As filed with the Securities and Exchange Commission on June 14, 2002


                      Registration Statement No. 333-85308
                      =====================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                         ------------------------------


                                 AMENDMENT NO. 6


                                       TO
                                    FORM S-1
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                         ------------------------------
                               ENOVA SYSTEMS, INC.
             (Exact name of Registrant as specified in its charter)

California                                                      3711
-------------------------------                     ----------------------------
(State or Other Jurisdiction of                     (Primary Standard Industrial
Incorporation or Organization)                      Classification Code Number)

                                   95-3056150
                                (I.R.S. Employer
                             Identification Number)
                         ------------------------------
                           19850 South Magellan Drive
                           Torrance, California 90502
                                 (310) 527-2800
               (Address, Including Zip Code, and Telephone Number
        Including Area Code, of Registrant's Principal Executive Offices)
                         ------------------------------
                                  Carl D. Perry
                             Chief Executive Officer
                               Enova Systems, Inc.
                           19850 South Magellan Drive
                           Torrance, California 90502
                                 (310) 527-2800
            (Name, Address, Including Zip Code, and Telephone Number
                   Including Area Code, of Agent for Service)
                         ------------------------------
                                   Copies to:
                             Donald C. Reinke, Esq.
                               Kay F. Rubin, Esq.
                           Crosby, Heafey, Roach & May
                        1999 Harrison Street, Suite 2200
                            Oakland, California 94612
                                 (510) 763-2000


Approximate  date of  commencement  of proposed  sale to the public:  As soon as
practicable after the effective date of this Registration Statement.

If any of the  securities  being  registered on this form are to be offered on a
delayed or continuous  basis  pursuant  under Rule 415 of the  Securities Act of
1933, check the following box. |X|

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the  Securities  Act,  check the following box and list the
Securities  Act  registration   statement   number  of  the  earlier   effective
registration statement for the same offering.|_|

If this form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering.|_|

If this form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering.|_|

If delivery  of the  prospectus  is  expected  to be made  pursuant to Rule 434,
please check the following box.|_|

CALCULATION OF REGISTRATION FEE




----------------------------------------------------------------------------------------------------------
Title of Each                                    Proposed               Proposed
Class of                                         Maximum                Maximum               Amount of
Securities To Be          Amount to be           Offering Price         Aggregate             Registration
Registered                Registered (1)         Per Share(2)           Offering Price        Fee (3)
----------------------------------------------------------------------------------------------------------
                                                                                   
Common Stock, no
par value                  6,300,000               $ .15                 $ 945,000             $ 86.94
----------------------------------------------------------------------------------------------------------


(1) Includes an indeterminate number of additional shares of common stock as may
from time to time become issuable by reason of stock splits, stock dividends and
other similar  transactions,  which shares are registered  hereunder pursuant to
Rule 416 under the Securities Act.


(2) The price of $0.15 per  share,  which was the  average  of the bid and asked
prices  for the  common  stock on June 10,  2002,  is set forth  solely  for the
purpose of calculating  the  registration  fee in accordance with Rule 457(c) of
the Securities Act.



(3) Previously paid.
=====================================



The Registrant hereby amends this  Registration  Statement on such date or dates
as may be necessary to delay its effective date until the Registrant  shall file
a further amendment which specifically  states that this Registration  Statement
shall  thereafter  become  effective  in  accordance  with  Section  8(a) of the
Securities  Act of  1933 or  until  this  Registration  Statement  shall  become
effective on such date as the Commission,  acting pursuant to said Section 8(a),
may determine.



The  information  in this  prospectus is not complete and may be changed.  These
securities  may not be sold  until the  registration  statement  filed  with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these  securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.


SUBJECT TO COMPLETION, DATED JUNE 14, 2002


Prospectus

6,300,000 Shares
Common Stock

This is a public  offering of up to  6,300,000  shares of common  stock of Enova
Systems, Inc. and an indeterminate number of shares that may become available by
reason of stock splits, stock dividends and other similar  transactions.  All of
these shares are being offered by Fontal International, Ltd. We will not receive
any of the proceeds from the sale of shares.  Fontal may sell the shares offered
by this prospectus from time to time in the national  over-the-counter market at
their prevailing prices, or in negotiated transactions.

Our common stock is traded on the National  Association  of Securities  Dealers,
Inc.  Electronic  Bulletin Board ("OTC Bulletin Board") under the symbol "ENVA".
On May 30, 2002,  the OTC Bulletin  Board  reported that the bid price per share
was $0.15 and the asked price per share was $0.15.

                  ---------------------------------------------
                  Investing in the common stock involves risks.
                     See "Risk Factors" beginning on page 7.
                  ---------------------------------------------

Neither  the  Securities  and  Exchange  Commission  nor  any  state  securities
commission has approved or disapproved of these securities or determined if this
prospectus  is truthful or  complete.  Any  representation  to the contrary is a
criminal offense.

The shares of common stock offered by this  prospectus  have not been registered
under the blue sky or  securities  laws of any  jurisdiction,  and any broker or
dealer should assure itself of the existence of an exemption  from  registration
or the effect of such registration in connection with the offer and sale of such
shares.


The date of this prospectus is June 14, 2002



                                      -1-


PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This
summary is not  complete  and does not  contain all the  information  you should
consider  before  buying  shares in this  offering.  You should  read the entire
prospectus  carefully,  including  the risk factors and  consolidated  financial
statements  and  related  notes  appearing  elsewhere  in this  prospectus.  The
prospectus  contains  forward-looking   statements,   which  involve  risks  and
uncertainties. Our actual results could differ materially from those anticipated
in these  forward-looking  statements as a result of various factors,  including
those  described  under "Risk  Factors" and  elsewhere in this  prospectus.  See
"Cautionary Note on Forward-Looking Statements."

Our Company

Enova  Systems  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.  Our business  activities focus on
the  development  of  electric  and hybrid  electric  drive  systems and related
components,  fuel cell power  management  systems for both mobile and stationary
power  applications,  vehicle systems integration and the performance of various
engineering contracts for government and commercial  enterprises.  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  outside  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.

For the quarter ended March 31, 2002, our unaudited financial statements reflect
revenues of $941,000.  Our net loss from  operations  for the three months ended
March 31, 2002 was $704,000.  For the year ended  December 31, 2001, our audited
financial  statements  reflect  revenues  of  $3,780,000.   Our  net  loss  from
operations was $3,782,000.

We  are  now  building,  under  contract  with  global  vehicle  and  technology
companies, efficient, robust, cost effective digital power processing and energy
management  enabling  technologies  for electric,  hybrid electric and fuel cell
powered vehicles.  These power management  technologies are now being applied to
commercialization  of fuel cell power  generation for stationary  non-automotive
applications.  A  stationary  application  would  be  similar  to a  gas-powered
generator and would utilize a fuel cell or a microturbine generator as its power
source to provide  electricity  in remote  locations or where back-up or standby
power is a requirement.

Our  development  and production  program with Ballard Power,  formerly  Ecostar
Electric Drive Systems, for low voltage electric drive system components for use
in Ford's Global Th!nk City is progressing  as planned.  Ford has announced that
an  all-electric  vehicle is scheduled to be  introduced in the 2nd half of 2002
for markets in North America. We are designing and manufacturing the electronics
for the  drive  system  as well  as  certain  auxiliary  components.  The  final
prototype systems are currently undergoing pre-production testing and validation
in the  Ford  Th!nk  vehicle.  We  anticipate  that we  will  begin  to  deliver
production  systems to Ballard in


                                      -2-


August 2002. The low voltage inverter for the drive system will be priced around
$2,000 per unit and will be delivered to Ballard based on their projected annual
requirements.

We continue to expand our alliances with Hyundai, Ford, other Original Equipment
Manufacturers and Tier-One  suppliers for sales of its automotive  products.  We
offer our modular drive systems to Original  Equipment  Manufacturers  and other
customers.  These  suppliers  are  described  in  detail  below  and also in the
Management's  Discussion  and  Analysis  section of this  prospectus.  Our drive
systems  have been  successfully  installed  and  operated in various  passenger
vehicles and buses operating in North America, Europe and Asia.

We have  successfully  integrated our newest hybrid electric  Panther(TM)  120kW
drive  system  (utilizing  a  microturbine  produced  by  Capstone  Microturbine
Corporation  as  its  power  source)  into  vehicles   manufactured  by  Wrights
Environment,  a division  of  Wrights  Bus,  one of the  largest  low-floor  bus
manufacturers in the United Kingdom.  This is the initial delivery to Wrights as
part of our  agreement to  manufacture  and  integrate  pure electric and hybrid
electric  drive systems into Wrights' low floor,  mid-size buses for sale in the
United Kingdom and the European Continent. We have additionally delivered a pure
electric  Panther(TM)  120kW drive system to Wrights for integration  into their
Crusader II bus.  The  microturbine  functions  as a power source in this hybrid
drive system similar to an internal combustion gas or diesel engine.

We have  also  delivered  seventeen  120kW  hybrid  drive  systems  to Eco Power
Technology in Italy along with three 40kW Fast Charger  system.  Eco Power is an
integrator of medium size transit buses for the European shuttle bus market with
key contacts in Rome and Genoa.  Eco Power is  integrating  our systems into its
midsize shuttle buses and we anticipate that they will purchase twenty to thirty
additional  systems  during 2002.  We can make no assurance  that Eco Power will
actually purchase any additional systems.

Our  stationary  power programs  continue to attract new potential  partners and
customers  from both fuel cell  manufacturers  and  petroleum  companies.  It is
management's  belief that utilizing our power management  systems for stationary
applications  for fuel  cells  will open new  markets  for our  company.  We are
currently developing applications for our products in the telecommunications and
distributed  generation  markets.   Discussions  are  progressing  well  and  we
anticipate  an  initial  development  contract  within  the first  half of 2002,
although we can make no assurance that a development  contract will  materialize
during this time period or at all.

Our company continues to attract new development and integration  contracts with
the U. S. Government's  Department of Transportation,  or "DOT". Enova,  Hyundai
Motor  Company and the State of Hawaii  introduced  15 Hyundai Santa Fe electric
vehicles in Honolulu,  Hawaii for test and evaluation  prior to their entry into
the U.S.  markets.  This program will utilize Hawaii's rapid charging  stations,
manufactured by AeroVironment, now being installed.

Additionally,  in  conjunction  with  the DOT and the  State of  Hawaii,  we are
integrating our drive systems into several  vehicles.  We have already completed
the manufacture  and  integration of our  Panther(TM)  120kW drive system into a
trolley owned by E Noa  Corporation for evaluation in the Hawaii tourist market.
E Noa operates in the Hawaii tourist industry,  providing scenic  transportation
services to the islands. We will also be upgrading eight


                                      -3-


Chevrolet  S-10 trucks  owned by the City of Honolulu  to our  Panther(TM)  60kW
drive  system,  including  our BCU II battery  care unit which will  incorporate
fast-charge  capability for these vehicles. . In addition,  we are converting an
Eldorado 30-foot bus utilizing our Panther(TM) 120kW drive system for the Hickam
Air Force base in Honolulu. All of these programs are funded in conjunction with
the  Hawaii  Electric  Vehicle  Development  Project,  the DOT and the  State of
Hawaii.

Our  contract  with the DOT to design and test a three-car  tram  utilizing  the
Panther(TM)  120kW drive  system is nearing  completion.  This tram,  capable of
carrying  100  passengers,  was  delivered  in  January  2002  to  the  Honolulu
International  Airport  for test and  evaluation.  If  successful,  we intend to
market  this tram  system to  international  markets  for  application  to other
airports,  national  and  recreational  parks and other  high  capacity  transit
applications.

The development of our 240kW drive system continues to progress.  We are working
in  conjunction  with other  motor and gear  manufacturers  to develop a robust,
efficient  and  powerful  drive  system for  heavy-duty  applications  including
transit buses, heavy-duty trucks and other applications.

We have had many  technology  advances with Hyundai Motor Company of Korea,  the
world's seventh largest automobile  manufacturer,  with engineering contracts to
design,  develop and test electric and hybrid electric drive systems and related
products. These advances include the development of a parallel and series hybrid
drive  system for  automobiles  and medium duty truck and buses as well as power
management systems for vehicle applications. A hybrid drive system utilizes both
an electric motor and an internal combustion engine to maximize  performance and
fuel efficiency while reducing emissions. Earlier developments included our 60kW
all electric  drive  system and our BCU II battery care unit which  monitors and
reports  on  up  to 28  automotive  batteries  in a  pack.  Having  successfully
completed our hybrid drive system and fuel cell electric vehicle program, we are
working with Hyundai to earn the production contract for their upcoming parallel
hybrid drive system  program.  Hyundai has also  produced  four fuel cell driven
sports utility  vehicles for test and evaluation  utilizing our Panther(TM) 90kW
drive systems.

The industries and markets in which we compete are in their early stages, and we
have not yet been able to achieve profitability in these areas, although we have
established  several important  business  alliances.  We believe these alliances
will  enable  us to gain  market  penetration  which  will  allow  us to  become
profitable in the future.  In the past,  the nature of our  operations  has been
primarily  research and development.  We are now concentrating on production and
sales,  which we  anticipate  will  increase our  profitability.  We can make no
assurance  that our  efforts  to  increase  sales or become  profitable  will be
successful.

Our  principal  executive  offices are located at 19850  South  Magellan  Drive,
Torrance, California, 90502, and our telephone number is (310) 527-2800.


                                      -4-


The Offering


Common stock offered by
Fontal International, Ltd.               6,300,000 shares

Securities to be outstanding
after this offering (1):                 302,832,000 shares of common stock


                                         2,844,336    shares    of    Series   A
                                         Convertible       Preferred       Stock
                                         (convertible   into  an   aggregate  of
                                         2,844,336   shares  of  common   stock)
                                         ("Series A Stock")

                                         1,217,196    shares    of    Series   B
                                         Convertible       Preferred       Stock
                                         (convertible   into  an   aggregate  of
                                         2,434,392      shares     of     common
                                         stock)("Series B Stock")


Voting Rights:
     Common Stock:   302,832,000 votes
     Series A Stock: 2,844,336 votes
     Series B Stock: 2,434,392 votes


Use of proceeds from this offering:      We will not receive any of the proceeds
                                         from the shares of common stock sold by
                                         Fontal. See "Selling Shareholder".

OTC Bulletin Board symbol:               "ENVA"

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


(1) Securities  outstanding on May 30, 2002.  Excludes (A) 30,544,702  shares of
common stock  issuable upon exercise of  outstanding  options  granted under our
stock option plans plus an additional  19,455,298  shares  reserved for issuance
under our stock option plans,  and (B) 15,000,000  shares issuable upon exercise
of outstanding warrants.



                                      -5-


Summary Financial Data



                                            For the                                Five
As of and                                   Quarter                                Months
(in thousands, except per share data)       ended        For the Year ended        ended        Fiscal Years ending
                                            March 31,    December 31,              Dec 31       July 31,
                                            ---------    ----------------------    ---------    -----------------------------------
                                              2002         2001         2000         1999         1999         1998          1997
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
                                                                                                     
NET SALES                                   $     941    $   3,780    $   2,883    $     629    $   2,774    $   1,938    $   4,484
COST OF SALES                                     702        2,783        2,013          377        1,460        2,765        2,042
                                            ---------------------------------------------------------------------------------------
GROSS MARGIN                                      239          997          870          252        1,314         (827)       2,442
                                            ---------------------------------------------------------------------------------------
OTHER COSTS AND EXPENSES
 Research and Development                         275          879          626          262          499          445        1,218
 Selling, general and administrative              615        2,894        1,999          796        1,141        1,697        3,116
 Interest and financing fees                       55          113          174          724          724          665          792
 Other expense (income)                            (7)          (7)           6          (41)         (67)         274
 Acquisition of research and
 Development                                                                                                                  1,630
 Gain on Warranty Reevaluations                                                                      (474)
 Legal Settlements                                             900          755          125
                                            ---------------------------------------------------------------------------------------
Total other costs and expenses                    943        4,779        2,880        1,427        1,849        2,740        7,030
                                            ---------------------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS                  (704)      (3,782)      (2,010)      (1,175)        (535)      (3,567)      (4,588)
GAIN ON DEBT RESTRUCTURING                          0          354        1,551          214          140           42           53
                                            ---------------------------------------------------------------------------------------
NET LOSS                                    $    (704)   $  (3,428)   $    (459)   $    (961)   $    (395)   $  (3,525)   $  (4,535)
                                            =======================================================================================
PER COMMON SHARE:
 Loss from continuing operations            $   (0.01)   $   (0.01)   $   (0.01)   $   (0.01)   $   (0.01)   $   (0.02)   $   (0.03)
 Gain on debt restructuring                                           $    0.01
                                            ---------------------------------------------------------------------------------------
 Net loss per common share                  $   (0.01)   $   (0.01)   $    0.00    $   (0.01)   $   (0.01)   $   (0.02)   $   (0.03)
                                            =======================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING                     302,532      275,189      235,199      251,994      152,077      151,265      133,806
                                            =======================================================================================
Total Assets                                $   4,121    $   4,340    $   3,094    $   2,697    $   3,940    $   1,658    $   4,513
                                            =======================================================================================
Long-term debt                              $   3,332    $   3,332    $   3,332    $   3,332    $   3,332    $   3,332    $   3,639
                                            =======================================================================================
Shareholders' equity (deficit)              $    (933)   $    (232)   $  (1,648)   $  (5,015)   $  (7,316)   $ (12,615)   $  (9,095)
                                            =======================================================================================



                                      -6-


RISK FACTORS

You should  carefully  consider the  following  risks and all other  information
contained in this prospectus  before you decide to buy our common stock. We have
included a discussion of each  material  risk that we have  identified as of the
date of this  prospectus.  If any of the following  risks  actually  occur,  our
business, financial condition or operating results could suffer. If this occurs,
the trading price of our common stock could  decline,  and you could lose all or
part of the money you paid to buy our common stock.

Risks Relating to this Offering

Economic conditions beyond our control may keep the price of our stock low.

Numerous  factors,  many of which are beyond our  control,  may cause the market
price of our common stock to fluctuate significantly. These factors include, but
are not limited to, the following:

      o     continued losses;

      o     announcements concerning us, our competitors or our customers;

      o     market  conditions in the electric  vehicle and the hybrid  electric
            vehicle industry and the general state of the securities markets.

General  economic,   political  and  market  conditions,   including  recession,
international  instability or military tension or conflicts may adversely affect
the market  price of our common  stock.  If we are named as a  defendant  in any
securities-related  litigation  as a result of  decreases in the market price of
our shares, we may incur substantial  costs, and our management's  attention may
be diverted,  for lengthy  periods of time. The market price of our common stock
may not increase  above the offering price or maintain its price at or above any
particular level.

Securities  traded on the OTC Bulletin Board are generally  thinly traded and an
active market may never develop.

Our common  stock  trades on the OTC Bulletin  Board.  Shares  traded in the OTC
market are generally  bought and sold in small amounts,  highly volatile and not
usually  followed by analysts.  You may therefore have  difficulty  selling your
shares in the resale market.

"Penny stock" regulations may impose restrictions on marketability of our stock.

The Securities and Exchange  Commission has adopted  regulations which generally
define "penny stock" to be any equity  security that is not traded on a national
securities exchange or NASDAQ and that has a market price of less than $5.00 per
share or an  exercise  price of less than  $5.00 per  share,  subject to certain
exceptions. Since our securities that are currently included on the OTC Bulletin
Board are trading at less than $5.00 per share at any time, our stock may become
subject to rules that impose


                                      -7-


additional  sales  practice   requirements  on  broker-dealers   who  sell  such
securities to persons other than established customers and accredited investors.
Accredited  investors  generally include investors that have assets in excess of
$1,000,000 or an individual annual income exceeding  $200,000,  or together with
the investor's spouse, a joint income of $300,000.  For transactions  covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase of the securities and must receive the purchaser's  written consent
to the  transaction  prior to the purchase.  Additionally,  for any  transaction
involving penny stock, unless exempt, the rules require, among other things, the
delivery,  prior to the transaction,  of a risk disclosure  document mandated by
the SEC relating to the penny stock market and the risks  associated  therewith.
The  broker-dealer  must  also  disclose  the  commission  payable  to both  the
broker-dealer  and the  registered  representative,  current  quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker dealer
must  disclose  this  fact and the  broker-dealer's  presumed  control  over the
market.  Finally,  monthly  statements  must be  sent  disclosing  recent  price
information  for the penny  stock held in the  account  and  information  on the
limited market in penny stocks. Consequently, the penny stock rules may restrict
the ability of broker-dealers to sell our securities and may affect your ability
to sell your shares in the secondary market.

We do not expect to pay dividends in the foreseeable future.

We have not declared or paid any cash dividends in the past and do not expect to
pay cash  dividends in the  foreseeable  future.  We intend to retain our future
earnings, if any, to finance the development of our business. We are required to
pay  dividends  on our Series A Stock and our  Series B Stock  before we may pay
dividends on our common stock. At March 31, 2002, we had an accumulated  deficit
of  approximately  $90,997,000  and,  until this deficit is  eliminated,  we are
prohibited  from paying  dividends  on any class of our stock  except out of net
profits  unless we can meet  certain  assets and other tests under  Sections 500
through 511 of the  California  Corporations  Code.  Our board of directors will
determine  any  future  dividend  policy  in light  of the all of the  foregoing
information  and then existing  conditions,  including  our earnings,  financial
condition and financial  requirements.  You may never receive dividend  payments
from us.

As of the date of this  prospectus,  we have outstanding  302,732,000  shares of
common stock,  2,844,336 shares of Series A Stock,  each of which is convertible
into one share of common stock, and 1,217,196 shares of Series B Stock,  each of
which is  convertible  into two shares of common  stock.  Sales of a substantial
number  of  shares of our  common  stock in the  public  market  following  this
offering  could cause our stock  price to  decline.  All the shares sold in this
offering will be freely tradable.  Currently  93,676,002  shares of common stock
are freely  tradable  and an  additional  5,278,728  shares of Series A Stock or
Series B Stock would be freely  tradable upon  conversion  to common  stock.  An
additional  131,494,137  shares of common  stock  are  eligible  for sale in the
public market subject to volume restrictions of Rule 144, shares of common stock
issuable upon exercise of outstanding  options will become freely  tradable upon
issuance.  In  addition,  the sale of these  shares  could impair our ability to
raise capital  through the sale of additional  stock.  See "Shares  Eligible for
Future Sale."


                                      -8-


Our principal  shareholders,  executive  officers and directors have substantial
control  over most  matters  submitted  to a vote of the  shareholders,  thereby
limiting your power to influence corporate action.

Our   officers,   directors   and  principal   shareholders   beneficially   own
approximately  60% of our common stock  (including in that percentage  shares of
our Series A Stock and Series B Stock). As a result, these shareholders have the
power  to  control  the  outcome  of  most  matters   submitted  to  a  vote  of
shareholders,  including the election of members of our board,  and the approval
of significant  corporate  transactions.  The shareholders  purchasing shares in
this offering will have little influence on these matters. This concentration of
ownership  may also have the  effect of making it more  difficult  to obtain the
needed approval for some types of transactions that these  shareholders  oppose,
and may result in delaying,  deferring or  preventing a change in control of our
company.

The effects of anti-takeover  provisions in our charter and bylaws could inhibit
the acquisition of us by others.

Several  provisions of our articles of incorporation and bylaws could discourage
potential  acquisition  proposals and could delay or prevent a change in control
of our company.

Risks Related to Our Business

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.

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.


                                      -9-


In order to remain  competitive,  we must  adapt  existing  products  as well as
develop new products and technologies. In fiscal years 2000 and 2001 we spent in
excess  of  $1.5  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 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.

We have continued losses.

Our company was founded in 1976 as Clover Solar  Corporation,  but initial sales
were very limited and were unprofitable as a manufacturer of solar powered toys.
The name was then changed to Solar  Electric  Engineering  in 1978.  In 1992, we
became  known as U. S.  Electricar,  Inc.  In July 2000,  we changed our name to
Enova Systems, Inc.

We have been  profitable  in only one year,  fiscal  1986.  For the three months
ended March 31, 2002, the  Corporation  lost an additional  $704,000 on sales of
$941,000.  There can be no assurance that we will achieve  profitability  in the
near or foreseeable future.

