting power to Robeco Institutional Asset
    Management.(6)
    
    Includes 114,166 shares of common stock underlying stock
    options that are exercisable within 60 days.
    Mr. Fenton resigned as an officer and his employment ended
    effective December 31, 2010.(7)
    
    Includes 239,667 shares of common stock underlying stock
    options that are exercisable within 60 days.(8)
    
    Includes 80,000 shares of common stock underlying stock
    options that are exercisable within 60 days.(9)
    
    Includes 34,500 shares of common stock underlying stock
    options that are exercisable within 60 days.(10)
    
    Includes 64,500 shares of common stock underlying stock
    options that are exercisable within 60 days.  Equity
    Compensation Plan Information
    Number of SecuritiesRemaining Available forFuture Issuance UnderNumber of Securities to


Weighted-Average


Equity Compensationbe Issued upon Exercise


Exercise Price of


Plans (Excludingof Outstanding Options,


Outstanding Options,


Securities Reflected inWarrants and Rights


Warrants and Rights


Column (a))Plan Category

(a)


(b)


(c)Equity compensation plans approved by security holders


1,393,000


$
2.06



1,607,000Equity compensation plans not approved by security holders










Total


1,393,000


$
2.06



1,607,000  59




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##### Table of Contents



ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    Pre-Approval
    of Audit and Permissible Non-Audit Services
  case-by-case
  Audit
    Fees
    2010

2009Audit Fees

$
200,000


$
195,000Audit-Related Fees

$



$
25,000Tax Fees

$
14,000


$
13,000All Other Fees

$
14,000



Total

$
228,000


$
233,000    PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  (a) 1. Financial Statements
    (a) 2. Financial Statement Schedule
    (a) 3. Exhibits
  Exhibit #

Description3
.1

Our Amended and Restated Articles of Incorporation (incorporated
    by reference to Exhibit 3.1 of our Annual Report on
    Form 10-K
    for the fiscal year ending December 31, 2006, as filed on
    April 2, 2007)3
.2

Our Amended and Restated bylaws (incorporated by reference to
    Exhibit 3.2 of our Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2009, as filed on
    November 12, 2009) 60




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##### Table of Contents



Exhibit #

Description10
.1

Form of Indemnification Agreement (incorporated by reference to
    Exhibit 10.26 of our Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2005, as filed on
    August 15, 2005)10
.2

Form of Security Agreement entered into May 31, 1995
    between us and Credit Managers Association of California,
    Trustee (incorporated by reference to Exhibit 10.65 of our
    Quarterly Report on
    Form 10-Q
    for the period ended April 30, 1996, as filed on
    June 14, 1996)10
.3

Commercial Promissory Note dated October 10, 2007 between
    us and Union Bank of California (incorporated by reference to
    Exhibit 10.3 of our Annual Report
    Form 10-K
    for the period ended December 31 2007, as filed on
    March 26, 2008)10
.4

Placing Agreement in connection with an application to join AIM
    dated July 19, 2005 between us and Investec Bank (UK)
    Limited (incorporated by reference to Exhibit 10.28 of our
    amended Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2005, as filed
    November 21, 2005)10
.5

Agreement relating to the appointment of a Nominated Adviser and
    Broker dated July 19, 2005 between us and Investec Bank
    (UK) Limited (incorporated by reference to Exhibit 10.29 of
    our amended Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2005, as filed
    November 21, 2005)10
.6

Placing Agreement dated July 25, 2007 between us and
    Investec Bank (UK) Limited (incorporated by reference to
    Exhibit 10 of our Current Report on
    Form 8-K
    as amended filed August 7, 2007)10
.7

Facility Lease Agreement entered into October 17, 2007
    between us and Sunshine Distribution L.P., (incorporated by
    reference to Exhibit 10.1 of our Current Report on
    Form 8-K
    filed October 23, 2007)10
.8

Retirement Agreement and Limited Release entered into
    July 12, 2007 between us and Edwin Riddell, formerly our
    Chief Executive Officer and President (incorporated by reference
    to Exhibit 10 of our Current Report on
    Form 8-K
    as amended filed July 16, 2007)+10
.9

