SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB

[Mark One]
[X]  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

For the quarterly period ended July 31, 1999

                                       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 small business issuer as specified in its charter)

            Delaware                                  06-1528142
(State or other jurisdiction             (I.R.S. Employer Identification No.)
of incorporation or organization)

2 Lee Mac Avenue, Danbury, Connecticut                   06810
(Address of principal executive offices)              (Zip code)

Issuer's telephone number including area code: (203) 825-3900

--------------------------------------------------------------------------------
(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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.

[X] Yes  [_] No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares  outstanding of the issuer's common stock,  par value $.01,
as of September 10, 1999, 1999, was 2,861,045.

Transitional Small Business Disclosure Format (check one):
[_] Yes  [X] No


<PAGE>

                                  EVERCEL, INC.

                                   FORM 10-QSB

                                      INDEX



PART I - FINANCIAL INFORMATION                                             PAGE


Item 1. Unaudited Condensed Financial Statements:

        Condensed Balance Sheet as of July 31, 1999                            2

        Condensed Statements of Operations for the three
        months ended July 31, 1999 and July 31, 1998                           3

        Condensed Statement of Operations for the nine
        months ended July 31, 1999 and July 31, 1998                           4

        Condensed Statements of Cash Flows for the nine
        months ended July 31, 1999 and July 31, 1998                           5

        Notes to Unaudited Condensed Financial Statements
                                                                               6

Item 2. Management's Discussion and Analysis or Plan of Operation              9

PART II - OTHER INFORMATION

Item 2. Changes in Securities                                                 13
Item 6. Exhibits and Reports on Form 8-K                                      13


        Signatures                                                            14

                                       1


<PAGE>

                                  EVERCEL, INC.
                             CONDENSED BALANCE SHEET
                             (Dollars in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                          July 31,
                                                                            1999
                                                                            ----
                                        ASSETS
<S>                                                                        <C>
CURRENT ASSETS:
Cash and cash equivalents                                                  $ 3,471
  Accounts receivable                                                           23
 Inventories                                                                   243
  Other current assets                                                          28
                                                                           -------
    Total current assets                                                     3,765
                                                                           -------
Property, plant and equipment:
  Cost                                                                       2,760
  Accumulated depreciation                                                     942
                                                                           -------
  Net                                                                        1,818

Other assets, net                                                               48
                                                                           -------

    TOTAL ASSETS                                                           $ 5,631
                                                                           =======

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accrued liabilities                                                      $   409
  Accounts payable                                                              74
                                                                           -------
    Total current liabilities                                                  483

SHAREHOLDERS' EQUITY:
  Common Stock ($.01 par value); 10,000,000
   shares authorized: 2,861,045 issued and
   outstanding at July 31, 1999
                                                                                29
  Additional paid-in capital                                                 7,996
  Note receivable from shareholder                                            (300)
  Accumulated deficit                                                       (2,577)
                                                                           -------

  Total shareholders' equity                                                 5,148
                                                                           -------

  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                               $ 5,631
                                                                           =======
</TABLE>


       See accompanying notes to unaudited condensed financial statements.


                                       2

<PAGE>


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


<TABLE>
<CAPTION>
                                                             Three Months Ended July 31,
                                                             ---------------------------
                                                               1999                 1998
                                                               ----                 ----
<S>                                                         <C>                 <C>
Revenues:

  License fee income                                        $        --         $       201
                                                            -----------         -----------
    Total revenues                                                   --                 201
                                                            -----------         -----------
Cost & expenses:
  Cost of revenues                                                   --                  30
  Depreciation & amortization                                        49                  14
  Administrative and selling expenses                               677                 454
  Research & development                                            629                 427
                                                            -----------         -----------
     Total costs and expenses                                     1,355                 925
                                                            -----------         -----------

    (Loss) from operations before income tax benefit             (1,355)               (724)

Interest income                                                      50                  --
                                                            -----------         -----------

    (Loss) before income tax benefit                             (1,305)               (724)

Income tax (benefit)                                                 --                (246)
                                                            -----------         -----------

     Net (loss)                                             $    (1,305)        $      (478)
                                                            ===========         ===========

     Basic and diluted (loss) per share                     $     (0.46)        $     (0.34)(a)
                                                            ===========         ===========

     Basic and diluted shares outstanding                     2,861,045           1,389,000 (a)
                                                            ===========         ===========
</TABLE>


(a)  Represents   proforma  loss  per  share  on  proforma  shares   outstanding
     reflecting  1,388,856 shares of common stock issued in conjunction with the
     spin-off from Energy  Research  Corporation on February 22, 1999 as if they
     were outstanding as of the beginning of the period presented.


