##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Fiscal Year Ended December 31, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 000-31083
(Commission File Number)
 MILLENNIUM CELL INC.
 (Exact Name Of Registrant As Specified In Its Charter)
 Delaware
    
    22-3726792(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification Number)Incorporation or Organization)1 Industrial Way West, Eatontown, New Jersey
    
    07724(Address Of Principal Executive Offices)
    
    (Zip Code)
 (732) 542-4000
(Registrants Telephone Number, Including Area Code)
 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.001 par value per share
 Securities registered pursuant to Section 12(g) of the Act: None
 o þ
 o þ
 þ o
 o
  o o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 Item
    
    Description
    
    PagePART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    8Item 1B.
    
    Unresolved Staff Comments
    
    
    13Item 2.
    
    Properties
    
    
    13Item 3.
    
    Legal Proceedings
    
    
    13Item 4.
    
    Submission of Matters to a Vote of Securities Holders
    
    
    13PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    14Item 6.
    
    Selected Financial Data
    
    
    16Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 7A.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    26Item 8.
    
    Financial Statements and Supplementary Data
    
    
    26Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    26Item 9A.
    
    Controls and Procedures
    
    
    26Item 9B.
    
    Other Information
    
    
    27PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    27Item 11.
    
    Executive Compensation
    
    
    27Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    27Item 13.
    
    Certain Relationships, Related Transactions and Director Independence
    
    
    27Item 14.
    
    Principal Accountant Fees and Services
    
    
    27PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    28Consent of Ernst & Young LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO & CFO Pursuant to Section 906




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MARKET AND INDUSTRY DATA
    FORWARD-LOOKING STATEMENTS




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##### Table of Contents



PART I
 
 Item 1. Business.
 General
  Our Hydrogen Fuel Cartridge Technology
 Hydrogen on
Demand
   Hydrogen on Demand Hydrogen on Demand
 1




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Our Fuel Cell Technology
      Business Strategy
  2
    Table of Contents    Strategic Relationship with The Dow Chemical Company
   Licensees and Development Programs
     3




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Market Opportunity for Our Licensees Products
    Target Markets
   4
    Table of Contents      Fuel Distribution and Infrastructure
   Research and Development
   Intellectual Property Rights
  5




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Competition
     Raw Materials
  6
    Table of Contents    Human Resources
  Available Information
   7




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Item 1A. Risk Factors.
  Risks Relating To Our Business
 We are a development stage company, which has only been in business for a limited time.
  We have incurred substantial losses and expect continued losses for the next 18 to 24 months. There
can be no assurance that we can achieve profitability, and even if we do become profitable, that we
can sustain profitability.
  We may need future capital to complete our product development and commercialization plans. If
we are able to raise additional capital, it may dilute our existing stockholders or restrict our
ability to operate our business.
  We expect our future operating results to vary from quarter to quarter, and increase the likelihood
that we may fail to meet the expectations of securities analysts and investors at any given time.
  We may be subject to litigation resulting from common stock volatility, which may result in
substantial costs and a diversion of our managements attention and resources and could have a
negative effect on our business and results of operations.
  
    
    failure to meet our product development and commercialization milestones,
 8




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
    
    demand for our common stock,
    
    technological innovations by competitors or in competing technologies,
    
    investor perception of our industry or our prospects, or
    
    general technology or economic trends.
  If we or our collaborative partners fail to perform under our joint development and research
agreements, our ability to commercialize our proposed products could be impaired.
  We rely on government funding for certain research and development and technology demonstration
projects.
  Our future plans could be adversely affected if we are unable to attract or retain key personnel.
  If we are unable to continue to complete prototype development and engineering of commercially
viable hydrogen batteries, we will not be able to build our business as anticipated.
  Failure to meet milestones and performance goals with potential customers could delay or impede
commercialization of our technology. Potential purchasers of our systems may decline to purchase
our technology or choose to purchase alternate technologies.
 9
    Table of Contents    Our hydrogen fuel cartridge technology may only be commercially viable as a component of other
companies products, and these companies may choose not to include our systems in their products.
  Any perceived problem while conducting demonstrations of our technology could hurt our reputation
and the reputation of our products, which could impede the development of our business.
  Our failure to obtain, maintain or protect the right to use certain intellectual property may
negatively affect our business.
  
    
    pay substantial damages,
    
    cease the development, manufacture, use, sale or importation of products that
infringe upon other patented intellectual property,
    
    expend significant resources to develop or acquire non-infringing intellectual
property,
    
    discontinue processes incorporating infringing technology, or
    
    obtain licenses to the infringing intellectual property. An adverse outcome
as plaintiff, in addition to the costs involved, may, among other things, result in the
loss of the patent in a suit by a holding of invalidity or unenforceability,
significantly increase competition as a result of the holding, and require the payment
of penalties resulting from counterclaims by the defendant.
  
    
    any of the patents owned by us or other patents that other parties license to
us in the future will not be invalidated, circumvented, challenged, rendered
unenforceable or licensed to others,
    
    any of our pending or future patent applications will be issued with the
breadth of claim coverage sought by us, if issued at all, or
 10




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
    
    any patents owned by or licensed to us, although valid, will not be dominated by a
patent or patents to others having broader claims.In addition, effective patent, trademark, copyright and trade secret protection may be
unavailable, limited or not applied for in certain foreign countries.We also seek to protect our proprietary intellectual property, including intellectual
property that may not be patented or patentable, in part by confidentiality agreements. We
cannot assure you that these agreements will not be breached, that we will have adequate
remedies for any breach or that such persons will not assert rights to intellectual property
arising out of these relationships.
 Any accidents involving our products or the raw materials used in our products could impair their
market acceptance.
  Risks Relating To Our Securities
 If we fail to comply with certain obligations in respect of our convertible securities, we may be
subject to mandatory redemption obligations at the option of certain creditors and preferred
stockholders which, if exercised, could have a material adverse effect on our financial condition
and our business.
  Our outstanding debentures are subject to mandatory prepayments at the option of the holders
thereof upon certain conditions which, if exercised, will have a material adverse effect on our
financial condition and our business.
   We may be required to issue more shares of common stock upon adjustment of the conversion
price of our outstanding preferred stock and unsecured convertible debentures or the exercise price
of our outstanding warrants, resulting in dilution of our existing stockholders.
 11
    Table of Contents    Sales of substantial amounts of common stock in the public market could reduce the market price of
our common stock and make it more difficult for us and our stockholders to sell our equity
securities in the future.
  We do not intend to pay any dividends on our common stock.
  Risks Relating To Our Industry
 A mass market for our products may never develop or may take longer to develop than we anticipate.
  
    
    the acceptance in mass markets of hydrogen as an alternative fuel source,
    
    the cost competitiveness of our hydrogen generation systems,
    
    acceptance of fuel cells as a reliable cost competitive energy source,
    
    the emergence of newer, more competitive technologies and products,
    
    the future cost of sodium borohydride,
    
    regulatory requirements,
    
    consumer perceptions of the safety of our products, and
    
    consumer reluctance to try a new product.
  We will continue to face intense competition from energy technology companies and may be unable to
compete successfully.
  12




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Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
  
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  13




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PART II
 
 Item 5. Market For The Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
 Market Price And Dividend Information
 Price Range of Common Stock
  Common Stock PriceHigh
    
    LowFiscal Year Ending December 31, 2006Fourth quarter
    
    $
    1.23
    
    
    $
    0.87Third quarter
    
    $
    1.51
    
    
    $
    1.00Second quarter
    
    $
    1.88
    
    
    $
    1.38First quarter
    
    $
    1.79
    
    
    $
    1.35Fiscal Year Ending December 31, 2005Fourth quarter
    
    $
    2.07
    
    
    $
    1.31Third quarter
    
    $
    2.57
    
    
    $
    1.48Second quarter
    
    $
    1.99
    
    
    $
    1.33First quarter
    
    $
    2.72
    
    
    $
    0.95
  Dividend Policy
   14




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Performance Graph
  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 
 *
    
    $100 invested on 12/31/01 in stock or index-including reinvestment of dividens. Fiscal year ending December 31.  15




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Item 6. Selected Financial Data.
  Year
    
    
    Year
    
    
    Year
    
    
    Year
    
    
    Year
    
    
    CumulativeEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    AmountsDec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    From2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    InceptionStatement of Operations Data:Revenue
    
    $
    221,910
    
    
    $
    416,902
    
    
    $
    198,474
    
    
    $
    466,859
    
    
    $
    719,392
    
    
    $
    2,023,537Cost of revenue
    
    
    217,802
    
    
    
    382,318
    
    
    
    198,474
    
    
    
    409,449
    
    
    
    690,059
    
    
    
    1,898,102Gross margin
    
    
    4,108
    
    
    
    34,584
    
    
    
    
    
