UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30 ,2004
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or
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From To .
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Commission File No. 0-25184
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ENOVA SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3056150
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(State or other jurisdiction of (IRS employer identification number)
incorporation or organization)
19850 South Magellan Drive Torrance, CA 90502
---------------------------------------------
(Address of Principal Executive Offices and Zip Code) Registrant's
telephone number, including area code (310) 527-2800
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No (_)
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes (_)No (X)
As of November 12, 2004, there were 404,924,000 shares of Common Stock, no par
value, 2,747,500 shares of Series A Preferred Stock, no par value, and 1,217,000
shares of Series B Preferred Stock, no par value, outstanding.
1
INDEX
ENOVA SYSTEMS, INC.
Page No.
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).........................................3
Balance Sheets:
September 30, 2004 and December 31, 2003.................................3
Statements of Operations:
Three and Nine months ended September 30, 2004 and 2003..................4
Statements of Cash Flows:
Nine months ended September 30, 2004 and 2003............................5
Notes to Financial Statements:
Nine months ended September 30, 2004 and 2003............................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................10
Item 3. Quantitative and Qualitative Disclosures about Market Risk..............19
Item 4. Controls and Procedures.................................................19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ......................................................20
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds..............20
Item 3. Defaults upon Senior Securities.........................................20
Item 4. Submission of Matters to a Vote of Security Holders.....................20
Item 5. Other Information.......................................................21
Item 6. Exhibits................................................................22
SIGNATURE ........................................................................23
CERTIFICATIONS ........................................................................24
2
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
September 30, December 31,
2004 2003
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(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 2,243 $ 530
Accounts receivable 500 803
Inventory 1,314 1,606
Stockholder receivable 0 8
Prepaids and other current assets 330 78
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Total Current Assets 4,387 3,025
PROPERTY AND EQUIPMENT - NET 432 481
INVESTMENTS in JOINT VENTURE 825 960
OTHER ASSETS 323 404
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TOTAL ASSETS $ 5,967 $ 4,870
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
CURRENT LIABILITES:
Accounts payable $ 337 $ 768
Unearned income 262 0
Line of credit 229 120
Accrued payroll and related expense 160 120
Other accrued expenses 48 98
Current portion of notes payable and captial lease obligations 184 154
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Total Current Liabilities 1,220 1,260
ACCRUED INTEREST PAYABLE 1,311 1,122
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 0 5
NOTES PAYABLE, NET OF CURRENT PORTION 3,338 3,347
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TOTAL LIABILITIES $ 5,869 $ 5,734
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COMMITMENTS AND CONTINGENCIES 0 0
SHAREHOLDERS' EQUITY/(DEFICIT):
Series A convertible preferred stock - No par value; 30,000,000 shares
authorized; 2,747,500 and 2,820,000 shares issued and outstanding
at 9/30/04 and 12/31/03 1,773 1,837
liquidating preference at $0.60 per share aggregating $1,680,000 and $1,692,000
Series B convertible preferred stock - No par value; 5,000,000 shares authorized;
1,217,000 shares issued and outstanding at 9/30/04 and 12/31/03
liquidating preference at $2.00 per share aggregating $2,434,000 2,434 2,434
Common Stock - No par value; 750,000,000 shares authorized; 404,909,000
and 378,341,000 shares issued and outstanding at 9/30/04 and 12/31/03 88,965 86,054
Common stock subscribed 50 60
Stock notes receivable (1,176) (1,203)
Additional paid-in capital 6,993 7,031
Accumulated deficit (98,941) (97,077)
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Total Shareholders' deficit 98 (864)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) $ 5,967 $ 4,870
======== ========
Note: The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date.
See notes to financial statements.
3
ENOVA SYSTEMS, INC.
INCOME and EXPENSE STATEMENTS
(Unaudited)
(In thousands, except for share and per share data)
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Three Months Ended Nine Months Ended
September 30 September 30
--------------------------------------- ---------------------------------
2004 2003 2004 2003
------------- ------------- ------------- -------------
NET REVENUES
Research and development contracts $ 217 $ 626 $ 915 $ 1,354
Production $ 189 $ 149 $ 1,317 $ 2,115
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$ 406 $ 775 $ 2,232 $ 3,469
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COST OF REVENUES
Research and development contracts 113 563 606 1,219
Production 244 100 928 1,623
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357 663 1,534 2,842
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GROSS MARGIN 49 112 698 627
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OPERATING EXPENSES:
Research & development 45 57 173 379
Engineering 153 101 334 606
Selling, general & administrative 751 463 1,555 1,826
Depreciation and amortization 93 85 268 254
------------- ------------- ------------- -------------
Total operating expenses 1,042 706 2,330 3,065
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NET OPERATING LOSS (993) (594) (1,632) (2,438)
OTHER COSTS AND EXPENSES:
Interest and financing fees 69 55 196 164
Other (income)/expense 42 3 44 3
Interest income (3) (1) (8) (8)
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Total other costs and expenses 108 57 232 159
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NET LOSS $ (1,101) $ (651) $ (1,864) $ (2,597)
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NET LOSS PER COMMON SHARE: $ (0.01) $ (0.01) $ (0.01) $ (0.01)
============= ============= ============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 389,924,000 364,085,000 389,924,000 364,085,000
4
ENOVA SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
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Nine Months Ended September 30
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2004 2003
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OPERATIONS
Net loss $(1,864) $(2,597)
Adjustments to reconcile net loss to net cash used
by operating activities:
Change in allowance of uncollectible receivables (595) 595
Depreciation and amortization 268 254
Equity in losses 135 0
Stock and stock options issued for services 66 140
Change in operating assets and liabilities:
Accounts receivable 898 (389)
Inventory 292 337
Stockholder receivable 8 24