Employment Agreement entered into February 11, 2008 between
    us and Michael Staran, our President and Chief Executive Officer
    (incorporated by reference to Exhibit 10.1 of our Current
    Report on
    Form 8-K
    filed February 15, 2008)+10
.10

Placing Agreement entered into March 26, 2008 (incorporated
    by reference to Exhibit 10 of our Current Report on
    Form 8-K/A
    filed April 4, 2008)10
.11

Securities Purchase Agreement entered into April 23, 2008
    (incorporated by reference to Exhibit 10.1 of our Current
    Report on
    Form 8-K
    filed April 24, 2008)10
.12

Registration Rights Agreement entered into April 23, 2008
    (incorporated by reference to Exhibit 10.2 of our Current
    Report on
    Form 8-K
    filed April 24, 2008)10
.13

Supply Agreement with Navistar, Inc. entered into May 16,
    2008 (incorporated by reference to Exhibit 10.4 of our
    Quarterly Report on
    Form 10-Q
    for the three month period ending July 30, 2008, as filed
    on August 14, 2008) #10
.14

Stock Purchase Agreement entered into April 6, 2009
    (incorporated by reference to Exhibit 99.1 of our Current
    Report on
    Form 8-K
    filed April 6, 2009)10
.15

Joint Venture Dissolution and Termination Agreement entered into
    April 6, 2009 (incorporated by reference to
    Exhibit 99.2 of our Current Report on
    Form 8-K
    filed April 6, 2009)10
.16

Securities Purchase Agreement entered into October 29, 2009
    (incorporated by reference to Exhibit 99.1 of our Current
    Report on
    Form 8-K
    filed October 30, 2009)10
.17

Placing Agreement entered into October 29, 2009
    (incorporated by reference to Exhibit 99.3 of our Current
    Report on
    Form 8-K
    filed October 30, 2009)10
.18

Registration Rights Agreement entered into December 15,
    2009 (incorporated by reference to Exhibit 99.1 of our
    Current Report on
    Form 8-K
    filed December 15, 2009)10
.19

Amendment to Employment Agreement entered into on
    February 17, 2009 (incorporated by reference to
    Item 5.02 of our Current Report on
    Form 8-K
    filed February 23, 2009)+10
.20

Bonus Arrangement between us and Mike Staran, John Mullins, and
    John Micek (incorporated by referenced to item 5.02 on
    Form 8-K
    filed December 13, 2010)+10
.21

Separation Agreement and General Release between us and Jarett
    Fenton effective as of December 10, 2010+*10
.22

Severance Agreement between us and John Mullins effective as of
    August 31, 2009+* 61




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##### Table of Contents



Exhibit #

Description23
.1

Consent of PMB Helin Donovan*31
.1

Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002*31
.2

Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002*32


Certification Pursuant to 18 U.S.C. Section 1350*     *
    
    Filed herewith.+
    
    Management contract or compensatory plan or arrangement.#
    
    Portions of the exhibit have been omitted pursuant to a request
    for confidential treatment submitted to the Securities and
    Exchange Commission. 62




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##### Table of Contents



SIGNATURES
    ENOVA SYSTEMS, INC.
  By:
    /s/  Michael
    Staran       POWER OF
    ATTORNEY
  Form 10-K,
    Signature

Title

Date/s/  Michael
    StaranMichael
    Staran

Chief Executive Officer,
    President, and Director
    (Principal Executive Officer)

March 30, 2011/s/  John
    MicekJohn
    Micek

Chief Financial Officer and Director (Principal Financial
    Officer and Principal Accounting Officer)

March 30, 2011/s/  John
    R. WallaceJohn
    R. Wallace

Director, Chairman of the Board

March 30, 2011/s/  Richard
    DaviesRichard
    Davies

Director

March 30, 2011/s/  Roy
    RobertsRoy
    Roberts

Director

March 30, 2011/s/  Edwin
    RiddellEdwin
    Riddell

Director

March 30, 2011  63