    
    
    57,410
    
    
    
    29,333
    
    
    
    125,435Product development and marketing
    
    
    2,981,931
    
    
    
    3,580,729
    
    
    
    3,396,469
    
    
    
    5,294,419
    
    
    
    5,788,315
    
    
    
    26,555,035General and administrative
    
    
    3,894,577
    
    
    
    5,396,694
    
    
    
    4,262,066
    
    
    
    3,835,873
    
    
    
    4,052,943
    
    
    
    29,507,042Restructuring expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,982
    
    
    
    104,982Non-cash charges
    
    
    3,536,083
    
    
    
    3,519,991
    
    
    
    796,286
    
    
    
    2,164,634
    
    
    
    4,148,251
    
    
    
    32,292,087Depreciation and amortization
    
    
    497,994
    
    
    
    291,649
    
    
    
    516,172
    
    
    
    681,358
    
    
    
    710,975
    
    
    
    3,485,006Research and development
    
    
    902,273
    
    
    
    609,534
    
    
    
    474,609
    
    
    
    1,020,102
    
    
    
    1,515,376
    
    
    
    10,098,529Total operating expenses
    
    
    11,812,858
    
    
    
    13,398,597
    
    
    
    9,445,602
    
    
    
    12,996,386
    
    
    
    16,320,842
    
    
    
    102,042,681Loss from operations
    
    
    (11,808,750
    )
    
    
    (13,364,013
    )
    
    
    (9,445,602
    )
    
    
    (12,938,976
    )
    
    
    (16,291,509
    )
    
    
    (101,917,246
    )Interest income (expense), net
    
    
    (677,661
    )
    
    
    (1,623,118
    )
    
    
    (1,770,102
    )
    
    
    (2,897,077
    )
    
    
    300,299
    
    
    
    (4,751,953
    )Equity in losses of affiliate
    
    
    (334,822
    )
    
    
    
    
    
    
    
    
    
    
    (488,364
    )
    
    
    (367,714
    )
    
    
    (1,190,900
    )Loss before income taxes
    
    
    (12,821,233
    )
    
    
    (14,987,131
    )
    
    
    (11,215,704
    )
    
    
    (16,324,417
    )
    
    
    (16,358,924
    )
    
    
    (107,860,099
    )Benefit from income taxes
    
    
    550,647
    
    
    
    386,692
    
    
    
    410,726
    
    
    
    221,480
    
    
    
    234,963
    
    
    
    1,804,508Net loss
    
    
    (12,270,586
    )
    
    
    (14,600,439
    )
    
    
    (10,804,978
    )
    
    
    (16,102,937
    )
    
    
    (16,123,961
    )
    
    
    (106,055,591
    )Preferred stock amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,150,881
    )Series B dividends
    
    
    (44,384
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,384
    )Net loss applicable to common
stockholders
    
    $
    (12,314,970
    )
    
    $
    (14,600,439
    )
    
    $
    (10,804,978
    )
    
    $
    (16,102,937
    )
    
    $
    (16,123,961
    )
    
    $
    (108,250,856
    )Loss per share  basic and
diluted
    
    $
    (.25
    )
    
    $
    (.34
    )
    
    $
    (.29
    )
    
    $
    (.51
    )
    
    $
    (.58
    )
    
    $
    (3.28
    )
 December 31,
    
    December 31,2006
    
    2005Balance Sheet Data: (1)Total assets
    
    $
    9,866,851
    
    
    $
    15,034,393Redeemable Series C Preferred Stock
    
    $
    4,712,750
    
    
    $
    5,035,416Convertible unsecured debentures
    
    $
    449,988
    
    
    $
    2,399,988Refundable grant obligation
    
    $
    143,132
    
    
    $
    156,329
 
 (1)
    
    The balance sheet data does not reflect $6.0 million of cash that was
received in a financing completed February 16, 2007. 16




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.




General




Overview






Results of Operations


Year Ended December 31, 2006 versus 2005


Revenues




Cost of Revenues.


Product Development and Marketing Expense


General and Administrative Expense


Non-Cash Charges 17




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2006
    
    
    2005Product development expense
    
    $
    2,176,812
    
    
    $
    2,556,423General and administrative expense
    
    
    1,336,731
    
    
    
    920,499Research and development expense
    
    
    22,540
    
    
    
    43,069Total
    
    $
    3,536,083
    
    
    $
    3,519,991


Depreciation and Amortization


Research and Development Expense


Interest Expense




2006
    
    
    2005Beneficial conversion feature (BCF)
    
    $
    0.1
    
    
    $
    0.2Amortization of debt discount
    
    
    0.2
    
    
    
    0.9Amortization of debt issue costs
    
    
    0.1
    
    
    
    0.4Other interest, net
    
    
    0.3
    
    
    
    0.1Total Interest Expense
    
    $
    0.7
    
    
    $
    1.6




Benefit from Income Taxes


Results of Operations


Year Ended December 31, 2005 versus 2004


Revenues


18



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Cost of Revenues.
 Product Development and Marketing Expense
 General and Administrative Expense
 Non-Cash Charges
  2005
    
    
    2004Product development expense
    
    $
    2,556,423
    
    
    $
    100,738General and administrative expense
    
    
    920,499
    
    
    
    673,100Research and development expense
    
    
    43,069
    
    
    
    22,448Total
    
    $
    3,519,991
    
    
    $
    796,286
 Depreciation and Amortization
 Research and Development Expense
 Interest Expense
 19




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2005
    
    
    2004Beneficial conversion feature (BCF)
    
    $
    0.2
    
    
    $
    0.5Amortization of debt discount
    
    
    0.9
    
    
    
    0.8Amortization of debt issue costs
    
    
    0.4
    
    
    
    0.4Other interest, net
    
    
    0.1
    
    
    
    0.1Total Interest Expense
    
    $
    1.6
    
    
    $
    1.8
 Benefit from Income Taxes
 Liquidity and Capital Resources
 General
   Convertible Debentures
  Series C Preferred Stock
  20




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Series A and Series B Preferred Stock








21




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Gecko












Cash
    
    $
    79,461Plant and equipment
    
    
    58,999Intangibles
    
    
    2,705,136Total assets acquired
    
    
    2,843,596Less: Current liabilities assumed
    
    
    189,418Net assets acquired
    
    $
    2,654,178


Convertible Debentures




22



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Sources and Uses of Cash
   Off-Balance Sheet Arrangements
  Commitments and Contingencies
    23




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Payment due in fiscal yearsContractualObligationsTotal
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011Operating lease  Facility
    
    $
    928,260
    
    
    $
    484,310
    
    
    $
    443,950
    
    
    $
    
    
    
    $
    
    
    
    $
    Refundable grant obligation
    
    
    156,329
    
    
    
    13,197
    
    
    
    
    
    
    
    
    
    
    
    143,132
    
    
    
    Redeemable Series C Preferred Stock (1)
    
    
    4,712,750
    
    
    
    2,356,375
    
    
    
    2,356,375
    
    
    
    
    
    
    
    
    
    
    
    Convertible unsecured debentures (1)
    
    
    449,988
    
    
    
    449,988
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2007 Debentures (1)
    
    
    6,000,000
    
    
    
    
    
    
    
    
    
    
    
    6,000,000
    
    
    
    
    
    
    
    Total
    
    $
    12,247,327
    
    
    $
    3,303,870
    
    
    $
    2,800,325
    
    
    $
    6,000,000
    
    
    $
    143,132
    
    
    $
    





|    |  |                                                                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Redeemable Series C Preferred Stock, convertible unsecured debentures and
2007 Debentures are convertible into common stock or can be satisfied with cash.



Critical Accounting Policies


Application of Critical Accounting Policies








Revenue Recognition




Convertible Debt


24




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Stock Based Compensation


Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees


Share-Based Payments Statement of Cash Flows








2006
    
    2005
    
    2004Expected stock price volatility
    
    
    .80
    
    
    
    .89
    
    
    
    .57Risk free interest rate(s)
    
    
    4.89
    %
    
    
    4.45
    %
    
    
    3.48
    %Expected life of options (years)
    
    
    10.0
    
    
    
    5.0
    
    
    
    5.0




25




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Impact of Recently Issued Accounting Standards
   
 Item 7a. Quantitative and Qualitative Disclosure of Market Risk.
   
 Item 8. Financial Statements and Supplementary Data.
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
   26




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Item 9B. Other Information.
  
 Item 10. Directors, Executive Officers and Corporate Governance.
  
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14. Principal Accountant Fees & Services.
  27




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PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
        ExhibitNo.
    