Prepaids and other assets (252) (64)
Accounts payable and accrued expenses 10 (85)
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Net cash used by operating activities (1,034) (1,785)
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INVESTING:
Purchases of property, plant and equipment, net of disposals (138) (78)
Investment in joint ventures 0 (1,000)
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Net cash used by investing activities (138) (1,078)
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FINANCING:
Borrowing (repayments) on leases and notes payable 16 (28)
Borrowing on line of credit 109 108
Proceeds from issuance of common stock, exercise of
stock options and remittances on stock notes receivable 2,760 1,661
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Net cash provided (used) by financing activities 2,885 1,741
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NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 1,713 (1,122)
CASH AND EQUIVALENTS:
Beginning of period 530 1,868
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End of period $ 2,243 $ 746
======= =======
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for services $ 66 $ 44
Conversion of Series A preferred stock to common stock $ 64 $ 5
5
ENOVA SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
For the Nine months ended September 30, 2004 and 2003
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 of America 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
of America 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 September 30, 2004 and the
interim results of operations for the three and nine months ended September 30,
2004 and cash flows for the nine months ended September 30, 2004 have been
included. The balance sheet at December 31, 2003, presented herein, has been
prepared from the audited financial statements of our company for the year then
ended.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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
September 30, 2004 and December 31, 2003 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 reclassifications
have been made to the prior periods financial statements to conform with the
current periods presentation. 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, 2003. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America 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, 2003, which are included in our Form 10-K Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as
filed with the Securities and Exchange Commission.
Basic and diluted net loss per common share is computed using the weighted
average number of common shares outstanding. Since a loss from operations
exists, 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 and nine months ended September 30, 2004
presented herein are not necessarily indicative of the results to be expected
for the full year.
Revenue Recognition
From time to time, the Company enters into arrangements with its customers where
there are multiple deliverables. In accordance with Emerging Issues Task Force
Issue No. 00-21 "Revenue Arrangements with Multiple Deliverables", when a
company enters into these types of arrangements, the contract is divided into
6
separate units of accounting based on relative fair values, and revenue
recognition criteria are assessed separately for each separate unit of
accounting. These elements will include product sales, service elements, and
fixed-price development elements.
Revenues from Component Sales
Revenues from sales of components are recognized when shipped and title passes
to the customer.
Service Revenue
Services revenues are billed and recognized in the period the services are
rendered and earned and the collection of the related receivable is probable.
Method of Accounting for Long-Term Contracts
In accordance with the American Institute of Certified Public Accountant's
Statement of Position 81-1, "Accounting for Performance of Certain
Construction-Type and Certain Product Type Contracts," the Company records its
revenues on long-term, fixed price contracts on the basis of the
percentage-of-completion method applied to individual contracts, commencing when
progress reaches a point where experience is sufficient to estimate final
results with reasonable accuracy and collection of the related receivable is
probable.
That portion of the total contract price is accrued which is allocable, on the
basis of the Company's estimates of the percentage-of-completion, to contract
expenditures and work performed. Operating expenses, including indirect costs
and administrative expenses, are charged to income as incurred and are not
allocated to contract costs.
As these long-term contracts are performed, revisions in cost and profit
estimates during the course of the work are recognized in the accounting period
in which the facts which require the revision become known.
At the time a loss on a contract becomes known, the entire amount of the
estimated ultimate loss on both short- and long-term contracts is accrued.
7
NOTE 2 - Notes Payable, Long-Term Debt and Other Financing
Notes payable and long-term debt is comprised of the following (in thousands):
September 30, December 31,
2004 2003
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(unaudited)
Secured subordinated promissory note - CMAC as
exclusive agent for Non-Qualified Creditors;
interest at 3% through 2001, 6% in 2002 and
2003, and then at prime plus 3% thereafter
through the 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,
2003 and September 30, 2004. The sinking fund
escrow requires the Company to fund the
account with 10% of future equity financing,
including convertible debt converted to
equity, based upon approval of the new
investors per the terms of the note. No
additions were made to the sinking fund with
respect to the equity investment from the
accredited investors at the investors' option. 3,332 3,332
Unsecured note payable - Schulz 120 120
Secured note payable - CCE, Inc. 40 0
Secured note payable - Microsoft Capital 18 26
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3,510 3,478
Less current maturities 172 131
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Total $ 3,338 $ 3,347
======= =======
NOTE 3 - Tomoe LTA Long-Term Contract
Enova has entered into a development and production contract with Tomoe
Electro-Mechanical Engineering and Manufacturing, Inc. for eight
battery-electric locomotives for the Singapore Land Transport Authority for
service vehicles for the Singapore Mass Rapid Transit Circle Line system for
maintenance, repair, shunting and recovery of passenger trains. Completion of
the contract will take approximately 15-18 months and is valued at approximately
$3.1M. We are recording revenues for this long-term, fixed price contract on the
basis of the percentage-of-completion method. The contract contains several
deliverables over its life and therefore we will divide these deliverables into
separate units of accounting based on relative fair values. Revenue recognition
criteria will be assessed separately for each separate unit of accounting. As of
September 30, 2004, we recorded revenues of $116,100 related to the development
portion of this contract.
8
NOTE 4 - Shareholders' Equity/(Deficit)
During the third quarter 2004, we received approximately $140,000 in equity
capital as a result of our employees exercising incentive stock options, a
majority of which expired in July 2004.
