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Enova Systems Announces Interim Results for the Six Months Ended June 30, 2005

TORRANCE, Calif.--Aug. 1, 20056, 2005--Enova Systems, Inc. (OTCBB:ENOV)(AIM:ENV)(AIM:ENVS), today announced interim results for the six months ended June 30, 2005.
                  Financial Summary Table (Unaudited)
                 (in thousands, except per share data)

                               Three Months Ended    Six Months Ended
                                    June 30,             June 30,
                                 2005      2004       2005      2004

Net revenues                    $1,322    $  718    $ 2,014    $1,826
Gross profit                        29       199        420       649
Operating loss                    (528)     (602)    (1,340)     (763)
                                 ------    ------    -------    ------
Net loss                          (528)     (602)    (1,340)     (763)
                                 ======    ======    =======    ======
Basic and diluted net loss
 per common share                (0.01)    (0.01)     (0.01)    (0.01)
                                 ======    ======    =======    ======
Basic and diluted weighted
 average common shares
 outstanding                     9,263     8,519      9,263     8,519
                                 ======    ======    =======    ======


Edwin Riddell, the Company's President and CEO, said: "Revenues increased in the second quarter from the first quarter of 2005 as we continued to deliver our HybridPower drive systems to our growing customer base. With the addition of the capital funding and our listing on the London Stock Exchange's AIM, we believe Enova is poised to accelerate its market capture strategy in medium- and heavy-duty hybrid vehicle drive components and power management systems."

Mr. Riddell continued: "We believe the AIM listing and interest from UK institutional investors demonstrate a strong vote of confidence for Enova's technology and potential. This latest milestone should raise our profile internationally and allow us to market our leading-edge hybrid drive systems and digital power management solutions much more actively to our growing global customer base as well as assist us in maintaining a competitive technological edge."

This is the first set of results since our successful IPO on AIM, raising $20 million, on July 26, 2005.

Net revenues for the three- and six-month periods ended June 30, 2005, were $1,322,000 and $2,014,000, respectively, as compared with $718,000 and $1,826,000 for the corresponding periods in 2004, an increase of 84% and 10%, respectively. Net production revenues for the quarter ended June 30, 2005, increased to $817,000 from $456,000 for the same period in 2004. Net research and development revenues for the quarter ended June 30, 2005, increased to $505,000 from $262,000 for the quarter ended June 30, 2004. The increase in production revenues is primarily the result of delivery of drive systems to our customers as forecasted in prior quarters. Our sources of revenue for the second quarter of 2005 came predominantly from product sales rather than development contracts. Product sales as a percentage of total revenues were 62% for the three months ended June 30, 2005, and 65% of total revenues for the six months ended therein, with sales of our HybridPower 120kW drive systems accounting for a majority of our product sales. We believe this trend will continue to accelerate for the foreseeable future as more current and prospective customers purchase additional drive systems for their production vehicles. We will continue to seek out and contract for new development programs with both our current partners, such as WrightBus, Eneco, EcoPower Technology, First Auto Works, Tomoe, Hyundai Motor Company (HMC) and our other U.S., Asian and European alliance partners, as well as with new alliances with other vehicle manufacturers and energy companies to enhance our technology and our product offerings. Research and development revenues for the second quarter of 2005 are a result of development programs and engineering services for the Tomoe LTA train, the HMC fuel cell bus and various Hawaii Center for Advanced Transportation Technology programs (HCATT).

Cost of revenues consists of component and material costs, direct labor costs, integration costs, and overhead related to manufacturing our products. Product development costs incurred in the performance of engineering development contracts for the U.S. government and private companies are charged to cost of sales for this contract revenue. Cost of revenues for the quarter ended June 30, 2005, increased $505,000 to $1,024,000 from $519,000 for the same period in 2004. For the six months ended June 30, 2005, there was an increase in cost of revenues from $1,177,000 to $1,594,000 for the same six-month period in 2004. These increases are primarily attributable to the increase in sales for the three and six months, as well as additional support costs for some of our new product lines. We anticipate there may be additional increases in cost of sales for products in 2005 due to foreign exchange rate fluctuations of the U.S. dollar versus those currencies of our primary manufacturer. We anticipate this to be offset by a reduction in costs associated with manufacturing these products due to increasing purchases, thereby improving our gross margins.