    
    
    Description2.1
    
    
    
    Certificate of Conversion of Millennium Cell LLC to Millennium Cell Inc. (incorporated by reference to
the Registration Statement filed on Form S-1, Registration No. 333-37896)2.2
    
    
    
    Agreement and Plan of Merger dated December 29, 2006, by and among Millennium Cell Inc.,
M.C.E. Venture, LLC, Gecko Energy Technologies, Inc., Ronald J. Kelley and Steven D. Pratt
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on January 8, 2007).3.1
    
    
    
    Certificate of Incorporation of Millennium Cell Inc. (incorporated by reference to the Registration
Statement filed on Form S-1, Registration No. 333-37896)3.2
    
    
    
    By-Laws of Millennium Cell Inc. (incorporated by reference to the Registration Statement filed on Form
S-1, Registration No. 333-37896)3.3
    
    
    
    Certificate of Amendment to Certificate of Incorporation of Millennium Cell Inc. (incorporated by
reference to the Registration Statement filed on Form S-1, Registration No. 333-37896)3.4
    
    
    
    Certificate Eliminating Reference to the Series A Convertible Preferred Stock from the Certificate of
Incorporation of Millennium Cell Inc. (incorporated by reference to Exhibit 3.4 to the Quarterly
Report on Form 10-Q filed on May 13, 2002)3.5
    
    
    
    Certificate of Amendment of Certificate of Incorporation of Millennium Cell Inc. (incorporated by
reference to Exhibit 3.5 to the Quarterly Report on Form 10-Q filed on May 13, 2002)3.6
    
    
    
    Designations of Preferences, Limitations, and Relative Rights of Series A Convertible Preferred Stock
(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on April 26, 2005
(first filing))3.7
    
    
    
    Designations of Preferences, Limitations, and Relative Rights of Series B Convertible Preferred Stock
(incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on April 26, 2005
(first filing))3.8
    
    
    
    Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock
(incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on April 26, 2005
(second filing))
 28




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##### Table of Contents



ExhibitNo.
    
    
    
    Description3.9
    
    
    
    Designations of Preferences, Limitations, and Relative Rights of Series A2 Convertible Preferred Stock
(incorporated by reference to Exhibit 3.9 to Registration Statement No. 333-126418 on Form S-3 filed
on July 6, 2005)3.10
    
    
    
    Certificate of Amendment to the Designations of Preferences, Limitations, and Relative Rights of
Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.10 to Registration
Statement No. 333-126418 on Form S-3 filed on July 6, 2005)3.11
    
    
    
    Certificate of Designations, Preferences and Rights of Series C2 Convertible Preferred Stock
(incorporated by reference to Exhibit 3.11 to Registration Statement No. 333-126418 on Form S-3 filed
on July 6, 2005)3.12
    
    
    
    Certificate Eliminating Reference to the Series A Convertible Preferred Stock from the Certificate of
Incorporation of Millennium Cell Inc. (incorporated by reference to Exhibit 3.12 to the Annual Report
on Form 10-K filed on March 29, 2006)3.13
    
    
    
    Certificate Eliminating Reference to the Series C Convertible Preferred Stock from the Certificate of
Incorporation of Millennium Cell Inc. (incorporated by reference to Exhibit 3.13 to the Annual Report
on Form 10-K filed on March 29, 2006)3.14*
    
    
    
    Certificate of Amendment to the Certificate of Incorporation of Millennium Cell Inc. dated May 9, 2006.3.15
    
    
    
    Certificate of Correction to the Designations of Preferences, Limitations, and Relative Rights of
Series A2 Convertible Preferred Stock dated July 25, 2006 (incorporated by reference to Exhibit 3.1 to
the Current Report on Form 8-K filed on July 25, 2006).4.1
    
    
    
    Specimen stock certificate representing the Registrants Common Stock (incorporated by reference to
the Registration Statement filed on Form S-1, Registration No. 333-37896)4.2
    
    
    
    First Warrant to Purchase 224,014 shares of Common stock dated June 19, 2002 (incorporated by
reference to Exhibit 4.5 to the Current Report on Form 8-K filed on June 26, 2002)4.3
    
    
    
    First Warrant to Purchase 44,803 shares of Common Stock dated June 19, 2002 (incorporated by reference
to Exhibit 4.6 to the Current Report on Form 8-K filed on June 26, 2002)4.4
    
    
    
    Closing Warrant No. 1 to purchase 73,599 shares of Common Stock dated October 31, 2002 (incorporated
by reference to Exhibit 4.7.1 to the Annual Report on Form 10-K filed on March 17, 2003)4.5
    
    
    
    Closing Warrant No. 2 to purchase 73,599 shares of Common Stock dated October 31, 2002 (incorporated
by reference to Exhibit 4.7.2 to the Annual Report on Form 10-K filed on March 17, 2003)4.6
    
    
    
    First Warrant to purchase 242,678 shares of Common Stock dated December 26, 2002 (incorporated by
reference to Exhibit 4.8 to the Annual Report on Form 10-K filed on March 17, 2003)4.7
    
    
    
    Form of Warrant issuable to The Dow Chemical Company (incorporated by reference to Exhibit 10.7 to the
Current Report on Form 8-K filed on February 28, 2005)4.8
    
    
    
    Form of Warrant to Purchase Common Stock dated April 25, 2005 (incorporated by reference to Exhibit
10.2 to the Current Report on Form 8-K filed on April 26, 2005 (second filing))4.9
    
    
    
    Warrant to purchase 178,571 shares of Common Stock dated May 30, 2006 (incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K filed on May 30, 2006)4.10
    
    
    
    Form of Convertible Debenture Due on September 30, 2007 (incorporated by reference to Exhibit 4.1 to
the Current Report on Form 8-K filed on November 14, 2005)4.11
    
    
    
    Warrant to purchase 195,000 shares of Common Stock dated April 25, 2005 (incorporated by reference to
Exhibit 4.10 to the Current Report on Form 10-K filed on March 29, 2006)
 29




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##### Table of Contents



ExhibitNo.
    
    
    
    Description4.12
    
    
    
    Form of Warrant to Purchase Common Stock dated February 16, 2007 (incorporated by reference to Exhibit
4.2 to the Report on Form 8-K filed on February 16, 2007).4.13
    
    
    
    Form of Convertible Debenture Due on February 16, 2009 (incorporated by reference to Exhibit 4.1 to
the Current Report on Form 8-K filed on February 16, 2007).10.1
    
    
    
    Agreement for Recoverable Grant Award, dated as of April 1999, by and between State of New Jersey
Commission on Science and Technology and Millennium Cell LLC (incorporated by reference to Exhibit the
Registration Statement filed on Form S-1, Registration No. 333-37896)10.2
    
    
    
    Amended and Restated Millennium Cell Inc. 2000 Stock Option Plan, Amended effective December 1, 2001
(incorporated by reference to Exhibit 10.6 to the Annual Report on Form 10-K filed on March 25, 2002)10.3
    
    
    
    Securities Purchase Agreement dated as of June 19, 2002 between the Company and the Purchasers
(incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed on June 26, 2002)10.4
    
    
    
    Registration Rights Agreement dated as of June 19, 2002 between the Company and the Purchasers
(incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K filed on June 26, 2002)10.5
    
    
    
    Securities Purchase Agreement dated as of October 31, 2002 among the Company and the Purchasers named
therein (incorporated by reference to Exhibit 10.16 to Registration Statement No. 333-101061 on Form
S-3 filed on November 7, 2002)10.6
    
    
    
    Registration Rights Agreement dated as of October 31, 2002 among the Company and the Purchasers named
therein (incorporated by reference to Exhibit 10.17 to Registration Statement No. 333-101061 on Form
S-3 filed on November 7, 2002)10.7
    
    
    
    Securities Purchase Agreement dated as of November 8, 2002 Company and Ballard Power Systems, Inc.
(incorporated by reference to Exhibit 10.19 to the Quarterly Report on Form 10-Q filed on November 14,
2002)10.8
    
    
    
    Registration Rights Agreement dated as of November 8, 2002 between the Company and Ballard Power
Systems, Inc. (incorporated by reference to Exhibit 10.20 to the Quarterly Report on Form 10-Q filed
on November 14, 2002)10.9
    
    
    
    Change-in-Control Agreement between the Company and Adam Briggs dated as of July 28, 2004 and Schedule
of Other Change-in-Control Agreements. (incorporated by reference to Exhibit 10.9 to the Annual Report
on Form 10-K filed on March 29, 2006)10.10
    
    
    
    Securities Purchase Agreement dated as of January 16, 2004 between the Company and the purchaser named
therein. (incorporated by reference to Exhibit 10.24 to Registration Statement No. 333-112519 on Form
S-3 filed on February 5, 2004)10.11
    
    
    
    Registration Rights Agreement dated as of January 16, 2004 between the Company and the purchaser named
therein. (incorporated by reference to Exhibit 10.25 to Registration Statement No. 333-112519 on Form
S-3 filed on February 5, 2004)10.12
    
    
    
    Employment Agreement, dated as of July 20, 2004, by and between Millennium Cell Inc. and H. David
Ramm. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 28,
2004)10.13
    
    
    
    Restricted Stock Grant Agreement, dated as of July 20, 2004, by and between Millennium Cell Inc. and
H. David Ramm. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on
July 28, 2004)10.14
    
    
    
    Agreement, dated as of July 20, 2004, by and between Millennium Cell Inc. and DKRW Energy LLC.
(incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on July 28, 2004)
 30




---



##### Table of Contents



ExhibitNo.
    