On August 19, 2004, 263,000 shares of restricted common stock were issued to the
Board of Directors at a price of $0.11 per share for full board meetings and
committee meetings during the third quarter of 2004.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following information should be read in conjunction with the interim
financial statements and the notes thereto in Part I, Item I of this Quarterly
Report and with Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in the Company's Annual report on Form 10-K for
the year ended December 31, 2003. 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 the risks discussed in this
Item 2 and specifically discussed in this report under the heading "Certain
Factors That May Affect Future Results" following this Management's Discussion
and Analysis section, and elsewhere in this report.
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 of America. 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.
o Revenue recognition - The Company is required to make judgments based
on historical experience and future expectations, as to the
reliability of shipments made to its customers. These judgments are
required to assess the propriety of the recognition of revenue based
on Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition,"
and related guidance. The Company makes these assessments based on the
following factors: i) customer-specific information, ii) return
policies, and iii) historical experience for issues not yet
identified.
These accounting policies were applied consistently for all periods presented.
Our operating results would be affected if other alternatives were used.
Information about the impact on our operating results is included in the
footnotes to our financial statements.
10
GENERAL
Enova Systems, Inc., a California Corporation ("Enova" or the "Company"), was
incorporated on July 30, 1976. The Company's fiscal year ends December 31. All
year references refer to fiscal years.
Enova believes it is a leader in the development and production of commercial
digital power management systems. Power management systems control and monitor
electric power in an automotive or commercial application such as an automobile
or a stand-alone power generator. Drive systems are comprised of an electric
motor, an electronics control unit and a gear unit which power an electric
vehicle. Hybrid systems, which are similar to pure electric drive systems,
contain an internal combustion engine in addition to the electric motor,
eliminating external recharging of the battery system. A fuel cell based system
is similar to a hybrid system, except that instead of an internal combustion
engine, a fuel cell is utilized as the power source. A fuel cell is a system
which combines hydrogen and oxygen in a chemical process to produce electricity.
Stationary power systems utilize similar components to those which are in a
mobile drive system in addition to other elements. These stationary systems are
effective as power-assist or back-up systems, alternative power, for
residential, commercial and industrial applications.
Enova develops and produces advanced software, firmware and hardware for
applications in these alternative power markets. Our focus is digital power
conversion, power management, and system integration, for two broad market
applications - vehicle power generation and stationary power generation.
Specifically, we develop, design and produce drive systems and related
components for electric, hybrid-electric, fuel cell and microturbine-powered
vehicles. We also develop, design and produce power management and power
conversion components for stationary distributed power generation systems. These
stationary applications can employ fuel cells, microturbines, or advanced
batteries for power storage and generation. Additionally, we perform research
and development to augment and support others' and our own related product
development efforts.
Our product development strategy is to design and introduce to market
successively advanced products, each based on our core technical competencies.
In each of our product / market segments, we provide products and services to
leverage our core competencies in digital power management, power conversion and
system integration. We believe that the underlying technical requirements shared
among the market segments will allow us to more quickly transition from one
emerging market to the next, with the goal of capturing early market share.
During the third quarter of 2004, the Company continued to advance its
technologies and products for greater market penetration for 2005 and beyond. We
continue to develop independently, and in conjunction with the Hyundai-Enova
Innovative Technical Center, commercially available heavy-duty, series and
parallel hybrid drive systems. Enova continued its expansion into the Asian
hybrid vehicle markets by securing contracts for hybrid buses and trains in
China and Singapore, respectively. In July of 2004, we entered into an agreement
with Tomoe and Hyundai Heavy Industries of Korea for the development and
production of eight, 36-ton battery electric locomotives for the Singapore Land
Transport Authority for anticipated delivery in late 2005 or early 2006.
During the quarter ended September 30, 2004, we continued to develop and produce
electric and hybrid electric drive systems and components for Mack/Volvo, First
Auto Works of China, Ford Motor Company (Ford), Wright Bus and Eneco of the
United Kingdom, and Tomoe of Japan and several other domestic and international
vehicle and bus manufacturers.
Our various electric and hybrid-electric drive systems, power management and
power conversion systems are being used in applications including Class 8
trucks, train locomotives, transit buses and industrial vehicles as well as in
11
non-transportation applications such as fuel-cell management and power
management systems including the EDO minesweeper. Enova has furthered its
development and production of systems for both mobile and stationary fuel cell
powered systems with major companies such as Ford and Hydrogenics, a fuel cell
developer in Canada.
Heavy-Duty Drive Systems - Buses, Trucks, Vans and Other Industrial Vehicle
--------------------------------------------------------------------------------
Applications
------------
Enova's primary market focus centers on both series and parallel heavy-duty
drive systems for multiple vehicle and marine applications. We believe
series-hybrid and parallel hybrid heavy-duty drive system sales offer Enova the
greatest return on investment in both the short and long term. Although this
market sector has developed more slowly than anticipated, management believes
that this area will see significant growth over the next several years. As the
Company penetrates more market areas, we are continually refining and optimizing
both our market strategy and our product line to maintain our leading edge in
power management and conversion systems for mobile applications.
During the third quarter of 2004, we introduced our latest hybrid, the
HybridPower Series Hybrid, at the Electric Drive Transportation Association's
annual symposium in Orlando Florida. The new diesel generator set will deliver
60 kilowatts volts of continuous power and integrates with Enova's 240kW or
120kW drive motors and other digital power management components. The series
hybrid genset consists of a 60kW electric motor, a motor controller and a diesel
engine meeting stringent Euro 3 or Euro 4 emission specifications. The genset is
distinctively designed to allow end users to choose the engine best suited for
their commercial needs, permitting a wide variety of engine choices.