       See accompanying notes to unaudited condensed financial statements.


                                       3

<PAGE>


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




<TABLE>
<CAPTION>
                                                    Nine Months Ended July 31,
                                                    --------------------------
                                                    1999                 1998
                                                    ----                 ----
<S>                                              <C>                 <C>
Revenues:

  Contracts                                      $        --         $         2
  License fee income                                      --                 419
                                                 -----------         -----------

    Total revenues                                        --                 421
                                                 -----------         -----------
Cost & expenses:

  Cost of revenues                                        --                  30
  Depreciation & amortization                             98                  37
  Administrative and selling expenses                  1,637               1,076
  Research & development                               1,759               1,283
                                                 -----------         -----------

                                                       3,494               2,426
                                                 -----------         -----------
    (Loss) from operations before income
     tax (benefit)                                    (3,494)             (2,005)

Interest income                                           70                  --
Interest expense                                         (18)                 --
                                                 -----------         -----------

    (Loss) before income tax benefit                  (3,442)             (2,005)

Income tax (benefit)                                    (360)               (682)
                                                 -----------         -----------

     Net (loss)                                  $    (3,082)        $    (1,323)
                                                 ===========         ===========
     Basic and diluted (loss) per share          $     (1.54)        $     (0.95)(a)
                                                 ===========         ===========

     Basic and diluted shares outstanding          1,998,848           1,389,000 (a)
                                                 ===========         ===========
</TABLE>


(a)  Represents   proforma  loss  per  share  on  proforma  shares   outstanding
     reflecting  1,388,856 shares of common stock issued in conjunction with the
     spin-off from Energy  Research  Corporation on February 22, 1999 as if they
     were outstanding as of the beginning of the period presented.


       See accompanying notes to unaudited condensed financial statements.


                                       4

<PAGE>


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


<TABLE>
<CAPTION>
                                                         Nine Months Ended July 31,
                                                         --------------------------
                                                          1999             1998
                                                          ----             ----
<S>                                                       <C>            <C>
Cash flows from operating activities:
  Net (loss)                                              $(2,577)       (1,323)
    Depreciation and amortization                              87            37
      Changes in operating assets and liabilities:
    Accounts receivable                                        (6)           13
    Inventory                                                (243)           --
    Other current assets                                      (28)           42
     Accounts payable                                          21            30
    Accrued liabilities                                       295            19
    Due to ERC                                                 --           162
     Change in deferred income tax                             17            --
                                                          -------       -------
       Net cash(used in)operating activities               (2,434)       (1,020)
                                                          -------       -------

Cash flows from investing activities:
  Capital expenditures                                     (1,080)         (322)
 Changes in other assets                                     (216)           --
                                                          -------       -------
       Net cash (used in)investing activities              (1,296)         (322)
                                                          -------       -------

Cash flows from financing activities:
 Sale of minority interest in joint venture                    --         3,020
 Contributions from ERC                                        --         1,422

 Repayment on debt                                           (603)           --
 Common stock issued                                        7,803            --
                                                          -------       -------

       Net cash provided by financing activities            7,200         4,442
                                                          -------       -------

       Net increase/(decrease) in cash and
       cash equivalents                                     3,470         3,100

Cash and cash equivalents-beginning of period             $     1       $    --

Cash and cash equivalents-end of period                   $ 3,471       $    --
                                                          =======       =======

Other non cash transactions:
  Net assets transferred from ERC                         $   501       $    --
</TABLE>


       See accompanying notes to unaudited condensed financial statements.

                                       5


<PAGE>


Part I - Financial Information
Item 1. Financial Statements


                                  EVERCEL, INC.
                          NOTES TO UNAUDITED CONDENSED
                              FINANCIAL STATEMENTS


NOTE 1:  GENERAL INFORMATION
----------------------------

Evercel,   Inc.   (the   "Company")   is   engaged   in  the   development   and
commercialization of an innovative,  patented nickel-zinc  rechargeable battery,
as well as the research and design of other advanced battery  technologies.  The
Company  was  recently   spun-off  from  its  former  parent,   Energy  Research
Corporation  ("ERC") by means of a tax free  distribution  (the  "Distribution")
effected on February 22, 1999 to ERC  stockholders  of one share of common stock
of the Company for every three shares of ERC common stock outstanding.  Prior to
the  Distribution,  effective  February 16,  1999,  ERC had  transferred  to the
Company the principal  assets related to its battery  business group and certain
liabilities related to those assets.