    
    
    Description10.15
    
    
    
    Employment Agreement, dated as of August 12, 2005, by and between Millennium Cell Inc. and H. David
Ramm. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 12,
2005)10.16
    
    
    
    Restricted Stock Grant Agreement, dated as of August 12, 2005, by and between Millennium Cell Inc. and
H. David Ramm. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on
August 12, 2005)10.17
    
    
    
    Agreement, dated as of August 12, 2005, by and between Millennium Cell Inc. and DKRW Energy LLC.
(incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on August 12, 2005)10.18
    
    
    
    Stock Purchase Agreement, dated February 28, 2005, by and between Millennium Cell Inc. and The Dow
Chemical Company (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on
February 28, 2005)10.19
    
    
    
    Amendment No. 1, dated as April 25, 2005, to Stock Purchase Agreement by and between Millennium Cell
Inc. and The Dow Chemical Company (incorporated by reference to Exhibit 10.9 to the Current Report on
Form 8-K filed on April 26, 2005 (first filing))10.20
    
    
    
    Registration Rights Agreement, dated as April 25, 2005, by and between Millennium Cell Inc. and The
Dow Chemical Company (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K
filed on April 26, 2005 (first filing))10.21
    
    
    
    Investor Rights Agreement, dated April 25, 2005, by and between Millennium Cell Inc. and The Dow
Chemical Company (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on
February 28, 2005)10.22
    
    
    
    Securities Purchase Agreement, dated April 20, 2005, by and among Millennium Cell Inc. and the
investors listed on the Schedule of Buyers attached thereto (incorporated by reference to Exhibit 10.1
to the Current Report on Form 8-K filed on April 26, 2005 (second filing))10.23
    
    
    
    Registration Rights Agreement, dated April 20, 2005, by and among Millennium Cell Inc. and the
investors listed on the Schedule of Buyers attached thereto (incorporated by reference to Exhibit 10.3
to the Current Report on Form 8-K filed on April 26, 2005 (second filing))10.24
    
    
    
    Form of Voting Agreement, dated April 25, 2005, by and among Millennium Cell Inc. and the stockholders
name therein (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on
April 26, 2005 (second filing))10.25
    
    
    
    Security Agreement, dated April 25, 2005, by Millennium Cell Inc. in favor of Portside Growth &
Opportunity Fund, as collateral agent for the Buyers (incorporated by reference to Exhibit 10.4 to the
Current Report on Form 8-K filed on April 26, 2005 (second filing))10.26
    
    
    
    Account Control Agreement, dated April 25, 2005, by and among Millennium Cell Inc., Portside Growth &
Opportunity Fund, as agent for the Buyers, and Wachovia Bank, National Association (incorporated by
reference to Exhibit 10.5 to the Current Report on Form 8-K filed on April 26, 2005 (second filing))10.27
    
    
    
    Joint Development Agreement, dated February 15, 2006, by and between Millennium Cell Inc. and Gecko
Energy Technologies, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K
filed on February 15, 2006)10.28
    
    
    
    Stock Purchase Agreement, dated as of February 15, 2006, by and between Millennium Cell Inc., and
Gecko Energy Technologies, Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K filed on February 15, 2006)10.29
    
    
    
    Stockholders Agreement, dated as of February 15, 2006, by and among Millennium Cell Inc., Gecko Energy
Technologies, Inc., Ronald J. Kelley, and Steven D. Pratt (incorporated by reference to Exhibit 10.3
to the Current Report on Form 8-K filed on February 15, 2006)10.30
    
    
    
    Amendment No. 2, dated as of May 30, 2006, to Stock Purchase Agreement by and between Millennium Cell
Inc. and The Dow Chemical Company (incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K filed on May 30, 2006)
 31




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##### Table of Contents



ExhibitNo.
    
    
    
    Description10.31
    
    
    
    Amendment No. 1, dated as of May 30, 2006, to the Joint Development Agreement between Millennium Cell
Inc. and The Dow Chemical Company (incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K filed on May 30, 2006)10.32
    
    
    
    Employment Agreement, dated as of June 22, 2006, between Millennium Cell Inc. and H. David Ramm
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 22, 2006)10.33
    
    
    
    Restricted Stock Grant Agreement, dated as of June 22, 2006, between Millennium Cell Inc. and H. David
Ramm (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 22,
2006)10.34
    
    
    
    Form of Change in Control Agreement of Millennium Cell Inc., dated as of September 25, 2006
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 29,
2006)10.35
    
    
    
    Amendment to Unsecured Convertible Debentures of Millennium Cell Inc., dated as of March 16, 2007,
between Millennium Cell Inc. and the Majority Holders, (incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K/A filed on March 19, 2007)10.36
    
    
    
    Securities Purchase Agreement dated February 15, 2007, among Millennium Cell Inc. and the
investors listed on the Schedule of Buyers attached thereto (incorporated by reference to Exhibit 10.1
to the Current Report on Form 8-K filed on February 16, 2007).10.37
    
    
    
    Registration Rights Agreement dated February 15, 2007 among Millennium Cell Inc. and the investors
listed on the Schedule of Buyers attached thereto (incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K filed on February 16, 2007).10.38
    
    
    
    Voting Agreement dated February 15, 2007 by and among Millennium Cell Inc. and the stockholders
signatory thereto (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed
on February 16, 2007).10.39
    
    
    
    Employment Agreement between Ronald J. Kelley and Gecko Energy Technologies, LLC, dated December 29,
2006 (incorporated by reference to the Current Report on Form 8-K filed on January 8, 2007).10.40
    
    
    
    Employment Agreement between Ronald J. Kelley and Gecko Energy Technologies, LLC, dated December 29,
2006 (incorporated by reference to the Current Report on Form 8-K filed on January 8, 2007).10.41
    
    
    
    IP Assignment Agreement dated December 29, 2006, by Gecko Energy Technologies, Inc., Ronald J. Kelly
and Steven D. Pratt in favor of M.C.E. Venture, L.L.C. (incorporated by reference to the Current
Report on Form 8-K filed on January 8, 2007).10.42
    
    
    
    Target Termination Agreement dated December 29, 2006, by and among Millennium Cell Inc., Ronald J.
Kelley and Steven D. Pratt (incorporated by reference to the Current Report on Form 8-K filed on
January 8, 2007).10.43
    
    
    
    Consulting Termination Agreement dated December 29, 2006, by and among Millennium Cell Inc., Ronald J.
Kelley and Steven D. Pratt (incorporated by reference to the Current Report on Form 8-K filed on
January 8, 2007).23.1*
    
    
    
    Consent of Ernst & Young.31.1*
    
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.31.2*
    
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 200232.1*
    
    
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of
Sarbanes-Oxley Act of 2002
 
 
    
    Previously filed.*
    
    Filed herewith. 32




---



##### Table of Contents



Date Filed orFurnished
    
    Item No.
    
    DescriptionOctober 30, 2006
    
    Item 2.02
    
    Millennium Cell Inc.
issued a press release
to report its
financial results for
the quarter ending,
September 30, 2006.December 15, 2006
    
    Item 5.02, Item 7.01
    
    Resignation of Richard
L. Sandor as a
director and the
election of L.J.
Evans, Jr. as a
director; Regulation
FD disclosure in
connection with a
potential private
placement of
convertible
debentures.
 33




---



##### Table of Contents



MILLENNIUM CELL INC.By:
    /s/ H. DAVID RAMMH. David RammChief Executive Officer   Signature
    
    Title
    
    Date/s/ H. DAVID RAMM
    
    Chief Executive Officer and Director (PrincipalExecutive Officer)
    