In the third quarter of 2004, Enova entered into two development and production
contracts for Asian markets. Enova continued its expansion into the Chinese
hybrid vehicle markets by securing contracts for hybrid buses and trains in
China and Singapore respectively.
Enova's potential in China is growing with the addition of two more bus
manufacturers, First Auto Group (FAW) and Top-Electric. Our contract with FAW is
for the development and evaluation of a parallel hybrid drive system for FAW's
buses in conjunction with the proposed production of up to 1,000 hybrid vehicles
for the 2008 Summer Olympics in Beijing. The development contract is scheduled
to run through early 2005 and upon successful completion may lead to additional
development and production contracts with FAW. Management believes that these
development and initial production programs will result in additional production
contracts during 2005 and beyond; however at this time; there are no assurances
that such additional contracts will be consummated.
In Japan, Tomoe Electro-Mechanical Engineering and Manufacturing, Inc. has
entered into a development and production contract with Enova for eight
battery-electric locomotives for the Singapore Land Transport Authority for
service vehicles for the Singapore Mass Rapid Transit Circle Line system for
maintenance, repair, shunting and recovery of passenger trains. Over the last
several years, Enova has successfully integrated its HybridPowerTM drive systems
into Tomoe's heavy-duty Isuzu dump truck application, three passenger trams and
a mine tunnel crawler. It is anticipated that the hybrid drive train components
will be delivered in late 2005 at Tomoe's Japan-based facilities. Enova
anticipates the total contract to exceed US$3 million over the life of the
contract. This latest market penetration in Asia enhances not only Enova's
alliances with both Tomoe and HHI, but also advances Enova's hybrid-electric
technologies in high voltage power management components. As part of this
contract, Enova will develop a high voltage charging system to enable the
locomotive to receive a direct battery charge from the high voltage rail. Tomoe
and Enova continue to develop other commercial and industrial applications for
our drive systems including potential light rail applications.
12
Wrights Environment, a division of WrightBus, one of the largest low-floor bus
manufacturers in the United Kingdom, has taken delivery of our series hybrid
diesel genset for integration and evaluation in its medium and large bus
applications. We are completing negotiations with Wrights to be their exclusive
supplier of heavy-duty hybrid drive systems and anticipate such to be completed
in the fourth quarter of 2004. Wrights has notified us of additional purchase
requirements for 2004 through 2006. At this time, however, there are no
assurances that such additional orders will be forthcoming.
EcoPower Technology of Italy continued to purchase components for its hybrid
electric drive systems during the first nine months of 2004 for service and
maintenance parts for its fleet of buses powered by HybridPowerTM 120kw drive
systems. To date, we have sold 42 drive systems to EcoPower, forming one of the
largest fleets of hybrid buses in the world. EcoPower is one of the largest
integrators of medium size transit buses for the European shuttle bus market,
with key customers in five Italian cities, namely Turin, Genoa, Brescia, Ferrara
and Vicenza. EcoPower has notified Enova of its requirements for additional
drive systems in 2005; however, there are no assurances that such additional
orders will be forthcoming.
Additionally, we are in discussions with other bus manufacturers and industrial,
commercial and military vehicle manufacturers regarding the purchase of our
heavy-duty, high performance, 120kW and 240kW drive systems in 2004. There are
no assurances, however, that these discussions will result in any sales of the
HybridPowerTM 240kW or 120kW drive systems.
Light-Duty Drive Systems - Automobiles and Delivery vehicles
------------------------------------------------------------
Our 90kW controller, motor and gear unit is utilized in light duty vehicles such
as midsize automobiles and delivery vehicles. The topology of this system is
being adapted to also be utilized as a parallel hybrid motor and controller
system. We are beginning to receive more interest in our light-duty systems from
both European and Asian customers.
Eneco of the United Kingdom, a vehicle integrator which utilizes Enova's
HybridPowerTM 120kW drive systems in its hybrid bus applications, purchased two
HybridPowerTM 120kW drive systems for integration into British mini-buses. Eneco
plans to order an additional four HybridPowerTM 120kW systems for its hybrid bus
programs in 2004 and has notified Enova of their intent for 2005. At this time,
however, there are no assurances that such additional orders will be
forthcoming.
We continue to cross-sell our systems to new and current customers in the light
and medium duty vehicle markets, both domestically and globally.
Fuel Cell Technologies
----------------------
Enova's development and production program for the High Voltage Energy Converter
for Ford Motor Company continues to progress in its evaluation phase. These
systems will be integrated into approximately 30 Ford Focus FCVs which will be
part of an evaluation program being implemented by Ford later in 2004. There is
a potential for additional production orders for HVEC units from Ford in 2005
and beyond; however at this time, there are no assurances that such additional
orders will be forthcoming.
Furthermore, we are applying the technology and components derived from this
program to other applications. The HVEC is a critical component of our Fuel Cell
bus programs, noted below in development programs, and other fuel cell powered
systems such as the Hyundai fuel cell vehicle noted below under research and
development programs.