If we do not raise  significant  additional  capital,  we will be unable to fund
continuing  operations  and will  likely  be  forced  to  reduce  or even  cease
operations.

We need  substantial  working  capital to fund our  operations.  As of March 31,
2002,  we had cash,  cash  equivalents  and  short-term  investment  balances of
approximately  $793,000.  Our projections show that cash on hand as of March 31,
2002 will be sufficient to fund operations at the current level through December
2002  based in part  upon  receipt  of  additional  capital  from  our  majority
stockholder, Jagen Pty, Ltd. Jagen has committed to fund up to $2,000,000 during
2002.


                                      -10-


We are  currently  negotiating  to correct a payment  default  with respect to a
$120,000 unsecured note to Jeann Schulz. Unless we are successful in our efforts
to raise  additional  funds,  our cash  resources  will be used to  satisfy  our
existing liabilities,  such as that of Ms. Schulz, and we will be unable to fund
our  current  operations,  which may result in the  reduction  or  cessation  of
operations.  Even if we are  successful  in these  efforts to raise funds,  such
funds may not be adequate to fund our operations on a long-term basis.

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


                                      -11-


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. The
likelihood of our success must be considered in light of the problems, expenses,
difficulties,  complications,  and delays  frequently  encountered in connection
with the growth of an existing  business,  the  development  of new products and
channels of  distribution,  and current  and future  development  in several key
technical fields, as well as the competitive and regulatory environment in which
we operate.

We operate in a highly regulated business  environment and changes in regulation
could impose costs on us or make our products less economical.

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

We are  highly  dependent  on a few key  personnel  and will need to retain  and
attract such personnel in a labor competitive market.

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

There are minimal barriers to entry in our market.

We presently  license or own a limited  amount of  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


                                      -12-


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.

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.

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

Some of the matters  discussed  under the captions  "Prospectus  Summary," "Risk
Factors,"  "Management's  Discussion  and  Analysis of Financial  Condition  and
Results of  Operations,"  "Business"  and elsewhere in this  prospectus  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.  A description of risks that could cause our results to vary appears
under the  caption  "Risk  Factors"  and  elsewhere  in this  prospectus.  These
forward-looking  statements  are  made as of the date of this  prospectus,  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.


                                      -13-


USE OF PROCEEDS

All  proceeds  from any sale of shares of common  stock  offered by the  selling
shareholder will be received by the selling shareholder and not by us.

PRICE RANGE OF COMMON STOCK

Our common stock is traded in the National  Association  of Securities  Dealers,
Inc.  Electronic  Bulletin Board ("OTC Bulletin Board") under the symbol "ENVA".
The following table sets forth, for the fiscal quarters indicated,  the high and
low prices for our common  stock as  reported on the OTC  Bulletin  Board by the
National Quote Bureau. 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
                             ------------       ---------          -------------
Fiscal 2000
First Quarter                $     0.77         $     0.31         1,337,885
Second Quarter               $     0.47         $     0.23           476,538
Third Quarter                $     0.44         $     0.20           476,523
Fourth Quarter               $     0.42         $     0.16           332,731
Fiscal 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
Fiscal 2002
First Quarter                $     0.23         $     0.14           265,875

Second Quarter
(through May 30, 2002)       $     0.18         $     0.14           127,248



                                      -14-


DIVIDEND POLICY

We have never  declared  or paid any cash  dividends  on our capital  stock.  We
retain any future earnings to fund our business.  Additionally,  we are required
to pay  dividends on our Series A Stock and our Series B Stock before we may pay
dividends  on our common  stock.  Therefore,  we do not  anticipate  paying cash
dividends on our common stock in the foreseeable  future.  At March 31, 2002, we
had an accumulated deficit of approximately  $90,997,000.  Until this deficit is
eliminated,  we are prohibited  from paying  dividends on any class of our stock
except out of net  profits  unless we can meet  certain  assets and other  tests
under Sections 500 through 511 of the California Corporations Code. Our board of
directors will determine any future  dividend  policy in light of the all of the
foregoing  information  and then  existing  conditions,  including our earnings,
financial condition and financial requirements.

CAPITALIZATION

The  following  table  summarizes  our balance  sheet data as of March 31, 2002,
December 31, 2001 and December 31, 2000:



                                                                                       As of         As of         As of
                                                                                    03/31/2002    12/31/2001    12/31/2000
                                                                                                           
DEBT:
     Long Term Debt - CMAC Note                                                           3,332          3,332        3,332

SHAREHOLDERS DEFICIT:
     Series A preferred stock - No par value; 30,000,000 shares authorized;
     2,844,000 shares issued and outstanding at  03/31/02, 12/30/01 and 12/31/00          1,867          1,867        1,867
     Series B preferred stock - No par value; 5,000,000 shares authorized;
     1,217,000 shares issued and outstanding at 03/31/02, 12/30/01 and 12/31/00           2,434          2,434        2,434
     Stock notes receivable                                                             (1,208)        (1,208)      (1,149)
     Common Stock - No par value; 500,000,000 shares authorized; 302,732,000
     issued and outstanding at 03/31/02, 302,702,000
     and 244,249,000 shares issued and outstanding at 12/31/01 and 12/31/00              79,862         79,859       75,680
     Common stock subscribed                                                                160            160           13
     Additional paid-in capital                                                           6,949          6,949        6,372
     Accumulated deficit                                                               (90,997)       (90,293)     (86,865)

                                                                                  ------------------------------------------
Total Shareholders Deficit                                                                (933)          (232)      (1,648)
                                                                                  ------------------------------------------

                                                                                  ------------------------------------------
TOTAL CAPITALIZATION                                                                    $ 2,399        $ 3,100      $ 1,684
                                                                                  ==========================================


This information  should be read together with our Financial  Statements and the
related Notes and "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations" appearing elsewhere in this prospectus.


                                      -15-


SELECTED FINANCIAL DATA

The following  selected  financial data tables set forth selected financial data
for three  months  ended March 31,  2002,  the year ended  December 31, 2001 and
2000,  the five month period ended  December 31, 1999 and the fiscal years ended
July 31, 1999,  1998 and 1997. 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 the three months ended March 31, 2002 are
unaudited. The statement of income data and balance sheet data for and as of the
end of the year ended  December  31, 2001 and 2000,  the five month period ended
December  31, 1999 and the three 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, and are qualified in their entirety by, our
financial statements,  including the notes thereto and "Management's  Discussion
and Analysis of Financial  Condition and Results of Operations"  included in the
following pages of this prospectus.



                                            For the                                Five
As of and                                   Quarter                                Months
(in thousands, except per share data)       ended        For the Year ended        ended        Fiscal Years ending
                                            March 31,    December 31,              Dec 31       July 31,
                                            ---------    ----------------------    ---------    -----------------------------------
                                              2002         2001         2000         1999         1999         1998          1997
                                            ---------    ---------    ---------    ---------    ---------    ---------    ---------
                                                                                                     
NET SALES                                   $     941    $   3,780    $   2,883    $     629    $   2,774    $   1,938    $   4,484
COST OF SALES                                     702        2,783        2,013          377        1,460        2,765        2,042
                                            ---------------------------------------------------------------------------------------
GROSS MARGIN                                      239          997          870          252        1,314         (827)       2,442
                                            ---------------------------------------------------------------------------------------
OTHER COSTS AND EXPENSES
 Research and Development                         275          879          626          262          499          445        1,218
 Selling, general and administrative              615        2,894        1,999          796        1,141        1,697        3,116
 Interest and financing fees                       55          113          174          724          724          665          792
 Other expense (income)                            (7)          (7)           6          (41)         (67)         274
 Acquisition of research and
 Development                                                                                                                  1,630
 Gain on Warranty Reevaluations                                                                      (474)
 Legal Settlements                                             900          755          125
                                            ---------------------------------------------------------------------------------------
Total other costs and expenses                    943        4,779        2,880        1,427        1,849        2,740        7,030
                                            ---------------------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS                  (704)      (3,782)      (2,010)      (1,175)        (535)      (3,567)      (4,588)
GAIN ON DEBT RESTRUCTURING                          0          354        1,551          214          140           42           53
                                            ---------------------------------------------------------------------------------------
NET LOSS                                    $    (704)   $  (3,428)   $    (459)   $    (961)   $    (395)   $  (3,525)   $  (4,535)
                                            =======================================================================================
PER COMMON SHARE:
 Loss from continuing operations            $   (0.01)   $   (0.01)   $   (0.01)   $   (0.01)   $   (0.01)   $   (0.02)   $   (0.03)
 Gain on debt restructuring                                           $    0.01
                                            ---------------------------------------------------------------------------------------
 Net loss per common share                  $   (0.01)   $   (0.01)   $    0.00    $   (0.01)   $   (0.01)   $   (0.02)   $   (0.03)
                                            =======================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING                     302,532      275,189      235,199      251,994      152,077      151,265      133,806
                                            =======================================================================================
Total Assets                                $   4,121    $   4,340    $   3,094    $   2,697    $   3,940    $   1,658    $   4,513
                                            =======================================================================================
Long-term debt                              $   3,332    $   3,332    $   3,332    $   3,332    $   3,332    $   3,332    $   3,639
                                            =======================================================================================
Shareholders' equity (deficit)              $    (933)   $    (232)   $  (1,648)   $  (5,015)   $  (7,316)   $ (12,615)   $  (9,095)
                                            =======================================================================================



                                      -16-


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 and 2001  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 "Risk Factors."

Overview

Enova  develops  and  produces  advanced  software,  firmware  and  hardware for
applications  in the  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.

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,  we perform  research
and  development  to augment  and support  others'  and our own related  product
development efforts.

Our  products  and  systems are the  enabling  technologies  for power  systems.
Without these types of enabling technologies, power cannot be converted into the
appropriate  form  required  by the  vehicle  or device;  nor is power  properly
managed to protect the battery, vehicle or device, and user.

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 2001, we expanded our sales and development efforts to capture additional
global  market  share  for our  product  line and our  technical  expertise.  We
expanded  into  European and Asian markets with our heavy duty drive systems and
continued to progress on our development  programs with Ford,  Ballard,  Hyundai
and the DOT. Our


                                      -17-


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,  2001 were  financed  by
development  contracts  and  product  sales,  as  well as an  additional  equity
infusion  of  $3,000,000  from  Jagen Pty,  Ltd and  Anthony  Rawlinson  for the
purchase of 50,000,000 shares of common stock, as previously reported.


We have completed the  restructuring  of our prior  liabilities  and debt.  This
reduction of liabilities and debt was  accomplished  through  various  financial
transactions  including  conversion of approximately  $1.2 million of debt being
converted to common  stock in 1999,  The  remainder of the debt and  liabilities
were  eliminated  via  debt  forgiveness  and  recapture  by  legal  statute  as
previously  discussed in our From 10-K and 10-Q filings.  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 May 30,  2002,  we have
received  a  commitment  from  Jagen  Pty,  Ltd to  fund up to  $2,000,000  of a
combination  of  equity  and/or  debt  during  2002.  The  final  terms  of this
commitment have not yet been  determined.  Although Jagen Pty, Ltd has made this
commitment  for 2002,  Jagen and our other  shareholders  have no ongoing  legal
obligation to provide any further funding.


In the ordinary  course of business,  the company has made a number of estimates
and assumptions relating to the reporting of results of operations and financial
condition in the  preparation  of its financial  statements  in conformity  with
accounting  principles  generally accepted in the United States.  Actual results
could differ significantly from those estimates under different  assumptions and
conditions.  The Company  believes that the following  discussion  addresses the
Company's  most  critical  accounting  policies,  which are those  that are most
important to the portrayal of the Company's financial condition and results. The
Company constantly  re-evaluates these significant factors and makes adjustments
where facts and  circumstances  dictate.  Historically,  actual results have not
significantly  deviated  from those  determined  using the  necessary  estimates
inherent in the preparation of financial  statements.  Estimates and assumptions
include,  but are not  limited to,  customer  receivables,  inventories,  equity
investments,  fixed asset lives,  contingencies and litigation.  The Company has
also chosen certain accounting policies when options were available, including:

      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, additional allowances may be required.


                                      -18-


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
consolidated financial statements.

The financial  statements present our financial  condition as of March 31, 2002,
December  31, 2001 and 2000,  the results of  operations  and cash flows for the
three months ended March 31, 2002, the year ended December 31, 2001 and 2000 and
the five month period ended  December 31, 1999,  as well as the three  preceding
fiscal  years ended July 31, 1999,  1998 and 1997.  All  references  to the 1999
fiscal year denote the twelve months ended July 31, 1999.

Three Months Ended March 31, 2002

During the three  months  ended  March 30,  2002,  we  continued  to develop and
produce electric and hybrid electric drive systems and components for Ford Motor
Company,  Hyundai Motor Company and several domestic and  international  vehicle
and bus  manufacturers.  We also are  continuing  on our  current  research  and
development  programs  with Hyundai  Motor  Company and the U.S.  Department  of
Transportation  as well as developing  new programs with Hyundai and the federal
government.

Ford Motor Company

Our program  with Ford Motor  Company to develop and  manufacture  a high power,
high voltage  conversion module for their fuel cell vehicle is progressing well.
The High Voltage Energy Converter was a key component in Ford's Focus FCV, which
was featured at the New York  International Auto Show in February 2002. The high
voltage  conversion module converts high voltage power from the fuel cell into a
lower  voltage.  We are  currently  in the second  phase of this program and the
units are meeting  expectations  in performance  and  reliability.  In the three
months  ended March 31,  2002,  we billed  approximately  $70,000 from this Ford
program.

Ballard Power

Our  development  and  production  program  with  Ballard  Power for low voltage
electric  drive system  components for use in Ford's Global Th!nk city has moved
into its production phase.  Ford has announced that the all-electric  vehicle is
scheduled to be introduced  in 2002 for markets in North America and Europe.  We
have designed and are commencing  high-volume  manufacturing  of the electronics
for the drive system  including the power inverter,  charger and controller.  In
conjunction with Hyundai Autonet of Korea, we are finalizing production planning
for initial  production  systems to be delivered in mid 2002. Gross revenues for
the  three  months  ended  March  31,  2002  from  this  Ballard   program  were
approximately $69,000. Additional revenues for non-recurring engineering will be
realized in the second quarter and production  revenues  should  commence in the
third  quarter  of 2002  based on  projections  we have  received  from Ford and
Ballard.  We  anticipate  that sales of these  systems will  provide  additional


                                      -19-


revenues in the upcoming years, however, we cannot assure that there will be any
such future revenues.

Hyundai Motor Company Programs

Hyundai  continues to contract with our company for the  development of advanced
hybrid and fuel cell powered  drive  systems.  In regards to  passenger  vehicle
programs,  we have developed a  commercially  viable  parallel  hybrid motor and
controller  for Hyundai's  new hybrid  vehicle to be introduced in 2004. We have
teamed with SL Montevideo of Minnesota and Hyundai Heavy  Industries of Korea to
build this new motor and controller. The prototype drive system for this program
was delivered to Hyundai Motor Company in February  2002. We expect to learn the
results of Hyundai's  evaluation of the prototype  during the second  quarter of
2002.

Additionally,  Hyundai Motor is procuring a number of our High Energy  Converter
modules for use in their hybrid fuel cell  programs.  Hyundai has indicated that
they will purchase additional systems for other programs during 2002.

Development programs with Hyundai generated  approximately $470,000 in sales for
the quarter ended March 31, 2002. We  anticipate  additional  contracts for both
development and purchase of our components during 2002 for Hyundai's alternative
vehicle  applications,  however we cannot assure that such additional  contracts
will be realized.

Light-Duty Drive Systems

In addition to the 30kW motor  controller,  charger and DC-DC converter that we,
in alliance with Hyundai Autonet,  are  manufacturing  for Ballard Power, we are
also marketing and  manufacturing  our Panther(TM) 90kW drive systems.  Our 90kW
controller,  motor and gear unit provide outstanding  performance for light duty
vehicles  such as midsize  automobiles  and  delivery  vehicles.  Our  outsource
manufacturer for the Panther(TM) 90kW drive system is Hyundai Heavy Industries.

We have received a purchase  order for over 200  Panther(TM)  90kW drive systems
for delivery in 2002 and 2003 from Voltage Vehicles of California, an integrator
of specialty  vehicles.  We have begun  delivery of these systems and anticipate
producing  approximately 100 systems  representing  approximately  $1,000,000 in
gross revenues this year. Additionally,  we are discussing further sales of this
system configuration to other domestic and international customers;  however, we
can give no  assurance  at this time that such  discussions  will  result in any
further sales.

Heavy-Duty Drive Systems

Sales of our  Panther(TM)  120kW drive  systems  continue  to provide  increased
revenues for our  company.  We are selling  drive  systems to  manufacturers  in
Europe and Japan as well as  domestically.  Hyundai Heavy Industries is also our
outsource  manufacturer  for the  Panther(TM)  120kW  as well as the  motor  and
controller for our Panther(TM) 240kW drive systems.


                                      -20-


Eco Power  Technology of Italy has purchased an additional 27 Panther(TM)  120kW
electric and hybrid  electric drive systems which will be delivered 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 Rome and Genoa.
Total  sales for the quarter  ended March 31, 2002 from Eco Power were  $152,000
which does not include the new systems sales.

Wrights Environment, a division of Wrights Bus, one of the largest low-floor bus
manufacturers  in  the  United  Kingdom,  has  integrated  our  hybrid  electric
Panther(TM)  120kW drive system,  which  utilizes a  microturbine  from Capstone
Turbine  Corporation  as its power  source.  The bus is currently  performing to
specifications  and has been  tested  at the  Milford  Test  facility,  a highly
renowned  European bus test  location.  Wrights has  purchased  additional  pure
electric  drive systems for their  midsize buses for sale in the United  Kingdom
and  the  European  Continent.  Further,  we are in  negotiations  with  them to
purchase  both our new  240kW  drive  system  and our Fast  Charger  system.  We
anticipate  additional orders for both electric and  hybrid-electric  P120 drive
systems during 2002; however, we cannot assure at this time that such additional
contracts will be realized.

Tomoe   Electro-Mechanical   Engineering  and  Manufacturing,   Inc.  and  Moria
Corporation  of Japan have both  received our 120kW drive systems and have begun
integrating  them into their bus  platforms.  We are working  closely with these
companies to ensure a successful  integration  and future  sales.  We anticipate
that both companies will purchase additional systems during 2002, however we can
make no assurance that any 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 on schedule.  We are completed the  development  and production of our
additional  power  management  accessories  for this  vehicle so that it can run
power  applications  such as drills and motors used by the  Southern  California
Edison  technicians.  The purpose of this project is to demonstrate and evaluate
this  unique  hybrid  power drive  system.  Our system will be able to power the
vehicle as well as the auxiliary  utility  accessories  which will eliminate the
need for a separate  diesel  generator  normally  trailered  behind the vehicle.
These  systems have been  delivered and are being  integrated  into the vehicle.
This line service  truck will be a  demonstration  vehicle,  which we anticipate
will lead to sales to utility companies  throughout the U.S. We cannot assure at
this time that such sales will occur.

In the high performance heavy-duty drive system area, our 240kW drive system has
been successfully  integrated into a heavy-duty  application and its performance
is exceeding  expectations.  We have currently produced five initial systems and
have  begun on the next  order for five to ten more.  Advanced  Vehicle  Systems
"AVS" of Tennessee has purchased one electric 240kW system and is in the process
of integration  and performance  evaluation.  The 240kW drive system is designed
for heavy-duty


                                      -21-


applications  such as transit buses and heavy-duty  trucks. We are finalizing an
agreement  with  Hyundai  for  the  purchase  of this  240kW  system  for  their
heavy-duty  vehicle  applications  which will be  combined  with a fuel cell for
urban and transit bus  applications.  Additionally,  we are in discussions  with
Wrights of the United Kingdom and other bus manufacturers regarding the purchase
of these drive systems in 2002. We can make no assurance that these  discussions
will result in any sales of the Panther(TM) 240kW drive system.

Research and Development Programs

Our research and development programs with the U.S. department of Transportation
and the State of Hawaii continue to provide us with new insights and innovations
in the development and integration of our electric vehicle programs.

The Hyundai Santa Fe electric vehicle program has provided us with valuable data
regarding  performance,  battery  life  and  vehicle  maintenance.  The  program
utilizes Hawaii's rapid charging  stations,  manufactured by AeroVironment,  and
has enabled us to fine tune our power management  systems to the  specifications
of numerous  battery  manufacturers.  The  contract  has two  elements,  one for
integration of our BCU II battery care unit, which allows the vehicles to accept
fast charging,  and a second  contract for  maintenance of the vehicles over the
two-year  program.  The  participants  in the  program  include  state and local
offices as well as Hickam Air Force base. The vehicles are  performing  well and
reports on their performance and handling continue to be positive.

Our  contract  with the DOT to design and test a three-car  tram  utilizing  the
Panther(TM)  120kW drive system has been completed and has been delivered to the
High  Technology  Development  Corporation's  facility in  Honolulu.  This tram,
capable of  carrying  100  passengers,  will now be  delivered  to the  Honolulu
International Airport for further test and evaluation.  If successful, we intend
to market this tram system to  international  markets for  application  to other
airports,  national  and  recreational  parks and other  high  capacity  transit
applications.

The Eldorado 30-foot bus conversion utilizing our Panther(TM) 120kW drive system
for the Hickam Air Force base is nearing completion. The success of this program
is leading to a potential  new contract  with Hickam to integrate a hybrid drive
system into a second  30-foot bus for the Air Force  base.  We cannot  assure at
this time that such a contract will be finalized.

All of these programs are funded in conjunction with the Hawaii Electric Vehicle
Development Project, the DOT and the State of Hawaii.

We will  continue to establish  new  development  programs  with the Hawaii High
Technology Development Corporation as well as other state and federal government
agencies as funding becomes available.

Stationary Power Applications

Our  stationary  power programs  continue to attract new potential  partners and
customers from both fuel cell manufacturers and petroleum  companies.  It is our
belief that utilizing our power management  systems for stationary  applications
for fuel cells will open new markets  for our  company.  We are also  developing
applications  for  these  products  in the  telecommunications  and  distributed
generation markets. We can make no assurance


                                      -22-


that  we  will   successfully   develop  such  applications  or  that  any  such
applications will find acceptance in the marketplace.

Our fuel cell care 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 and we are currently in negotiations
with a domestic  energy  company for  stationary  applications  of our fuel cell
management system. We believe this market will play a key role in our future and
we  continue  to pursue  alliances  with  leading  manufacturers  in this  area,
however,  we can make no assurance  that this market will develop as anticipated
or that such alliances will occur.

LIQUIDITY AND CAPITAL RESOURCES

We have  experienced  cash flow  shortages  due to  operating  losses  primarily
attributable to research, development, marketing and other costs associated with
the our strategic plan to become an  international  manufacturer and supplier of
electric propulsion and power management systems and components. Cash flows from
operations have not been sufficient to meet our obligations as they came due. We
have therefore had to raise funds through  several  financial  transactions.  At
least until we reach  breakeven  volume in sales and develop  and/or acquire the
capability  to  manufacture  and sell its products  profitably,  we will need to
continue to rely on cash from external  financing.  We  anticipate  that it will
require   additional   outside   financing  to  meet  research  and  development
expenditures through 2003.


We have completed the  restructuring  of our prior  liabilities  and debt.  This
reduction of liabilities and debt was  accomplished  through  various  financial
transactions  including  conversion of approximately  $1.2 million of debt being
converted to common  stock in 1999,  The  remainder of the debt and  liabilities
were  eliminated  via  debt  forgiveness  and  recapture  by  legal  statute  as
previously  discussed in our From 10-K and 10-Q filings.  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 May 30,  2002,  we have
received  a  commitment  from  Jagen  Pty,  Ltd to  fund up to  $2,000,000  of a
combination  of  equity  and/or  debt  during  2002.  The  final  terms  of this
commitment have not yet been  determined.  Although Jagen Pty, Ltd has made this
commitment  for 2002,  Jagen and our other  shareholders  have no ongoing  legal
obligation to provide any further funding.


During the three  months  ended  March 31,  2002,  we spent  $387,000 in cash on
operating  activities  to fund the net loss of $704,000  resulting  from factors
explained in the following  section of this  discussion  and analysis.  Accounts
receivable  decreased by $359,000 due to aggressive  collection of  receivables.
Inventory  increased by $420,000  from December 31, 2001 as we continue to build
up our raw materials and work in progress inventories for the Ballard production
commencing  in second  quarter 2002 and other  programs  such as our 120kW drive
system sales to EcoPower, Wrights and other bus manufacturers.