Immediately after the Distribution, the Company granted at no cost to holders of
its common  stock as of February  22,  1999,  transferable  subscription  rights
("Rights") to subscribe for and purchase additional shares of the Company common
stock (the "Rights Offering").

In connection with the  Distribution,  1,388,856  shares of Company common stock
were  issued.  On April 5, 1999,  921,915  shares of common  stock  were  issued
pursuant  to the  exercise  of  Rights.  Pursuant  to the  Standby  Underwriting
Agreement entered into in connection with the Rights Offering with Loeb Partners
Corporation  and Burnham  Securities  Inc.,  an additional  466,941  shares were
issued on April 12, 1999.

NOTE 2:  BASIS OF PRESENTATION
------------------------------

The  accompanying  condensed  financial  statements  for the  Company  have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)of
Regulation S-B. In the opinion of management,  all adjustments  (consisting only
of normal  recurring  adjustments)  necessary  to present  fairly the  financial
position of the Company as of July 31,  1999 and the results of  operations  for
the three and nine  months  ended July 31, 1999 and 1998 and cash flows for such
nine month periods have been included.

The Company operates as a separate, publicly held corporation.  The accompanying
financial  statements  are  presented  as  if  the  Company  had  existed  as  a
corporation  separate  from  ERC for  the  periods  presented  and  include  the
historical assets, liabilities,  revenues and expenses that


                                       6

<PAGE>

are directly related to the business that comprise the Company's operations. The
"Company"  refers to  Evercel,  Inc. or the  Battery  Business  Group of ERC, as
appropriate.

For all of fiscal year 1998 and for the period November 1, 1998 through February
22,  1999,  in fiscal year 1999,  certain  general and  administrative  expenses
reflected in the financial  statements include  allocations of certain corporate
expenses from ERC, which took into consideration personnel,  space, estimates of
time spent to provide services, or other appropriate bases.  Management believes
the foregoing  allocations were made on a reasonable basis; however, they do not
necessarily  equal the costs  which  would have been or will be  incurred by the
Company on a stand-alone basis.

The  financial  information  included  herein may not  necessarily  reflect  the
financial  position  and results of  operations  of the Company in the future or
what the financial  position and results of operations of the Company would have
been had it been a separate, stand-alone company for the periods presented.

The results of operations  for the three and nine months ended July 31, 1999 and
1998 are not  necessarily  indicative of the results to be expected for the full
year.

The reader should  supplement the information in this document with  disclosures
in the  Company's  Registration  Statement on Form SB-2 in  connection  with the
Rights Offering (File No. 333-64931) declared effective on February 19, 1999 and
the Company's previous 10-QSB Reports.


NOTE 3: LICENSE AGREEMENTS AND SIGNIFICANT CONTRACTS
----------------------------------------------------

On May 29, 1998,  ERC entered into a  Technology  Transfer and License  Contract
(the "License  Contract")  with Xiamen Three Circles Co.,  Ltd.  ("Xiamen").  In
connection with this transaction,  ERC received $3,000 in payment for granting a
license of its  nickel-zinc  ("Ni-Zn")  batteries to Xiamen.  As required by the
License Contract,  ERC entered into a Joint Venture Contract with Xiamen on July
24, 1998 for the construction of a manufacturing  facility for the production of
Ni-Zn batteries.  As a result, Xiamen Three Circles-ERC Battery Corp., Ltd. (the
"Joint Venture") was formed.  The Joint Venture will  manufacture  batteries for
electric  bicycles,   scooters,   wheel  chairs,  miners  cap  lamps  and  other
applications for sale within the licensed territories.

In accordance with the License Contract requirements, ERC contributed the $3,000
license fee received plus an additional $80 to the Joint Venture in exchange for
a 50.5% ownership interest.

In order for ERC to transfer the Joint  Venture  contract and the Three  Circles
License Agreement to the Company,  ERC must obtain the consent of



                                       7
<PAGE>

Xiamen and the Joint Venture and the approval of the appropriate examination and
approval  authority  of the People's  Republic of China.  ERC has agreed to seek
these  consents and  approvals,  however,  there can be no assurance  that these
consents and approvals will be obtained on a timely basis or at all.