Enova's fuel cell enabling components are part of the proposed fleets of fuel
cell vehicles being utilized by both Ford Motor Company - the Ford Focus FCV-
and Hyundai Motor Company - the Hyundai Tucson fuel cell hybrid electric vehicle
13
- in response to the U.S. Department of Energy's solicitation, entitled
"Controlled Hydrogen Fleet and Infrastructure Demonstration and Validation
Project." This government-funded project will last over five years, commencing
in late 2004. It is evaluating the economic and performance feasibility of fuel
cell vehicles and infrastructure across the U.S.
The Company will continue to explore new applications for this versatile
technology in both mobile and stationary systems.
Research and Development Programs
---------------------------------
We continue to aggressively pursue government and commercially sponsored
development programs for both ground and marine heavy-duty drive system
applications.
During the three months ended September 30, 2004, we continued to develop the
post-transmission parallel hybrid drive system for Mack Truck, Inc., Powertrain
division - a unit of The Volvo Group, Sweden. The new parallel hybrid vehicle
program is part of the Air Force's efforts to improve efficiency, reduce fuel
and maintenance costs, provide re-generative brake energy and reduce emissions.
The refueler fleet consists of approximately 300 vehicles and, upon successful
completion and evaluation of the refueler vehicle, there is the potential for
additional upgrades to the parallel hybrid drive system. As part of the program,
Mack Trucks will also evaluate the applicability of the drive system to
commercial vehicle commencing with its Class 8 Refuse Hauler. Mack Trucks
currently produces approximately 3,000 refuse vehicles per annum for major
customers such as Waste Management. This development program is anticipated to
be completed in late 2004 and followed by an evaluation period of approximately
three to nine months. This program has opened several avenues within Mack and
Volvo for Enova to develop and manufacture advanced drive system components,
including a pre-transmission parallel hybrid for Volvo. However, at this time,
there are no assurances that such additional orders will be forthcoming.
Our development contract with EDO Corporation of New York for the design and
fabrication of a high voltage DC-DC power conversion system utilizing a Capstone
microturbine as the primary power source for the U.S. Navy unmanned minesweeper
project is in its final stages of functional testing prior to being integrated
into the minesweeper as of the third quarter of 2004. We believe that the
aggregate value of the program will be approximately $420,000, of which $380,000
was billed in the three quarters of 2004. Although this program also has the
potential for additional system sales following the demonstration phase, there
are no assurances that such additional orders will be forthcoming.
The all-electric Hyundai Santa Fe SUV demonstration project in Honolulu Hawaii
has been extended for another two years for three of the vehicles. Fast-charging
capabilities and performance will be the primary focus of this continued
evaluation. This is a continuation of the State of Hawaii and Hyundai Motor
Company's program for pure electric vehicle performance.
Enova continues its development for Hyundai Motor Company (HMC) of the fuel cell
power management and conversion components for Hyundai's latest fuel cell hybrid
electric vehicle, the Tucson, which was unveiled at the Geneva Auto Show in
March 2004. During the third quarter of 2004, Enova continued its test and
evaluation of this next generation hybrid-electric motor and control unit at
Hyundai Motor Company in Korea. Enova is working in conjunction with UTC Fuel
Cells, part of the UTC Power unit of United Technologies Corporation. During the
nine months ending September 30, 2004, this program generated $223,000 in
revenues from development and hardware sales. Although we believe there is
potential for further production of these drive system components in early 2005,
there can be no assurances at this time that such orders will be realized.
14
During the three months ended September 30, 2004, Enova delivered a series
hybrid, microturbine-powered airport tug to the Hickam U.S. Air Force base in
Honolulu Hawaii. The tug, capable of towing a 300,000 lb C-130 or F-15, had its
existing drive system completely re-integrated using our HybridPowerTM 120kW
drive system and hybrid components. The program was sponsored by the U.S.
Transportation Department's Volpe Center in conjunction with the U.S. Air Force.
During the fourth quarter of 2004, we contracted with the Hawaii Center for
Advanced Transportation Technologies (HCATT) to enhance the drive system for
low-speed operations and off-board, auxiliary power systems capability. Upon
completion of the evaluation process, there is a potential to re-integrate up to
300 additional tug vehicles.
Also during the third quarter of 2004, we began development on two fuel-cell
powered hybrid step vans in conjunction with Hydrogenics of Canada. The first
development program is for a step-van for Purolator Courier Ltd, Canada's
largest overnight courier company. A fuel cell/battery electric propulsion
system is being designed and integrated into a hybrid-electric vehicle (HEV)
platform, produced by Enova, to be used in Purolator's delivery fleet. We
anticipate this program to be completed in early 2005, after which it will be
evaluated for performance. A similar HEV program is also under contract with the
HCATT for a step-van for flight-line operations at Hickam Air Force base. This
system will be identical to the Purolator vehicle system and is anticipated to
be completed in the first quarter of 2004.
Several other programs are in discussion in conjunction with HACTT, the U.S. Air
Force, and several other government agencies and private corporations for both
fuel cell hybrid and hybrid-electric vehicles. We anticipate finalizing these
contracts in early 2005. There can be no assurances at this time, however, that
such contracts will be realized.
We intend to establish new development programs with the Hawaii High Technology
Development Corporation in mobile and marine applications as well as other state
and federal government agencies as funding becomes available.
Stationary Power Applications
-----------------------------
We believe the stationary power market will play a key role in our future. We
continue to pursue alliances with leading manufacturers in this area. There are,
however, no assurances that this market will develop as anticipated or that such
alliances will occur.