                                      -23-


Current  liabilities  increased by a net of $434,000  due to  purchases  made in
connection with various on-going development programs. As we expand our customer
base and produce higher inventories for sales, we have negotiated extended terms
with several of our  suppliers,  which allows us improved  cash flows.  Interest
accruing on notes payable  increased by $27,000 for the three months ended March
31,  2002  compared  with the  similar  period in 2001 due to an increase in the
interest rate on the $3.3 million CMAC note per the terms of that agreement.

RESULTS OF OPERATIONS for the Three Months Ended March 31, 2002

Net sales in the three months  ending March 31, 2002  decreased by $174,000 from
the corresponding  quarter in 2001. The decrease as compared with the prior year
was  primarily  due to carry  forward of the Ballard  billings  which would have
increased sales over the prior year had they been included in this quarter.  Due
to  milestone  restrictions  set forth by Ballard,  these  revenues  will not be
earned until the final hardware is proven.

We believe  these  revenues  will be booked  during the second  quarter of 2002.
Development contracts with Hyundai Motor Company, Ballard Power Systems (for the
Ford  Th!nk city Car) and Eco Power  Technology  account  for a majority  of the
Company's sales in the first quarter of 2002.

Cost of sales in the quarter ended March 31, 2002 increased to $702,000 compared
to cost of sales of  $658,000  for the same  three-month  period in 2001.  Costs
incurred with respect to the Ballard  development  program have been recorded to
cost of sales prior to the booking of the revenues  associated with that program
due to certain  contract  limitations  set forth by  Ballard.  We believe  these
associated revenues will be recorded in the second quarter of 2002.

Research  and  development  expense  increased  in the first  quarter of 2002 to
$275,000 as compared  with  $267,000 in the first  quarter of 2001. We intend to
utilize internal research and development as well as seek partners in the mobile
and stationary  alternative  energy fields to develop new and enhanced  products
for drive system and distributed generation markets.

Selling,  general and administrative  expense increased $167,000 to $615,000 for
the three  months  ended  March 31,  2002 from the  previous  year's  comparable
period. We incurred additional  professional fees in the amount of approximately
$100,000 in connection with a Form S1 prospectus filing during the first quarter
of 2002.  Additionally,  we incurred additional marketing and travel expenses in
our efforts to attract new customers and partners for the sale and  distribution
of our products.

Interest and  financing  fees  increased to $55,000 in the first quarter of 2002
from $28,000 in the first quarter of 2001.  Interest costs have increased due to
a change in interest


                                      -24-


accrual for our $3.3 million CMAC note in accordance  with the original terms of
that note.

We  incurred a net loss from  continuing  operations  of  $704,000  in the first
quarter of 2002 compared to a net loss of $270,000 in the first quarter of 2001.
As  discussed  above,  the net  loss for the  first  quarter  was  significantly
affected by the exclusion of the Ballard revenues, which could not be included.

Three Years Ended December 31, 2001

Our fiscal year ends December 31. All year references refer to fiscal years.

During  1999,  we  concentrated  on creating  new  business in the mobile  power
management  and  conversion  markets  as well as  reducing  operating  costs and
outstanding debt. Our business activities focused on the development of electric
and hybrid  electric  drive trains and related  components,  fuel cell  systems,
vehicle  systems   integration  and  the  performance  of  various   engineering
contracts.  Enova  completed  several key contracts  with the U.S.  Government's
Defense Advanced  Research Project Agency or "DARPA" and the DOT,  including the
analysis  of a new  plastic  lithium ion  vehicle  battery  concept,  testing of
advanced vehicle batteries and development of an airport electric passenger tram
system.  We have enhanced our  relationship  with Hyundai,  the world's  seventh
largest automobile  manufacturer,  with several engineering contracts to design,
develop  and test  electric  and  hybrid  electric  drive  systems  and  related
products.  We completed  development of an advanced  battery charging unit and a
parallel  hybrid  production  vehicle,  and  continue  to produce  the family of
Panther(TM) drive systems for their electric vehicles.  We also developed a high
power charger for use with our drive  systems.  Hyundai has adapted a customized
version of the Panther(TM) 60 for their production  electric vehicle,  the Santa
Fe sports utility vehicle.

Beginning in 2000, we started working with Ecostar  Electric Drive Systems,  now
known as Ballard Power, to develop and  manufacture  low voltage  electric drive
system  components  for use in Ford's  Global Th!nk City.  Ballard has announced
that an  all-electric  vehicle is  scheduled to be  introduced  in late 2002 for
markets in North America. We are designing and manufacturing the electronics for
the drive system in this vehicle as well as certain  auxiliary  components.  The
final  prototype  systems are currently  undergoing  pre-production  testing and
validation in the Ford Th!nk vehicle.  We continue to develop our  relationships
with Hyundai,  Ballard and other Original  Equipment  Manufacturers and Tier-One
suppliers for sales of our automotive  products.  We offer modular drive systems
to such  manufacturers  and  other  customers.  These  drive  systems  have been
installed in various vehicles currently  operating in North America,  Europe and
Asia.

In  2001,  we  entered  into  several  supplier  agreements  and  commenced  new
development programs with automotive and transit manufacturers both domestically
and internationally. Additionally, we completed various research and development
programs sponsored by the U.S. Government and private corporations.


                                      -25-


Ford Motor Company Programs

In July 2001, we entered into a strategic  relationship  with Ford Motor Company
under which we were selected by Ford's Th!nk brand to develop and  manufacture a
high power, high voltage conversion module for their upcoming fuel cell vehicle.
The high voltage conversion module will convert high voltage power from the fuel
cell into a lower voltage.  We are currently in the second phase of this program
having successfully designed and tested the proof of concept prototype. To date,
we have received approximately $500,000 from this Ford program.

This strategic  relationship also grants Ford warrants to purchase up to 4.6% of
our outstanding  common stock over the life of the relationship.  The vesting of
these  warrants is dependent  upon Ford  contracting  with us for additional new
production programs. The relationship will last for five years during which time
Ford will evaluate our company for future programs. Ford's warrants will vest at
the rate of 2,500,000  warrants for every $2,000,000 in new production  business
between Ford and Enova.  The agreement  between Ford and ourselves is referenced
as Exhibit 10.18 in this Prospectus.  Confidential treatment of this exhibit was
requested for portions of this document.

Our  development  and  production  program  with  Ballard  Power for low voltage
electric  drive system  components for use in Ford's Global Th!nk City has moved
into its production phase.  Ford has announced that the all-electric  vehicle is
scheduled to be introduced  in 2002 for markets in North America and Europe.  We
are designing and  manufacturing  the electronics for the drive system including
the power inverter,  charger and controller. In conjunction with Hyundai Autonet
of Korea, we are finalizing  production  planning for initial production systems
to be delivered in mid 2002. Gross revenues for the year ended December 31, 2001
from this Ballard program were approximately  $950,000.  Based on projections we
have received from Ford and Ballard,  we anticipate  that sales of these systems
will provide  additional  revenues in the  upcoming  years,  however,  we cannot
assure that there will by any such future revenues.

Hyundai Motor Company Programs

We continue to develop  hybrid and fuel cell based  systems with  Hyundai  Motor
Company,   the  world's  seventh   largest   automobile   manufacturer.   Having
successfully  completed our hybrid drive system and fuel cell  electric  vehicle
program, we will work with Hyundai on advanced hybrid and fuel cell applications
in 2002. We have delivered four series hybrid drive systems for use in Hyundai's
county bus at the World Cup Soccer in Seoul, Korea in June 2002.

Hyundai  continues to contract with our company for the  development of advanced
hybrid and fuel cell powered  drive  systems.  In regards to  passenger  vehicle
programs,  we continue in our efforts to develop a commercially  viable parallel
hybrid motor and controller for Hyundai's new hybrid vehicle to be introduced in
2004.  The  prototype  drive system for this program was delivered to Hyundai in
February  2002.  We expect to learn the results of Hyundai's  evaluation  of the
prototype during the second quarter of 2002.

Development programs with Hyundai generated  approximately  $450,000 in sales in
the year ended  December 31, 2001. We anticipate  additional  contracts for both
development and purchase of our components during 2002 for Hyundai's alternative
vehicle  applications,  however we cannot assure that such additional  contracts
will be realized.


                                      -26-


Light-Duty Drive Systems

In addition to the 30kW motor controller,  charger and DC-DC converter which we,
in alliance with Hyundai Autonet,  are  manufacturing  for Ballard Power, we are
also marketing our Panther(TM) 90kW drive systems.  Our 90kW  controller,  motor
and gear unit provide  outstanding  performance  for light duty vehicles such as
midsize automobiles and delivery vehicles. We have received a purchase order for
over 200  Panther(TM)  90kW drive  systems  for  delivery  in 2002 and 2003 from
Voltage   Vehicles  of   California,   an  integrator   of  specialty   vehicles
Additionally,  we are discussing  further sales of this system  configuration to
other domestic and international customers, however, we can give no assurance at
this time that such discussions will result in any further sales.

Heavy-Duty Drive Systems

Sales of our  Panther(TM)  120kW drive  systems  continue  to provide  increased
revenues  for our  company.  We  have  entered  into  supplier  agreements  with
manufacturers  in  Europe  and  Japan  as well as  domestically.  Hyundai  Heavy
Industries is also our outsource  manufacturer  for the Panther 120kW as well as
the motor and controller for our Panther 240kW drive systems.

Eco Power  Technology of Italy  purchased 15  Panther(TM)  120kW  electric drive
systems,  which  were  delivered  during  2001,  as well as  three  of our  Fast
Chargers.  . Under  the  terms of our  supplier  agreement,  Eco Power has given
notice of their  production  requirements  for 2002,  which  range from 25 to 30
Panther(TM) 120kW systems and additional Fast Chargers.  Eco Power is one of the
largest  integrators  of medium size transit buses for the European  shuttle bus
market  with key  customers  in Rome and Genoa.  Total  sales for the year ended
December 31, 2001 from Eco Power were $360,000.

Wrights Environment, a division of Wrights Bus, one of the largest low-floor bus
manufacturers  in  the  United  Kingdom,  has  integrated  our  hybrid  electric
Panther(TM)  120kW drive system,  which  utilizes a  microturbine  from Capstone
Turbine Corporation as its power source.  Wrights has purchased  additional pure
electric  drive systems for their  midsize buses for sale in the United  Kingdom
and the European Continent.  Further,  Wrights has begun discussions to purchase
both our new 240kW  drive  system and our Fast  Charger  system.  We  anticipate
additional  orders for both  electric  and  hybrid-electric  P120 drive  systems
during  2002,  however,  we cannot  assure  at this  time  that such  additional
contracts will be realized.

We  have  entered  the  Japanese  bus  market  with  two  new  customers,  Tomoe
Electro-Mechanical  Engineering and Manufacturing,  Inc. and Moriah Corporation.
Both of these  companies  have entered into supplier  agreements  with us and we
have already  delivered our first  Panther 120kW system to Tomoe.  We anticipate
that both companies will purchase additional systems during 2002, however we can
make no assurance that any purchases will occur.

The development of a utility vehicle for Southern  California  Edison  utilizing
our 120kW drive  system and a Capstone  Turbine  Corporation  30kW  microturbine
continues on schedule. We are developing additional power management accessories
for this vehicle so that it can run power applications such as drills and motors
used by the Southern California Edison technicians. This line service truck will
be a  demonstration  vehicle,  which we anticipate will lead


                                      -27-


to sales to utility companies  throughout the U.S. We cannot assure at this time
that such sales will occur.

In the high  performance  heavy-duty  drive system area;  we have  completed the
first  prototype of our  Panther(TM)  240kW drive system.  In  conjunction  with
Hyundai  Heavy  Industries  and  Ricardo,  Inc, of  Michigan,  a  developer  and
manufacturer of advanced transmissions, we have produced a robust, efficient and
powerful  drive system for  heavy-duty  applications  including  transit  buses,
heavy-duty  trucks  and other  applications.  We have been in  discussions  with
Wrights,  Hyundai and a major  alternative  transit bus manufacturer in the U.S.
regarding  the purchase of these drive systems in 2002. We can make no assurance
that these  discussions will result in any sales of the Panther(TM)  240kW drive
system.

Research and Development Programs

Our development  and integration  contracts with the DOT and the State of Hawaii
continue to create new opportunities for our drive systems.

During 2001, Enova,  Hyundai and the State of Hawaii introduced 15 Hyundai Santa
Fe electric vehicles in Honolulu,  Hawaii for test and evaluation prior to their
entry into the U.S.  markets.  The program will utilize  Hawaii's rapid charging
stations, manufactured by AeroVironment.  The contract has two elements, one for
integration of our BCU II battery care unit, which allows the vehicles to accept
fast charging,  and a second  contract for  maintenance of the vehicles over the
two-year  program.  The  participants  in the  program  include  state and local
offices as well as Hickam Air Force base. The vehicles are  performing  well and
initial reactions to their performance and handling are positive.

Our  contract  with the DOT to design and test a three-car  tram  utilizing  the
Panther(TM)  120kW drive system has been completed and has been delivered to the
High  Technology  Development  Corporation's  facility in  Honolulu.  This tram,
capable of  carrying  100  passengers,  will now be  delivered  to the  Honolulu
International Airport for further test and evaluation.  If successful, we intend
to market this tram system to  international  markets for  application  to other
airports,  national  and  recreational  parks and other  high  capacity  transit
applications.

We completed the  integration  of our drive systems into several State of Hawaii
and DOT vehicles.  We upgraded eight  Chevrolet S-10 trucks owned by the City of
Honolulu to our Panther(TM) 60kW drive system, including our BCU-II battery care
unit for fast-charge capability. Also, we are converting an Eldorado 30-foot bus
utilizing our Panther(TM)  120kW drive system for the Hickam Air Force base. All
of these programs are funded in  conjunction  with the Hawaii  Electric  Vehicle
Development Project, the DOT and the State of Hawaii.

Development  programs  with the  Department of  Transportation  and the State of
Hawaii  accounted for  approximately  $1,180,000 of total  revenues for the year
ended December 31, 2001. We will continue to establish new development  programs
with the Hawaii High Technology  Development  Corporation as well as other state
and federal government agencies as funding becomes available.


                                      -28-


Stationary Power Applications

Our  stationary  power programs  continue to attract new potential  partners and
customers from both fuel cell manufacturers and petroleum  companies.  It is our
belief that utilizing our power management  systems for stationary  applications
for fuel cells will open new markets  for our  company.  We are also  developing
applications  for  these  products  in the  telecommunications  and  distributed
generation markets.  We can make no assurance that we will successfully  develop
such  applications  or that any such  applications  will find  acceptance in the
marketplace.

Our fuel cell care unit is being  delivered  to UTC Fuel  Cells,  a division  of
United  Technologies  Corp., for use in their  stationary fuel cell systems.  To
date, we have delivered  approximately 20 fuel cell care units to UTC Fuel Cells
and to Hamilton Sundstrand,  an aerospace division of United  Technologies.  The
Hyundai  companies  have  also  expressed  interest  in  working  with us on the
development  of advanced  fuel cell  management  technologies,  as have  certain
domestic  energy  companies.  We believe this market will play a key role in our
future and we continue to pursue  alliances with leading  manufacturers  in this
area,  however,  we can make no  assurance  that this  market  will  develop  as
anticipated or that such alliances will occur.

We view  stationary  power  applications of our power  management  systems as an
important new area of product  development.  In the stationary  power management
field, we are developing applications for our products in the telecommunications
and  distributed  generation  markets.  We believe our approach of providing the
enabling  technology in power  management  and  conversion  to power  generation
companies  is key to early  access to these  markets.  Our joint  marketing  and
development  efforts with  Capstone  Turbine  Corporation,  Avestor and UTC Fuel
Cells have the potential to assist us in penetrating these markets. As discussed
earlier,  we are now  producing  and selling an  advanced  version of our BCU II
battery  care  unit and fuel  cell  care  unit for use with  fuel  cells in both
stationary  and mobile  systems,  starting with UTC Fuel Cells and the Institute
for a Sustainable Environment Research Lab.

Investment Funding

We are 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 in order to create  additional
intellectual  property.  In May 2001,  Jagen  Pty,  Ltd  exercised  warrants  to
purchase  41,666,666  shares of  common  stock at $0.06 per share for a total of
$2,500,000. In July 2001, Anthony Rawlinson, our chairman, exercised warrants to
purchase  8,333,334  shares  of  common  stock at $0.06 per share for a total of
$500,000.  Jagen  and  Mr.  Rawlinson  represented  that  they  were  accredited
investors.  We  relied  on Rule  506 of  Regulation  D and  Section  4(2) of the
Securities Act of 1933, as amended,  for the exemption from  registration of the
sale of such shares.

In June 2001, we issued warrants to purchase  15,000,000  shares of common stock
of Enova Systems to Ford Motor Company with respect to a participation  program.
We relied on Rule 506 of Regulation D and Section 4(2) of the  Securities Act of
1933,  as  amended,  for the  exemption  from  registration  of the sale of such
shares.

In early 2001,  we retained  Merrill Lynch as our  investment  advisor to pursue
equity  financing  options  and  other  strategic  alternatives.  We  intend  to
vigorously  pursue  additional  equity  capital  in order  to fund  new  product
development.


                                      -29-


Liquidity and Capital Resources

We have  experienced  cash flow  shortages  due to  operating  losses  primarily
attributable to research, development, marketing and other costs associated with
our  strategic  plan 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 approximately $5,000,000 in additional outside financing to
fund planned  operations  and  development  programs  through the end of 2003 at
which time we believe we will begin to be profitable from ongoing operations. We
can make no assurances that we will receive this amount of funding or that after
receiving such, that our company will become profitable.

During the year ended December 31, 2001, our operations required $3,023,000 more
in cash then was  generated.  We continue 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 $233,000 from $1,004,000, or 23% from the balance at December 31, 2000, as we
continued to expand our customer base and increased sales.  Inventory  increased
by  $520,000  from  $406,000 or 128% from  December  31,  2000  balances.  As we
continue to enter into  additional  production  contracts with companies such as
Eco Power,  Ford, Ballard and others, we will continue to require additional raw
materials and finished goods to meet demand.

Fixed assets increased by $219,000 or 28% before depreciation for the year ended
December 31, 2001 from the prior year  balance of $784,220 as we increased  both
the number of engineers and the  complexity  of our programs.  Increases in test
equipment,  production  machinery  and  both  technical  hardware  and  software
attributed to the increase.

Other assets  increased by $668,000  during 2001 from $68,000 in 2000  primarily
due to the  booking  of an asset in  relation  to the Ford  Value  Participation
Agreement.  We determined,  utilizing the Black Scholes method, the value of the
initial  tranche  of the vested  warrants  under this  program is  $577,000.  As
additional warrants become vested in the coming years, they will be valued under
the same  methodology  and booked as an expense  and into  stockholders  equity.
Additionally, increases were due to intellectual property expenses being applied
as they relate to several new patents on our technology.

As of December 31, 2001, we completed our  restructuring of the remainder of our
antecedent payables, reducing those accounts to zero from $210,000 in 2000.

Long term debt includes a secured promissory note to Credit Managers Association
of  California  in the amount of  $3,332,000,  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.  The
note is secured  with a UCC1 filing


                                      -30-


for all the assets of our company. We also have an unsecured promissory note for
$120,000 to Jeann Schulz with interest at 10%. This note is past due, however we
are currently renegotiating terms to bring the note current.

Due to the nature of our  industry  and the amount of research  and  development
which has been necessary to begin to produce  commercially  viable products,  we
have  experienced  the need for cash for  operations  from outside  sources.  We
changed  our  business  strategy  in 1997 to focus on the  development  of drive
systems and  components for electric,  hybrid-electric  and fuel cell mobile and
stationary applications. Invested capital from 1997 to the present has been used
for the development and advancement of these systems which are now being sold as
discussed  elsewhere  in this  prospectus.  We may,  from time to time,  require
additional invested capital to fund development of new or advanced  technologies
for our products.

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

Year 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 Panther(TM)  120kw systems as well as
new  contracts  with Ford and the DOT  accounted  for the increase in sales.  We
changed our fiscal year end from July 31 to December 31  effective  December 31,
1999. All  comparisons of  year-to-year  financial data for 2000 to 1999 are for
the twelve  months ended  December 31, 2000 and the twelve months ended July 31,
1999.  Net sales of  $2,883,000  for the twelve  months ended  December 31, 2000
increased  $109,000 or 4% from $2,774,000 during the same period in 1999.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. Cost of sales of $2,013,000
for the year ended December 31, 2000 increased $553,000, or 37%, from $1,460,000
during the same period  ending July 31, 1999.  During the fiscal year ended July
31, 1999, we sold a technology license to Hyundai Heavy Industries which did not
have  associated  costs  of sales  which  accounted  for the  lesser  amount  in
1999.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%. Research and development expense increased in 2000
to $626,000  from  $499,000 in fiscal  1999,  an increase of $127,000 or 25%. 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


                                      -31-


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,  account for the majority of the rise
in expense.  We do not anticipate this level of  professional  fees to continue.
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 will facilitate
in  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 2000,
interest  and  financing  fees  decreased to $174,000  from  $724,000 in 1999, a
decrease of 76%, due to the  forgiveness  of  $4,300,000  of debt,  formerly the
Itochu debt, and the conversion of $1,000,000 of debt into common stock.

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.  Additional  settlements  resulted  in a gain  on  debt  restructuring  of
$140,000 in fiscal 1999.

During 2001,  we settled a lawsuit  brought  against us by Fontal  International
Ltd., the selling shareholder in this prospectus.  The settlement requires us to
issue, and register by March 31, 2002, 6,000,000 share 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 and 1999 were $75,000 and
$125,000, respectively, and related to matters involving claims made in 1996 and
1998  respectively.  In the first  half of 2002,  we agreed to issue  additional
shares to Fontal based on the timing of the approval of this  prospectus  by 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  in this  Prospectus  including  the  increased  legal and
accounting  fees,  the legal


                                      -32-


settlement with respect to the 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.  The
loss  from  operations  for  2000  of  $2,010,000  represented  an  increase  of
$1,001,000 or 99% from the  $1,009,000  loss in fiscal 1999,  which excludes the
recapture of approximately $474,000 of prior warranty reserves.

Fiscal Year Ended December 31, 2000 v. Fiscal Year Ended July 31, 1999

Effective  December  31,  1999 we changed  our  fiscal  year end from July 31 to
December 31. Because we do not experience seasonal  fluctuations in revenues and
expenses,  all  comparisons  of  year-to-year  financial data are for the twelve
months ended December 31, 2000 and the twelve months ended July 31,1999.

During the year ended December 31, 2000,  operations required $2,358,000 more in
cash then were  generated.  We  continued to  encounter  increased  research and
development  costs, as well as increased sales and marketing and  administrative
expenses necessary for expansion. Accounts receivable increased by $432,000 from
$572,000  as we  continued  to expand  our  product  and  customer  bases and to
increase  sales.  Customer  Deposits  decreased by $102,000  from $102,000 as we
applied an advance  payment from one of our customers for  engineering  services
performed.  Inventory increased by $151,000 from $256,000.  The increase was due
the purchase of raw materials for current development and production contracts.

Results of Operations

Net sales of $2,883,000  for the twelve months ended December 31, 2000 increased
$109,000 or 4% from  $2,774,000  during the same period in 1999.  Of total sales
for the year ended December 31, 2000, $2,662,900,  or 92% were revenues realized
on engineering  contracts with Ecostar,  the DOT, the Hyundai Group of Korea and
other customers.

Cost of sales of  $2,013,000  for the year ended  December  31, 2000  reflect an
increase of $553,000, or 37%, from $1,460,000 during the same period ending July
31,  1999.  During the fiscal  year ended July 31,  1999,  we sold a  technology
license to Hyundai Heavy  Industries that did not have associated costs of sales
and thus accounted for the lesser amount in 1999.

Cost of sales as a percentage of sales  increased to 70% in fiscal 2000 from 53%
in fiscal 1999.  As stated,  sales  revenue for fiscal 1999 included a sale of a
technology  license of $600,000.  Excluding the sale of the technology  license,
cost of sales for fiscal 1999 was 67% of sales.

