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: June 30, 2000

                                       OR

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the transition period from: _____________ to ________________

         Commission File Number: 0-25411



                                  EVERCEL, INC.

             (Exact Name of Registrant as Specified in Its Charter)

               DELAWARE                                      06-1528142
     (State or Other Jurisdiction                         (I.R.S. Employer
          of Incorporation or                          Identification Number)
             Organization)


                                2 LEE MAC AVENUE
                           DANBURY, CONNECTICUT 06810
                                 (203) 825-3900
               (Address, Including Zip Code, and Telephone Number,
        Including Area Code, of Registrant's Principal Executive Offices)
                         ------------------------------
             ROBERT L. KANODE, PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                  EVERCEL, INC.
                                2 LEE MAC AVENUE
                           DANBURY, CONNECTICUT 06810
                                 (203) 825-3900
            (Name, Address Including Zip Code, and Telephone Number,
                   Including Area Code, of Agent For Service)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None
           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, $.01 par value per share
                                (Title of class)

Indicate by check mark whether the  registrant  (1) has filed all  documents and
reports  required to be filed by Section 13 or 15(d) of Securities  Exchange Act
of 1934  during the  preceding  12 months (or for such  shorter  period that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [  ]

The number of shares  outstanding of the  Registrant's  Common Stock,  par value
$.01 as of July 25, 2000 was 7,124,338.

                                       1
<PAGE>

                                  EVERCEL, INC.
                                    FORM 10-Q
                                      INDEX

PART 1 - FINANCIAL INFORMATION

Item 1.  Unaudited Condensed Financial Statements

             Condensed Balance Sheets as of
             June 30, 2000 and December 31, 1999

             Condensed Statements of Operations for the
             three months ended June 30, 2000 and June 30, 1999

             Condensed Statements of Operations
             for the six months ended June 30, 2000
             and June 30, 1999

             Condensed Statements of Cash Flows for the
             six months ended June 30, 2000 and June 30, 1999

             Notes to Unaudited Condensed
             Financial Statements

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations

Item 3.  Quantitative and Qualitative Disclosures About
         Market Risk

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

            Signatures

                                       2
<PAGE>


                                  EVERCEL, INC.
                            CONDENSED BALANCE SHEETS
           (Dollars in thousands, except share and per share amounts)



                                                     (Unaudited)
                                                       JUNE 30,     DECEMBER 31,
                      ASSETS                             2000            1999
                      -------                       ----------------------------
Current assets:
   Cash and cash equivalents                         $   15,168      $    6,117
   Accounts receivable                                       24             193
   Inventories                                              297             159
   Other current assets                                     225              35
                                                     ----------      ----------
      Total current assets                               15,714           6,504

   Property, plant and equipment, net                     1,990           1,703
   Other assets, including deposits on new
     equipment, net                                       2,587             603
                                                     ----------             ---

TOTAL ASSETS                                         $   20,291      $    8,810
                                                     ==========      ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:

   Accounts payable                                  $      137      $      391
   Accrued liabilities                                      779             351
                                                     ----------      ----------
      Total current liabilities                             916             742

Long term-debt:
   Long-term obligations under capital leases                17              -
                                                     ----------      ----------
       Total liabilities                                    933            742

Shareholders' equity:

   Preferred Stock ($0.01 par value); 1,000,000
      shares authorized: 264,000 issued and
      outstanding at June 30, 2000 and December
      31, 1999 (with cumulative dividends at 8%).             3               3
   Common Stock ($0.01 par value); 10,000,000
      shares authorized: 7,124,338 and 5,722,090
      issued and outstanding at June 30, 2000 and
      December 31, 1999, respectively.                       71              57
   Additional paid-in-capital                            29,778          14,084
   Note receivable from shareholder                        (300)           (300)
   Accumulated deficit                                  (10,194)         (5,776)
                                                     -----------     -----------
      Total shareholders' equity                         19,358           8,068
                                                     ----------      ----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           $   20,291      $    8,810
                                                     ===========     ==========


                  See notes to condensed financial statements.