LIQUIDITY AND CAPITAL RESOURCES
We have experienced cash flow shortages due to operating losses primarily
attributable to research, development, marketing and other costs associated with
our strategic plan as an international manufacturer and supplier of electric
propulsion and power management systems and components. Cash flows from
operations have not been sufficient to meet our obligations. Therefore, we have
had to raise funds through several financing transactions. At least until we
reach breakeven volume in sales and develop and/or acquire the capability to
manufacture and sell our products profitably, we will need to continue to rely
on cash from external financing sources. Enova continues to seek additional
investment capital to fund its operations, development and expansion plans. As
of November 12, 2004, there are no firm commitments for such financing.
Enova has a commitment from Hyundai Heavy Industries to invest an additional
$1,500,000 in Enova under the same terms as the initial investment, subject to
stock price adjustments, in accordance with the terms of the Joint Venture
Agreement. This commitment is expected to be received in November 2004 upon
approval from Korean government authorities. Additionally, we received
approximately $140,000 in equity capital during the nine months ended September
30, 2004 as a result of our employees exercising incentive stock options, a
majority of which expired in July 2004. On August 19, 2004, 263,000 shares of
15
restricted common stock were issued to the Board of Directors at a price of
$0.11 per share for full board meetings and committee meetings during that the
third quarter of 2004.
During the nine months ended September 30, 2004, we spent $1,034,000 in cash on
operating activities to fund our net loss of $1,864,000 resulting from factors
explained in the following section of this discussion and analysis. Accounts
receivable decreased by $303,000 from December 31, 2003 balances as remittances
for prior quarters' sales were greater than current period sales. Sales for the
third quarter were less than anticipated due to customer schedule delays in
several of our development programs and delayed demand for our drive systems.
Management believes these delays are finished and customer demand will increase
in the first quarter of 2005 based on customer response. Inventory decreased by
$292,000 from December 31, 2003 to September 30, 2004 as the Company worked down
inventories from sales of production systems, notably 120kW drive systems.
Prepaid and other current assets increased by $252,000 from December 31, 2003 to
September 30, 2004, primarily as a result of an increase of $211,000 in deposits
in conjunction with the Tomoe/LTA project for funds on deposit with HHI for
component purchases.
Fixed assets increased by $138,000, exclusive of $187,000 in depreciation
accruals, for the nine months ended September 30, 2004. Investments decreased by
$135,000 due to equity in losses generated by the Hyundai-Enova ITC joint
venture. Other assets decreased by $81,000 for the nine months ended September
30, 2004 strictly due to amortization of patents and other long-term agreements.
Current liabilities maintained an overall net increase of $9,000 from December
31, 2003 to September 30, 2004, due primarily to reductions of outstanding
vendor payables offset by increases in deferred revenues and borrowing on our
line of credit. The decrease in accounts payable is due to payments made to
reduce mines owed to Hyundai Heavy Industries in connection with additional
power management and conversion component inventory and Hyundai Autonet for
materials associated with the terminated Ballard/Ford Th!nk city program. As of
September 30, 2004, all of these prior balances have been paid in full to these
two manufacturers. At September 30, 2004, accounts payable were $337,000
compared to a balance of $768,000 at December 31, 2003, a decrease of $431,000
or 56%. These accounts payable balances as of September 30, 2004, have been
subsequently paid during the fourth quarter of 2004. The offsetting increases of
$346,000 during the nine-month period were due mainly to deferred revenues of
$262,000 in connection with funds received from Tomoe on the LTA program which
have not yet been earned and draws on our bank line of credit, which are being
repaid of the course of the year.
Capital lease obligations decreased to $12,000 from $28,000 during the nine
months ended September 30, 2004, from December 31, 2003 as a result of scheduled
payments of these liabilities. Short term notes payable increased by $40,000
during the nine months ended September 30, 2004 in connection with the $125,000
purchase of an International Class 8 truck which will be used for demonstration
of Enova's new diesel genset powered drive system.
Interest accruing on notes payable increased by $189,000 for the nine months
ended September 30, 2004 as per the terms of the liabilities discussed in Note 2
of the financial statements.
The operations of the Company during the third quarter of fiscal 2004 were
financed primarily by the funds received on engineering contracts and sales of
drive system components as well as cash reserves provided by equity financings.
It is management's intention to continue to support current operations through
sales of products and engineering contracts, as well as to seek additional
financing through private placements and other means to increase inventory
reserves and to continue internal research and development.
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 this year.
16
RESULTS OF OPERATIONS
Net revenues for the three and nine month periods ending September 30, 2004 were
$406,000 and $2,232,000, respectively, as compared with $775,000 and $3,469,000
for the corresponding periods in 2003. Net production revenues for the quarter
ended September 30, 2004 increased to $189,000 from $149,000 for the same period
in 2003 or from $1,354,000 to $915,000 for the nine-month period. Net R&D
revenues for the quarter ended September 30, 2004 decreased to $217,000 from
$626,000 for the quarter ended September 30, 2003. For the nine-month period,
the decrease was from $2,115,000 to $1,317,000 from 2004 to 2003. The decreases
in production and development revenues are a result of an ongoing slowdown in
heavy-duty alternative fuel drive system sales as manufacturers assess the
various new types of systems on the market. There has been a greater shift to
parallel hybrid type systems, however, as yet, no particular type of systems has
gained a major foothold. Management's strategy in this regard is to provide a
dual path approach in offering both a series and parallel hybrid drive systems
solution commencing in 2004. To offset this temporary decline in production
sales, the Company is aggressively pursuing privately and governmental funded
development programs. This allows the Company to increase its revenue base, form
new alliances with major OEMs and participate in the latest trends in
alternative fuel technologies. The decrease in R&D revenues is due to customer
requirement slippage during the quarter. Research and development revenues are a
result of engineering services for the Mack/Volvo hybrid drive system, the EDO
minesweeper project, the FAW parallel hybrid program and various HCATT programs.