In connection with the Distribution,  ERC and the Company entered into a License
Assistance Agreement pursuant to which the Company will provide all services and
assistance  necessary for the Company to effectively  fulfill, on behalf of ERC,
all of ERC's  obligations  under  the Joint  Venture  Contract  and the  License
Contract,  until such time as ERC obtains the approval for the assignment of the
agreements  to the  Company.  In return  for such  assistance,  ERC will pay the
Company  an  amount  equal  to  the  sum  of  all  money,  dividends,   profits,
reimbursements,  distributions  and payments  actually paid to ERC in cash or in
kind or otherwise accruing to ERC pursuant to the Joint Venture Contract and the
License Contract.  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 ERC shall not be liable for their payment. The Company will account
for its involvement in the Joint Venture under the License Assistance  Agreement
in a manner similar to the equity method of accounting.

In February  1998,  ERC entered  into a license  agreement  (the "NanYa  License
Agreement")  with a joint venture  between NanYa Plastics  Corporation of Taiwan
and Xiamen for the use of the Company's Ni-Zn batteries in electric vehicles 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.
Under the NanYa  License  Agreement,  which was  assigned  by ERC to the Company
pursuant to the Distribution  Agreement,  the joint venture would be required to
pay $2,000 to the Company upon  completion  of certain  conditions,  and a final
payment  of  $1,500  upon  completion  of  duplication  of  the  battery  at its
facilities  in China.  In addition,  the NanYa  License  Agreement  requires the
licensee to pay to the Company  royalties on sales of batteries  during the term
of the Agreement. The NanYa License Agreement provides that the licensor has the
right to invest the final payment in equity in the joint  venture  manufacturing
and sales organization  formed between NanYa Plastics and Xiamen. ERC has agreed
to seek the consent of the other parties to the NanYa  License  Agreement to the
assignment of such agreement to the Company.


NOTE 4: PRO FORMA LOSS PER SHARE
--------------------------------

Represents pro forma shares  outstanding to reflect shares issued in conjunction
with the  Distribution on February 22, 1999 of 1,388,856  shares of common stock
as if they were outstanding as of the beginning of the periods presented.


                                       8
<PAGE>

The computation of diluted loss per share for all periods  presented follows the
basic calculation since common stock equivalents were antidilutive. The weighted
average  number of options  outstanding  for the period  ended July 31, 1999 was
176,655.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
-----------------------------------------------------------------

This Report contains forward looking statements,  including statements regarding
the   Company's   plans  and   expectations   regarding  the   development   and
commercialization of its advanced battery technology.  When used in this Report,
the words "expects",  "plans",  "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 the  Company's  actual  results to differ
materially  from those  projected.  Factors  that could cause such a  difference
include,  without  limitation,  the risk that the  ramp-up of the Xiamen  and/or
Danbury manufacturing facilities will be delayed, the risk that the Company will
not initiate manufacturing or realize commercial sales as currently anticipated,
and  general  risks   associated  with  doing  business  in  China  and  product
development, manufacturing and introduction, 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.

Results of Operations
---------------------

Comparison Three Months Ended July 31, 1999 and July 31, 1998
-------------------------------------------------------------

The Company had no revenues in the current quarter of fiscal 1999 as compared to
$201,000  for the same  period in the last  fiscal  year.  Lower  revenue in the
quarter  resulted from the termination of the Company's  license with Corning in
May 1998.

The Company  had no cost of  revenues  in the current  quarter of fiscal 1999 as
compared to $30,000 for the same period in the last fiscal year.

Administrative  and  selling  expense  increased  49% to $677,000 in the current
quarter of fiscal 1999 from $454,000 in the same period in the last fiscal year.
The   increase   is  the  result  of   increased   staffing   to   support   the
commercialization effort, production and distribution of sales samples and costs
associated with the joint venture and license agreement activities. Depreciation
increased  to  $49,000  from  $14,000 in the same  quarter  of the prior  period
reflecting capital purchases to outfit the Danbury manufacturing facility.




                                       9
<PAGE>

Research and development expense increased 47% to $629,000 in the second quarter
of fiscal 1999 from  $427,000 in the same period in the last fiscal  year.  This
was a result  of  increased  costs  incurred  in  developing  and  refining  the
manufacturing  process for the Company's  nickel-zinc battery in preparation for
the commercialization of the Company's batteries, as compared to the same period
in the last fiscal year.