    March 30, 2007H. David Ramm/s/ JOHN D. GIOLLI

John D. Giolli
    
    Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
    
    March 30, 2007/s/ G. CHRIS ANDERSEN
    
    Director
    
    March 30, 2007G. Chris Andersen/s/ KENNETH R. BAKER
    
    Director
    
    March 30, 2007Kenneth R. Baker/s/ ALEXANDER MACLACHLAN
    
    Director
    
    March 30, 2007Alexander MacLachlan/s/ PETER A. MCGUIGAN

Peter A. McGuigan
    
    Director
    
    March 30, 2007/s/ ZOLTAN MERSZEI
    
    Director
    
    March 30, 2007Zoltan Merszei/s/ JAMES L. RAWLINGS
    
    Director
    
    March 30, 2007James L. Rawlings/s/ HIDEO ITO
    
    Director
    
    March 30, 2007Hideo Ito/s/ L.J. EVANS
    
    Director
    
    March 30, 2007L.J. Evans
 34




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##### Table of Contents



PageReport of Independent Auditors
    
    
    F-2Balance Sheet as of December 31, 2006 and 2005
    
    
    F-3Statement of Operations for the fiscal years ended December 31, 2006, 2005 and 2004 and
cumulative amounts from inception
    
    
    F-4Statement of Stockholders Equity for the period from December 31, 2003 to December 31, 2006
    
    
    F-5Statement of Cash Flows for the fiscal years ended December 31, 2006, 2005 and 2004 and
cumulative amounts from inception
    
    
    F-7Notes to Financial Statements
    
    
    F-8
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 F-2




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    December 31,2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,358,040
    
    
    $
    11,675,877Restricted cash
    
    
    174,045
    
    
    
    373,868Accounts receivable  trade
    
    
    75,000
    
    
    
    36,808Accounts receivable  government
    
    
    523,878
    
    
    
    112,462Prepaid expenses
    
    
    133,992
    
    
    
    237,867Deferred financing costs
    
    
    92,532
    
    
    
    102,270Total current assets
    
    
    5,357,487
    
    
    
    12,539,152Property and equipment, net
    
    
    307,257
    
    
    
    450,138Intangibles, net
    
    
    3,280,257
    
    
    
    654,876Restricted cash
    
    
    846,767
    
    
    
    1,208,191Deferred financing costs
    
    
    29,407
    
    
    
    136,360Security deposits
    
    
    45,676
    
    
    
    45,676$
    9,866,851
    
    
    $
    15,034,393Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    352,480
    
    
    $
    521,615Accrued expenses
    
    
    1,016,198
    
    
    
    893,868Short-term portion of capital lease obligation
    
    
    
    
    
    
    6,173Short-term portion of refundable grant obligation
    
    
    13,197
    
    
    
    49,611Deferred compensation
    
    
    116,273
    
    
    
    101,050Convertible unsecured debentures
    
    
    449,988
    
    
    
    2,399,988Short-term portion of redeemable Series C preferred stock, net of discount
    
    
    2,356,375
    
    
    
    Deferred revenue
    
    
    113,153
    
    
    
    Total current liabilities
    
    
    4,417,664
    
    
    
    3,972,305Redeemable Series C preferred stock, net of discount
    
    
    2,356,375
    
    
    
    5,035,416Refundable grant obligation
    
    
    143,132
    
    
    
    156,329Commitments and contingenciesStockholders equity:Series A preferred stock, $.001 par value; 1,694,724 authorized shares,
293,874 and 155,724 issued and outstanding as of December 31, 2006 and 2005,
respectively
    
    
    4,527,417
    
    
    
    2,413,722Series B preferred stock, $.001 par value; 1,539,000 authorized shares,
71,429 issued and outstanding as of December 31, 2006
    
    
    1,090,773
    
    
    
    Common stock, $.001 par value; authorized 120,000,000 shares and
51,401,215 and 46,454,375 shares issued and outstanding as of December 31,
2006 and 2005, respectively
    
    
    51,401
    
    
    
    46,454Additional paid-in capital
    
    
    105,486,561
    
    
    
    99,942,349Deferred compensation
    
    
    
    
    
    
    (596,296
    )Deficit accumulated during development stage
    
    
    (108,206,472
    )
    
    
    (95,935,886
    )Total stockholders equity
    
    
    2,949,680
    
    
    
    5,870,343$
    9,866,851
    
    
    $
    15,034,393
  F-3




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year
    
    
    Year
    
    
    Year
    
    
    CumulativeEnded
    
    
    Ended
    
    
    Ended
    
    
    AmountsDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    From2006
    
    
    2005
    
    
    2004
    
    
    InceptionRevenue
    
    $
    221,910
    
    
    $
    416,902
    
    
    $
    198,474
    
    
    $
    2,023,537Cost of revenue
    
    
    217,802
    
    
    
    382,318
    
    
    
    198,474
    
    
    
    1,898,102Gross margin
    
    
    4,108
    
    
    
    34,584
    
    
    
    
    
    
    
    125,435Product development and marketing
    
    
    2,981,931
    
    
    
    3,580,729
    
    
    
    3,396,469
    
    
    
    26,555,035General and administrative
    
    
    3,894,577
    
    
    
    5,396,694
    
    
    
    4,262,066
    
    
    
    29,507,042Restructuring expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,982Non-cash charges
    
    
    3,536,083
    
    
    
    3,519,991
    
    
    
    796,286
    
    
    
    32,292,087Depreciation and amortization
    
    
    497,994
    
    
    
    291,649
    
    
    
    516,172
    
    
    
    3,485,006Research and development
    
    
    902,273
    
    
    
    609,534
    
    
    
    474,609
    
    
    
    10,098,529Total operating expenses
    
    
    11,812,858
    
    
    
    13,398,597
    
    
    
    9,445,602
    
    
    
    102,042,681Loss from operations
    
    
    (11,808,750
    )
    
    
    (13,364,013
    )
    
    
    (9,445,602
    )
    
    
    (101,917,246
    )Interest expense, net
    
    
    (677,661
    )
    
    
    (1,623,118
    )
    
    
    (1,770,102
    )
    
    
    (4,751,953
    )Equity in losses of affiliates
    
    
    (334,822
    )
    
    
    
    
    
    
    
    
    
    
    (1,190,900
    )Loss before income taxes
    
    
    (12,821,233
    )
    
    
    (14,987,131
    )
    
    
    (11,215,704
    )
    
    
    (107,860,099
    )Benefit from income taxes
    
    
    550,647
    
    
    
    386,692
    
    
    
    410,726
    
    
    
    1,804,508Net loss
    
    
    (12,270,586
    )
    
    
    (14,600,439
    )
    
    
    (10,804,978
    )
    
    
    (106,055,591
    )Preferred stock amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,150,881
    )Series B dividends
    
    
    (44,384
    )
    
    
    
    
    
    
    
    
    
    
    (44,384
    )Net loss applicable to common stockholders
    
    $
    (12,314,970
    )
    
    $
    (14,600,439
    )
    
    $
    (10,804,978
    )
    
    $
    (108,250,856
    )Loss per share  basic and diluted
    
    $
    (.25
    )
    
    $
    (.34
    )
    
    $
    (.29
    )
    
    $
    (3.28
    )Weighted  average number of shares outstanding
    
    
    49,295,487
    
    
    
    43,405,306
    
    
    
    37,226,377
    
    
    
    33,023,564
  F-4




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Deferred
    
    
    Series A
    
    
    Series B
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Preferred
    
    
    Preferred
    
    
    Deficit
    
    
    EquityBalance at December 31,
2003
    
    
    35,029,052
    
    
    
    35,029
    
    
    
    77,784,952
    
    
    
    (358,427
    )
    
    
    
    
    
    
    
    
    
    
    (70,530,469
    )
    
    
    6,931,085Issuance of common stock
in private placement
transactions
    
    
    3,162,034
    
    
    
    3,162
    
    
    
    5,296,839
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,300,001Beneficial conversion
feature on private
placement transactions
    
    
    
    
    
    
    
    
    
    
    497,757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    497,757Issuance of stock for
deferred financing costs
    
    
    377,846
    
    
    
    378
    
    
    
    813,445
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    813,823Issuance of common stock
from exercise of options
    
    
    115,532
    
    
    
    115
    
    
    
    345,208
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    345,323Common stock under
deferred compensation
plan
    
    
    
    
    
    
    
    
    
    
    (27,216
    )
    
    
    169,622
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,406Issuance of stock for
interest payments
    
    
    90,671
    
    
    
    91
    
    
    
    142,426
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,517
    )Issuance of common stock
to Board of Directors
    
    
    126,817
    
    
    
    127
    
    
    
    226,751
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    226,878Issuance of stock for
merit program
    
    
    51,800
    
    
    
    52
    
    
    
    130,996
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,048Issuance of stock for
executive compensation
    
    
    100,000
    
    
    
    100
    
    
    
    199,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,000Issuance of common stock
for 401(k)
    
    
    60,211
    
    
    
    60
    
    
    
    103,712
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103,772Non-cash compensation
charges for issuance of
stock options
    
    
    
    
    
    
    
    
    
    
    148,709
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,709Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,804,978
    )
    
    
    (10,804,978
    )Balance at December 31,
2004
    
    
    39,113,963
    
    
    $
    39,114
    
    
    $
    85,663,479
    
    
    $
    (188,805
    )
    
    $
    
    
    