                                       3
<PAGE>



                                  EVERCEL, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share amounts)
                                   (Unaudited)


                                                       THREE MONTHS ENDED
                                               ---------------------------------
                                                   JUNE 30,          JUNE 30,
                                                     2000              1999
                                               ------------------ --------------

Revenues                                          $       59        $       -
Cost and expenses:
   Cost of revenues                                      240                -
   Administrative and selling expenses                 1,753               765
   Research and development                            1,018               722
                                                  ----------        ----------
      Total operating costs and expenses               3,011             1,487
                                                  ----------        ----------

Loss from operations                                  (2,952)           (1,487)


Interest income, net                                     171                53

License fee income                                       572                -

Losses of unconsolidated affiliate                       (43)               -
Other income (expense)                                   (99)               (1)
                                                  ------------      ----------

Loss before income taxes                              (2,351)           (1,435)

Income tax expense                                        88                -
                                                  -----------       ----------

Net loss                                              (2,439)           (1,435)

Preferred stock dividends                               (132)               -
                                                  ----------        ----------

Net loss - common shareholders                    $   (2,571)        $  (1,435)
                                                  ==========        ==========

Basic and diluted loss per share                  $    (0.41)        $   (0.26)
                                                  ==========        ==========

Basic and diluted shares outstanding                   6,254             5,528
                                                  ==========        ==========


                  See notes to condensed financial statements.

                                       4
<PAGE>




                                  EVERCEL, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
           (Dollars in thousands, except share and per share amounts)
                                   (Unaudited)


                                                        SIX MONTHS ENDED
                                               ---------------------------------
                                                    JUNE 30,          JUNE 30,
                                                     2000              1999
                                               ------------------ --------------

Revenues                                          $       64        $       -
Cost and expenses:
   Cost of revenues                                      245                -
   Administrative and selling expenses                 3,116             1,230
   Research and development                            1,697             1,234
                                                  ----------        ----------
      Total operating costs and expenses               5,058             2,464
                                                  ----------        ----------

Loss from operations                                  (4,994)           (2,464)

Interest income, net                                     234                38
License fee income                                       572                -
Losses of unconsolidated affiliate                       (43)               -
Other income (expense)                                   (99)               (1)
                                                  ----------        ----------

Loss before income taxes                              (4,330)           (2,427)

Income tax expense (benefit)                              88              (111)
                                                  -----------       ----------

Net loss                                              (4,418)           (2,316)

Preferred stock dividends                               (264)               -
                                                  ----------        ----------

Net loss - common shareholders                    $   (4,682)       $   (2,316)
                                                  ==========        ==========

Basic and diluted loss per share                  $    (0.78)       $    (0.58)
                                                  ==========        ==========

Basic and diluted shares outstanding                   6,028             3,993
                                                  ==========             =====



                  See notes to condensed financial statements.

                                       5
<PAGE>

                                  EVERCEL, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                              SIX MONTHS ENDED
                                                                   ------------------------------------
                                                                           JUNE 30,        JUNE 30,
                                                                             2000            1999
                                                                   -----------------  -----------------
<S>                                                                    <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss                                                              $    (4,418)       $    (2,316)
Adjustments to reconcile net loss to net cash used in operating
   activities:
     Depreciation and amortization                                            185                 62
     (Increase) decrease in operating assets:
       Accounts receivable                                                    169                 13
       Inventories                                                           (138)              (157)
       Other current assets                                                  (190)                -
     Increase (decrease) in operating liabilities:
       Accounts payable                                                      (254)               (43)
       Accrued liabilities                                                    319                326
     Other, net                                                                83                254
                                                                      -----------        -----------
   Net cash used in operating activities                                   (4,244)            (1,861)
                                                                      -----------        -----------
CASH FLOWS FROM INVESTING ACTIVITIES:

   Capital expenditures                                                    (2,367)              (849)
    Investment in subsidiaries                                               (155)                 -
                                                                      -------------      -----------
   Net cash used in investing activities                                   (2,522)              (849)
                                                                      -----------        -----------
CASH FLOWS FROM FINANCING ACTIVITIES:

   Borrowings from FuelCell                                                    -                (821)

    Preferred stock dividends paid                                           (155)                -
    Proceeds from common stock issued                                      15,972              7,729
   Contributions from FuelCell                                                 -                (340)
                                                                      -----------        ------------
     Net cash provided by  financing activities                            15,817              3,858
                                                                      -----------        -----------
Net decrease (increase) in cash and cash equivalents                        9,051              3,784
Cash and cash equivalents - beginning of period                             6,117                  1
                                                                      -----------        -----------
Cash and cash equivalents - end of period                             $    15,168        $     3,859
                                                                      ===========        ===========
CASH PAID DURING THE PERIOD FOR:

   Income taxes                                                       $        88        $        -

</TABLE>


                  See notes to condensed financial statements.