Research and development  expense  increased in the year ended December 31, 2000
to $626,000 from $499,000 in the year ended July 31, 1999.  Product  development
costs  incurred in the  performance  of  engineering  development  contracts 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 2000 to $626,000 from $499,000 in fiscal 1999, an increase
of $127,000, or 25%.


                                      -33-


Selling, general and administrative expense increased in the year ended December
31, 2000 to  $1,999,000  from  $1,141,000  for the similar  period in 1999.  The
increase was due to increased  sales,  marketing,  legal and travel  expenses in
relation to  acquiring  new business  and  creating  alliances  with several key
manufacturers during 2000, including Gillig Bus, Capstone Turbine, Wright Bus of
Ireland  and EPT of Italy.  Selling,  general  and  administrative  expense  was
$1,141,000 in fiscal 1999,  which  declined by  $1,697,000,  or 33%, from fiscal
1998, as we reduced spending and consolidated operations.  During 1999 and 2000,
we began to increase  operations  as we began to move from a pure  research  and
development company to a more diversified development and production business.

For the year ended  December 31, 2000,  interest and financing fees decreased by
$550,000 to  $174,000,  a decrease of 76%.  The  reduction  was due to continued
restructuring  of long-term debt by forgiveness  or conversion  into equity.  In
fiscal 1999,  interest and financing fees increased to $724,000 from $665,000 in
1998, an increase of 9%, due mainly to default interest rates becoming effective
on certain notes payable.  The  forgiveness of $4,300,000 of debt,  formerly the
Itochu debt, and the conversion of $1,000,000 of Fontal debt,  reduced  interest
expense significantly during 2000.

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.  Additional  settlements  resulted in a gain on debt
restructuring of $140,000 in fiscal 1999 and $42,000 in 1998.

As a result of the foregoing  changes in net sales,  cost of sales,  other costs
and expenses and gain on debt restructuring,  the net loss of $459,000 increased
16%  from the  $395,000  loss  during  the  similar  period  in  1999.  As noted
previously,  the  increase  in net loss is  attributed  primarily  to efforts to
establish  our  company  as a key  player in the  mobile  power  conversion  and
management  markets and to develop new systems for the stationary  markets.  The
net  loss for  fiscal  1999 of  $395,000  decreased  $3,130,000  or 89% from the
$3,525,000  loss in 1998.  These results  reflect the  successful  shift from an
electric  vehicle   conversion   business  to  a  mobile  and  stationary  power
electronics components developer and producer.

Fiscal Year Ended July 31, 1999 v. Fiscal year Ended July 31, 1998

During 1999, we continued to concentrate on the reduction of operating costs and
outstanding debt. Our business  activities focus primarily on the development of
electric and hybrid  electric  drive-trains  and related  components,  fuel cell
systems,  vehicle systems integration and the performance of various engineering
contracts.

We  received  capital  investments  from  Jagen,  Pty,  Ltd.  in the  amount  of
$2,500,000 on June 4, 1999 and from Anthony  Rawlinson in the amount of $500,000
on July 30, 1999,  which enabled us to further  develop our hybrid drive systems
as well as embark on other in-house funded research and development.

During 1999, we spent  $798,000 in cash on operating  activities to fund the net
loss of $395,000,  resulting from the factors explained in the following section
of this discussion and analysis. Accounts receivable increased by $560,000 as we
increased the number of


                                      -34-


engineering   contracts  from  Hyundai  Motor   Corporation  and  Hyundai  Heavy
Industries.  Customer  Deposits  decreased by $387,000 as we  completed  various
contracts started in 1998 and moved toward a milestone based billing  procedure.
Inventory decreased by $329,000, net of write-downs of $36,000. The decrease was
primarily caused by our  reclassification of certain finished goods inventory to
fixed  assets to  reflect  the assets  current  usage.  These  items will now be
depreciated over their useful lives.

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

Results of Operations

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

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

Research and development  expense increased in 1999 to $499,000 from $445,000 in
1998,  an increase of $54,000,  or 12%.  While we reduced staff and cut costs in
all areas, our focus continues to be centered on research and  development.  The
product development cost incurred in the performance of engineering  development
contracts  is charged  to cost of sales for this  contract  revenue.  Non-funded
development costs are reported as research and development expense.

Selling,  general and administrative  expense of $1,141,000 in 1999 continued to
decline from  $1,697,000,  or 33% from 1998, as we continued to reduce  spending
and consolidated operations.

In 1999,  interest  and  financing  fees  increased  slightly to  $724,000  from
$665,000 in 1998,  an increase  of 9% due mainly to a default  interest  rate on
certain notes payable becoming effective.

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

As a result of the foregoing  changes in net sales,  cost of sales,  other costs
and  expenses  and gain on debt  restructuring,  the  1999 net loss of  $395,000
decreased  $3,130,000  or 89% from


                                      -35-


the $3,525,000 loss in 1998.  These results reflect a significant  change in our
operating condition. Our cost structure and operating conditions are now more in
line with the sales volume and the scope of business.

Recent Accounting Pronouncements

The  Financial  Accounting  Standards  Board has recently  issued the  following
Financial Accounting Standards (FAS):

FAS No. 140, " Accounting  for Transfers  and Servicing of Financial  Assets and
Extinguishments of Liabilities", provides accounting and reporting standards for
transfers and servicing of financial assets and  extinguishments of liabilities.
This Statement replaces FAS No. 125,  "Accounting for Transfers and Servicing of
Financial Assets and  Extinguishments of Liabilities".  It revises the standards
for accounting for  securitizations  and other transfers of financial assets and
collateral  and requires  certain  disclosures.  This statement is effective for
transfers and servicing of financial assets and  extinguishments  of liabilities
occurring after March 31, 2001.

FAS  No.  141,  "Business  Combinations",  addresses  financial  accounting  and
reporting for business  combinations and supersedes  Accounting Principles Board
Opinion No. 16. This Statement requires that all business combinations are to be
accounted for using the purchase  method of  accounting.  The provisions of this
Statement apply to all business combinations initiated after June 30, 2001.

FAS No.  142,  "Goodwill  and  Other  Intangible  Assets",  addresses  financial
accounting and reporting for acquired  goodwill and other intangible  assets. It
addresses how intangible  assets that are acquired  individually or with a group
of other  assets (but not those  acquired in a business  combination)  should be
accounted for in financial  statements  upon their  acquisition.  This Statement
also addresses how goodwill and other intangible  assets should be accounted for
after they have been initially recognized in the financial statements.

FAS No. 143, " Accounting for Asset Retirement Obligations", addresses financial
accounting  and  reporting for  obligations  associated  with the  retirement of
tangible  long-lived  assets and the associated  asset  retirement  costs.  This
Statement  is  effective  for  financial  statements  issued  for  fiscal  years
beginning after June 15, 2002.

FAS No. 144,  "Accounting for the Impairment or Disposal of Long-Lived  Assets",
addresses  financial  accounting and reporting for the impairment or disposal of
long-lived assets.  This statement is effective for financial  statements issued
for fiscal years beginning after December 15, 2001.

Implementation of the above financial accounting pronouncements are not expected
to have a material effect on our financial position or results of operations.


                                      -36-


BUSINESS

General

In July 2000, we changed our name to Enova Systems,  Inc. from U.S.  Electricar,
Inc. We were incorporated in California on July 30, 1976.

We believe that we are a leader in the  development and production of commercial
digital power  management  systems.  We are now  producing,  under contract with
global vehicle and  technology  companies,  digital power  processing and energy
management enabling  technologies for electric,  hybrid electric,  and fuel cell
powered vehicles.  These power management  technologies are now being applied to
commercialization  of fuel cell power  generation for stationary  non-automotive
applications.  Our business activities continue to be focused on the development
of electric and hybrid electric drive systems and related components,  fuel cell
power  management  systems for both mobile and  stationary  power  applications,
vehicle  systems   integration  and  the  performance  of  various   engineering
contracts.

Our fiscal year ends December 31. All year references refer to fiscal years.

Products

Our 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.  Our 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
microturbine  based systems,  and stationary  power  generation all require some
type of power  management and conversion  mechanism.  We supply these  essential
components.  Our drive train  systems work with any kind of  fuel/power  source,
from  electric  to  hybrid  to fuel  cell to  turbine,  and they  are  essential
components for any vehicle, system or device that uses power.

We are  moving to  expand  our  product  base into new  markets  outside  of the
traditional  electric and hybrid-electric  automotive fields. Key areas in which
we have begun to penetrate include energy  management in the  telecommunications
industry,  distributed  generation in the utility industry,  and stand-by/backup
power  generation in the  commercial  electronics  industry.  All three of these
markets can be served with our  existing  energy  management  and power  control
products.  We have entered into  agreements  or begun  discussions  with various
alternative power generation  manufacturers such as Capstone Turbine Corporation
and UTC Fuel  Cells,  as well as others.  We  currently  have a joint  marketing
agreement  with  Capstone  for  sales of our  combined  systems.  UTC Fuel  Cell
purchases  components  on a  purchase  order  basis.  Other  companies  such  as
Pentadyne  Power   Corporation  and  Maxwell   Technologies  have  entered  into
Memorandums of Understanding with us which define, in general


                                      -37-


terms,  systems and market  segments in which our  companies  could  potentially
produce and sell  components.  We believe our enabling  technologies  will prove
beneficial  to these types of companies in their  strategies  to bring these new
power systems to commercialization,  however, we can make no assurance that such
agreements,  if made, will result in a successful  expansion of our product base
in these new markets.

We have embraced fuel cell technology and we have 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 will also provide added reliability and safety by monitoring,  adjusting
and reporting on operation of the unit.

Panther(TM) Electric and Hybrid-Electric Drive Systems

The Panther(TM)  electric drive system provides all the  functionality one would
find  under the hood of an  internal  combustion  gas or diesel  engine  powered
vehicle.  The Panther(TM)  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.

Our family of light-duty drive systems  includes 30kW,  60kW, 90kW  all-electric
drives, 90kW fuel cell powered  series-hybrid  drive, and a 10kW parallel-hybrid
drive unit.  Our family of heavy-duty  electric  drive systems  includes a 120kW
all-electric drive, a 120kW turbine powered series-hybrid drive, and a new 240kW
turbine powered series-hybrid drive system.

We  currently  market  these  systems to  automobile  and bus  manufacturers  as
discussed in detail elsewhere in this prospectus. Prices for electric and hybrid
electric  drive  systems vary based on the  configuration  of the system and the
number of units purchased,  however,  on average our systems list for $12,000 to
$25,000  for light duty  systems  and $20,000 to $75,000 per unit for heavy duty
drive systems.

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(TM) drive system exclusively  utilizes induction AC motors for their
high performance, power density, robustness and low cost. The AC drive system is
scaleable


                                      -38-


and can be customized  for different  applications.  Due to the large  operating
range that the 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.  We  also  offer  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

Our  Panther(TM)  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 120/30kW series hybrid system uses
the 120kW  electric  drive  components  to propel the  vehicle,  and uses a 30kW
microturbine  to generate power while the vehicle is in operation.  This synergy
of design reduces the development cost of our hybrid systems by taking advantage
of existing  designs.  Accessories for these drives include battery  management,
chargers and 12-volt power supplies, as with the all electric drive family.

Our  hybrid  systems  are  designed  to work  with a  variety  of  hybrid  power
generation  technologies.  In our 120/60kW hybrid system, an internal combustion
gas or diesel  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 Cells  system,  or many
others.  In all of these examples,  our battery  management  system provides the
power management to allow for proper power control.

Power Management and Accessory Products

We currently sell a number of power management and power  conversion  components
which  may or may not be used in  conjunction  with  our  drive  systems.  These
components  vary in  price  based  upon  systems  configuration  and  quantities
purchased, but on average range in price from $2,000 to $5,000 per unit based on
our current pricing.


                                      -39-


Battery Care Unit

We place a great  amount of focus on our power  management  systems.  Our BCU II
battery care unit  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.

Our BCU II  monitors,  manages,  protects,  and reports on the  condition of the
vehicles battery pack. 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 systemand also reports  state-of-charge,  amp hours and
kilowatt-hours.

The BCU II  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 II 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 II directly interfaces with our Panther(TM) and other drive systems, and
also  controls  the safety  disconnect  unit.  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 II 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 non-volatile  built-in memory allows the BCU II to update,  store and report
key  battery  pack  parameters  such as amp hours,  kilowatt-hours  and state of
change. Using our proprietary  Windows(TM)-based diagnostic software, the BCU II
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 II to  perform  the  critical  role  of  hybrid
controller.  Our hybrid control unit continuously  monitors the condition of the
battery pack through  communications with the BCU II battery care unit, monitors
the driver commands through  communications  with the motor controller,  and the
state of the hybrid generator.  Based upon the data received, the hybrid control
unit provides  continuous  updates to the hybrid


                                      -40-


generator  with  instructions  on  mode  of  operation  and  power  level.  This
innovative  control loop ensures 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 is under the control of the BCU II battery care unit,
and allows vehicle systems to gracefully 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 II commands the safety  disconnect unit to
break the battery  connection.  The safety  disconnect  unit is available in two
configurations to match the requirements of the drive systems.

Fast Charger

We have also developed a 40kW rapid charger for electric vehicles, which reduces
charging  time from six to eight  hours to 20 to 30  minutes.  The  charger  was
initially developed in conjunction with Hyundai for their electric vehicles. The
Fast Charger is also ideal for small or shuttle buses,  trams and trucks. We are
currently  selling rapid  chargers to Eco Power  Technology of Italy.  This unit
lists for $40,000 to $55,000 per unit based on volumes.

Fuel Cell Power Conditioning Unit

We have  developed and are 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  microturbine,  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 adjusted50kW ICE
Generator Unit

We provide 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(TM)  product  line.  The
same hybrid  control unit that controls the Capstone  microturbine  in our other
series hybrid  configurations  provides power command,  start command,  and stop
commands.


                                      -41-


Fuel Cell Management Unit

We have  added a fuel  cell  control  unit to  broaden  our  market in the power
management  field.  This unit is designed to manage  fuel cell  powered  systems
whether  stationary or mobile,  such as in vehicles.  The fuel cell control unit
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.

We have also  reconfigured our battery  management unit to perform the functions
required to monitor, manage, and report on the status of a fuel cell stack. This
new units  currently  being  used by UTC Fuel Cells as a  management  systems in
their fuel stack products.

An internal  real-time  clock  allows the fuel cell  control  unit 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 non-volatile  RAM allows the unit to update,  store and report key
battery pack parameters such as amp hours,  kilowatt-hours  and state of charge.
With our  proprietary  Windows(TM)-based  diagnostic  software,  the  fuel  cell
control unit control parameters can be programmed in-system.  Additionally, fuel
cell performance can be monitored in real-time and output to a laptop computer.

Distributed   Power   Generation  for  Industrial  /  Commercial  /  Residential
Applications

Our  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 will 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 II  battery  care  unit  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.

These  products are custom  designed  for the  customer's  specific  application
requirements.  Currently, we are finalizing a development and production program
with a major petroleum company for process control.  Other systems are available
for sale requiring minimal reconfiguration for customer requirements.

Back-Up Power for Telecommunications

As  in  the  distributed  generation  market,  telecommunications  products  are
virtually  identical  in  system  configuration  to  a  series  hybrid  vehicle,
including a controller and battery management unit. 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  communications  link.  The BCU II  battery  care  unit will
provide power management  functions to control the entire system.  When the grid
goes down, the AC power typically supplied to the motor for


                                      -42-


propulsion power is, in this case, sent to the  communications  link (or router)
to  supply  power  as a  backup.  We  are  currently  seeking  customers  in the
telecommunication  equipment  and  battery  manufacturing  industries  for these
products. We anticipate that this market will open to our products in 2003 based
upon current industry trends,  however,  we can make no assurance that this will
occur.

Company Operations

In 1998,  we  restructured  our top  management,  realigned our product base and
concentrated  on the reduction of overall  company  operating  costs.  We closed
facilities, streamlined operations, and developed new product lines. During 2000
and 2001,  we increased  our product line and began to penetrate new markets for
our products.  Accordingly, at December 31, 2001, we had increased our headcount
to 39 employees and 6 independent contractors from 35 in 2000.

During  1999,  we  concentrated  on creating  new  business in the mobile  power
management  and  conversion  markets  as well as  reducing  operating  costs and
outstanding debt. Our business activities focused on the development of electric
and hybrid  electric  drive trains and related  components,  fuel cell  systems,
vehicle  systems   integration  and  the  performance  of  various   engineering
contracts. We completed several key contracts with the U.S. Government's Defense
Advanced Research Project Agency and the Department of Transportation, including
the analysis of a new plastic  lithium ion vehicle battery  concept,  testing of
advanced vehicle batteries and development of an airport electric passenger tram
system.  We have enhanced our  relationship  with Hyundai,  the world's  seventh
largest automobile  manufacturer,  with several engineering contracts to design,
develop  and test  electric  and  hybrid  electric  drive  systems  and  related
products.  We completed  development of an advanced charging unit and a parallel
hybrid  production  vehicle,  and continue to produce the family of  Panther(TM)
drive systems for their electric vehicles. Our Company has also developed a high
power charger for use with our drive  systems.  Hyundai has adapted a customized
version of the Panther(TM) 60 for their production  electric vehicle,  the Santa
Fe sports utility vehicle.

Beginning in 2000, we started  working with Ecostar  Electric Drive  Systems,  a
joint  venture of Ford,  Daimler  Chrysler  and  Ballard  Power to  develop  and
manufacture  low voltage  electric  drive  system  components  for use in Ford's
Global  Th!nk  city.  Ecostar  has  announced  that an  all-electric  vehicle is
scheduled to be  introduced in early 2002 for markets in North  America.  We are
designing  and  manufacturing  the  electronics  for the drive system as well as
certain  auxiliary  components.   The  final  prototype  systems  are  currently
undergoing  pre-production  testing and validation in the Ford Th!nk vehicle. We
continue to develop our  relationship  with Hyundai,  Ecostar and other Original
Equipment  Manufacturers  and  Tier-One  suppliers  for sales of our  automotive
products.  We offer our modular  drive systems to such  manufacturers  and other
customers. These drive systems have been installed in various vehicles operating
in North America, Europe and Asia.


In 2001, we began  supplying  drive systems to  manufacturers  such as Eco Power
Technology,  Tomoe and Moria as  discussed  below and in other  sections of this
Prospectus.  We also  commenced new  development  programs with  automotive  and
transit  OEMs  both  domestically  and  internationally,  as well as  completing
various research and development  programs sponsored by the U.S.  Government and
private corporations such as Hyundai Motor Company. These programs are discussed
more fully below.



                                      -43-


For marketing our larger drive systems, we are discussing sales of the system to
various  transit  bus  manufacturers  in the U.S.  and  Europe,  to develop  and
manufacture  series hybrid  electric  transit  buses  utilizing our 240kW hybrid
drive system.  Additionally,  We have entered into a development,  manufacturing
and marketing agreement with Wrights Environment, a division of Wrights Bus, one
of the largest  low-floor bus  manufacturers in the United Kingdom,  to develop,
manufacture  and integrate pure electric and hybrid  electric drive systems into
Wrights'  low  floor,  mid-size  buses for sale in the  United  Kingdom  and the
European  Continent.  In January  2001,  we received an order for a  Panther(TM)
120kW  hybrid  drive system from  Wrights  which  utilizes the Capstone  Turbine
Corporation microturbine as the primary power source.

We continue to expand our markets by  creating  alliances  with other  component
suppliers.  Capstone Turbine  Corporation has recently teamed with us to develop
and market  hybrid  electric  drive  systems using  Capstone's  microturbine  in
conjunction  with our power management and drive systems.  We currently  utilize
Capstone's  microturbine in our drive systems for Eco Power Technology of Italy,
as well as for Wright's Bus in the United Kingdom.

Our  engineering  contracts  with  DARPA and the DOT  continue  to  progress  on
schedule.  These  programs  include  the  development  of  an  airport  electric
passenger  tram  system for the  Honolulu  Airport  and an EV  commercialization
program  for the State of  Hawaii.  Our  contract  with the U.S.  Department  of
Transportation  to design and test this tram  system  utilizes  the  Panther(TM)
120kW drive system.  The tram was developed in conjunction with APS, an electric
bus  manufacturer  in Oxnard,  California.  This tram,  capable of carrying  100
passengers,  was  delivered in the 1st quarter of 2002 to the  Honolulu,  Hawaii
Airport  for test and  evaluation.  We  intend to  market  this  tram  system to
international   markets  for  application  to  other   airports,   national  and
recreational parks and other high capacity transit  applications.  Another joint
DOT program, the Hawaii/Hyundai commercialization program, which we established,
has been  enhanced  to  include  the  testing of 15  Hyundai  Santa Fe  electric
vehicles in Honolulu, Hawaii prior to their entry into the U.S. markets. We have
also begun work on a electric  trolley for the Hawaii market in conjunction with
the DOT and E Noa, a  manufacturer  and  operator  of  stand-alone  trolleys  in
Hawaii. Our Hawaii operations in Honolulu are both a development and maintenance
installation  for various  DARPA/DOT  programs.  The facility also maintains the
electric  vehicle fleets for different  state and local  government  agencies as
well as private institutions.

We  continue  to further  our  relationship  with  Hyundai  through  engineering
contracts to design, develop and test electric and hybrid electric drive systems
and related products.  We have completed  development work on Hyundai's parallel
hybrid  production  vehicle and a series hybrid  electric  drive  system.  These
hybrid  systems are slated to be  integrated  into  Hyundai's new Santa Fe sport
utility  vehicle.  Hyundai has adapted a customized  version of the  Panther(TM)
60kW for their  production  electric  vehicle  and intends to utilize our hybrid
drive system and battery  management for their next generation  alternative fuel
vehicles.  We have also  developed  a high power fast  charger  for use with our
drive systems in conjunction with Hyundai.

We view  stationary  power  applications of our power  management  systems as an
important new area for product  development.  In the stationary power management
field, we are developing applications for our products in the telecommunications
and  distributed  generation  markets.  We believe our approach of providing the
enabling  technology in power


                                      -44-


management and conversion to power  generation  companies is key to early access
to these  markets.  Our joint  marketing and  development  efforts with Capstone
Turbine Corporation,  Avestor and UTC Fuel Cells have the potential to assist us
in penetrating  these markets.  As discussed  earlier,  we are now producing and
selling an advanced  version of our BCU-II  battery care unit and fuel cell care
unit for use with fuel cells in both  stationary  and mobile  systems,  starting
with UTC Fuel Cells and the  Institute for a  Sustainable  Environment  Research
Lab.

We continue to seek new investment  capital to fund research and development and
create new market  opportunities.  We received capital investments of $1,000,000
each from Perla  Blanca  Investments  and Kafig  Pty,  Ltd for the  purchase  of
3,333,333  shares of common stock each during the twelve  months ended  December
31, 2000. In early 2001, we retained Merrill Lynch as our investment  advisor to
pursue equity financing options and other strategic  alternatives.  We intend to
vigorously  pursue  additional  equity  capital  in order  to fund  new  product
development.  In July 2001,  Anthony  Rawlinson  exercised  warrants to purchase
8,333,334 shares of our common stock at $0.06 per share for a total of $500,000.

Debt Restructuring


We completed  our balance  sheet  restructuring  during 2001.  Overall,  we have
reduced  outstanding  indebtedness and liabilities by approximately  $10,000,000
since we began our restructuring program in 1999. We have also been reducing our
outstanding past due accounts payable and other accrued liabilities. At December
31,  2001,  we  have  eliminated  all of our  antecedent  accounts  payable  and
non-current  accrued  liabilities.  This reduction of  liabilities  and debt was
accomplished  through various  financial  transactions  including  conversion of
approximately  $1.2 million of debt being converted to common stock in 1999, The
remainder of the debt and liabilities  were eliminated via debt  forgiveness and
recapture  by legal  statute as  previously  discussed in our From 10-K and 10-Q
filings.