The  Company has  recorded no tax benefit for its losses in the current  quarter
pursuant  to  the  requirements  of  Financial   Accounting   Standard  No.  109
"Accounting for Income Taxes".

Results of Operations
---------------------

Comparison Nine Months Ended July 31, 1999 and July 31, 1998
------------------------------------------------------------

The  Company had no revenues in the first nine months of fiscal 1999 as compared
to $421,000 for the same period in the last fiscal year.  Lower revenue resulted
from the termination of the Company's license with Corning in May 1998.

The  Company  had no cost of revenues in the first nine months of fiscal 1999 as
compared to $30,000 for the same period in the last fiscal year.

Administrative and selling expense increased 52% to $1,637,000 in the first nine
months of fiscal 1999 from  $1,076,000 in the same period last fiscal year.  The
increase is the result of  increased  staffing to support the  commercialization
effort,  production and  distribution of sales samples and costs associated with
the joint venture and license agreement.  Depreciation increased to $98,000 from
$37,000 in the same period in the last fiscal year reflecting  capital purchases
to outfit the Danbury manufacturing facility.

Research and development  expense  increased 37% to $1,759,000 in the first nine
months of fiscal  1999 from  $1,283,000  in the same  period in the last  fiscal
year. The increase reflects activity  relating to the  commercialization  of the
Company's battery technology.

The Company  recognized a tax benefit of $360,000 in the first quarter of fiscal
1999 due to its inclusion in the consolidated tax return of ERC and has recorded
no benefit  for the losses  incurred  in the second and third  quarter of fiscal
1999,  pursuant to the  requirement  of Financial  Accounting  Standard No. 109,
"Accounting for Income Taxes".


Liquidity and Capital Resources
-------------------------------

Prior to having  received the  proceeds  from the Rights  Offering,  the Company
obtained  all of its  funding  from ERC.  ERC  provided  funding for all battery
research  activities under its research and development  expense budget. ERC has
also historically  provided all of the funding



                                       10
<PAGE>

for capital  expenditures  for the purchase of machinery  and  equipment for all
battery activities.

On January 15,  1999,  the Company  entered  into a lease for five years with an
option to extend for an additional  five years.  The annual rent is $171,000 for
the first three  years and  increases  to $178,000 in year four and  $185,000 in
year  five.  ERC  has  guaranteed  the  performance  of the  lease  (the  "Lease
Guaranty"). In the event of a default by the Company, ERC's liability is limited
to  $500,000   reduced  each   anniversary   date  of  the  lease  by  $100,000.
Notwithstanding  the foregoing,  the Lease Guaranty  terminates  after the first
anniversary of the lease upon the Company's net worth exceeding $3,000,000.

On  February 5, 1999,  the Company  entered  into a Loan  Agreement  and Line of
Credit Note (the "Line of Credit") to borrow up to $3,450,000 (including certain
borrowings  from a Bank)  from ERC for  working  capital  and  proposed  capital
expenditures  to be  secured by all of the  Company's  tangible  and  intangible
personal property. In connection with the completion of the Rights Offering, the
Line of  Credit  terminated  and all  outstanding  borrowings  were paid in full
pursuant to its terms.

The Company has entered into a Services  Agreement  with ERC to provide  certain
management and administrative  services and office, research and development and
manufacturing  support  facilities  and  services  to the  Company.  The Company
estimates that the net fees to be paid to ERC pursuant to the Services Agreement
for services  performed  will be  approximately  $96,000 per quarter,  excluding
certain  services billed on the basis of usage,  such as purchasing,  analytical
lab,  microscope  analysis,  machine shop and drafting,  which amount takes into
account ERC's  additional  costs related to providing  such  services,  and will
decline as the services performed  decrease.  The Company presently expects that
most of such services will be provided by ERC for approximately one year.

The Company  received  $7,873,000  of proceeds from the Rights  Offering  (after
deducting  underwriting  discounts and fees),  including funds received from the
sale of unsubscribed shares to Loeb Partners  Corporation and Burnham Securities
Inc.  pursuant  to a  Standby  Underwriting  Agreement.  Pursuant  to  its  loan
agreements,  the  Company  used a  portion  of the  proceeds  to pay in full the
outstanding  principal and interest on certain notes held by a Bank and the Line
of Credit from ERC. The  principal  amounts paid were  $1,647,000  and $300,000,
respectively.