                                       6
<PAGE>

                                  EVERCEL, INC.
                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS


(1) BASIS OF PRESENTATION

On October 6, 1999,  the Board of Directors  voted to change the fiscal year end
of  Evercel,   Inc.  (the  "Company")  from  October  31  to  December  31.  The
accompanying  financial  statements  represent  the  financial  position  of the
Company  as of June 30,  2000 and 1999,  and the  results of  operations  of the
Company for the three  months  ended June 30, 2000 and the period from  February
22, 1999 to June 30, 1999 and the results of  operations of the Battery Group of
FuelCell Energy,  Inc.  ("FuelCell") for the period from January 1, 1999 through
February 21, 1999.

Comparative amounts for the three and six months ended June 30 are unaudited. In
the opinion of management,  the information presented in the unaudited three and
six month statements reflects all adjustments  necessary for a fair presentation
of the Company's results of operations for those periods.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

The Company is engaged in the design and  manufacture  of  innovative,  patented
nickel-zinc  rechargeable batteries, as well as the research and design of other
advanced battery technologies.  The Company believes the nickel-zinc battery has
commercial  applications in markets  requiring long cycle life, light weight and
relative cost efficiency.

SPIN-OFF FROM FUELCELL ENERGY, JOINT VENTURES AND LICENSE AGREEMENTS

On  February  22,  1999,   FuelCell  effected  a  spin-off  of  the  Company  by
deconsolidating the financial statements of the Company and a Joint Venture from
its consolidated  financial statements.  As part of the spin-off of the Company,
FuelCell  transferred  capital assets (net),  prepaid  spin-off costs,  accounts
receivable and short-term liabilities amounting to $1,228,000, $501,000, $36,000
and  $1,096,000,  respectively.  FuelCell  distributed to its  shareholders in a
tax-free  distribution  one share of Evercel common stock for every three shares
of common stock of FuelCell  held on the record date of February  22,  1999.  On
April 5, 1999,  the Company  completed a rights  offering of its shares at $3.00
per share and began trading.

In February  1998,  FuelCell  entered into the Nan Ya License  Agreement  with a
joint venture between Nan Ya Plastics  Corporation of Taiwan, a Formosa Plastics
Group company,  and Xiamen Three Circles Co., Ltd. of Xiamen,  China for the use
of the Company's  nickel-zinc batteries in electric and hybrid electric vehicles
in China,  Taiwan,  Hong Kong and Macao on an  exclusive  basis and for  certain
other Southeast Asian countries on a non-exclusive  basis. The license agreement
calls for the  payment  of $5.0  million in three  stages and a royalty  for the
exclusive  and  non-exclusive  territories.  The  payments  include $1.5 million
received  by  FuelCell  in  1998,  of  which  $1.3  million  and  $0.2  million,
respectively were recorded on FuelCell's  financial statements in 1999 and 1998.
A further $2.0 million was to be paid to the Company based on cycle life testing
that was  substantially  achieved  in  December,  1999.  Although we believe the
principal milestone conditions have been achieved and we have received $572,000,
we cannot guarantee that we will receive the remaining  balance.  If the Company
receives the balance of the $2.0 million  payment,  we may also be entitled to a
final  payment of $1.5  million to be paid to the  Company  upon  completion  of
duplication  of the  battery  at its  facilities  in China.  The Nan Ya  License
Agreement provides that the Company has the right to invest the final payment in
equity in the joint venture  manufacturing and sales organization formed between
Nan Ya Plastics and Xiamen Three Circles Co., Ltd.
                                       7

<PAGE>

In July 1998,  FuelCell  also  entered  into a  Technology  Transfer and License
Contract (the "Three Circles License  Agreement") with Xiamen Three  Circles-ERC
Battery  Corp.,  Ltd.  for the use of the  Company's  nickel-zinc  batteries  in
electric  bicycles,  scooters,  three-wheel  vehicles,  off-road  vehicles,  and
miners'  safety lamps in China on an  exclusive  basis and  Southeast  Asia on a
non-exclusive  basis.  The license included an initial payment to FuelCell of $3
million.  In connection with the Three Circles License Agreement,  FuelCell also
entered into a joint venture agreement with Xiamen Three Circles Co., Ltd., used
this  $3.0  million  as  its  initial   investment  in  the  joint  venture  and
subsequently  contributed an additional  $80,500 to receive a 50.5% share of the
joint  venture  called  Xiamen  Three  Circle-ERC   Battery  Corp.  (the  "Joint
Venture").  Pursuant to the Three Circles License  Agreement,  the Joint Venture
must  also  pay the  Company  certain  royalties  based  upon  the net  sales of
nickel-zinc batteries sold, leased or transferred in the applicable territories.
In addition the Joint Venture may sub-license the Company's  technology to third
parties in China, Hong Kong, Taiwan and Macao on a non-exclusive basis.