Environmental Initiatives and Legislation

Federal legislation was enacted to promote the use of alternative fuel vehicles,
including electric vehicles.  Several states have also adopted  legislation that
sets  deadlines for the  introduction  of zero emission  vehicles.  The State of
California delayed the mandated introduction of zero emission vehicles from 1998
to 2003 and established a required  percentage of zero emission vehicles and new
hybrid-electric  vehicles  for  2003  at 10%  of  total  new  vehicle  sales  in
California from the six major automobile manufacturers.  The State of California
estimates  that a  combination  of  approximately  100,000  electric  and hybrid
electric  vehicles  will be  required  to meet the  State's  2003  mandate.  The
California Air Resources  Board  recently  confirmed  their  commitment to these
percentages,  adding that  hybrid-electric  vehicles may offset a portion of the
required  percentage.  We have taken an aggressive  position in diversifying our
product base to include  various  hybrid-electric  platforms in our product mix.
The U.S.  Department  of Energy also  modified  their rules  governing how state
fleets and utility  fleets  must  comply  with the Energy  Policy Act of 1992 on
alternative fuel transportation programs.

Strategic Alliances, Partnering and Technology Developments

We continue  to adapt to the  ever-changing  environment  of  alternative  power
markets for both


                                      -45-


stationary and mobile  applications.  Originally focusing on pure electric drive
systems,  we are now  positioned  as a  global  supplier  of drive  systems  for
electric,  hybrid and fuel cell  applications.  We are now  entering  stationary
power  markets  with our power  management  systems and intend to develop  other
systems to monitor  and  control  the  complex  fuel cell and  ancillary  device
systems being developed for distributed generation and mobile applications.

We also  continue  to seek and  establish  alliances  with major  players in the
automotive,  stationary power and telecommunication fields. For instance, we are
partnering  with the  Hyundai  Group of Korea  in the  development  of  advanced
drive-train  technology  and  related  systems.  Additionally,  we have begun to
partner with Ford and Ballard Power on other automotive programs and are 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 UTC Fuel Cells and  Capstone
Turbine Corporation. 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 our competitive advantage
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, we design
our products to QS9000  manufacturing and quality  standards.  Our redundancy of
systems,  robustness of design,  and rigorous  quality  standards result in high
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
original equipment manufacturing customers.

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

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  will be highly
dependent upon the successful  development and introduction of new products that
are  responsive  to market needs and can be  manufactured  and sold at a profit.
There can be no assurance that 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  but not in markets  where  government
mandates call for zero emission vehicles.  We are involved in the development of
hybrid vehicles and fuel cell systems in order to meet future  requirements  and
applications.


                                      -46-


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  itself  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

We believe  that timely  development  and  introduction  of new  technology  and
products is 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 shuttle and transit buses;

      *     Systems integration of these technologies;

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

      *     Original Equipment Manufacture technical and product development.

For the year ended  December 31, 2001 and 2000, we spent  $879,000 and $626,000,
respectively,  on internal  research and  development  activities.  For the five
months  ending  December  31, 1999 and the fiscal  years ended July 31, 1999 and
1998,  we spent  $262,000,  $499,000  and  $445,000,  respectively,  on internal
research and development activities.  We are continually evaluating and updating
the technology and equipment used in developing each of our 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

We currently hold one patent for crash management  safety,  which was originally
issued in 1997, and we have submitted  applications for four additional  patents
and several  trademarks  or service marks in the United  States.  Our patent for
crash  management  safety  expires in October  2017. We  continually  review and
append our protection of proprietary technology.  The status of patents involves
complex legal and factual questions, and the breadth of claims


                                      -47-


allowed is  uncertain.  Accordingly,  we can make no  assurance  that any patent
applications we file will result in patents being issued.  Moreover, can make 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, we can make 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.  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.

Employees


As of May  30,  2002,  we had 39  employees,  of  whom  38 are  full-time  and 1
part-time.  Additionally,  we employ six individuals as independent contractors,
engaged  on an hourly  basis,  two of whom are  domiciled  in South  Korea.  The
departmental  breakdown of these individuals includes 3 in administration,  1 in
sales, 30 in engineering and research and development, and 11 in production.


Facilities

Our  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  2003.  The monthly  lease  expense is  $13,500.  We also have a leased
office in Hawaii, which is rented on a month to month basis at $1,500 per month.

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 have 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 10Q. The suit
alleged  breach of  contract  with  respect  to  certain  warrants  to  purchase
10,833,332 shares of our common stock. The settlement  agreement  required us to
issue  6,000,000  shares of common stock which were to be registered  and freely
tradable  on, or before,  March 31, 2002.  As it became  apparent  that,  due to
circumstances  beyond our  control,  we would not be able to provide  registered
shares by that date, we entered into an agreement  with Fontal  granting them an
additional  (i)100,000  registrable  shares of common stock if the  registration
statement of which this  prospectus  is a part is not declared  effective by the
Securities  and Exchange  Commission  on or before April 30, 2002;  (ii) 100,000
registrable  shares of common stock if registration is not declared effective by
the SEC on or before May 31, 2002;  (iii) 100,000  registrable  shares of common
stock if registration is not declared effective by the SEC on or before June 15,
2002;  and (iv) 100,000 shares of common stock if  registration  is not declared
effective by the SEC on or before June 30, 2002.



                                      -48-


MANAGEMENT

The following table sets forth certain  information  regarding our directors and
executive officers as of December 31, 2001.

Name                            Age    Position
----                            ---    --------
Anthony N. Rawlinson            47     Chairman of the Board

Carl D. Perry                   69     President, Chief Executive Officer, Chief
                                       Financial Officer and Secretary

Malcolm R. Currie, Ph.D. (1)    72     Director

Donald H. Dreyer (2)            64     Director

John J. Micek III (2)           49     Director

Edwin O. Riddell (1)            59     Director

James M. Strock                 46     Director

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

Anthony N. Rawlinson, Chairman of the Board

Mr. Rawlinson was appointed Chairman 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. Mr. Rawlinson is currently Chairman of Matrix Oil NL,
an Australian publicly listed company with Indonesian oil and gas interests.  He
is also a director of Cardsoft  Inc., a software  company with secure Java based
solutions for mobile phones and handheld devices.

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

Mr. Perry was elected Chairman,  Chief Executive Officer, Acting Chief Financial
Officer and Secretary in November 1997. Mr. Perry served as a director and as an
Executive Vice President from 1993 until 1997. In 1997, Mr. Perry was elected as
Chairman and Chief  Executive,  and was elected  President in June 1999. In July
1999, Mr. Perry resigned his position as Chairman to allow Mr. Anthony Rawlinson
to become  Chairman.  Previously,  he was Executive  Vice  President of Canadair
Ltd., Canada's largest aerospace corporation responsible for all worldwide joint
ventures,  strategic planning and global operations.  He was also Executive Vice
President of Howard Hughes  Helicopter  Company,  now known as Boeing Helicopter
Company,  where he was  responsible  for all general  management  and  worldwide
operations.  Mr. Perry has a B.S. in Political  Science from the  University  of
California at Los Angeles.


                                      -49-


Malcolm R. Currie, Ph.D., Director

Dr.  Currie was  re-elected  to our board of directors in 1999.  Dr.  Currie had
served as a  director  from 1995  through  1997.  Since  1994,  he has served as
Chairman of Currie Technologies,  a developer of electric  transportation.  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 pap s in microwave and millimeter  wave
electronics, laser, space systems, and related fields. He has led major programs
in radar, commercial satellites, communication systems, and defense electronics.
He served as Undersecretary of Defense for Research and Engineering, the Defense
Science  Board,  and  currently  serves on the  boards of Inamed  Corporation  ,
Investment  Company of America,  and LSI Logic.  He is President of the American
Institute of Aeronautics and Astronautics,  and is a Member (former Chairman) of
the Board of Trustees of the University of Southern California.

John J. Micek III, Director

Mr. Micek was elected to our board of directors in 1999. Mr. Micek served as our
Vice President,  General  Counsel,  and Secretary from March 1994 to March 1997.
From 1997 to the  present,  he has been  Managing  Director  of Silicon  Prairie
Partners,  L.P.,  a venture  fund.  From 1987 to 1994,  Mr.  Micek held  several
positions with Armanino Foods of Distinction,  Inc.,  including  General Counsel
and Chief Financial Officer from 1987 to 1988, Vice President from 1989 to 1994,
and  director  from  1988 to  1989.  Mr.  Micek  is also a  practicing  attorney
specializing  in  corporate  finance  and  business  development  in Palo  Alto,
California.  He is a board member of  Universal  Warranty and sits on the boards
Burst.com, Inc. and Pelion Systems, Inc.

Donald H. Dreyer, Director

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

Edwin O. Riddell, Director

Mr.  Riddell has been one of our  directors  since 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  served  as  Manager  of the  Transportation  Business  Unit 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.


                                      -50-


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 of Enova in June,  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.  Currently,  he is principal of  jamesstrock.com,  inc., a San Francisco
firm providing consulting,  communications and mediation 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: Executive
Lessons from the Bully Pulpit.

There  are no  family  relationships  among any of the  directors  or  executive
officers of our company.

Board of Directors, Committees and Compensation

Each of the  directors  is  elected  to  serve a  one-year  term and  until  his
successor if duly elected and qualified.  The authorized  number of directors is
currently  fixed at  seven.  The  holders  of the  Series B Stock,  voting  as a
separate class, are entitled to elect two directors. The holders of the Series A
Stock and the common stock,  voting together as a single class,  are entitled to
elect the balance of the directors. See "Description of Capital Stock."

The Board currently has two committees: the Compensation Committee and the Audit
Committee.  The Compensation  Committee  currently consists of Mr. Edwin Riddell
and  Dr.  Malcolm  Currie.   Its  functions  are  to  establish  and  apply  our
compensation policies with respect to our executive officers,  and to administer
our stock option plans. The Audit Committee currently consists of Messrs. Donald
Dreyer  and  John  Micek.  The  Audit  Committee  recommends  engagement  of the
independent  auditors and is primarily  responsible  for  approving the services
performed by the  independent  auditors and for reviewing and evaluating the our
accounting principles and system of internal accounting controls.

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 chairman 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.  All directors are reimbursed for expenses  incurred
in connection with attending board and committee meetings.


                                      -51-


Executive Compensation

The following  table sets forth all  compensation  earned by our company's Chief
Executive  Officer  and each of the  other  most  highly  compensated  executive
officers  whose annual  salary and bonus  exceeded  $100,000 for the years ended
December 31, 2001, 2000 and 1999 (collectively, the "Named Executive Officers").
Mr. Carl D. Perry is the sole executive  officer of Enova whose salary currently
exceeds $100,000.



                                                                                            Long Term Compensation Awards
                                                                                            -----------------------------
                                                                                            Securities Underlying
                                                     Salary          Bonus                  Options/SARs
                                         Year        ($)             ($)                    (#)
                                         ----        ------          -----                  ------------
                                                                                
Carl D. Perry, Chief Executive           2001        $136,118        $ 30,000               0
Officer, Chief Financial Officer,        2000        $128,170        $      0               0
President and Secretary                  1999        $ 75,000        $      0               0


Option/SAR Grants

No grants of stock  options  or stock  appreciation  rights  ("SARs")  were made
during fiscal 2001 to the Named Executive Officers.

Option Exercises and Option Values

The following table sets forth  information  concerning  option exercises during
2001, and the aggregate  value of  unexercised  options as of December 31, 2001,
held by each of the Named Executive Officers:

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES



                                                                              Number of
                                                                              Securities                      Value Of
                                                                              Underlying                      Unexercised
                                                                              Unexercised                     In-The-Money
                                                                              Options/SARs At                 Options/SARs At
                             Shares                                           Fiscal Year-End                 Fiscal Year-End
                             Acquired On               Value                  Exercisable/                    Exercisable/
Name                         Exercise (#)              Realized ($)           Unexercisable (#)               Unexercisable ($)
----                         ------------              ------------           -----------------               -----------------
                                                                                                     
Carl D. Perry                                                                  1,200,000/0                       $  72,000


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

(1) Calculated on the basis of the average of the high bid and low ask prices of
the Common  Stock on December  31, 2001 of $0.16 per share,  minus the  exercise
price.


                                      -52-


Stock Option Plans

A  general  description  of the  principal  terms of the 1996 Plan are set forth
below.  This  description  is qualified in its entirety by the terms of the 1996
Plan. A copy of the actual 1996 Plan document has been previously filed with the
Securities and Exchange Commission.

Our  board of  directors  adopted  the 1996  Plan in  October  1996.  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.
In 1999,  our board of directors and  shareholders  approved an amendment to the
1996 Plan to increase the number of shares of common stock reserved for issuance
thereunder by 30,000,000  shares,  bringing the total number of shares  issuable
under the 1996 Plan to  45,000,000.  The share increase to the 1996 Plan assured
that a sufficient  reserve of common stock are  available to provide us with the
continuing  opportunity to utilize  equity  incentives to attract and retain the
services of employees essential to our long-term growth and financial success.

With  respect to the grant of options to  directors  or  employees  who are also
officers  or  directors,  the  1996  Plan is  administered  by (i) our  board of
directors, or (ii) a committee designated by the board and constituted in such a
manner as to comply  with  applicable  laws to permit  such  grants and  related
transactions  to be exempt from Section  16(b) of the Exchange Act in accordance
with Rule 16b-3.  With  respect to grants to employees  or  consultants  who are
neither  officers nor directors of Enova,  the 1996 Plan is  administered by the
board or by a committee of the board.

The  administrators  of the 1996 Plan have full power to select,  from among our
employees,  directors and  consultants  eligible for grants,  the individuals to
whom options will be granted,  to determine the specific terms and conditions of
each grant,  including the number of shares subject to each option, to amend the
terms of  outstanding  options  granted  under  the 1996 Plan  (except  that any
amendments that would adversely affect an optionee's rights under an outstanding
option may not be made without the optionee's written consent), and to interpret
and  construe  the terms of the 1996 Plan and options  granted  thereunder,  all
subject to the provisions of the 1996 Plan. The  interpretation and construction
of any  provision  of the 1996  Plan by the  administrators  shall be final  and
conclusive.  Members of the board receive no additional  compensation  for their
services in connection with the administration of the 1996 Plan.

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.

Each option  granted  under the 1996 Plan is to be evidenced by a written  stock
option agreement  between Enova and the optionee and is subject to the following
additional terms and conditions:

The board or its  committee  determines  on the date of grant when  options will
become exercisable. An option is exercised by giving written notice of exercise,
specifying  the  number  of full  shares  of common  stock to be  purchased  and
tendering payment of the purchase price.


                                      -53-


The exercise  price of options  granted under the 1996 Plan is determined on the
date of grant.  The exercise  price of incentive  stock options must be at least
100% of the fair  market  value  per  share of the  common  stock at the time of
grant.  In the case of incentive stock options granted to an employee who at the
time of grant owns more than 10% of the voting  power of all classes of stock or
any parent or  subsidiary,  the exercise price must be at least 110% of the fair
market  value per share of the common  stock at the time of grant.  The exercise
price of  nonstatutory  stock  options  must be at least 85% of the fair  market
value per share of the common stock at the time of grant.  The exercise price of
nonstatutory  stock options granted to an employee who at the time of grant owns
more than 10% of the voting power of all classes of our stock including stock of
any parent or  subsidiary,  the exercise price must be at least 110% of the fair
market value per share of the common stock at the time of grant. In the event of
the grant of a  nonstatutory  option with an exercise  price below the then fair
market value of the common stock,  the  difference  between fair market value on
the date of grant and the  exercise  price  would be treated  as a  compensation
expense for accounting purposes and would therefore affect the our earnings. For
purposes  of the 1996 Plan,  fair market  value is defined as the  closing  sale
price of the common stock as reported on the OTC  Bulletin  Board on last market
trading day prior to the time of grant.

If the optionee's employment, directorship or consulting relationship with us is
terminated  for any reason  (other  than death or  disability),  options  may be
exercised  within such period as is determined by the board or its committee (up
to three months in the case of incentive  stock options) after such  termination
as to all or part of the  shares  as to  which  the  optionee  was  entitled  to
exercise at the date of such termination,  provided that the option is exercised
no later than its expiration date.

At the time an option is  granted,  the board or its  committee  determines  the
period within which the option may be exercised.  In no event may the term of an
incentive stock option be longer than ten (10) years. No option may be exercised
by any person  after the  expiration  of its term.  An  incentive  stock  option
granted to an  optionee  who,  at the time such  option is  granted,  owns stock
possessing  more than 10% of the voting  power of all classes of our stock,  may
not have a term of more than five (5) years.

An incentive  stock option is not  transferable  by the optionee,  other than by
will or the laws of descent  and  distribution,  and is  exercisable  during the
optionee's  lifetime  only by the  optionee.  A  nonstatutory  option  shall  be
transferable to the extent determined by the administrator and as provided in an
optionee's option agreement.

The option agreement may contain such other terms, provisions and conditions not
inconsistent  with  the  1996  Plan as may be  determined  by the  board  or its
committee.

In the event any change,  such as a stock  split,  reverse  stock  split,  stock
dividend, or combination or reclassification of the common stock, is made in the
our  capitalization  without  receipt  of  consideration,  which  results  in an
increase or decrease in the number of  outstanding  shares of common  stock,  an
appropriate adjustment shall be made in the number of shares under the 1996 Plan
and the price per share covered by each outstanding option.

In the event we merge or  consolidate  with  another  entity  and we are not the
surviving corporation,  or a proposed sale, transfer or other disposition of all
or  substantially  all of our assets in connection with complete  liquidation or
dissolution,  or a reverse  merger in which we


                                      -54-


are the surviving entity but in which securities possessing more than 50% of the
total combined voting power of our  outstanding  securities are transferred to a
person or  persons  different  from those who held such  securities  immediately
prior to such merger, each outstanding option shall  automatically  become fully
vested and  exercisable  and  released  from any  restrictions  on transfer  and
repurchase or forfeiture rights,  unless the option is assumed or substituted by
the successor  corporation or replaced with a comparable  option with respect to
shares in the surviving corporation, or the option is replaced with a comparable
cash  incentive  program of the  successor  corporation,  or unless the vesting,
exercisability and release of the option is subject to other limitations imposed
by the 1996 Plan administrators at the time of granting the options.

The  board  may  amend  the 1996  Plan at any  time or from  time to time or may
suspend  or  terminate  the 1996  Plan  without  approval  of the  shareholders;
provided,  however,  that shareholder  approval is required for any amendment to
the 1996 Plan for which shareholder  approval would be required under applicable
law, as in effect at the time. Any  amendment,  suspension or termination of the
1996 Plan shall not affect  options  already  granted,  and such  options  shall
remain in full force and effect,  unless  mutually  agreed  otherwise in writing
between the optionee and the Plan  administrators.  The board may accelerate any
option or waive any  condition or  restriction  pertaining to such option at any
time. The board may also  substitute  new stock options for  previously  granted
stock options,  including  previously granted stock options having higher option
prices, and may reduce the exercise price of any option to the then current fair
market  value,  if the fair  market  value of the common  stock  covered by such
option shall have declined since the date the option was granted.  In any event,
the 1996 Plan shall terminate in October 2006. Any options outstanding under the
1996 Plan at the time of its  termination  shall remain  outstanding  until they
expire by their terms.

We cannot now  determine the number of options to be granted in the future under
the 1996 Plan, as proposed to be amended,  to executive  officers,  directors or
employees.  During 2001, 7,080,000 stock options were granted to employees under
the 1996 Plan.

Compensation Committee Interlocks and Insider Participation

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

Limitation on Liabilities and Indemnification Matters

Our articles of incorporation  limit the personal  liability of our directors to
our shareholders to the maximum extent  permitted by California law.  California
law provides that directors of a corporation  will not be personally  liable for
monetary damages for breach of their fiduciary duties as directors,  except with
respect to liability for:

      o     acts or omissions that involve  intentional  misconduct or a knowing
            and culpable violation of law;

      o     acts or  omissions  that a director  believes  to be contrary to the
            best  interests  of the  corporation  or our  shareholders  or  that
            involve the absence of good faith on the part of the director;


                                      -55-


      o     any transaction from which the director derived an improper personal
            benefit.

      o     acts or omissions that show a reckless  disregard for the director's
            duty to the  corporation or our  shareholders  in  circumstances  in
            which the  director  was aware,  or should have been  aware,  in the
            ordinary  course of  performing  a director's  duties,  of a risk of
            serious injury to the corporation or our shareholders;

      o     acts  or  omissions   that   constitute  an  unexcused   pattern  of
            inattention  that amounts to an abdication of the director's duty to
            the corporation or our shareholders;

      o     contracts or other transactions in which the director has a material
            financial  interest  that are not  approved  in the manner set forth
            under Section 310 of the California General Corporation Law; or

      o     certain  distributions  or the making of certain loans or guarantees
            approved  by (or  deemed  to have been  approved  by)  directors  as
            provided  under Section 316 of the California  General  Corporations
            Law.

This  provision  will have no effect on any  non-monetary  remedies  that may be
available to us or to our shareholders, nor will it relieve us or other officers
or directors from compliance with federal or state securities laws.

Our articles of  incorporation  and bylaws also  generally  provide that we will
indemnify,  to  the  fullest  extent  permitted  under  the  California  General
Corporation  Law, any person who was or is a party or is threatened to be made a
party to any  threatened,  pending or  completed  action,  suit,  investigation,
administrative  hearing or any other proceeding by reason of the fact that he or
she is or was a director or officer of ours, or is or was serving at our request
as a director,  officer,  employee or agent of another entity,  against expenses
incurred by him or her in  connection  that  proceeding.  An officer or director
will not be entitled to indemnification by us if:

      o     the  officer or  director  did not act in good faith and in a manner
            reasonably believed to be in our best interests; and

      o     with respect to any criminal  action or  proceeding,  the officer or
            director had no  reasonable  cause to believe his or her conduct was
            unlawful.

At the present time there is no pending  litigation or proceeding  involving any
of our directors,  officers,  employees or agents for which indemnification will
be required  or  permitted.  We are not aware of any  threatened  litigation  or
proceeding which may result in a claim for indemnification.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 2001,  there were no  transactions  or series of similar  transactions to
which we were or are to be a party in which the amount involved  exceeds $60,000
and in which any of our directors, executive officers or holders of more than 5%
of our common stock, or an


                                      -56-


immediate  family member of any of the  foregoing,  had or will have a direct or
indirect interest other than:

      o     compensation arrangements,  which are described where required under
            "Management"; and

      o     the transactions described below.

In May 2001, Jagen Pty, Ltd. exercised warrants to purchase 41,666,666 shares of
common  stock at $0.06 per share for a total of  $2,500,000.  Jagen  represented
that it was an  accredited  investor  under  the  definition  set  forth  by the
Securities  and Exchange  Commission.  We relied on Rule 506 of Regulation D and
Section 4(2) of the Securities  Act of 1933, as amended,  for the exemption from
registration of the sale of such shares.

In July 2001, Anthony Rawlinson  exercised warrants to purchase 8,333,334 shares
of  common  stock at $0.06  per share  for a total of  $500,000.  Mr.  Rawlinson
represented that he was an accredited investor under the definition set forth by
the  Securities and Exchange  Commission.  We relied on Rule 506 of Regulation D
and Section 4(2) of the  Securities  Act of 1933, as amended,  for the exemption
from registration of the sale of such shares.

PRINCIPAL SHAREHOLDERS

The  following  table  sets  forth  certain  information   regarding  beneficial
ownership  of our  stock as of May 30,  2002,  (i) by each  person  (or group of
affiliated persons) who we know to own beneficially more than 5% of any class of
our voting securities, (ii) by each of our Directors, (iii) by each of our Named
Executive  Officers listed in the Summary  Compensation  Table above, and (v) by
our  directors  and  executive  officers as a group.  Except as indicated in the
footnotes to this table and subject to applicable  community  property laws, the
persons named in the table, based on information provided by such persons,  have
sole  voting  and  investment   power  with  respect  to  all  shares  of  stock
beneficially owned by them.