    
    
    
    
    
    (81,335,447
    )
    
    $
    4,178,341Issuance of common stock
in private placement
transactions
    
    
    5,625,205
    
    
    
    5,625
    
    
    
    9,918,373
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,923,998Beneficial conversion
feature on private
placement transactions
    
    
    
    
    
    
    
    
    
    
    168,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168,000Issuance of stock for
deferred financing costs
    
    
    52,477
    
    
    
    53
    
    
    
    62,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,500Issuance of common stock
from exercise of options
    
    
    120,288
    
    
    
    120
    
    
    
    288,571
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    288,691Common stock under
deferred compensation
plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,181
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,181Issuance of stock for
interest payments
    
    
    178,829
    
    
    
    179
    
    
    
    297,215
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    297,394Issuance of common stock
to Board of Directors
    
    
    138,485
    
    
    
    138
    
    
    
    219,148
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219,286Issuance of stock for
warrants
    
    
    589,376
    
    
    
    589
    
    
    
    883,475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    884,064Issuance of stock for
executive compensation
    
    
    50,000
    
    
    
    50
    
    
    
    85,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,500Issuance of common stock
for 401(k)
    
    
    110,952
    
    
    
    111
    
    
    
    163,920
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164,031Issuance of restricted
stock for merit awards
    
    
    474,800
    
    
    
    475
    
    
    
    1,044,085
    
    
    
    (1,044,560
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 F-5




---



##### Table of Contents



Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Deferred
    
    
    Series A
    
    
    Series B
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Preferred
    
    
    Preferred
    
    
    Deficit
    
    
    EquityVesting of restricted
stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    417,824
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    417,824Amortization of
restricted stock awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,347Warrants issued in
connection with Series C
preferred stock
    
    
    
    
    
    
    
    
    
    
    1,021,928
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,021,928Issuance of Series A
preferred stock, 155,724
shares issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,413,722
    
    
    
    
    
    
    
    
    
    
    
    2,413,722Deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,283
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,283Non-cash compensation
charges for issuance of
stock options
    
    
    
    
    
    
    
    
    
    
    126,258
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    126,258Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,600,439
    )
    
    
    (14,600,439Balance at December 31,
2005
    
    
    46,454,375
    
    
    $
    46,454
    
    
    $
    99,942,349
    
    
    $
    (596,296
    )
    
    $
    2,413,722
    
    
    $
    
    
    
    
    (95,935,886
    )
    
    $
    5,870,343
  F-6




---



##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(continued)
 Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Deferred
    
    
    Series A
    
    
    Series B
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Preferred
    
    
    Preferred
    
    
    Deficit
    
    
    EquityBalance at December 31, 2005
    
    
    46,454,375
    
    
    $
    46,454
    
    
    $
    99,942,349
    
    
    
    (596,296
    )
    
    $
    2,413,722
    
    
    
    
    
    
    $
    (95,935,886
    )
    
    $
    5,870,343Reclassification of
unearned stock compensation
in connection with adoption
SFAS 123R
    
    
    
    
    
    
    
    
    
    
    (596,296
    )
    
    
    596,296
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Beneficial conversion
feature on private
placement transactions
    
    
    
    
    
    
    
    
    
    
    136,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,500Issuance of common stock
from conversion of
debentures and Series C
preferred stock
    
    
    1,706,955
    
    
    
    1,707
    
    
    
    2,480,293
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,482,000Issuance of restricted
stock for consulting
    
    
    200,000
    
    
    
    200
    
    
    
    (200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of stock for
interest payments
    
    
    303,710
    
    
    
    304
    
    
    
    397,382
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    397,686Issuance of common stock to
Board of Directors
    
    
    152,994
    
    
    
    153
    
    
    
    199,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199,290Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    1,116,667
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,116,667Issuance of restricted
stock for executive
compensation
    
    
    50,000
    
    
    
    50
    
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
for 401(k)
    
    
    154,314
    
    
    
    154
    
    
    
    252,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    252,700Issuance of restricted
stock for merit awards
    
    
    465,400
    
    
    
    465
    
    
    
    (465
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Series B preferred dividends
    
    
    
    
    
    
    
    
    
    
    (44,384
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,384
    )Payment for retirement of
warrants
    
    
    
    
    
    
    
    
    
    
    (400,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (400,000
    )Issuance of Series A
preferred stock, 138,150
shares issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,113,695
    
    
    
    
    
    
    
    
    
    
    
    2,113,695Issuance of Series B
preferred stock,71,429
shares issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250,000
    
    
    
    
    
    
    
    1,250,000Warrants issued in
connection with Series B
preferred stock
    
    
    
    
    
    
    
    
    
    
    159,227
    
    
    
    
    
    
    
    
    
    
    
    (159,227
    )
    
    
    
    
    
    
    Deferred compensation plan
    
    
    (86,533
    )
    
    
    (86
    )
    
    
    (34,145
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34, 231
    )Acquisition of Gecko
    
    
    2,000,000
    
    
    
    2,000
    
    
    
    1,878,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,880,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,270,586
    )
    
    
    (12,270,586
    )Balance at December 31, 2006
    
    
    51,401,215
    
    
    $
    51,401
    
    
    $
    105,486,561
    
    
    $
    
    
    
    $
    4,527,417
    
    
    $
    1,090,773
    
    
    $
    (108,206,472
    )
    
    $
    2,949,680
  F-7




---



##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year
    
    
    Year
    
    
    YearEnded
    
    
    Ended
    
    
    Ended
    
    
    CumulativeDecember 31,
    
    
    December 31,
    
    
    December 31,
    
    
    Amounts From2006
    
    
    2005
    
    
    2004
    
    
    InceptionOperating activitiesNet loss
    
    $
    (12,270,586
    )
    
    $
    (14,600,439
    )
    
    $
    (10,804,978
    )
    
    $
    (106,055,591
    )Adjustments to reconcile net loss to net cash used in
operation activitiesDepreciation and amortization
    
    
    497,994
    
    
    
    291,649
    
    
    
    516,172
    
    
    
    3,485,006Amortization of discount on unsecured debentures
    
    
    209,334
    
    
    
    856,509
    
    
    
    773,623
    
    
    
    2,788,163Amortization of deferred financing costs
    
    
    116,691
    
    
    
    429,507
    
    
    
    367,932
    
    
    
    1,510,774Non-cash interest charges
    
    
    272,377
    
    
    
    297,394
    
    
    
    142,517
    
    
    
    712,288Beneficial conversion feature on PIPE financing
    
    
    136,500
    
    
    
    168,000
    
    
    
    497,757
    
    
    
    2,159,082Losses on investment in affiliate
    
    
    334,822
    
    
    
    
    
    
    
    
    
    
    
    1,190,900Non-cash charges
    
    
    3,536,083
    
    
    
    3,519,991
    
    
    
    796,286
    
    
    
    32,292,087Changes in operating assets and liabilities:Accounts receivable
    
    
    (449,608
    )
    
    
    296,980
    
    
    
    (405,006
    )
    
    
    (598,878
    )Prepaid expenses and other assets
    
    
    103,875
    
    
    
    23,600
    
    
    
    3,993
    
    
    
    (179,667
    )Accounts payable and accrued expenses
    
    
    133,928
    
    
    
    445,218
    
    
    
    754,842
    
    
    
    2,425,165Deferred revenue
    
    
    113,153
    
    
    
    (85,000
    )
    
    
    85,000
    
    
    
    2,513,141Net cash used in operating activities
    
    
    (7,265,437
    )
    
    
    (8,356,591
    )
    
    
    (7,271,862
    )
    
    
    (57,757,530
    )Investing ActivitiesPurchase of property and equipment
    
    
    
    
    
    
    
    
    
    
    (97,585
    )
    
    
    (2,885,446
    )Patent registration costs
    
    
    (199,940
    )
    
    
    (194,286
    )
    
    
    (46,057
    )
    
    
    (1,102,507
    )Acquisition of Gecko, net of cash acquired
    
    
    (1,163,539
    )
    
    
    
    
    
    
    
    
    
    
    (1,163,539
    )Investment in affiliate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (856,078
    )Decrease/(increase) in restricted cash
    
    
    561,247
    
    
    
    1,452,963
    
    
    
    (36,642
    )
    
    
    (1,020,811
    )Net cash (used in) provided by investing activities
    
    
    (802,232
    )
    
    
    1,258,677
    
    
    
    (180,284
    )
    
    
    (7,028,381
    )Financing activitiesProceeds from sale of common stock
    
    
    
    
    
    
    1,172,755
    
    
    
    345,324
    
    
    
    39,394,207Underwriting and other expenses of initial public offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,669,613
    )Proceeds from issuance of debentures
    
    
    
    
    
    
    
    
    
    
    9,428,806
    
    
    