In  accordance  with a License  Assistance  Agreement  entered  into between the
Company  and  FuelCell,  the  Company  has agreed to provide  all  services  and
assistance necessary for it to effectively  fulfill, on behalf of FuelCell,  all
of  FuelCell's  obligations  under the Joint  Venture  and the  related  license
agreement  until such time as  FuelCell  obtains the  approval  from the Chinese
partner and  appropriate  Chinese  governmental  authority for the assignment of
such agreements to the Company. In return for such assistance, FuelCell will pay
to the  Company  an amount  equal to the sum of all money,  dividends,  profits,
reimbursements, distributions and payments actually paid to FuelCell pursuant to
the Joint Venture contract and related license agreement.  The Company would pay
FuelCell all payments made by FuelCell  pursuant to the Joint  Venture  contract
and related license agreement. All expenses and costs incurred by the Company in
meeting the obligations under the License  Assistance  Agreement shall be solely
those of the Company,  and FuelCell shall not be liable for their  payment.  The
Company  accounts for its  involvement  in the Joint  Venture  under the License
Assistance Agreement in a manner similar to the equity method of accounting as a
result  of the fact  that it does not have  significant  control  over the Joint
Venture.

(3) CAPITALIZATION

The Company  declared a 100% stock dividend having the effect of a 2-for-1 stock
split payable on March 22, 2000 to  shareholders of record on March 7, 2000. All
share and per share data have been adjusted  retroactively to give effect to the
stock dividend.

On May 12, 2000 the  Company  completed a stock  offering  of  1,250,000  common
shares  at  $12.50  per  share,  and on May 22,  2000 the  underwriter,  Burnham
Securities Inc., exercised an over-allotment  option of 141,080 shares resulting
in total net proceeds of $15,940,000.

(4) INVENTORY

Inventories consists of the following:
                                    June 30,       December 31,
                                      2000             1999
                                      ----             ----

        Raw Materials             $    166         $    123
        Work in Progress               131               23
        Finished Goods                  -                13
                                   --------         --------

        Total Inventories         $    297         $    159
                                   ========         ========




(5) SUBSEQUENT EVENTS

-        On July 13, 2000 Madison  Capital Group,  USA, LLC, acting as financial
         advisor to the participating investors,  announced the incorporation of
         OXYGEN, S.p.A. in Italy. The Company is an initial investor and will be
         the exclusive  supplier of batteries to Oxygen,  which has been created
         to provide transportation  solutions in Italy, including  non-polluting
         electric two-wheeled vehicles and the necessary  infrastructure to make
         these vehicles feasible and affordable.

-        On July 17,  2000 the Company  announced  that it will locate its North
         American  manufacturing  operation in a 97,600  square foot building in
         Newport News,  Virginia.  The Company will begin  installing  the first
         automated  manufacturing line in August and the initial product to come
         off this new line will be the Company's  trolling  motor marine battery
         for the North America sport fishing market.

-        On July 19, 2000 the Company  introduced its  Evertroll(R)  battery,  a
         high  performance  battery made  expressly to power  electric  trolling
         motors in fishing boats.  The battery was formally  unveiled at a press
         conference on July 20, 2000, at the International  Convention of Allied
         Sportfishing Trades (ICAST) 2000 & BASS Masters Classic Outdoor show in
         Chicago.
                                       8
<PAGE>

-        On July  19,  2000  at the  Company's  Annual  Meeting,  the  Company's
         shareholders  approved  an  increase  in the  number of  common  shares
         authorized  from 10 million to 30 million and  expanded the 1998 Equity
         Incentive Plan from 600,000 to 1,300,000 shares.

                                       9
<PAGE>


                                  EVERCEL, INC.