-------------------------------------------------------------------------------------------------------------------------
                Name                                     Shares                  Percentage of Shares        Voting
                                                  Beneficially Owned (1)         Beneficially Owned (2)    Percentage (3)
-------------------------------------------------------------------------------------------------------------------------
                                                                                                     
Jagen, Pty., Ltd.                                         125,000,000                     35.31%              40.52%
9 Oxford Street, South Yorra 3141
Melbourne, Victoria Australia
-------------------------------------------------------------------------------------------------------------------------
Carl D. Perry                                          11,200,500 (4)                      3.16%               3.24%
c/o Enova Systems, Inc.
19850 South Magellan Drive
Torrance, CA 90502
-------------------------------------------------------------------------------------------------------------------------
Citibank N.A.                                              31,655,754                      8.94%              10.26%
111 Wall Street, 8th Floor
New York, NY  10043
-------------------------------------------------------------------------------------------------------------------------
Anthony N. Rawlinson                                       25,208,873                      7.12%               8.17%
c/o Enova Systems, Inc.
19850 South Magellan Drive
Torrance, CA 90502
-------------------------------------------------------------------------------------------------------------------------



                                      -57-




-------------------------------------------------------------------------------------------------------------------------
                Name                                     Shares                  Percentage of Shares        Voting
                                                  Beneficially Owned (1)         Beneficially Owned (2)    Percentage (3)
-------------------------------------------------------------------------------------------------------------------------
                                                                                                     
John J. Micek, III                                         817,383(5)                          *                   *
-------------------------------------------------------------------------------------------------------------------------
Edwin O. Riddell                                              447,445                          *                   *
-------------------------------------------------------------------------------------------------------------------------
Dr. Malcolm Currie                                            325,878                          *                   *
-------------------------------------------------------------------------------------------------------------------------
Donald H. Dreyer                                              212,646                          *                   *
-------------------------------------------------------------------------------------------------------------------------
James M. Strock                                                67,056                          *                   *
-------------------------------------------------------------------------------------------------------------------------
Delphi Delco Electronics (6)                                1,278,720                          *                   *
-------------------------------------------------------------------------------------------------------------------------
Jean Schulz (7)                                             1,329,111                          *               1.12%
-------------------------------------------------------------------------------------------------------------------------
All directors and executive officers                   38,279,781 (8)                     10.81%              12.04%
as a group (7 persons)
-------------------------------------------------------------------------------------------------------------------------


*     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 May 30, 2002.

(2)   The percentages are based on the number of shares of Common Stock,  Series
      A Preferred  Stock and Series B Preferred  Stock owned by the  shareholder
      divided by the sum of: (i) the total  Common Stock  outstanding,  (ii) the
      Series A  Preferred  Stock owned by such  shareholder;  (iii) the Series B
      Preferred Stock owned by such shareholder;  and (iv) Common Stock issuable
      pursuant to warrants, options and other convertible securities exercisable
      or  convertible by such  shareholder  within sixty (60) days after May 30,
      2002.


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

(6)   Series B  Preferred  Stock  shareholder.  Series B  shares  represent  the
      equivalent  of two shares of Common  Stock for every one share of Series B
      Preferred stock.

(7)   Series A  Preferred  Stock  shareholder.  Series A  shares  represent  the
      equivalent  of one share of  Common  Stock for every one share of Series A
      Preferred stock.

(8)   Includes  1,765,000  shares of Common  Stock  issuable  pursuant  to stock
      options exercisable at price of $.10 per share


                                      -58-


SELLING SHAREHOLDER


The following table sets forth information,  as of May 30, 2002, with respect to
Fontal International, Ltd., the selling shareholder. We issued the shares of our
common stock being  offered by Fontal in private  placement in December 2001 and
March 2002. We initially  issued 6,000,000 shares of our common stock at a price
equivalent to $0.15 per share. The shares were issued as  consideration  for the
out-of-court  settlement of a lawsuit brought against us by Fontal. We issued an
additional 300,000 shares in further  negotiations with Fontal, again at a price
equivalent to $0.15 per share. This prospectus covers the resale of these shares
by Fontal,  plus, in accordance  with Rule 416 under the Securities Act of 1933,
such  additional  number of shares of our  common  stock as may be issued due to
stock  splits,  stock  dividends or other  similar  transactions.  The number of
shares shown in the following  table as being offered by Fontal does not include
such presently indeterminate number of additional shares of our common stock.


Any and all of the  shares of common  stock  may be  offered  for sale by Fontal
pursuant  to this  prospectus  from  time to time.  Accordingly,  we can give no
estimate as to the  amounts of shares of our common  stock that Fontal will hold
upon  consummation  of any such  sales.  In  addition,  Fontal  may  have  sold,
transferred  or  otherwise  disposed of all or a portion of our shares since the
date on which  the  information  regarding  the  common  stock was  provided  in
transactions exempt from the registration  requirements of the Securities Act of
1933.

Fontal was a holder of Enova debt prior to December  31, 1999.  In 1999,  Fontal
converted long-term debt of approximately  $1,247,000 including accrued interest
into approximately 4,246,000 shares of our common stock.




                                                                                      Shares of
                                  Shares of                                           Common                      Percent of
                                  Common                    Shares of                 Stock to be                 Common
                                  Stock owned               Common                    owned after                 Stock Owned
                                  prior to the              Stock                     the                         after the
Name                              Offering                  Offered (1)               Offering (1)                Offering
----                              --------                  -----------               ------------                --------
                                                                                                        
Fontal International, Ltd.           0                       6,300,000                  6,300,000                   1.68%



      (1) The  number  of shares  listed in these  columns  include  all  shares
beneficially owned and all options and warrants to purchase shares held, whether
or not deemed to be  beneficially  owned,  by Fontal.  The ownership  percentage
listed in these  columns  includes  only  shares  beneficially  owned by Fontal.
Beneficial  ownership  is  determined  in  accordance  with  the  rules  of  the
Securities  and Exchange  Commission.  In  computing  the  percentage  of shares
beneficially  owned by  Fontal,  shares of common  stock  subject  to options or
warrants  held by the  shareholder  that are  exercisable  now or within 60 days
hereafter  are  deemed  outstanding,   although  those  shares  are  not  deemed
outstanding  for the purpose of computing the percentage  ownership of any other
person. The ownership  percentage is calculated assuming that 296,227,095 shares
of common  stock,  2,844,336  shares of Series A Stock and  1,217,196  shares of
Series B Stock were outstanding immediately prior to this offering.


                                      -59-


PLAN OF DISTRIBUTION


We are  registering  all  6,300,000 of the shares of our common stock offered by
this  prospectus  on behalf of Fontal,  and will  receive no proceeds  from this
offering.


Fontal,  or its pledgees,  donees,  transferees or other  successors-in-interest
selling shares received from Fontal as a gift, partnership distribution or other
non-sale related transfer after the date of this prospectus are free to sell the
shares  from  time to  time.  Fontal  will  act  independently  of us in  making
decisions  with respect to the timing,  manner and size of each sale.  The sales
may be made in the national  over-the-counter market or otherwise, at prices and
at terms then  prevailing or at prices related to the then current market price,
or in negotiated  transactions.  Fontal may effect such  transactions by selling
the shares to or through  broker-dealers.  The shares may be sold in one or more
transactions and by one or more of, or a combination of, the following:

      o     block trade in which the  broker-dealer  so engaged  will attempt to
            sell the shares as agent,  but may  position and resell a portion of
            the block as principal to facilitate the transaction;

      o     purchases  by a  broker-dealer  as  principal  and  resale  by  such
            broker-dealer for its account pursuant to this prospectus;

      o     an  exchange  distribution  in  accordance  with  the  rules of such
            exchange;

      o     a  distribution  or  other  transfer  to one or more  of the  equity
            holders of Fontal;

      o     ordinary brokerage transactions and transactions in which the broker
            solicits purchasers; and

      o     in privately negotiated transactions.

In  effecting  sales,  broker-dealers  engaged by Fontal may  arrange  for other
broker-dealers to participate in the resales.

Fontal may enter into hedging  transactions  with  broker-dealers  in connection
with   distributions  of  the  shares  or  otherwise.   In  such   transactions,
broker-dealers  may engage in short sales of the shares in the course of hedging
the  positions  they assume with  Fontal.  Fontal also may sell shares short and
redeliver  the shares to close out such short  positions.  Fontal may enter into
option or other  transactions with  broker-dealers  that require the delivery to
the broker-dealer of the shares.  The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. Fontal also may loan or pledge
the shares to a broker-dealer.  The broker-dealer may sell the shares so loaned,
or upon a default  the  broker-dealer  may effect  sales of the  pledged  shares
pursuant to this prospectus.

Broker-dealers  or agents may receive  compensation  in the form of commissions,
discounts or concessions from Fontal.  Broker-dealers or agents may also receive
compensation from the purchasers of the shares for whom they act as agents or to
whom  they  sell  as  principals,  or  both.  Compensation  as  to a  particular
broker-dealer might be in excess of customary commissions and will be in amounts
to be negotiated in connection with the sale.  Brokers-dealers or agents and any
other  participating  broker-dealers  or Fontal may be deemed to be underwriters
within the meaning of Section 2(11) of the Securities Act of 1933, in connection
with  sales  of the  shares.  Accordingly,  any  such  commission,  discount  or
concession received


                                      -60-


by them and any  profit on the  resale of the  shares  purchased  by them may be
deemed to be  underwriting  discounts or commissions  under the Securities  Act.
Because Fontal may be deemed to be an underwriter  within the meaning of Section
2(11) of the Securities Act,  Fontal will be subject to the prospectus  delivery
requirements of the Securities Act. In addition,  any securities covered by this
prospectus  that  qualify for sale  pursuant to Rule 144  promulgated  under the
Securities  Act  may be  sold  under  Rule  144  rather  than  pursuant  to this
prospectus.  Fontal has advised us that it has not entered into any  agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of the shares; nor is any underwriter or coordinating  broker acting in
connection with the proposed sale of the shares.

The shares will be sold only through  registered or licensed  brokers or dealers
if required under  applicable  state  securities  laws. In addition,  in certain
states the shares may not be sold unless they have been  registered or qualified
for sale in the  applicable  state or an  exemption  from  the  registration  or
qualification requirements is available and is complied with.

Under  applicable  rules and  regulations  under the Securities  Exchange Act of
1934,   any  person  engaged  in  the   distribution   of  the  shares  may  not
simultaneously  engage in  market-making  activities  with respect to our common
stock  for a period  of two  business  days  prior to the  commencement  of such
distribution.  In addition, we have Fontal that it will be subject to applicable
provisions of the Exchange Act and the associated  rules and  regulations  under
the Exchange  Act,  including  the  anti-manipulation  rules under  Regulation M
promulgated  under the Exchange Act,  which  provisions  may limit the timing of
purchases and sales of shares of our common stock by the selling shareholder. We
will make copies of this prospectus available to Fontal and we have informed its
management  of the need for delivery of copies of this  prospectus to purchasers
at or prior to the time of any sale of the shares.

We will bear all costs, expenses and fees in connection with the registration of
the shares and will  supplement and amend this  prospectus  from time to time as
may be required under the Securities  Act.  During any time when a supplement or
amendment is required,  the selling  shareholder will be required to cease sales
of the  shares  covered by this  prospectus  until it has been  supplemented  or
amended.

Fontal will bear all  commissions  and discounts,  if any,  attributable  to the
sales  of the  shares.  The  selling  shareholder  may  agree to  indemnify  any
broker-dealer or agent that participates in transactions  involving sales of the
shares against  certain  liabilities,  including  liabilities  arising under the
Securities Act.

DESCRIPTION OF CAPITAL STOCK


Our authorized  capital stock consists of 500,000,000 shares of common stock, no
par  value,  and  35,000,000  shares  of  preferred  stock.  We  currently  have
302,832,000  shares of common stock  outstanding,  2,844,336  shares of Series A
Stock and 1,217,196 shares of Series B Stock.


Common Stock

Voting Rights. Each outstanding share of common stock is entitled to one vote on
all matters submitted to a vote of our  shareholders,  including the election of
directors.


                                      -61-


Dividends. Subject to the preferential dividend rights of the Series A Stock and
Series B Stock, holders of common stock are entitled to receive dividends at the
same rate if and when  dividends  are declared by our board of directors  out of
assets legally available for the payment of dividends.

Liquidation.  In the  event of a  liquidation,  dissolution  or  winding  up our
affairs,  whether voluntary or involuntary,  after payment of our debts or other
liabilities and making  provisions for the holders of the outstanding  shares of
preferred  stock as described  below,  our remaining  assets will be distributed
ratably among the holders of shares of common stock.

Rights  and  Preferences.  Our  common  stock  has  no  preemptive,  redemption,
conversion or subscription rights. The rights, powers, references and privileges
of holders of common stock are subject to, and may be adversely affected by, the
rights of the  holders  of shares of any series of  preferred  stock that we any
designate and issue in the future.

Fully Paid and  Nonassessable.  All of our  outstanding  shares of common stock,
including  the  shares   offered  by  this   prospectus,   are  fully  paid  and
nonassessable.

Preferred Stock

Voting Rights.  Each outstanding share of Series A Stock is entitled to one vote
on all matters submitted to a vote of our  shareholders,  including the election
of the  common/Series A directors.  Each outstanding  share of Series B Stock is
entitled to two votes on all matters  submitted  to a vote of our  shareholders,
including the election of directors.

Dividends.  Holders of preferred  stock are entitled to receive  dividends in an
amount equal to 6% of $0.60 per share of  preferred  stock per annum if and when
dividends are declared by our board of directors out of assets legally available
for the payment of dividends.

Liquidation.  In the event of any liquidation,  dissolution or winding up of the
affairs of the  corporation,  voluntarily  or  involuntarily,  after  payment or
provision for payment of all debts,  liabilities and  obligations of Enova,  but
before any  distribution to the holders of common stock, the holders of Series A
Stock  shall be paid the  amount of $0.60  per share for each  share of Series A
Stock held by them,  plus all  dividends  declared  but unpaid on such shares of
Series A Stock.  After payment to the holders of Series A Stock,  the holders of
common  stock shall be paid an amount per share equal to the per share  Series A
Stock  liquidation  price paid to the holders of Series A Stock.  Any  remaining
assets shall be  distributed to the holder of shares of stock of all classes and
series which have been  converted  into common stock as of the date of filing of
the Certificate of Dissolution Enova with the California Secretary of State.

Rights and Preferences.

Conversion Rights. While any Series A Stock remains outstanding:

      a.    Option to Convert. At the option of the holder, each share of Series
            A Stock  shall  be  convertible  at any  time  into  fully  paid and
            non-assessable  shares of common stock at the conversion  price then
            in effect.

      b.    Automatic Conversion. Each share of Series A Stock will be converted
            common  stock at the then  effective  conversion  price upon (a) the
            consummation  of the sale of


                                      -62-


            the common stock in an underwritten public offering registered under
            the Securities Act of 1933, as amended (the  "Securities  Act");  or
            (b) the registration of the underlying  common stock of the holders'
            Series  A  Stock  under  the  Securities  Act;  or (c) a  merger  or
            consolidation  with or into  another  corporation  or a sale of more
            than fifty percent (50%) of our outstanding  voting  securities or a
            sale of all or substantially all of our properties and assets.

      c.    Adjustment to Conversion Price for Diluting Issues. If we declare or
            pay any dividend on common  stock  payable in common stock or in any
            right to  acquire  common  stock,  or  effect a  subdivision  of the
            outstanding  shares of common stock into a greater  number of shares
            of common stock (by stock split,  reclassification or otherwise than
            by payment of a dividend in common  stock or in any right to acquire
            common stock), then and in any such event,  appropriate  adjustments
            in the conversion price will be made.

      Except  upon the  automatic  conversion  of the  Series A Stock if, at any
      time, there occurs any capital reorganization,  or any reclassification of
      our  stock  (other  than a change  in par  value or as a result of a stock
      dividend or  subdivision,  split-up  or  combination  of  shares),  or our
      consolidation  or  merger  with  or  into  another  entity  (other  than a
      consolidation  or merger in which we are the  surviving  entity  and which
      does not result in any change in the rights of the common  stock),  or the
      sale or other  disposition of all or substantially  all our properties and
      assets in entirety to any other person,  then each share of Series A Stock
      will, after such capital reorganization, reclassification,  consolidation,
      merger,  sale or other disposition,  be converted into the kind and number
      of shares of stock or other  securities or property of the  corporation or
      of the entity resulting in the consolidation or surviving the merger or to
      which the properties and assets shall have been sold or otherwise disposed
      to which the holder would have been entitled if  immediately  prior to the
      capital reorganization,  reclassification,  consolidation, merger, sale or
      other  disposition  the holder had converted his or its shares of Series A
      Stock into common stock.  These  provisions  similarly apply to successive
      capital  reorganizations,   reclassifications,   consolidations,  mergers,
      sales, or other similar dispositions.

Fully Paid and  Nonassessable.  All of our outstanding shares of preferred stock
fully paid and nonassessable.

Our board of directors has the authority, without action by our shareholders, to
provide for the issuance of preferred stock in one or more classes or series and
to designate  the rights,  preferences  and  privileges of each class or series,
which may be greater than the rights of the common stock.  We cannot predict the
effect of the  issuance  of any  shares of  preferred  stock  upon the rights of
holders of the common stock until the board of directors determines the specific
rights of the holders of the preferred stock. However, the effects could include
one or more of the following:

      o     restricting dividends on the common stock;

      o     diluting the voting power of the common stock;

      o     impairing the liquidation rights of the common stock; or


                                      -63-


      o     delaying  or  preventing  a change in control of us without  further
            action by the shareholders.

We have no present plans to issue any additional shares of preferred stock.

Warrants


As of May 30,  2002,  there were  outstanding  warrants to  purchase  15,000,000
shares of common stock at an average  exercise price of $0.29 per share (subject
to adjustment for certain anti-dilutive issuances).


Registration Rights

The warrants described above have so called "Piggyback"  registration rights. If
we at any time propose to file on our behalf or on behalf of any of our security
holders a registration  statement under the Securities Act on any form and other
than a registration  statement on Form S-4 or S-8 for any class that is the same
or similar to the warrants, we must give written notice of the proposed offering
to the warrant  holders at least  thirty (30) days before the initial  filing of
such  registration  statement,  and offer to include the warrant  holders in the
proposed offering.

Transfer Agent and Registrar

Computershare Investor Services, Inc. serves as our transfer agent and registrar
for our common stock.

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of our common stock,  and the  availability of our common stock for
sale,  may  depress  the  market  price  for  our  common  stock.  Approximately
247,227,000  shares of our common stock currently are freely tradable,  of which
131,000,000  shares are currently subject to the volume  limitations of Rule 144
discussed below. All of the shares sold in this offering will be freely tradable
except for any shares  purchased  by our  affiliates.  In  addition,  30,544,000
shares of our common stock  previously  issued or upon issuance  pursuant to the
exercise  of  options  granted  under  our stock  option  plans may be resold in
reliance  on Rule 144 and Rule 701,  as  discussed  below.  All other  shares of
common  stock  outstanding  as of the date hereof are  restricted  or subject to
lock-up agreements.  These other shares will be available for sale in the public
market as follows:

In  general,  under  Rule  144,  as  currently  in  effect,  a  person  who  has
beneficially  owned  shares of our  common  stock for at least one year would be
entitled to sell within any three-month  period a number of shares that does not
exceed the greater of:

      o     1% of the number of shares of common stock then  outstanding,  which
            will equal approximately shares immediately after this offering; or


                                      -64-


      o     the average  weekly  trading  volume of the common  stock during the
            four  calendar  weeks  preceding  the filing of a notice on Form 144
            with respect to the sale.

Sales under Rule 144 are also  subject to manner of sale  provisions  and notice
requirements and to the availability of current public information about us.

Under Rule 144(k), a person who is not deemed to have been one of our affiliates
at any time during the 90 days preceding a sale, and who has beneficially  owned
the shares  proposed  to be sold for at least two years,  including  the holding
period of any prior  owner  other than an  affiliate,  is  entitled  to sell the
shares without  complying with the manner of sale,  public  information,  volume
limitation or notice provisions of Rule 144.

Rule 701, as currently  in effect,  permits  resales of shares in reliance  upon
Rule 144 but without compliance with certain restrictions, including the holding
period  requirement,  of Rule  144.  No shares of our  common  stock  previously
issued,  or when issued,  pursuant to our stock option plans may be resold under
the  provisions of Rule 701. Rule 701 permits  affiliates to sell their Rule 701
shares under Rule 144 without complying with the holding period  requirements of
Rule 144. Rule 701 further provides that non-affiliates may sell their shares in
reliance on Rule 144 without  having to comply with the holding  period,  public
information, volume limitations or notice provisions of Rule 144.

We filed a Registration Statement on Form S-8 registering shares of common stock
subject to the 1996 Plan  (including  shares that may be resold  under Rule 701,
discussed  above).  As of  February  1,  2002,  options  to  purchase a total of
30,544,000  shares were  outstanding  and  14,456,000  shares were  reserved for
future  issuance  under our stock option plans.  24,762,898 of these options are
vested and available for immediate resale in the open market.

LEGAL MATTERS

The validity of the shares of common stock being  offered will be passed for the
selling  shareholder by Crosby,  Heafey,  Roach & May Professional  Corporation,
Oakland, California.

EXPERTS

The  financial  statements  as of and for the years ended  December 31, 2001 and
2000,  the five months ended  December 31, 1999 and for the years ended July 31,
1999 and 1998 included in this prospectus and in the registration statement have
been audited by Moss Adams LLP, independent certified public accountants, to the
extent and for the periods set forth in their reports appearing elsewhere herein
and in the registration statement.

WHERE YOU CAN GET MORE INFORMATION

We have  filed  with the  Securities  and  Exchange  Commission  a  registration
statement  on Form S-1 under the  Securities  Act with  respect to the shares of
common  stock  being  offered.  This  prospectus  does  not  contain  all of the
information described in the registration statement and the related exhibits and
schedules. For further information with respect to us and the common stock being


                                      -65-


offered,  reference  is  made to the  registration  statement  and  the  related
exhibits and  schedule.  A copy of the  registration  statement  and the related
exhibits and schedule may be inspected  without  charge at the public  reference
facilities  maintained by the Commission in Room 1024,  450 Fifth Street,  N.W.,
Washington,  D.C. 20549, and at the Commission's regional offices located at the
Northwestern  Atrium  Center,  500 West  Madison  Street,  Suite 1400,  Chicago,
Illinois 60661 and 233 Broadway,  New York, New York 10279, and copies of all or
any part of the  registration  statement may be obtained from these offices upon
the  payment  of the  fees  prescribed  by the  Commission.  Information  on the
operation of the Public Reference Room may be obtained by calling the Commission
at 1-800-SEC-0330.  The Commission maintains a World Wide Web site that contains
reports,  proxy  and  information  statements  and other  information  regarding
registrants  that file  electronically  with the Commission.  The address of the
site is http://www.sec.gov.

We intend to provide our shareholders with annual reports  containing  financial
statements  audited  by an  independent  accounting  firm  and to file  with the
Commission  quarterly reports containing  unaudited financial data for the first
three quarters of each year.


                                      -67-


INDEX TO FINANCIAL STATEMENTS

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

BALANCE SHEETS AT DECEMBER 31, 2001 AND 2000................................F-2

STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
         DECEMBER 31, 2001 AND 2000 AND THE FIVE MONTHS
         ENDED DECEMBER 31, 1999 AND YEAR ENDED
          JULY 31, 1999.....................................................F-3

STATEMENTS OF STOCKHOLDERS' DEFICIT FOR
         THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND
         THE FIVE MONTHS ENDED DECEMBER 31, 1999 AND YEAR
         ENDED JULY 31, 1999................................................F-4

STATEMENTS OF CASH FLOWS FOR THE YEARS
         ENDED DECEMBER 31, 2001 AND 2000, AND THE FIVE MONTHS
         ENDED DECEMBER 31, 1999 AND YEAR ENDED
          JULY 31, 1999.....................................................F-5

NOTES TO FINANCIAL STATEMENTS  .............................................F-6

BALANCE SHEET AT MARCH 31, 2002.............................................Q-1

STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
         ENDED MARCH 31, 2002 AND 2001......................................Q-2

STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
         ENDED MARCH 31, 2002 AND 2001......................................Q-3


NOTES TO FINANCIAL STATEMENTS  .............................................Q-4




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., formerly
U.S.  Electricar,  Inc., as of December 31,  2001and 2000, and the statements of
operations,  stockholders'  deficit,  and cash  flows  for the two  years  ended
December 31, 2001,  the five months ended  December 31, 1999, and the year ended
July  31,  1999.  These  financial  statements  are  the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United  States.  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, 2001 and 2000, and the results of its operations and cash flows for
the two years ended  December 31, 2001, the five months ended December 31, 1999,
and the year ended July 31,  1999,  in  conformity  with  accounting  principles
generally accepted in the United States.