Internal research, development and engineering expenses remained constant for the three months ended June 30, 2005, at $178,000 as compared with $181,000 in the same period in 2004. For the six months ended June 30, 2005, such expenses increased to $395,000 from $309,000 in 2004. As the market for heavy-duty hybrid vehicles continues to evolve and grow, we have increased allocating engineering resources to the development and enhancement of our new parallel hybrid drive systems, our series hybrid system, upgrading proprietary control software, higher power DC-DC converters, and advancing our digital inverters and other power management firmware.

Selling, general and administrative expenses increased from $453,000 to $550,000, or 21%, for the three months ended June 30, 2005, from the previous year's comparable period. For the six months ended June 30, 2005, the increase was from $935,000 to $1,158,000, or a 24% increase. The increases are attributable to additional marketing, engineering and technical staff employed in the first half of 2005 as well as increased expense due to stricter regulatory oversight in conjunction with the Sarbanes-Oxley Act of 2002 and our efforts to attract additional capital funding. Management continues to implement cost-reduction strategies in 2005 in its efforts to achieve profitability.

Net interest and other income/expense remained relatively constant at approximately $72,000 for the second quarter of 2005, down slightly from the same period in 2004. For the six months ended June 30, 2005, net interest and other income/expense was $141,000 compared to $124,000 for the same period in 2004.

We incurred a loss from continuing operations of $528,000 in the second quarter of 2005 compared to a loss of $602,000 in the second quarter of 2004, which represents a 5% reduction in loss. For the six months ended June 30, 2005, the loss increased from $763,000 to $1,340,000, or a 75% increase. The increase was attributable to several factors, including higher comparative costs of revenue due to the type of products sold in the first half of 2005 as compared to 2004, higher support costs in the second quarter of 2005, increased internal development efforts and higher general operating costs due to factors noted above.

The previous table, description and the condensed financial statements should be read in conjunction with the Risk Factors and other information contained in the Company's Forms 10-Q for the periods ended March 31 and June 30, 2005, and the 2004 Annual Report on Form 10-K, as amended.

CURRENT TRADING

Since June 30, 2005, we continue to progress in our production and development programs for FAW China, Wright Bus and Eneco of the United Kingdom, EcoPower Technology (EPT) of Italy, Tsinghua University of China, MTrans of Malaysia, Tomoe Electro-Mechanical Engineering and Manufacturing, Inc. of Japan, and several other domestic and international vehicle and bus manufacturers. We are completing or continuing negotiations for heavy-duty hybrid drive system development for several major North American truck and engine manufacturers, as well as new development, integration and evaluation programs for the U.S. Air Force, the state of Hawaii and HCATT, and New York Sanitation. We anticipate these programs to commence in the third or fourth quarter of 2005; however, at this time, there are no assurances that such additional contracts will be consummated.

            CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
                 (in thousands, except per share data)

                               Three Months Ended    Six Months Ended
                                    June 30,             June 30,
                                 2005      2004       2005      2004

Net revenues                    $1,322    $  718    $ 2,014    $1,826
Cost of revenues                 1,024       519      1,594     1,177
                                 ------    ------    -------    ------
Gross profit                       298       199        420       649

Operating Expenses:
Research and development           178       181        395       309
Selling, general and
 administrative                    550       453      1,158       935
Interest and other income
 (expense), net                     72        79        141       124
Equity in losses                    26        88         66        44
                                 ------    ------    -------    ------
Total operating expenses           826       801      1,760     1,412
                                 ------    ------    -------    ------
Operating loss                    (528)     (602)    (1,340)     (763)
                                 ------    ------    -------    ------
Net loss before income taxes      (528)     (602)    (1,340)     (763)
Income taxes                         -         -          -         -
                                -------   -------   --------   -------
Net loss                          (528)     (602)    (1,340)     (763)
                                 ======    ======    =======    ======
Basic and diluted net loss
 per common share                (0.01)    (0.01)     (0.01)    (0.01)
                                 ======    ======    =======    ======
Basic and diluted weighted
 average common shares
 outstanding                     9,263     8,519      9,263     8,519
                                 ======    ======    =======    ======