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

         This report contains forward looking statements,  including  statements
regarding the Company's  plans and  expectations  regarding the  development and
commercialization  of its  nickel-zinc  battery  technology.  When  used in this
Report,  the words  "expects",  "anticipates",  "estimates",  "should",  "will",
"could",  "would",  "may",  and  similar  expressions  are  intended to identify
forward-looking  statements. All forward-looking statements are subject to risks
and  uncertainties  that could cause actual  results to differ  materially  from
those  projected.  Factors that could cause such a difference  include,  without
limitation,  the risk that cost reduction in the manufacturing  process will not
be achieved to the extent  necessary to facilitate  commercialization,  the risk
that the company will not initiate commercial sales as currently scheduled,  the
risk that the Company's manufacturing capacity will not be increased as planned,
general  risks   associated   with  product   development,   manufacturing   and
introduction, rapid technological changes and competition as well as other risks
set forth in the Company's filings with the Securities and Exchange  Commission.
The  forward-looking  statements  contained  herein speak only as of the date of
this Report.  The Company  expressly  disclaims any obligation or undertaking to
release  publicly any updates or revisions to any such  statement to reflect any
change in the  Company's  expectations  or any change in events,  conditions  or
circumstances on which any such statement is based.

OVERVIEW

         We  develop,  design  and have  begun to  manufacture  high-performance
rechargeable  batteries.  To date,  our  operations  have  mainly  consisted  of
research and development activities with commercial and manufacturing operations
continuing  to  accelerate  in year 2000.  We recognize  revenue on the date our
products are shipped. To date, revenues have primarily resulted from shipment of
sample products to potential customers.

         FuelCell  Energy,   Inc.   ("FuelCell")  has  licensed  the  rights  to
manufacture  scooter  batteries  through  the Joint  Venture.  Under our license
assistance  agreement  with FuelCell,  we have assumed the rights,  benefits and
obligations of Fuel Cell's 50.5% ownership of the Joint Venture. We will account
for our involvement in the Joint Venture under the License Assistance  Agreement
using the equity method of accounting,  in which we record our share of earnings
or losses from the Joint Venture in our statement of operations.

         On February  16,  1999,  FuelCell  transferred  the  principal  assets,
intellectual  property and liabilities  related to its battery business group to
us. On February 22, 1999, FuelCell distributed to its shareholders shares of our
common stock in a tax-free  distribution.We continue to pay FuelCell for certain
administrative  services in accordance with a services agreement.  Results shown
before the period of the spin-off  reflect our activity as the Battery  Group of
FuelCell.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2000 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1999

         We had  revenues  of $59,000 for the three  months  ended June 30, 2000
compared to none for the three months  ended June 30, 1999.  The revenues in the
2000 period were due to consumer  samples  sold in our efforts to  commercialize
our  nickel-zinc  batteries.  Cost of revenues of $240,000  for the three months
ended June 30, 2000 represent the costs to produce the sample  batteries,  which
approximates revenues, as well as a charge to adjust inventory to net realizable
value. There were no cost of revenues for the same period in 1999.

         Administrative  and selling  expenses  increased 129% to $1,753,000 for
the three  months  ended June 30, 2000 from  $765,000 for the three months ended
June 30, 1999. The increase is the result of staffing  administrative  functions
during the latter half of 1999, including executive,  finance,  human resources,
sales  and  marketing,  the legal and  financial  costs of being an  independent
publicly traded company, and selling, marketing and administrative activities to
prepare us for commercialization of our nickel-zinc battery technology.

         Research and development expenses increased 41% to $1,018,000 for three
months  ended June 30, 2000 from  $722,000  for the three  months ended June 30,
1999 due to product development  activity relating to the  commercialization  of
our battery technology.
                                       10

<PAGE>

         Net  interest  income of $171,000  for the three  months ended June 30,
2000 increased from $53,000 for three months ended June 30, 1999 due to interest
income on funds  received  from the May 2000  public  offering  versus the funds
received from the April 1999 rights offering. License fee income of $572,000 was
received in the three  months  ended June 30, 2000 related to the Nan Ya license
agreement.  Our share of the Joint Venture  losses in the quarter ended June 30,
2000 was  $43,000.  We  recognized  a tax expense of $88,000 in the three months
ended June 30, 2000 for taxes on the  license fee payment and have not  recorded
the tax benefit of  operating  losses in the three months ended June 30, 2000 or
1999 pursuant to Financial  Accounting  Standard No.109,  "Accounting for Income
Taxes."


SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1999

         We had  revenues  of  $64,000  for the six months  ended June 30,  2000
compared to none for the six months  ended June 30,  1999.  The  revenues in the
2000 period were due to consumer  samples  sold in our efforts to  commercialize
our nickel-zinc batteries. Cost of revenues of $245,000 for the six months ended
June 30,  2000  represents  the costs to  produce  the sample  batteries,  which
approximate  revenues, as well as a charge to adjust inventory to net realizable
value. There were no cost of revenues for the same period in 1999.