    21,428,806Proceeds from Series B preferred stock
    
    
    1,250,000
    
    
    
    
    
    
    
    
    
    
    
    1,250,000Proceeds from redeemable Series C preferred stock
    
    
    
    
    
    
    10,000,000
    
    
    
    
    
    
    
    10,000,000Deferred financing costs
    
    
    
    
    
    
    (583,272
    )
    
    
    (79,077
    )
    
    
    (1,281,656
    )Capital lease obligation payments
    
    
    (6,173
    )
    
    
    (33,532
    )
    
    
    (29,240
    )
    
    
    (86,184
    )Payment for retirement of warrants
    
    
    (400,000
    )
    
    
    
    
    
    
    
    
    
    
    (400,000
    )Proceeds from capital contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,000Payment of note payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (250,000
    )Series B dividends paid
    
    
    (44,384
    )
    
    
    
    
    
    
    
    
    
    
    (44,384
    )(Payments)/proceeds from grant
    
    
    (49,611
    )
    
    
    
    
    
    
    
    
    
    
    156,329Proceeds from sale of preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,146,446Net cash provided by financing activities
    
    
    749,832
    
    
    
    10,555,951
    
    
    
    9,665,813
    
    
    
    69,143,951Net increase (decrease) in cash and cash equivalents
    
    
    (7,317,837
    )
    
    
    3,485,037
    
    
    
    2,213,667
    
    
    
    4,358,040Cash and cash equivalents, beginning of period
    
    
    11,675,877
    
    
    
    8,217,840
    
    
    
    6,004,173
    
    
    
    Cash and cash equivalents, end of period
    
    $
    4,358,040
    
    
    $
    11,675,877
    
    
    $
    8,217,840
    
    
    $
    4,358,040
 Supplemental Cash Flow Data:
   F-8




---



##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Basis of Presentation
  Note 2  Significant Accounting Policies
 Principles of Consolidation
  Cash and Cash Equivalents
  Accounts Receivable
  Concentration of Credit Risk
  Long-Lived Assets
  Property and Equipment
  F-9




---



##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Intangible Assets
  Restricted Cash
  Revenue Recognition
   Cost-Sharing Programs
   2006
    
    
    2005
    
    
    2004Product development expense
    
    $
    996,549
    
    
    $
    141,743
    
    
    $
    233,629General and administrative expense
    
    
    355,797
    
    
    
    293,252
    
    
    
    229,033Research and development expense
    
    
    688,595
    
    
    
    605,103
    
    
    
    745,446Total
    
    $
    2,040,941
    
    
    $
    1,040,098
    
    
    $
    1,208,108
 Product Development and Marketing Costs
  Research and Development Costs
  F-10




---



##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Stock-Based Compensation
  Accounting for Stock-Based Compensation Accounting for Stock
Issued to Employees
 Share-Based Payments Statement of Cash Flows
 Income Taxes
  Use of Accounting Estimates
  Earnings Per Share
   F-11




---



##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Other Recently Issued Accounting Standards
   Reclassifications
  Note 3  Supplemental Cash Flow Information
      F-12




---



##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Note 4Non-Cash Charges
   Year Ended December 31,2006
    
    
    2005
    
    
    2004Product development and marketing
    
    $
    2,176,812
    
    
    $
    2,556,423
    
    
    $
    100,738General and administrative
    
    
    1,336,731
    
    
    
    920,499
    
    
    
    673,100Research and development
    
    
    22,540
    
    
    
    43,069
    
    
    
    22,448Total
    
    $
    3,536,083
    
    
    $
    3,519,991
    
    
    $
    796,286
 Note 5  Acquisition of Gecko
     F-13




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Total Company cash contributions for initial 34.8% investment
    
    $
    1,000,000Value of services contributed by the Company
    
    
    450,000Common stock issued for the remaining 65.2% ownership interest
    
    
    1,880,000Acceleration of restricted stock
    
    
    59,0003,389,000Less: In-process research and development acquired
    
    
    (400,000
    )Less: The Companys portion of Gecko losses under equity method
    
    
    (334,822
    )Preliminary purchase price
    
    $
    2,654,178
   Cash
    
    $
    79,461Plant and equipment
    
    
    58,999Intangibles
    
    
    2,705,136Total assets acquired
    
    $
    2,843,596Total liabilities assumed
    
    $
    189,418Net assets acquired
    
    $
    2,654,178
   Pro Forma (Unaudited)
    
    2006Total operating revenues
    
    $
    221,910Net loss
    
    $
    (13,631,000
    )Basic and diluted earnings per share:Weighted-average shares outstanding
    
    
    50,275,637Loss per share
    
    $
    (0.27
    )
 F-14




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 6  Income Taxes
  Year Ended December 31,2006
    
    
    2005
    
    
    2004Current benefit:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    (550,647
    )
    
    
    (386,692
    )
    
    
    (410,726
    )Deferred provision:Federal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    (550,647
    )
    
    $
    (386,692
    )
    
    $
    (410,726
    )
   Year Ended December 31,2006
    
    
    2005Stock-based compensation
    
    $
    8,945,000
    
    
    $
    8,898,000Net operating loss carryforwards
    
    
    26,198,000
    
    
    
    22,545,000Research and development credits
    
    
    1,666,000
    
    
    
    1,770,000Depreciation and amortization
    
    
    (571,000
    )
    
    
    396,000Deferred revenue
    
    
    40,000
    
    
    
    Other
    
    
    142,000
    
    
    
    Valuation reserve
    
    
    (36,420,000
    )
    
    
    (33,609,000
    )Net deferred tax asset
    
    
    
    
    
    
    
   F-15




---



##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31,2006
    
    
    %
    
    
    2005
    
    
    %
    
    
    2004
    
    
    %Tax at U.S. statutory rate
    
    $
    (4,172,000
    )
    
    
    34.0
    
    
    $
    (4,964,000
    )
    
    
    34.0
    
    
    $
    (3,674,000
    )
    
    
    34.0State tax (benefit), net of federal
tax effect
    
    
    (363,000
    )
    
    
    2.9
    
    
    
    (584,000
    )
    
    
    3.9
    
    
    
    (647,000
    )
    
    
    5.8Research and experimentation tax credit
    
    
    (64,000
    )
    
    
    0.5
    
    
    
    (58,000
    )
    
    
    0.4
    
    
    
    (130,000
    )
    
    
    1.2Interest expense
    
    
    304,000
    
    
    
    (2.5
    )
    
    
    681,000
    
    
    
    (4.5
    )
    
    
    655,000
    
    
    
    (6.1
    )Other
    
    
    7,353
    
    
    
    0.0
    
    
    
    13,692
    
    
    
    (0.1
    )
    
    
    (4,726
    )
    
    
    Valuation allowance
    
    
    3,737,000
    
    
    
    (30.4
    )
    
    
    5,298,000
    
    
    
    (31.1
    )
    
    
    3,390,000
    
    
    
    (31.2
    )Provision (benefit) for income taxes
    
    $
    (550,647
    )
    
    
    4.5
    
    
    $
    (386,692
    )
    
    
    2.6
    
    
    $
    (410,726
    )
    
    
    3.7
 Note 7  Property and Equipment
  Useful Life
    
    2006
    
    
    2005Machinery and equipment
    
    3 years
    
    $
    1,405,072
    
    
    $
    1,329,655Furniture and fixtures
    
    3 years
    
    
    402,125
    
    
    
    402,125Leasehold improvements
    
    Lesser of 7 years or life of the lease
    
    
    1,290,078
    
    
    
    1,290,0783,097,275
    
    
    
    3,021,858Accumulated depreciation
    
    
    
    
    (2,790,018
    )
    
    
    (2,571,720
    )Property and equipment, net
    
    
    
    $
    307,257
    
    
    $
    450,138
  Note 8  Intangible Assets
  Useful Life
    
    2006
    
    
    2005Patent and license costs
    
    10-17 years
    
    $
    1,110,154
    
    
    $
    1,010,496Gecko intellectual property acquired
    
    5 years
    
    
    2,705,136
    
    
    
    Accumulated amortization
    
    
    
    
    (535,033
    )
    
    
    (355,620
    )Intangibles, net
    
    
    
    $
    3,280,257
    
    
    $
    654,876
  F-16




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 9  Convertible Debentures
  Note 10  Private Placement Transactions
 Redeemable Series C Preferred Stock
    F-17




---



##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Series A and Series B Preferred Stock
      Note 11  Stock Options, Employee Benefit Plans and Other
 Stock-Based Compensation
   F-18




---



##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     Year Ended December 31,2005
    
    
    2004Net loss attributable to common stockholders  as reported
    
    $
    (14,600,439
    )
    
    $
    (10,804,978
    )Plus: Stock-based compensation expense included in reported net loss
    