Working capital at July 31, 1999 was $3,282,000  including $3,471,000 of cash as
compared  to a negative  working  capital  $718,000 at October 31, 1998 and zero
cash.

Under the NanYa License  Agreement,  the Company  expects to receive license fee
income upon the  successful  completion  of two battery  tests



                                       11
<PAGE>

required by that  Agreement.  The  Company  expects to receive a portion of this
license  fee income  during  fiscal  1999 and the  remainder  of the license fee
income in fiscal  year 2000 upon the  duplication  of the  battery and the first
test's  results.  The amount of these  payments is expected to be $2,000,000 and
$1,500,000, respectively.

The Company  believes that the  remaining net proceeds  received from the Rights
Offering,  together with the license  payments  anticipated to be received under
the NanYa  License  Agreement in fiscal 2000,  will be sufficient to support its
planned operations for at least the next twelve months.

The Company's  cash  requirements  will vary depending upon a number of factors,
many of which are beyond the control of the  Company,  including  the demand for
the Company's  products,  the efforts and success of the Company's licensees and
joint venture partners in developing and marketing  products  incorporating  the
Company's  technology,   the  development  of  battery  markets,  the  level  of
competition  faced by the  Company  and the  ability of the  Company to develop,
market and license new products and effectively manage operating  expenses.  The
Company expects to continue to enter into license agreements,  to participate in
joint manufacturing ventures and to expand its battery manufacturing facilities.
The  Company  believes  that it will  require  additional  capital  in  order to
continue these activities.

If and when the Company is required to raise additional  funds,  there can be no
assurance  that the Company will be able to do so on favorable  terms if at all.
Failure of the Company to raise funds required to support its  operations  would
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

Year 2000 Compliance
--------------------

The Year 2000 issue is a computer  programming concern that may adversely affect
the Company's  information  technology systems. The Company believes that it has
taken reasonable  steps to implement a Year 2000 compliance  program designed to
ensure that the  Company's  computer  systems  and  applications  will  function
properly  beyond 1999.  The Company  believes that adequate  resources have been
allocated  for this  purpose.  The Company does not expect to incur  significant
expenditures to address this issue. However,  there can be no assurance that the
Company will identify all Year 2000  problems in advance of their  occurrence or
that the  Company  will be able to  successfully  remedy any  problems  that are
discovered.  The expenses of the Company's efforts to address such problems,  or
the expenses or  liabilities to which the Company may become subject as a result
of  such  problems,  could  have a  material  adverse  effect  on the  Company's
business,  results of  operations  and  financial  condition.  In addition,  the
revenue stream and financial  stability of existing or future  licensees,  joint
venture  partners or customers may be



                                       12
<PAGE>

adversely impacted by Year 2000 problems,  which could cause fluctuations in the
Company's revenues and operating profitability.


PART II - OTHER INFORMATION
Item 2. Changes in Securities.

Use of Proceeds

The  Company's  Registration  Statement  on Form SB-2 (File No.  333-64931)  was
declared effective on February 19, 1999.

From February 19, 1999 through July 31, 1999, the Company incurred approximately
$976,000 in expenses in  connection  with the issuance and  distribution  of the
shares  of  Common  Stock,   including   $459,000  in  underwriting   discounts,
commissions  and fees paid to underwriters  and $517,000 in other expenses.  The
net offering proceeds to the Company after deducting the total expenses itemized
above was  $7,356,921.  As stated  previously the Company has used $1,967,000 of
the net offering proceeds for repayment of indebtedness.  Approximately $744,000
has been used for equipping its new facility and $1,175,000 for working capital.
The remaining  net proceeds are  temporarily  invested in the  Evergreen  Select
Money Market Fund.


PART II - OTHER INFORMATION

Item 6. EXHIBITS AND REPORTS ON FORM 8-K
----------------------------------------

(a)  EXHIBIT DESCRIPTION
------------------------

EXHIBIT NO.
-----------


27   Financial Data Schedule


(b)  REPORTS ON FORM 8-K
------------------------

         None


                                       13
<PAGE>

                                   SIGNATURES
                                   ----------



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


                                               EVERCEL, INC.



                                               /s/ Joseph G. Mahler
                                               --------------------
                                               Joseph G. Mahler
                                               Acting Chief Financial Officer,
                                               Treasurer and Secretary





Dated: September 14, 1999


                                       14