                                                /s/  MOSS ADAMS LLP
                                                -------------------

Santa Rosa, California
February 22, 2002


                                                                        Page F-1


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                                  BALANCE SHEETS
                                                      December 31, 2001 and 2000
--------------------------------------------------------------------------------



                                            ASSETS
                                                                                                    2001                   2000
                                                                                                ------------           ------------
                                                                                                                 
CURRENT ASSETS
    Cash                                                                                         $  1,179,000          $  1,310,000
    Accounts receivable                                                                             1,237,000             1,004,000
    Inventories and supplies                                                                          926,000               406,000
    Related party receivable, current maturities                                                       25,000                25,000
    Prepaids and other current assets                                                                  87,000                68,000
                                                                                                 ------------          ------------
        Total current assets                                                                        3,454,000             2,813,000

PROPERTY AND EQUIPMENT                                                                                280,000               214,000

RELATED PARTY RECEIVABLE, less current maturities                                                      32,000                57,000

OTHER ASSETS                                                                                          574,000                10,000
                                                                                                 ------------          ------------
        Total assets                                                                             $  4,340,000          $  3,094,000
                                                                                                 ============          ============

                          LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
    Accounts payable                                                                             $    167,000          $    106,000
    Accrued payroll and related expenses                                                              194,000               301,000
    Other accrued expenses                                                                             53,000               119,000
    Current maturities of long-term debt                                                              120,000               120,000
    Current maturities of capital lease obligations                                                     9,000                 9,000
                                                                                                 ------------          ------------
        Total current liabilities                                                                     543,000               655,000

ACCRUED INTEREST PAYABLE                                                                              677,000               514,000

LONG-TERM PAYABLES                                                                                         --               210,000

CAPITAL LEASE OBLIGATIONS, less current maturities                                                     20,000                31,000

LONG-TERM DEBT, less current maturities                                                             3,332,000             3,332,000
                                                                                                 ------------          ------------
        Total liabilities                                                                           4,572,000             4,742,000
                                                                                                 ------------          ------------
STOCKHOLDERS' DEFICIT
    Series A convertible preferred stock - no par value; 30,000,000 shares
        authorized; 2,844,000 shares issued and outstanding; liquidating
        preference at $0.60 per share aggregating $1,706,000                                        1,867,000             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;
        302,502,000 and 244,249,000 shares issued and outstanding                                  79,859,000            75,680,000
    Common stock subscribed                                                                           160,000                13,000
    Stock notes receivable                                                                         (1,208,000)           (1,149,000)
    Additional paid-in capital                                                                      6,949,000             6,372,000
    Accumulated deficit                                                                           (90,293,000)          (86,865,000)
                                                                                                 ------------          ------------
        Total stockholders' deficit                                                                  (232,000)           (1,648,000)
                                                                                                 ------------          ------------
        Total liabilities and stockholders' deficit                                              $  4,340,000          $  3,094,000
                                                                                                 ============          ============


See accompanying notes.
--------------------------------------------------------------------------------
                                                                        Page F-2


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                        STATEMENTS OF OPERATIONS
                         Years Ended December 31, 2001 and 2000, the Five Months
                       Ended December 31, 1999, and the Year Ended July 31, 1999
--------------------------------------------------------------------------------



                                                                                                     December            July
                                                                  2001              2000               1999               1999
                                                             -------------      -------------      -------------      -------------
                                                                                                          
NET REVENUES                                                 $   3,780,000      $   2,883,000      $     629,000      $   2,774,000

COST OF REVENUES                                                 2,783,000          2,013,000            377,000          1,460,000
                                                             -------------      -------------      -------------      -------------

GROSS PROFIT                                                       997,000            870,000            252,000          1,314,000
                                                             -------------      -------------      -------------      -------------

OTHER COSTS AND EXPENSES
    Research and development                                       879,000            626,000            262,000            499,000
    Selling, general, and administrative                         2,894,000          1,999,000            796,000          1,141,000
    Interest and financing fees                                    113,000            174,000            244,000            724,000
    (Gain) loss on disposition of fixed assets                      (7,000)             6,000                 --                 --
    Legal settlements                                              900,000             75,000            125,000                 --
    Gain on warranty accrual reevaluation                               --                 --                 --           (474,000)
    Other (income)/expense                                              --                 --                 --            (41,000)
                                                             -------------      -------------      -------------      -------------
        Total other costs and expenses                           4,779,000          2,880,000          1,427,000          1,849,000
                                                             -------------      -------------      -------------      -------------
LOSS FROM CONTINUING OPERATIONS                                 (3,782,000)        (2,010,000)        (1,175,000)          (535,000)

EXTRAORDINARY ITEM - GAIN ON DEBT
    RESTRUCTURING                                                  354,000          1,551,000            214,000            140,000
                                                             -------------      -------------      -------------      -------------
NET LOSS                                                     $  (3,428,000)     $    (459,000)     $    (961,000)     $    (395,000)
                                                             =============      =============      =============      =============

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

WEIGHTED AVERAGE OF COMMON
    SHARES OUTSTANDING                                       $ 275,188,979      $ 235,199,406      $ 251,993,533      $ 152,076,615
                                                             =============      =============      =============      =============


See accompanying notes.
--------------------------------------------------------------------------------
                                                                        Page F-3


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                             STATEMENTS OF STOCKHOLDERS' DEFICIT
                         Years Ended December 31, 2001 and 2000, the Five Months
                       Ended December 31, 1999, and the Year Ended July 31, 1999
--------------------------------------------------------------------------------



                                                                  Preferred Stock
                                                  ---------------------------------------------------
                                                         Series A                    Series B                  Common Stock
                                                  ------------------------    -----------------------    --------------------------
                                                    Shares       Amount        Shares       Amount         Shares         Amount
                                                  ----------   -----------    ---------   -----------    -----------   ------------
                                                                                                     
Balance, July 31, 1998                             3,321,000   $ 2,258,000    1,291,000   $ 2,584,000    151,767,000   $ 68,742,000

Common Stock Transactions
    Conversion of Series A preferred stock           (62,000)      (67,000)          --            --         62,000         67,000
    Conversion of Series B preferred stock                --            --      (49,000)      (98,000)       163,000         98,000
    Sale of stock                                         --            --           --            --     83,333,000      2,375,000
    Conversion of debt                                    --            --           --            --     16,667,000        219,000
    Issuance of common stock warrants                     --            --           --            --             --             --
Debt forgiveness by stockholder                           --            --           --            --             --             --
Net loss                                                  --            --           --            --             --             --
                                                  ----------   -----------    ---------   -----------    -----------   ------------
Balance, July 31, 1999                             3,259,000     2,191,000    1,242,000     2,486,000    251,992,000     71,501,000

Common Stock Transactions
    Conversion of Series A preferred stock           (20,000)      (25,000)          --            --         20,000         25,000
    Stock issued for services                             --            --           --            --             --             --
    Conversion of debt                                    --            --           --            --             --             --
Debt forgivness by stockholder                            --            --           --            --             --             --
Net loss                                                  --            --           --            --             --             --
                                                  ----------   -----------    ---------   -----------    -----------   ------------
Balance, December 31, 1999                         3,239,000     2,166,000    1,242,000     2,486,000    252,012,000     71,526,000

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
    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

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


                                                        Common Stock
                                                          Subscribed          Additional     Stock
                                                   ------------------------    Paid-In       Notes       Accumulated
                                                     Shares       Amount       Capital     Reveivable      Deficit          Total
                                                   ----------   -----------    ---------   -----------    -----------   ------------
                                                                                                      
Balance, July 31, 1998                                     --   $        --   $       --  $(1,149,000)  $(85,050,000)  $(12,615,000)

Common Stock Transactions
    Conversion of Series A preferred stock                 --            --           --           --             --             --
    Conversion of Series B preferred stock                 --            --           --           --             --             --
    Sale of stock                                          --            --           --           --             --      2,375,000
    Conversion of debt                                     --            --           --           --             --        219,000
    Issuance of common stock warrants                      --            --      406,000           --             --        406,000
Debt forgiveness by stockholder                            --            --    2,694,000           --             --      2,694,000
Net loss                                                   --            --           --           --       (395,000)      (395,000)
                                                   ----------   -----------    ---------   -----------    -----------   ------------
Balance, July 31, 1999                                     --            --    3,100,000   (1,149,000)   (85,445,000)    (7,316,000)

Common Stock Transactions
    Conversion of Series A preferred stock                 --            --           --           --             --             --
    Stock issued for services                       1,317,000       148,000           --           --             --        148,000
    Conversion of debt                              4,246,000     1,297,000           --           --             --      1,297,000
Debt forgivness by stockholder                             --            --    1,817,000           --             --      1,817,000
Net loss                                                   --            --           --           --       (961,000)      (961,000)
                                                   ----------   -----------    ---------   -----------    -----------   ------------
Balance, December 31, 1999                          5,563,000     1,445,000    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                      (5,518,000)   (1,432,000)          --           --             --         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                             45,000        13,000    6,372,000   (1,149,000)   (86,865,000)    (1,648,000)

Common Stock Transactions
    Stock issued on exercise of warrants                   --            --           --           --             --      3,000,000
    Stock options exercised                                --            --           --      (59,000)            --        122,000
    Stock issued for services                         955,000       147,000           --           --             --        245,000
    Stock issued in legal settlement                       --            --           --           --             --        900,000
Warrants issued for value participation agreement          --            --      577,000           --             --        577,000
Net loss                                                   --            --           --           --     (3,428,000)    (3,428,000)
                                                   ----------   -----------    ---------   -----------    -----------   ------------
Balance, December 31, 2001                          1,000,000   $   160,000   $6,949,000  $(1,208,000)  $(90,293,000)  $   (232,000)
                                                   ==========   ===========   ==========  ===========   ============   ============


See accompanying notes.
--------------------------------------------------------------------------------
                                                                        Page F-4


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                        STATEMENTS OF CASH FLOWS
                         Years Ended December 31, 2001 and 2000, the Five Months
                       Ended December 31, 1999, and the Year Ended July 31, 1999
--------------------------------------------------------------------------------



                                                                                                         December           July
                                                                           2001            2000            1999             1999
                                                                        -----------     -----------     -----------     -----------
                                                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                            $(3,428,000)    $  (459,000)    $  (961,000)    $  (395,000)
    Adjustments to reconcile net loss to net cash from
           operating activities:
           Depreciation and amortization                                    205,000         136,000          60,000         179,000
           Loss on disposition of fixed assets                                   --           6,000              --              --
           Gain on debt restructuring and extinguishment                   (210,000)     (1,551,000)       (214,000)       (140,000)
           Stock issued for services                                        245,000          66,000         148,000              --
           Stock issued for legal settlement                                900,000              --              --              --
           Accrued interest forgiven                                             --         156,000         219,000              --
           Change in allowance for doubtful accounts                             --              --              --        (108,000)
           Provision to reduce inventory values                                  --              --              --         (36,000)
           Changes in valuation allowances and reserves                          --              --              --        (640,000)
           Change in operating assets and liabilities:
           Accounts receivable                                             (233,000)       (432,000)        185,000        (560,000)
           Inventories                                                     (520,000)       (151,000)        (33,000)        329,000
           Related party receivable                                          25,000          25,000          12,000              --
           Note receivable                                                       --              --              --         250,000
           Prepaids and other current assets                                (19,000)         (7,000)         21,000          32,000
           Other assets                                                     (39,000)             --              --              --
           Accounts payable and accrued expenses                           (112,000)       (120,000)        (77,000)        678,000
           Accrued interest payable                                         163,000          75,000        (154,000)             --
           Customer deposits                                                     --        (102,000)        102,000        (387,000)
                                                                        -----------     -----------     -----------     -----------

             Net cash from operating activities                          (3,023,000)     (2,358,000)       (692,000)       (798,000)
                                                                        -----------     -----------     -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Equipment acquisitions                                                 (219,000)        (88,000)         (3,000)         (1,000)
                                                                        -----------     -----------     -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES
    Borrowings on notes payable                                                  --              --              --         400,000
    Proceeds from exercise of warrants and options                        3,122,000              --              --              --
    Proceeds from sale of stock                                                  --       2,392,000              --              --
    Purchase of common stock                                                     --        (100,000)             --       2,600,000
    Payments on notes payable and capital lease obligations                 (11,000)         (1,000)       (307,000)             --
                                                                        -----------     -----------     -----------     -----------

             Net cash from financing activities                           3,111,000       2,291,000        (307,000)      3,000,000
                                                                        -----------     -----------     -----------     -----------

NET CHANGE IN CASH                                                         (131,000)       (155,000)     (1,002,000)      2,201,000

CASH, beginning of the period                                             1,310,000       1,465,000       2,467,000         266,000
                                                                        -----------     -----------     -----------     -----------

CASH, end of the period                                                 $ 1,179,000     $ 1,310,000     $ 1,465,000     $ 2,467,000
                                                                        ===========     ===========     ===========     ===========

SUPPLEMENTAL CASH-FLOW INFORMATION
    Cash paid during the year for interest                              $     5,000     $    40,000     $     9,000     $        --
    Non-cash investing and financing activities:
           Conversion of preferred stock to common stock                $        --     $   351,000     $    25,000     $   166,000
           Conversion of debt and accrued interest to equity            $        --     $ 1,470,000     $ 2,894,000     $   400,000
           Issuance of warrants                                         $        --     $        --     $        --     $   406,000
           Equipment acquired under capital lease                       $        --     $    41,000     $        --     $        --


See accompanying notes.
--------------------------------------------------------------------------------
                                                                        Page F-5


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                   NOTES TO FINANCIAL STATEMENTS

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

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

Description of operations - Enova Systems, Inc., formerly U.S. Electricar, 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 change in the Company's name to Enova Systems became
effective  January 1, 2000.  The Company  develops and sells  components  in the
United States and Asia and sells components in Europe.

Change in fiscal year - Effective  December  31, 1999,  the Company  changed its
fiscal year-end from July 31 to December 31.

Cash equivalents - Highly liquid  investments with an original  maturity debt of
three  months  or less  are  considered  cash  equivalents.  There  were no cash
equivalents at December 31, 2001 or 2000.

Inventory  -  Inventory  is  comprised  of  materials  used  in the  design  and
development of electric drive systems under 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 has committed to sell or abandon are
reported at the lower of carrying amount or fair value less cost to sell.

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

Revenue  recognition  -  The  Company  is  obligated  to  perform  research  and
development   activities  under  development  and  licensing   agreements.   The
agreements  require the Company to design,  develop,  and test drive systems and
deliver  working  prototypes.  The Company  retains  all rights to the  products
developed  and  will  license  their  use  to  the  counter-party.   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.  During  1999,  revenue from the sale of electric
vehicles was recognized when the vehicle was delivered 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 bank  demand
deposits that may, from time to time, be in excess of FDIC insurance thresholds,
and  trade  receivables.  Demand  deposits  are  placed  with  known  creditable
financial  institutions.  A customer,  Hyundai, is also a stockholder that holds
less than 5% of the outstanding  common stock.  For the years ended December 31,
2001  and  2000,  Hyundai  accounted  for  approximately  13% and  58% of  total
revenues.  Revenues  associated  with Hyundai for the five months ended December
31, 1999, and the twelve months ended July 31, 1999, were 63% and 44%.

Use of estimates - The  preparation of financial  statements in conformity  with
accounting  principles  generally  accepted in the United  States  requires  the
Company 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

                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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

Warranties - In 1999,  electric vehicle  warranties were provided by the Company
on vehicles sold when the Company was U.S. Electricar.  The warranties generally
extended for one year from the time of sale.  Warranties for  substantially  all
vehicles  sold  by  the  Company  had  elapsed,  resulting  in a  $474,000  gain
concurrent with the reevaluation of the warranty accrual.

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

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

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

SFAS No.  141,  "Business  Combinations."  This  Statement  addresses  financial
accounting and reporting for business  combinations  and  supersedes  Accounting
Principles Board (APB) Opinion No. 16, "Business Combinations," and SFAS No. 38,
"Accounting for  Preacquisition  Contingencies  of Purchased  Enterprises."  All
business  combinations  in the scope of this  Statement  are to be accounted for
using one method, the purchase method. The provisions of this Statement apply to
all business  combinations  initiated  after June 30, 2001. The adoption of SFAS
No. 141 is not  expected to have a material  effect on the  Company's  financial
statements.

SFAS No. 142, "Goodwill and Other Intangible  Assets." This Statement  addresses
financial  accounting and reporting for acquired  goodwill and other  intangible
assets  and  supersedes  APB No.  17,  "Intangible  Assets."  It  addresses  how
intangible assets that are acquired individually or with a group of other assets
(but not those  acquired in a business  combination)  should be accounted for in
financial  statements upon their acquisition.  This Statement also addresses how
goodwill and other  intangible  assets  should be accounted  for after they have
been initially  recognized in the financial  statements.  The provisions of this
Statement are required to be applied  starting with fiscal years beginning after
December  15,  2001.  The  adoption  of SFAS No. 142 is not  expected  to have a
material effect on the Company's financial statements.

SFAS No. 143,  "Accounting  for Asset  Retirement  Obligations."  This statement
addresses financial accounting and reporting for obligations associated with the
retirement of tangible  long-lived  assets and the associated  asset  retirement
costs.  This  Statement  applies  to  legal  obligations   associated  with  the
retirement of long-lived assets that result from the acquisition,  construction,
development and (or) the normal operation of a long-lived  asset. The provisions
of this  Statement  are  required  to be  applied  starting  with  fiscal  years
beginning  after June 15, 2002.  The adoption of SFAS No. 143 is not expected to
have a material effect on the Company's financial statements.

SFAS No. 144,  "Accounting for the Impairment or Disposal of Long-Lived Assets."
This statement addresses  financial  accounting and reporting for the impairment
or disposal of long-lived assets.  SFAS 144 replaces SFAS 121 and amends certain
other accounting pronouncements.  The provisions of this Statement are effective
for financial  statements  issued for fiscal years  beginning after December 15,
2001. The adoption of SFAS No. 144 is not expected to have a material  effect on
the Company's financial statements.


--------------------------------------------------------------------------------
                                                                        Page F-7


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 2 - MANAGEMENT'S PLANS

The  Company  has  experienced  cash  flow  shortages  due to  operating  losses
primarily attributable to research and development,  marketing,  and other costs
associated with its strategic plan to become an  international  manufacturer and
supplier of electric  propulsion and power  management  systems and  components.
Additional  outside  financing  is  anticipated  until  the  Company  reaches  a
breakeven  volume  in sales and  develops  and/or  acquires  the  capability  to
manufacture  and sell  products  profitably.  While the  Company  continues  its
efforts to obtain additional  equity funding,  a major stockholder has committed
up to $2 million to fund operations during 2002.

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

NOTE 3 - PROPERTY AND EQUIPMENT

                                                         2001             2000
                                                      ----------        --------
Computers                                             $  154,000        $124,000
Machinery and equipment                                  407,000         285,000
Furniture and office equipment                           186,000         126,000
Demonstration vehicles and buses                         147,000         142,000
Leasehold improvements                                    68,000          66,000
Equipment under capital lease                             41,000          41,000
                                                      ----------        --------
                                                       1,003,000         784,000
Less accumulated depreciation and amortization           723,000         570,000
                                                      ----------        --------
                                                      $  280,000        $214,000
                                                      ==========        ========

NOTE 4 - 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 5 - OTHER ASSETS

The Company is in the process of  obtaining  patents for several  products.  The
legal costs associated with the patents,  $49,000 to date, have been capitalized
and will be amortized over the life of the patents upon receiving the patent.

In June 2001, the Company entered into a strategic  relationship with Ford Motor
Company 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 this  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,  and is being  amortized on a
straight-line  basis  over the  life of the  contract.  Fair  market  value  was
determined using the Black-Scholes option pricing model.

                                                          2001            2000
                                                        --------         -------
Patents                                                 $ 49,000         $10,000
Valuation Participation Agreement                        577,000              --
                                                        --------         -------
                                                         626,000          10,000
Less accumulated amortization                             52,000              --
                                                        --------         -------
                                                        $574,000         $10,000
                                                        ========         =======


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


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 6 - LONG-TERM DEBT



                                                                           2001          2000
                                                                        ----------    ----------
                                                                                
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
                                                                        ==========    ==========


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,
        ------------------------

                2002                                            $ 14,000
                2003                                              16,000
                2004                                               6,000
                2005                                               7,000
                                                                --------

                                                                  43,000
Less amounts representing interest                                14,000
                                                                --------

Present value of minimum lease payments                           29,000
Less current maturities                                            9,000
                                                                --------

                                                                $ 20,000
                                                                ========

NOTE 8 - OPERATING LEASES

The Company's lease on its Torrance,  California,  facility  expires in February
2003.  Rent expense was  $210,000 and $177,000 for the years ended  December 31,
2001 and 2000.  Rent for the five months ended December 31, 1999, and the twelve
months ended July 31,  1999,  was $40,000 and  $144,000.  Future  minimum  lease
payments are as follows:

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

        2002                                             $ 163,000
        2003                                                27,000
                                                         ---------
                                                         $ 190,000
                                                         =========


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


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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.

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 - In December  2001,  the Company  settled an
outstanding lawsuit related to warrants that were issued during 1996 in exchange
for services  performed.  The warrants  contained a cashless exercise option and
were  originally set to expire in 1997.  The holders of these warrants  claimed,
however,  that the Company had agreed to extend the term. To settle the lawsuit,
the Company agreed to issue to the warrant  holders  6,000,000  shares of common
stock with a fair market value on the date of issuance of $900,000.

NOTE 10 - STOCK OPTIONS AND WARRANTS

The 1993 Employee and Consultant Stock Plan expires in 2003. Under the Plan, the
Company  has  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.


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


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

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



                                                   1996 Plan                        1993 Plan                       Other
                                          -----------------------------     -------------------------      ------------------------
                                            Shares            Price           Shares         Price           Shares        Price
                                          ----------      -------------     ----------    -----------      ---------    -----------
                                                                                                      
Options outstanding at July 31, 1998       8,439,000      $   0.10-0.30     11,383,000    $ 0.10-0.60      1,495,000    $ 0.60-2.80

Granted                                    1,765,000               0.10             --             --             --             --
Exercised                                 (1,765,000)              0.30       (113,000)          0.30             --             --
Forfeited                                    (49,000)              0.30       (159,000)          0.30             --             --
                                          ----------                        ----------                     ---------

Options outstanding at July 31, 1999       8,390,000                        11,111,000                     1,495,000      0.60-2.80

Granted                                   12,339,000      $        0.11             --             --             --             --
Forfeited                                   (234,000)         0.11-0.30             --             --             --             --
                                          ----------                        ----------                     ---------

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)          0.11-030             --             --             --             --
                                          ----------                        ----------                     ---------

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

Weighted average remaining
contractual life                          3.5 years                         1.5 years                      1.5 years
                                          ==========                        ==========                     =========


Options  exercisable  were 26,293,358 and 24,106,626 as of December 31, 2001 and
2000.  Options  exercisable  at  December  31,  1999,  and July 31,  1999,  were
20,879,245 and 18,567,454.

The Company measures its employee  stock-based  compensation  arrangements under
the  provisions of APB No. 25. Had  compensation  costs for the Company's  stock
option  plans  been  determined  based upon the fair value at the grant date for
awards under these plans  consistent with the methodology  prescribed under SFAS
No. 123, the Company's net loss would have been as follows:



                                                                                                       December             July
                                                                   2001               2000               1999               1999
                                                                -----------         ---------         -----------         ---------
                                                                                                              
Net loss for the year                                           $(3,428,000)        $(459,000)        $  (961,000)        $(395,000)
Compensation expense, net of tax effect                             776,500            88,000             174,000           640,700
                                                                -----------         ---------         -----------         ---------
Proforma net loss                                               $(4,204,500)        $(547,000)        $(1,135,000)        $ 245,700
                                                                ===========         =========         ===========         =========
Proforma earnings per common share                              $     (0.01)        $   (0.01)        $     (0.01)        $   (0.01)


The fair value of options  granted were estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:



                                                                          December              July
                                    2001                2000                1999                1999
                                   -------             -------             -------             -------
                                                                                   
Dividends                               0%                  0%                  0%                  0%
Expected volatility                   125%                124%                164%                164%
Risk-free interest rate                 5%                  5%       5.88% - 6.69%       5.88% - 6.59%
Expected life                      5 years             5 years             5 years             5 years


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


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

The agreement with Ford Motor Company,  as discussed in Note 5, 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.  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. 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.