    
    1,106,269
    
    
    
    796,286Less: Total stock-based compensation expense determined using
the fair value method
    
    
    (1,636,608
    )
    
    
    (1,576,863
    )Net loss attributable to common stockholders  pro forma
    
    $
    (15,130,778
    )
    
    $
    (11,585,555
    )Net loss per share attributable to common stockholders  as reported
    
    $
    (0.34
    )
    
    $
    (0.29
    )Net loss per share attributable to common stockholders  pro forma
    
    $
    (0.35
    )
    
    $
    (0.31
    )
  Year Ended December 31,2005
    
    2004Expected dividend yield
    
    
    
    
    
    
    Expected stock price volatility
    
    
    .89
    
    
    
    .57Risk-free interest rate
    
    
    4.45
    %
    
    
    3.48
    %Expected option term
    
    5 years
    
    
    5 years
  F-19




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Stock Options
   Weighted-AverageWeighted-
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateExercise
    
    
    Life(In
    
    
    IntrinsicShares
    
    
    Price
    
    
    years)
    
    
    ValueOutstanding at December 31, 2005
    
    
    3,994,769
    
    
    $
    3.75
    
    
    
    
    
    
    
    Granted
    
    
    150,000
    
    
    
    1.25
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited and cancelled
    
    
    (233,114
    )
    
    
    7.25
    
    
    
    
    
    
    
    Outstanding at December 31, 2006
    
    
    3,911,655
    
    
    $
    3.44
    
    
    
    5.4
    
    
    $
    Vested and expected to vest at December 31, 2006
    
    
    3,716,072
    
    
    $
    3.44
    
    
    
    5.4
    
    
    $
    Exercisable at December 31, 2006
    
    
    3,669,867
    
    
    $
    3.67
    
    
    
    5.3
    
    
    $
    
   Restricted Stock Awards
   .
 F-20




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Weighted-Average GrantNumber of
    
    
    Date FairShares
    
    
    ValueNonvested at December 31, 2005
    
    
    282,480
    
    
    $
    2.25Granted
    
    
    715,400
    
    
    
    1.63Vested
    
    
    (250,000
    )
    
    
    1.58Forfeited
    
    
    (11,400
    )
    
    
    1.85Nonvested at December 31, 2006
    
    
    736,480
    
    
    $
    1.88
   Savings Plan
  Other
  Note 12  Rabbi Trust
  F-21




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 13  Grant Obligation
  Note 14  Commitments and Contingencies
  2007
    
    
    484,3102008
    
    
    443,950Total
    
    $
    928,260
     Note 15  Related Party Transactions
  F-22




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Note 16  Subsequent Events
 Convertible Debentures
   F-23




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##### Table of Contents



MILLENNIUM CELL INC.
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Note 17  Quarterly Information (Unaudited) (1)
 Fiscal Year QuartersFirst
    
    
    Second
    
    
    Third
    
    
    Fourth (2)
    
    
    Total(in 000s, except per share amounts)Fiscal Year ended December 31, 2006Revenue
    
    $
    70
    
    
    $
    12
    
    
    $
    5
    
    
    $
    134
    
    
    $
    221Cost of revenue
    
    
    70
    
    
    
    12
    
    
    
    5
    
    
    
    130
    
    
    
    217Gross margin
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    4Product development & marketing
    
    
    905
    
    
    
    830
    
    
    
    732
    
    
    
    514
    
    
    
    2,981General and administrative
    
    
    1019
    
    
    
    1,035
    
    
    
    646
    
    
    
    1,200
    
    
    
    3,900Non-cash charges
    
    
    191
    
    
    
    2,460
    
    
    
    396
    
    
    
    487
    
    
    
    3,534Depreciation and amortization
    
    
    137
    
    
    
    78
    
    
    
    72
    
    
    
    210
    
    
    
    497Research and development
    
    
    196
    
    
    
    27
    
    
    
    15
    
    
    
    664
    
    
    
    902Total operating expenses
    
    
    2,448
    
    
    
    4,430
    
    
    
    1,861
    
    
    
    3,075
    
    
    
    11,814Loss from operations
    
    
    (2,448
    )
    
    
    (4,430
    )
    
    
    (1,861
    )
    
    
    (3,071
    )
    
    
    (11,810
    )Interest expense, net
    
    
    (162
    )
    
    
    (212
    )
    
    
    (137
    )
    
    
    (167
    )
    
    
    (678
    )Equity in losses of affiliates
    
    
    (53
    )
    
    
    (84
    )
    
    
    (95
    )
    
    
    (103
    )
    
    
    (335
    )Loss before income taxes
    
    
    (2,663
    )
    
    
    (4,726
    )
    
    
    (2,093
    )
    
    
    (3,341
    )
    
    
    (12,823
    )Benefit from income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    551
    
    
    
    551Net loss
    
    
    (2,663
    )
    
    
    (4,726
    )
    
    
    (2,093
    )
    
    
    (2,790
    )
    
    
    (12,271
    )Series B dividends
    
    
    
    
    
    
    (6
    )
    
    
    (19
    )
    
    
    (19
    )
    
    
    (44
    )Net loss applicable to common stockholders
    
    
    (2,663
    )
    
    
    (4,732
    )
    
    
    (2,112
    )
    
    
    (2,809
    )
    
    
    (12,315
    )Loss per share  basic and diluted
    
    $
    (.06
    )
    
    $
    (.10
    )
    
    $
    (.04
    )
    
    $
    (.06
    )
    
    $
    (0.25
    )Weighted  average number of shares outstanding
    
    
    46,960
    
    
    
    48,358
    
    
    
    48,505
    
    
    
    49,295
    
    
    
    48,295
 First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Total(in 000s, except per share amounts)Fiscal Year ended December 31, 2005Revenue
    
    $
    80
    
    
    $
    48
    
    
    $
    140
    
    
    $
    149
    
    
    $
    417Cost of revenue
    
    
    80
    
    
    
    48
    
    
    
    101
    
    
    
    153
    
    
    
    382Gross margin
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    (4
    )
    
    
    35Product development & marketing
    
    
    1,081
    
    
    
    799
    
    
    
    867
    
    
    
    834
    
    
    
    3,581General and administrative
    
    
    869
    
    
    
    1,858
    
    
    
    1,438
    
    
    
    1,232
    
    
    
    5,397Non-cash charges
    
    
    505
    
    
    
    2,525
    
    
    
    102
    
    
    
    388
    
    
    
    3,520Depreciation and amortization
    
    
    78
    
    
    
    64
    
    
    
    75
    
    
    
    75
    
    
    
    292Research and development
    
    
    218
    
    
    
    207
    
    
    
    99
    
    
    
    85
    
    
    
    609Total operating expenses
    
    
    2,751
    
    
    
    5,453
    
    
    
    2,581
    
    
    
    2,614
    
    
    
    13,399Loss from operations
    
    
    (2,751
    )
    
    
    (5,453
    )
    
    
    (2,542
    )
    
    
    (2,618
    )
    
    
    (13,364
    )Interest expense, net
    
    
    (367
    )
    
    
    (331
    )
    
    
    (817
    )
    
    
    (108
    )
    
    
    (1,623
    )Equity in losses of affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss before income taxes
    
    
    (3,118
    )
    
    
    (5,784
    )
    
    
    (3,359
    )
    
    
    (2,726
    )
    
    
    (14,987
    )Benefit from income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    387
    
    
    
    387Net loss
    
    
    (3,118
    )
    
    
    (5,784
    )
    
    
    (3,359
    )
    
    
    (2,339
    )
    
    
    (14,600
    )Loss per share  basic and diluted
    
    $
    (.08
    )
    
    $
    (.14
    )
    
    $
    (.08
    )
    
    $
    (.05
    )
    
    $
    (.34
    )Weighted  average number of shares outstanding
    
    
    40,174
    
    
    
    42,612
    
    
    
    44,360
    
    
    
    46,410
    
    
    
    43,405
 
 (1)
    
    Some columns and rows may not foot or cross-foot due to rounding. F-24




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##### Table of Contents



(2)
    
    The fourth quarter of 2006 includes $0.4 million and $0.1 million of charges for
in-process research and development and amortization expenses, respectively. These charges are in
connection with the investments in Gecko which began in the first quarter of 2006 and concluded
with the Acquisition of Gecko on December 29, 2006. The Company retained a valuation specialist to
assist them with the purchase price allocation in December 2006 which resulted in the determination
of the aforementioned charges which were not deemed material to prior 2006 quarters. F-25




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    
    
    Description23.1*
    
    
    
    Consent of Ernst & Young.31.1*
    
    
    
    Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.31.2*
    
    
    
    Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 200232.1*
    
    
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of
Sarbanes-Oxley Act of 2002
 
 
    
    Previously filed.*
    
    Filed herewith.