                       CONDENSED BALANCE SHEETS
                            (in thousands)

                                       June 30,   Dec. 31,   June 30,
                                         2005       2004       2004
                                     (Unaudited) (Audited) (Unaudited)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents               $  624     $ 1,575     $2,676
Accounts receivable, net                   726         522        638
Inventory and supplies, net                889       1,036      1,320
Prepaid expenses and other current
 assets                                    445         304         94
                                         ------     -------     ------
Total current assets                     2,684       3,437      4,728
PROPERTY AND EQUIPMENT, NET                346         387        489
EQUITY METHOD INVESTMENT                 1,702       1,768        872
OTHER ASSETS                               242      296350
TOTAL ASSETS                             4,974       5,888      6,439
                                         =====       =====      =====

LIABILITIES AND STOCKHOLDERS' EQUITY
 (DEFICIT)
CURRENT LIABILITIES
Accounts payable                           317          66        151
Deferred revenues                           84         392          -
Line of credit                               -         229        233
Other current liabilities                  218         207        248
Current portion of notes/lease
 payables                                  169         172        190
                                         ------     -------     ------
Total current liabilities                  788       1,066        822
                                         ------     -------     ------
Accrued interest payable                 1,528       1,378      1,246
Long-term liabilities                    3,332       3,341      3,340
Total liabilities                        5,648       5,785      5,408
                                         ------     -------     ------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)      (674)        103      1,031
LIABILITIES AND STOCKHOLDERS' EQUITY
 (DEFICIT)                               4,974       5,888      6,439
                                         ======     =======     ======



                        STATEMENT OF CASH FLOWS
                       (Unaudited, in thousands)

                                           June 30,          June 30,
                                             2005              2004

Cash flows from operating
 activities
  Net loss                                $   (1,340)       $    (763)
  Adjustments to reconcile net loss
   to net cash used by operating
   activities
  Depreciation and amortization                  146              175
  Equity in losses of equity method
   investee                                       66               88
  Issuance of common stock for
   services                                       63               37
  (Increase) decrease in
       Accounts receivable                      (204)             165
       Inventory and supplies                    147              286
       Prepaid expenses and other
        current assets                          (141)              (8)
  Increase (decrease) in
       Accounts payable                          252             (618)
       Accrued expenses                           11               30
       Deferred revenues                         308                -
       Accrued interest payable                  150              124
                                              -------           ------
  Net cash used by operating
   activities                                 (1,158)            (484)
                                              -------           ------
Cash flows from investing activities
  Purchases of property and
   equipment                                     (51)            (129)
                                              -------           ------
  Net cash used in investing
   activities                                    (51)            (129)
                                              -------           ------
Cash flows from financing activities
  Borrowings (repayments) on line
   of credit                                    (229)             113
  Proceeds (repayment) on notes
   payable and capital lease
   obligations                                   (13)              24
  Proceeds from sale of common
   stock                                         500            2,622
                                              -------           ------
  Net cash provided by (used in)
   financing activities                          258            2,759
                                              -------           ------

Net increase (decrease) in cash and
 cash equivalents                               (951)           2,146

Cash and cash equivalents,
 beginning of year                             1,575              530
                                              -------           ------
Cash and cash equivalents, end of
 year                                            624            2,676
                                               =====            =====

Supplemental disclosure of cash flow information

  Interest paid                                    4                4
                                               =====            =====
  Income taxes paid                                -                -
                                               =====            =====

Supplemental schedule of non-cash
 investing and financing activities

  Conversion of preferred stock to
   common stock                                   13               64
                                               =====            =====