NOTE 11 - INCOME TAXES

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.

                                                      2001              2000
                                                   -----------       -----------
Deferred tax assets
    Federal tax loss carryforward                  $25,692,000       $24,666,000
    State tax loss carryforward                        674,000           920,000
    Basis difference                                 1,610,000         1,610,000
    Other, net                                         290,000           218,000
                                                   -----------       -----------

                                                    28,266,000        27,414,000
Less valuation allowance                            28,266,000        27,414,000
                                                   -----------       -----------

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


Net operating losses expire as follows:

                                                     Net Operating Loss

 Date of Expiration                            Federal                California
 ------------------                          -----------              ----------
        2002                                 $    11,000              $2,778,000
        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                      --
        2015                                     322,000                      --
        2016                                   3,217,000                      --
                                             -----------              ----------
                                             $86,313,000              $7,630,000
                                             ===========              ==========


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


                            ENOVA SYSTEMS, INC. (Formerly U.S. Electricar, Inc.)
                                                   NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 12 - EXTRAORDINARY ITEM

The Company has been negotiating  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,  the Company  extinguished  certain payables
under a provision of the California Code of Civil Procedures. The code's statute
of  limitations  precludes  the  ability of a creditor  to commence an action to
recover stale  account  balances.  Upon  reviewing  the code's  provisions,  the
Company determined that conditions surrounding the application of the statute of
limitations had been met; accordingly,  the extraordinary item includes the gain
from the 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:

                                                        December          July
                            2001           2000           1999            1999
                         ----------     ----------     ----------     ----------
United States            $2,854,000     $1,003,000     $  235,000     $1,564,000
Korea                       483,000      1,670,000        394,000      1,210,000
England                      84,000             --             --             --
Canada                           --        110,000             --             --
Italy                       359,000        100,000             --             --
                         ----------     ----------     ----------     ----------
                         $3,780,000     $2,883,000     $  629,000     $2,774,000
                         ==========     ==========     ==========     ==========


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




PART 1.  FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS
ENOVA SYSTEMS, INC.
BALANCE SHEETS
(In thousands, except for share and per share data)
------------------------------------------------------------------------------------------------------------------------------------

                                                                                             As of                    As of
                                                                                        March 31, 2002         December 31, 2001
                                                                                        --------------         -----------------
ASSETS                                                                                   (Unaudited)
                                                                                                           
CURRENT ASSETS:
       Cash                                                                              $        793            $      1,179
       Accounts receivable                                                                        878                   1,237
       Inventory                                                                                1,346                     926
       Stockholder receivable                                                                      25                      25
       Prepaids and other current assets                                                           81                      87
                                                                                         -------------           -------------
             Total Current Assets                                                               3,123                   3,454

PROPERTY, PLANT AND EQUIPMENT - NET                                                               417                     280
OTHER ASSETS                                                                                      581                     606
                                                                                         -------------           -------------
TOTAL ASSETS                                                                             $      4,121            $      4,340
                                                                                         =============           =============

LIABILITIES AND SHAREHOLDERS' (DEFICIT)

CURRENT LIABILITES:
       Accounts payable                                                                  $        599            $        167
       Accrued payroll and related expense                                                        181                     194
       Other accrued expenses                                                                      16                      53
       Bonds and notes payable                                                                    120                     129
                                                                                         -------------           -------------
             Total Current Liabilities                                                            916                     543

ACCRUED INTEREST PAYABLE                                                                          730                     677
CAPITAL LEASE OBLIGATIONS                                                                          76                      20
LONG TERM DEBT                                                                                  3,332                   3,332
                                                                                         -------------           -------------
TOTAL LIABILITIES                                                                        $      5,054            $      4,572
                                                                                         -------------           -------------
SHAREHOLDERS' (DEFICIT):
       Series A preferred stock - No par value; 30,000,000 shares authorized;
       2,844,000 shares issued and outstanding at 3/31/02 and 12/31/01                          1,867                   1,867
       Series B preferred stock - No par value; 5,000,000 shares authorized;
       1,217,000 shares issued and outstanding at 3/31/02 and 12/31/01                          2,434                   2,434
       Stock notes receivable                                                                  (1,208)                 (1,208)
       Common Stock - No par value; 500,000,000 shares authorized; 302,532,000
       and 302,502,000 shares issued and outstanding at 3/31/02 and 12/31/01                   79,862                  79,859
       Common stock subscribed                                                                    160                     160
       Additional paid-in capital                                                               6,949                   6,949
       Accumulated deficit                                                                    (90,997)                (90,293)
                                                                                         -------------           -------------
             Total Shareholders' (Deficit)                                                       (933)                   (232)
                                                                                         -------------           -------------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)                                            $      4,121            $      4,340
                                                                                         =============           =============

Note: The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date.
See notes to financial statements.


                                                           Q-1





ENOVA SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except for per share and share data)
------------------------------------------------------------------------------------------------------------------------------------

                                                                                           Three Months Ended
                                                                                                 March 31
                                                                                 -----------------------------------------
                                                                                      2002                        2001
                                                                                 -------------               -------------
                                                                                                       
NET SALES                                                                        $         941               $       1,115

COST OF SALES                                                                              702                         658

                                                                                 -------------               -------------
GROSS MARGIN                                                                               239                         457
                                                                                 -------------               -------------

OTHER COSTS AND EXPENSES:
      Research & development                                                               275                         267
      Selling, general & administrative                                                    615                         448
      Interest and financing fees                                                           55                          28
      Interest income                                                                       (2)                        (16)

                                                                                 -------------               -------------
           Total other costs and expenses                                                  943                         727
                                                                                 -------------               -------------


LOSS FROM CONTINUING OPERATIONS                                                  $        (704)              $        (270)
                                                                                 -------------               -------------

GAIN ON DEBT RESTRUCTURING                                                                   0                           0
NET LOSS                                                                         $        (704)              $        (270)
                                                                                 =============               =============
NET LOSS PER COMMON SHARE:                                                       $       (0.01)              $       (0.01)
                                                                                 =============               =============

WEIGHTED AVERAGE SHARES
OUTSTANDING                                                                        302,532,000                 224,271,333





                                                                Q-2




ENOVA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
------------------------------------------------------------------------------------------------------------------------------------




                                                                                    Three Months Ended March 31
                                                                                 ----------------------------------
                                                                                   2002                      2001
                                                                                 --------                  --------
                                                                                                     
OPERATIONS
 Net loss                                                                        $  (704)                  $  (270)
 Adjustments to reconcile net loss to net cash used
  by operating activities:
  Depreciation and Amortization                                                       38                        46
  Change in operating assets and liabilities:
      Accounts Receivable                                                            359                      (433)
      Inventory                                                                     (420)                     (277)
      Prepaids and other assets                                                       31                       (58)
      Accounts payable and accrued expenses                                          434                       219
                                                                                 -------                   -------
               Net cash used by operating activities                                (263)                     (773)
                                                                                 -------                   -------

INVESTING:
 Purchases of property, plant and equipment, net of disposals                       (174)                      (19)
                                                                                 -------                   -------
               Net cash  used by investing activities                               (174)                      (19)
                                                                                 -------                   -------

FINANCING:
 Issuance of notes payable                                                            47                        (3)
 Proceeds from issuance of common stock                                                3                         6
                                                                                 -------                   -------
               Net cash provided by financing activities                              50                         3
                                                                                 -------                   -------

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS                                     (387)                     (789)

CASH AND EQUIVALENTS:

 Beginning of period                                                               1,179                     1,310
                                                                                 -------                   -------

 End of period                                                                   $   792                   $   521
                                                                                 =======                   =======



                                                             Q-3



                               ENOVA SYSTEMS, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
               For the Three Months Ended March 31, 2002 and 2001

NOTE 1 - Basis of Presentation

The  accompanying  unaudited  financial  statements  have been prepared from the
records of our company  without audit and have been prepared in accordance  with
accounting  principles  generally  accepted  in the United  States  for  interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation S-X.  Accordingly,  they do not contain all the information and notes
required by accounting  principles  generally  accepted in the United States for
complete  financial  statements.  In the opinion of management,  all adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation of the financial position at March 31, 2002 and the interim results
of operations and cash flows for the three months ended March 31, 2002 have been
included.  The balance sheet at December 31, 2001,  presented  herein,  has been
prepared  from the audited  financial  statements  of our company for the fiscal
year then ended.

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United  States  requires  us to make  estimates  and
assumptions affecting the reported amounts of assets, liabilities,  revenues and
expenses, and the disclosure of contingent assets and liabilities.  The December
31,  2001  and  March  31,  2002  inventories  are  reported  at  market  value.
Inventories have been valued on the basis that they would be used, converted and
sold in the normal course of business.  Certain accrued  expenses are based upon
an analysis  of future  costs  expected  to be  incurred  in meeting  contracted
obligations. The amounts estimated for the above, in addition to other estimates
not specifically addressed, could differ from actual results; and the difference
could have a significant impact on the financial statements.

Accounting  policies  followed  by us are  described  in  Note 1 to the  audited
financial  statements  for the fiscal  year ended  December  31,  2001.  Certain
information and footnote  disclosures  normally included in financial statements
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States  have been  condensed  or omitted  for  purposes  of the  interim
financial  statements.  The financial  statements  should be read in conjunction
with the audited financial statements, including the notes thereto, for the year
ended  December 31,  2001,  which are  included in this  Prospectus  pursuant to
Section  13 or 15(d) of the  Securities  Exchange  Act of 1934 as filed with the
Securities and Exchange Commission.

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,
consisting  of Series A and B preferred  stock,  unexercised  stock  options and
warrants, would be anti-dilutive.

The results of  operations  for the three months ended March 31, 2002  presented
herein are not necessarily indicative of the results to be expected for the full
year.


                                       Q-4


NOTE 2 - Inventories

Inventories are comprised of the following (in thousands):

                             March 31, 2002                    December 31, 2001
                              (unaudited)                      -----------------
                              -----------

Raw materials                      700                                 563
WIP                                472                                 272
Finished Goods                     174                                  91
                                $1,346                              $  926
                                ======                              ======

NOTE 3 - Notes and Bonds Payable, Long-Term Debt and Other Financing

Notes and bonds  payable and  long-term  debt are comprised of the following (in
thousands):


                                              March 31, 2002   December 31, 2001
                                              --------------   -----------------

Secured  subordinated  promissory note -
CMAC    as    exclusive     agent    for
Non-Qualified Creditors;  interest at 3%
for the  first 5 years,  6% for  years 6
and 7, and then at prime plus 3% through
date of maturity;  interest payments are
made upon  payment  of  principal,  with
principal and interest due no later than
April  2016;   with  an  interest  in  a
sinking  fund escrow with a zero balance
as of  December  31,  2001 and March 31,
2002.  The sinking fund escrow  requires
the Company to fund the account with 10%
of future  equity  financing,  including
convertible debt converted to equity.              3,332            3,332

Other                                                120              120

                                                   3,452            3,452

                                                     120              120
                                                  ------           ------
Less current maturities                           $3,332           $3,332
                                                  ======           ======


                                       Q-5



You  should   rely  only  on  the   information
contained  in  this  prospectus.  We  have  not
authorized   anyone   to   provide   you   with        6,300,000 Shares
information  different  from that  contained in
this  prospectus.  The selling  shareholder  is        ENOVA SYSTEMS, INC.
offering to sell,  and  seeking  offers to buy,
shares of common  stock  only in  jurisdictions        COMMON  STOCK
where  offers  and  sales  are  permitted.  The
information  contained  in this  prospectus  is
accurate  only as the date of this  prospectus,
regardless  of the  time  of  delivery  of this
prospectus or of any sale of our common stock.


____________________

TABLE OF CONTENTS

                                           Page
                                           ----



Prospectus Summary........................... 2
Risk Factors................................. 7
Cautionary Note on Forward-Looking
  Statements.................................11        _________________
Use of Proceeds..............................12
Price Range of Common Stock..................12           PROSPECTUS
Dividend Policy..............................13        _________________
Capitalization...............................13
Selected Financial Data......................13         June 14, 2002
Management's Discussion and Analysis
 of Financial Condition and
 Results of Operations.......................15
Business.....................................22
Management...................................33
Certain Relationships and Related
  Transactions...............................42
Principal Shareholders.......................42
Selling Shareholder..........................44
Plan of Distribution.........................45
Description of Capital Stock.................47
Shares Eligible for Future Sale..............50
Legal Matters................................51
Experts......................................52
Where you can get more Information...........52
Index to Financial Statements................53





PART II

Item 13. Other Expenses of Issuance and Distribution.

      The  following  table  indicates the expenses to be incurred in connection
with the offering described in this Registration Statement, all of which will be
paid by us. All amounts are estimates, other than the SEC registration fee.

      SEC Registration fees:                                    $    85.56
      Accounting fees and expenses:                             $10,000.00
      Legal fees and expenses:                                  $40,000.00
      Printing expenses:                                        $ 1,500.00
      Blue Sky fees and expenses:                               $ 2,500.00
      Miscellaneous fees and expenses:                          $ 5,000.00

      Total:                                                    $59,085.56
                                                                ==========

Item 14. Indemnification of Directors and Officers

Section 317 of the California General Corporation Law (the "CGCL") provides that
a  subject  corporation  shall  have the  power to  indemnify  any  agent of the
corporation  (including our directors and officers) who was or is a party to any
proceeding or threatened  proceeding (other than an action by or in the right of
the  corporation)  against  expenses,  judgments,  fines,  settlements and other
amounts  incurred if that person acted in good faith and in a manner  reasonably
believed to be in the best  interests of the  corporation,  and in the case of a
criminal  proceeding,  had no  reasonable  cause to believe  the conduct of such
person was  unlawful.  Section 317 of the CGCL further  provides  that a subject
corporation  shall have the power to indemnify any agent of the  corporation who
was or is a party to any proceeding or threatened  proceeding by or in the right
of the corporation  against expenses  incurred in connection with the defense or
settlement  of the  proceeding if the person acted in good faith and in a manner
the person  believed  to be in the best  interests  of the  corporation  and our
shareholders.

Under  Section  317 of the  CGCL,  to the  extent  that an  agent  of a  subject
corporation  is  successful  on the  merits in the  defense  of an  action,  the
corporation  must  indemnify  such  person for his or her actual and  reasonable
expenses  incurred in  connection  with such  defense.  Under Section 317 of the
CGCL, a subject  corporation may advance expenses of an indemnifiable  person in
defending an action; provided that such advancement of expenses may be made only
if the person  provides an  undertaking  to reimburse the  corporation  if it is
ultimately  determined that the person is not entitled to be indemnified against
such expenses.

The Registrant has entered into  agreements to provide  indemnification  for our
directors and certain officers in addition to the  indemnification  provided for
in the Bylaws. These agreements,  among other things,  indemnify such parties to
the fullest extent permitted by California law for certain  expenses  (including
attorneys'  fees), and all losses,  claims,


                                      II-1


liabilities,  judgments,  fines and settlement  amounts incurred by such persons
arising out of or in  connection  with such  persons'  service as  directors  or
officers of the Registrant or an affiliate of the Registrant.

The above-described  provisions relating to the indemnification of directors and
officers are sufficiently broad to permit the indemnification of such persons in
certain circumstances against liabilities  (including  reimbursement of expenses
incurred) arising under the Securities Act of 1993, as amended.

Item 15. Recent Sales of Unregistered Securities.


In December 2001, we issued  6,000,000 shares of common stock at $0.15 per share
for a total of $900,000 in settlement of litigation brought against us by Fontal
International, Ltd. In April 2002, in connection with this settlement, we issued
an additional  100,000  shares of common stock at $0.15 per share for a total of
$15,000.  In May 2002, also in connection with this settlement we issued another
100,000  shares of common  stock at $0.15 per share for a total of  $15,000.  In
June 2002,  also in connection  with this  settlement we issued another  100,000
shares of common  stock at $0.15 per share for a total of $15,000.  These shares
are the subject of this registration statement.


In July 2001, Anthony Rawlinson  exercised warrants to purchase 8,333,334 shares
of  common  stock at $0.06  per share  for a total of  $500,000.  Mr.  Rawlinson
represented that he was an accredited investor under the definition set forth by
the  Securities and Exchange  Commission.  We relied on Rule 506 of Regulation D
and Section 4(2) of the  Securities  Act of 1933,  as amended  (the  "Securities
Act"), for the exemption from registration of the sale of the shares.

In May 2001, Jagen Pty, Ltd exercised warrants to purchase  41,666,666 shares of
common stock at $0.06 per share for a total of $2,500,000.  Jagen, an Australian
company and the  majority  shareholder,  represented  that they were  accredited
investors.  We  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.

In June 2001,  we issued  warrants to purchase  15,000,000  shares of our common
stock to a customer.  We 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.

In September 2000, Perla Blanca Investments,  Ltd. purchased 3,333,333 shares of
common stock for  $1,000,000.  Perla Blanca,  a British Virgin Islands  company,
represented  that  they  were  accredited  investors.  We  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.

In January 2000, Kafig Pty, Ltd. purchased  3,333,333 shares of common stock for
$1,000,000.  Kafig, an Australian company, represented that they were accredited


                                      II-2


investors.  We  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 16. Exhibits and Financial Statement Schedules.

        (a) Exhibits

        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).

        5.1*    Opinion of Crosby, Heafey, Roach & May Professional  Corporation
                as to the legality of the securities being registered.

        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 our
                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).


                                      II-3


        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 24 10-Q for the quarter  ended April 30, 1996,  as filed on
                June 7, 1996, and incorporated herein by reference).

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

        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).


                                      II-4


        10.16   Letter of Intent  (redacted)  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  -  Confidential   treatment  requested  regarding
                information within this Letter of Intent).

        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  -  Confidential   treatment
                requested regarding information within this Agreement).


        10.19*  Agreement  (redacted**)  between  the  Registrant  and Eco Power
                Technology, dated June 12, 2001, to produce and sell power drive
                systems.

        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.

        10.21*  Agreement   (redacted**)   between  the  Registrant  and  Moriah
                Corporation,  dated  January 22, 2002, to produce and sell power
                drive systems.


        23.1*   Consent of Moss Adams, LLP, Independent Auditor's

        23.2    Consent of Crosby, Heafey, Roach & May Professional  Corporation
                (included in Exhibit 5.1 hereto).

        24*     Power of Attorney (included on signature page)

*     Filed herewith.


**    Certain information has been redacted as part of a confidential  treatment
      request filed separately with the SEC.


        (b) Financial Statements

            Audited Financial Statements - Fiscal Year ended July 31, 1999

            Audited Financial Statements - Five months ended December 31, 1999


                                      II-5


            Audited Financial Statements - Fiscal Year ended December 31, 2000

            Audited Financial Statements - Fiscal Year ended December 31, 2001

            Unaudited Financial Statements - Three Months ended March 31, 2002



Item 17.  Undertakings.

The undersigned Registrant hereby undertakes:

(1) To file,  during  any  period in which  offers or sales  are being  made,  a
post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;

(ii) To  reflect  in the  prospectus  any  facts or  events  arising  after  the
effective date of the Registration  Statement (or the most recent post-effective
amendment  thereof)  which,  individually  or  in  the  aggregate,  represent  a
fundamental  change in the information set forth in the Registration  Statement;
and

(iii)  To  include  any  material  information  with  respect  to  the  plan  of
distribution  not  previously  disclosed  in the  Registration  Statement or any
material change to such  information in the  Registration  Statement;  provided,
however, that (i) and (ii) do not apply if the Registration Statement is on Form
S-3 or Form S-8, and the information required to be included in a post-effective
amendment  by (i) and  (ii) is  contained  in  periodic  reports  filed  with or
furnished  to the SEC by the  Registrant  pursuant to Section 13 or 15(d) of the
Securities  Exchange  Act of 1934  that are  incorporated  by  reference  in the
Registration Statement.

(2) That, for the purpose of determining any liability under the Securities Act,
each such  post-effective  amendment  shall be  deemed to be a new  registration
statement relating to the securities  offered therein,  and the offering of such
securities  at that time shall be deemed to be the  initial  bona fide  offering
thereof.

(3) To remove from  registration by means of a  post-effective  amendment any of
the securities  being  registered  which remain unsold at the termination of the
offering.

Insofar as indemnification  for liabilities  arising under the Securities Act of
1933 may be permitted to directors,  officers,  and  controlling  persons of the
Registrant  pursuant to the provisions  described in Item 14, or otherwise,  the
Registrant  has been advised that in the opinion of the  Securities and Exchange
Commission  such  indemnification  is against  public policy as expressed in the
Securities Act and is, therefore,  unenforceable.  In the event that a claim for
indemnification  against  such  liabilities  (other  than  the  payment  by  the
registrant of expenses incurred or paid by a director,  officer,  or controlling
person of the  Registrant  in the  successful  defense of any action,  suit,  or
proceeding) is asserted by such  director,  officer,  or  controlling  person in
connection with the securities being registered,  the registrant will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification by it is against pubic policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.


                                      II-6


SIGNATURES


Pursuant to the  requirements  of the Securities Act of 1933, the registrant has
duly  caused  this  registration  statement  to be signed  on its  behalf by the
undersigned,  thereunto  duly  authorized,  in the  City of  Torrance,  State of
California, on June 14, 2002.


                                  ENOVA SYSTEMS, INC.


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



Pursuant to the  requirements of the Securities Act of 1933,  this  registration
statement has been signed by the following  persons in the capacities and on the
dates indicated.

                                  By: /s/ Larry B. Lombard
                                      ----------------------------
                                      Larry B. Lombard, Controller


We, the  undersigned  directors  and/or  officers of Enova  Systems,  Inc.  (the
"Registrant"),  hereby severally constitutes and appoint Carl D. Perry with full
powers of substitution and  resubstitution,  our true and lawful attorney,  with
full powers to sign for us, in our names and in the capacities  indicated below,
the  Registration  Statement on Form S-1 filed with the  Securities and Exchange
Commission, and any and all amendments to said Registration Statement (including
post-effective  amendments),  and any  registration  statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended,  of equity securities
of the  Registrant,  and to file or cause to be filed  with the  same,  with all
exhibits  thereto  and  other  documents  in  connection  therewith,   with  the
Securities  and  Exchange  Commission,  granting  unto  said  attorney,  and his
substitute or  substitutes,  full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection  therewith,
as fully to all  intents  and  purposes  as he might or could do in person,  and
hereby  ratifying and  confirming  all that said  attorney or his  substitute or
substitutes,  shall do or cause to be done by virtue of this Power of  Attorney.
This Power of Attorney may be executed in counterparts.


                                      S-1


Pursuant to the  requirements of the Securities Act of 1933,  this  registration
statement has been signed by the following  persons in the capacities and on the
dates indicated.




Name                          Title                                          Date
----                          -----                                          ----
                                                                       
/s/ Carl D. Perry             Chief Executive Officer, Chief Financial
------------------------      Officer and Director (Principal Executive
Carl D. Perry                 Officer and Principal Financial Officer)       June 14, 2002

/s/ Larry Lombard             Controller                                     June 14, 2002
------------------------
Larry Lombard

/s/ Anthony N. Rawlinson      Chairman                                       June 14, 2002
------------------------
Anthony N. Rawlinson

/s/ Malcolm Currie            Director                                       June 14, 2002
------------------------
Malcolm Currie

/s/ Edwin O. Riddell          Director                                       June 14, 2002
------------------------
Edwin O. Riddell

/s/ John J. Micek, III        Director                                       June 14, 2002
------------------------
John J. Micek, III

/s/ Donald H. Dreyer          Director                                       June 14, 2002
------------------------
Donald H. Dreyer

/s/ James M. Strock           Director                                       June 14, 2002
------------------------
James M. Strock




                                      S-2


EXHIBIT INDEX

Exhibit Description

10.19*  Agreement  (redacted**) between the Registrant and Eco Power Technology,
        dated June 12, 2001, to produce and sell power drive systems.

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.

10.21*  Agreement  (redacted**)  between the Registrant and Moriah  Corporation,
        dated January 22, 2002, to produce and sell power drive systems.

23.1    Consent of Moss Adams, LLP, Independent Auditor's

23.2    Consent of Crosby, Heafey, Roach & May, A Professional Corporation