Cost of revenues for the three months ended September 30, 2004 decreased to
$357,000 from $663,000 for the same period in 2003. For the nine months ended
September 30, 2004, the decrease in cost of revenues was to $1,534,000 from
$2,842,000 for the same nine-month period in 2003. The decrease in cost of sales
is directly attributable to lower sales volumes for these periods.
Internal research, development and engineering expenses increased in the three
months ended September 30, 2004 to $198,000 as compared with $158,000 in the
same period in 2003. For the nine months ended September 30, 2004, such expenses
decreased from $985,000 to $507,000 in 2003. The overall year-to-date decrease
in these expenses is due to an increase in externally funded development
programs and the decrease in the Company's workforce. Enova has therefore
allocated less of its own funds to new product development. This reduction in
engineering expense is also a result of our cost reduction programs resulting in
higher productivity per employee in the areas of new and sustaining development
engineering. We continue to allocate engineering resources to the development of
our diesel generation motor, upgrading proprietary control software, enhancing
DC-DC converters and advance digital inverters and other power management
firmware. The Company will continue to seek external funding, however, for a
greater percentage of these development costs.
Selling, general and administrative expenses increased from $463,000 to $751,000
for the three months ended September 30, 2004 from the previous year's
comparable period. For the nine months ended September 30, 2004, there was a
decrease from $1,827,000 to $1,555,000, or a 15% reduction. The increases during
the quarter were due primarily to annual shareholder meeting costs and other
legal, accounting and travel costs associated with business development and
capital raising activities. The year-to-date decreases are a direct result of
management's cost reduction strategies, which the Company will strive to
maintain in 2004 and beyond in its efforts to achieve profitability, although
management cannot assure that profitability will be achieved.
Interest and financing fees increased slightly to $69,000 for the third quarter
of 2004, up slightly from $55,000 for the same period in 2003 due to an increase
in the interest rate charged per the terms of our long- term note.
17
We incurred a loss from continuing operations of $1,101,000 in the third quarter
of 2004 compared to a loss of $651,000 in the third quarter of 2003. For the
nine months ending September 30, 2004, the loss decreased from $2,598,000 to
$1,864,000, or a 28% reduction. As noted above, this decrease is primarily due
to aggressive cost reduction strategies implemented by management and increases
in productivity throughout company operations. The net loss for the quarter
ended September 30, 2004 was higher than the prior year period due to lower
revenues as noted above. By increasing sales revenues while maintaining these
cost management strategies, the Company believes it will be able to reduce its
annual loss from operations as compared with prior years results; however,
management cannot assure that these results will be achieved.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Form 10-Q contains forward-looking statements concerning our existing and
future products, markets, expenses, revenues, liquidity, performance and cash
needs as well as our plans and strategies. Forward-looking statements may be
identified by the use of terminology such as "may," "anticipate," "estimate,"
"plans," "expects," "believes," "will," "potential" and by other comparable
terminology or the negative of any of the foregoing. These forward-looking
statements involve risks and uncertainties and are based on current management's
expectations and we are not obligated to update this information. Many factors
could cause actual results and events to differ significantly from the results
anticipated by us and described in these forward looking statements including,
but not limited to, the following risk factors.
Net Operating Losses. We experienced recurring losses from operations and had an
accumulated deficit of $98,941,000 at September 30, 2004. There is no assurance,
however, that any net operating losses will be available to us in the future as
an offset against future profits for income tax purposes.
Continued Losses. For the three months ended September 30, 2004 and 2003, we had
losses from continuing operations of $1,101,000 and $651,000 respectively on
sales of $406,000 and $775,000, respectively. For the nine months ended
September 30, 2004 and 2003, we had losses from continuing operations of
$1,864,000 and $2,598,000 respectively on sales of $2,232,000 and $3,469,000,
respectively.
Nature of Industry. The mobile and stationary power markets, including electric
vehicle and hybrid electric vehicles, continue to be subject to rapid
technological change. Most of the major domestic and foreign automobile
manufacturers: (1) have already produced electric and hybrid vehicles, and/or
(2) have developed improved electric storage, propulsion and control systems,
and/or (3) are now entering or have entered into production, while continuing to
improve technology or incorporate newer technology. Various companies are also
developing improved electric storage, propulsion and control systems. In
addition, the stationary power market is still in its infancy. A number of
established energy companies are developing new technologies. Cost-effective
methods to reduce price per kilowatt have yet to be established and the
stationary power market is not yet viable.
Our current products are designed for use with, and are dependent upon, existing
technology. As technologies change, and subject to our limited available
resources, we plan to upgrade or adapt our products in order to continue to
provide products with the latest technology. We cannot assure you, however, that
we will be able to avoid technological obsolescence, that the market for our
products will not ultimately be dominated by technologies other than ours, or
that we will be able to adapt to changes in or create "leading-edge" technology.
In addition, further proprietary technological development by others could
prohibit us from using our own technology.
Changed Legislative Climate. 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 of America 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
18
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.
Because vehicles powered by internal combustion engines cause pollution, there
has been significant public pressure in Europe and Asia, and enacted or pending
legislation in the United States of America at the federal level and in certain
states, to promote or mandate the use of vehicles with no tailpipe emissions
("zero emission vehicles") or reduced tailpipe emissions ("low emission
vehicles"). Legislation requiring or promoting zero or low emission vehicles is
necessary to create a significant market for electric vehicles. The California
Air Resources Board (CARB) is continuing to modify its regulations regarding its
mandatory limits for zero emission and low emission vehicles. Furthermore,
several car manufacturers have challenged these mandates in court and have
obtained injunctions to delay these mandates.