         Administrative  and selling  expenses  increased 153% to $3,116,000 for
the six months ended June 30, 2000 from $1,230,000 for the six months ended June
30, 1999. The increase is the result of staffing administrative functions during
the latter half of 1999, including executive,  finance,  human resources,  sales
and marketing,  the legal and financial  costs of being an independent  publicly
traded company, and selling,  marketing and administrative activities to prepare
us for commercialization of our nickel-zinc battery technology.

         Research and development  expenses  increased 38% to $1,697,000 for six
months  ended June 30, 2000 from  $1,234,000  for the six months  ended June 30,
1999 due to product development  activity relating to the  commercialization  of
our battery technology.

         Net interest  income of $234,000 for the six months ended June 30, 2000
increased  from  $38,000 for the six months  ended June 30, 1999 due to interest
income on funds  received  from the May 2000  public  offering  versus the funds
received  from the April 1999  rights  offering  and  interest  paid to FuelCell
Energy in 1999 on  short-term  borrowings.  License fee income of  $572,000  was
received  in the six months  ended June 30,  2000  related to the Nan Ya license
agreement.  Our share of the Joint  Venture  losses in the six months ended June
30, 2000 was $43,000.  We recognized a tax expense of $88,000 on the license fee
payment in the six months  ended June 30,  2000 and a tax benefit of $111,000 in
the six months ended June 30, 1999 due to our inclusion in the  consolidated tax
return of FuelCell  from January 1, 1999 through  February 21, 1999. We have not
recorded  the tax benefit of  operating  losses in the six months ended June 30,
2000 or the period from  February  22, 1999  through  June 30, 1999  pursuant to
Financial Accounting Standard No. 109, "Accounting for Income Taxes."

LIQUIDITY AND CAPITAL RESOURCES

         We have funded our  operations  primarily  through cash  generated from
sales of equity.  On May 12, 2000 we concluded a stock  offering of 1.25 million
shares  of our  common  stock  and on May  22,  2000  our  underwriter,  Burnham
Securities Inc., exercised an over-allotment  option of 141,080 shares resulting
in total net proceeds of $15,940,000.

         At June 30, 2000 we had working capital of $14,798,000,  including cash
and cash equivalents of $15,168,000,  compared to working capital of $5,762,000,
including  cash and cash  equivalents  of  $6,117,000  at December 31, 1999.  In
compliance  with the terms of the Newport News,  Virginia  lease signed July 10,
2000 with Oakland  Investors,  L.C., we have  designated a $1,000,000  letter of
credit as a form of rent  security  which will restrict our use of cash and cash
equivalents by the same amount.

         Preferred  stock  dividends  accrued  on the Series A  Preferred  Stock
issued in December  1999 were  $132,000 and $264,000 in the three and six months
ended June 30, 2000, respectively. Dividend payments for the quarter ended March
31, 2000 and the period December 16 to December 31, 1999 totaling  $155,000 were
made on  approximately  April 15, 2000. As part of the December  1999  preferred
offering,  investors and the underwriter,  Burnham  Securities Inc., were issued
warrants to purchase our common stock. If our common stock reaches certain price
levels on or  subsequent  to  December  16,  2000,  we may  choose to redeem the
warrants.  If all the warrants were exercised,  we would receive $5.0 million in
gross proceeds.
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<PAGE>

         Our capital expenditures are incurred primarily to support the expected
commencement of full scale  production.  Capital  expenditures were $877,000 and
$2,367,000 for the three and six month periods ended June 30, 2000.

         We anticipate  that our existing  capital  resources,  including  those
mentioned above,  together with anticipated revenues will be adequate to satisfy
existing  financial  requirements  and  agreements  for at least the next twelve
months.


ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk for changes in interest  rates relates  primarily to
our  investment  portfolio.  The  investment  portfolio  includes  money  market
accounts in U.S.  financial  institutions.  Cash is invested overnight with high
credit quality financial  institutions.  Based on the Company's overall interest
exposure,  including all interest rate sensitive instruments, a near-term change
in interest rate movements would not materially affect the results of operations
or financial position of the Company.

PART II - OTHER INFORMATION

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(A)      EXHIBITS

27 Financial Data Schedule

(B)      REPORTS ON FORM 8-K

None

                                   SIGNATURES

         In accordance with the requirements of the Securities Exchange of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                       EVERCEL, INC.
                                       (Registrant)


                                       By:/s/ Robert L. Kanode
                                          --------------------
Date: August 14, 2000                       Name:  Robert L. Kanode
                                            Title: President and Chief Executive
                                                   Officer



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