Our 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the
"Exchange Act"), an evaluation was carried out by the Company's President and
Chief Executive Officer and its Acting Chief Financial Officer of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange
Act) as of the end of the quarter ended September 30, 2004. Based upon that
evaluation of these disclosure controls and procedures, the President and Chief
Executive Officer and Acting Chief Financial Officer concluded that the
disclosure controls and procedures were effective as of the end of the quarter
ended September 30, 2004 to ensure that material information relating to the
Company was made known to them particularly during the period in which this
quarterly report on Form 10-Q was being prepared.
Changes in internal controls over financial reporting.
There was not any change in the Company's internal control over financial
reporting that occurred during the quarter ended September 30, 2004 that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We may from time to time become a party to various legal proceedings arising in
the ordinary course of business. As of November 12, 2004, the Company was not
involved in any legal proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
California law prohibits the payment of dividends unless the Company has
sufficient retained earnings or meets certain asset to liability ratios.
During the three months ended September 30, 2004, the Company has issued, or
accrued for issuance, common stock of Enova to the non-executive board directors
in accordance with the September 1999 Board of Directors compensation package
for outside directors, as amended to date. 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; and for each meeting of a Board committee attended
in person, a committee member 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 also reimbursed for out-of-pocket expenses incurred in
connection with attending Board and committee meetings.
On August 19, 2004, 263,000 shares of restricted common stock were issued to the
Board of Directors at a price of $0.11 per share for full board meetings and
committee meetings attended during the third quarter of 2004. 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. As of September
30, 2004, an aggregate of 3,356,451 shares had been issued, or accrued for
issuance, under the above compensation plan for Directors.
Item 3. Defaults Upon Senior Securities:
None.
Item 4. Submission of Matters to a Vote of Securities Holders
We held our annual meeting of stockholders on August 17, 2004, at which the
following matters were voted upon:
1. Our stockholders voted upon and approved a proposal to approve an amendment
to the Restated and Amended Articles of Incorporation increasing the authorized
number of shares of Common Stock from 500,000,000 shares to 750,000,000 shares.
The results of the voting were as follows:
Number of Shares voted FOR: 319,766,309
Number of Shares voted AGAINST: 6,612,447
Number of Shares ABSTAINING: 377,353
Number of Broker NON-VOTES: 0
2. Our stockholders voted upon and approved a proposal to authorize the Board
of Directors to effect a reverse stock split of the Company's Common Stock at a
specific ratio to be determined by the Board of Directors within a range from
one-for-ten to one-for-fifty within a 12 month period from the date of the
Annual Meeting;. The results of the voting were as follows:
20
Number of Shares voted FOR: 320,676,610
Number of Shares voted AGAINST: 5,883,617
Number of Shares ABSTAINING: 195,882
Number of Broker NON-VOTES: 0
3. Our stockholders voted upon and approved a proposal to approve an increase
in the authorized number of shares under the Enova Systems, Inc. 1996 Stock
Option Plan from 45,000,000 shares to 65,000,000 shares. The results of the
voting were as follows:
Number of Shares voted FOR: 246,363,702
Number of Shares voted AGAINST: 6,776,514
Number of Shares ABSTAINING: 300,174
Number of Broker NON-VOTES: 73,315,719
4. Our stockholders voted upon and elected eight (8) individuals to the Board
of Directors. The following Directors will serve until the next Annual Meeting
of Shareholders or until their respective successors are elected and qualified:
===============================================================================================================
Elected and Re-elected Directors: FOR ABSTAINED or WITHHELD
-------------------------------- --- ---------------------
===============================================================================================================
Anthony Rawlinson 299,902,409 26,214,565
===============================================================================================================
Carl D. Perry 315,313,145 10,803,829
===============================================================================================================
Edwin O. Riddell 325,349,008 767,966
===============================================================================================================
Bjorn Ahlstrom 325,509,224 607,750
===============================================================================================================
Malcolm R. Currie 325,341,184 775,800
===============================================================================================================
John R. Wallace 325,444,415 672,559
===============================================================================================================
John J. Micek, III (Preferred B) 639,135 0
===============================================================================================================
Donald H. Dreyer (Preferred B) 639,135 0
===============================================================================================================
5. Our stockholders voted upon and approved a proposal to ratify the action of
the Board of Directors appointing Singer Lewak Greenbaum & Goldstein LLP as the
independent auditors for Enova for the year ended December 31, 2004. The results
of the voting were as follows:
Number of Shares voted FOR: 325,854,143
Number of Shares voted AGAINST: 444,824
Number of Shares ABSTAINING: 457,142
Number of Broker NON-VOTES: 0
Item 5. Other Information
None.
21
Item 6. Exhibits:
31.1* Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act Of 2002.
31.2* Certification of Acting Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1* Certification Pursuant to 18 U.S.C. Section 1350 of President and Chief
Executive Officer.
32.2* Certification Pursuant to 18 U.S.C. Section 1350 of Acting Chief
Financial Officer.
* - attached herewith.
22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 15, 2004
ENOVA SYSTEMS, INC.
(Registrant)
/s/ Larry B. Lombard
-----------------------------------------------------
By: Larry B. Lombard, Acting Chief Financial Officer
23