**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**











**FORM
      10-Q**





**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**





**For
      the quarterly period ended September 30, 2005**





**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****Incorporation
                or Organization)**
            **Identification
                Number)**





**One
      Industrial Way West,**


**Eatontown,
      New Jersey 07724**


**(Address
      of Principal Executive Offices) (Zip Code)**





**(Registrant's
      telephone number, including area code) (732) 542-4000**





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





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Securities Exchange Act of 1934). Yes o No x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Securities Exchange Act of 1934). Yes o No x





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date: 46,413,092 shares of Common Stock,
      par
      value $.001, were outstanding on November 10, 2005.





**MILLENNIUM
      CELL INC.**


**(a
      development stage enterprise)**


**Index**








**PART
      I - FINANCIAL INFORMATION**





**Page**Item
                1.
            Financial
                Statements (Unaudited)Consolidated
                Balance Sheets- September 30, 2005 and December 31, 2004
            1Consolidated
                Statements of Operations - Three and nine months endedSeptember
                30, 2005 and 2004
            2Consolidated
                Statements of Cash Flows - Nine months ended September 30, 2005 and
                2004
            3Consolidated
                Statements of Stockholders’ Equity - Nine months ended September 30,
                2005
            4Notes
                to Consolidated Financial Statements - September 30, 2005
            5Item
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            10Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            18Item
                4.
            Controls
                and Procedures
            18**PART
                II - OTHER INFORMATION**Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            19Item
                6.
            Exhibits
            20























Unless
      the context otherwise requires, all references to “we,”“us,”“our,” and the
“Company” include Millennium Cell Inc., and its wholly-owned subsidiary, MCE
      Ventures LLC.





Unless
      the context otherwise requires, all references herein to our Series A
      Convertible Preferred Stock and Series C Convertible Preferred Stock
      shall
      refer to our Series A2 Convertible Preferred Stock and Series C2
      Convertible Preferred Stock, respectively, to reflect the exchange offers we
      completed on June 30, 2005 with respect to such securities. For more
      information regarding the exchange offers, see our Current Report on Form 8-K
      filed with the Securities and Exchange Commission on May 17, 2005.





**FORWARD-LOOKING
      STATEMENTS**





This
      report contains forward-looking statements (within the meaning of the Private
      Securities Litigation Reform Act of 1995). These forward-looking statements
      reflect our current view about future events and financial performance and
      are
      subject to risks and uncertainties. Statements contained herein that are not
      statements of historical fact may be deemed to be forward-looking information.
      When we use words such as “plan,”“believe,”“expect,”“anticipate,”“on target” and
“intend” or similar expressions, we are making forward-looking statements.
      Investors should
      not rely on forward-looking statements because they are subject to a variety
      of
      risks, uncertainties and other factors that could cause actual results to differ
      materially from our expectations, and we expressly do not undertake any duty
      to
      update forward-looking statements or to publicly announce revisions to any
      of
      the forward-looking statements, whether as a result of new information, future
      events or otherwise. These
      factors include, but are not limited to, the following: (i) the cost and timing
      of development and market acceptance of, and the availability of components
      and
      raw materials required by, a hydrogen battery technology and hydrogen delivery
      system, (ii) the cost and commercial availability of the quantities of raw
      materials required by the hydrogen fuel storage and delivery systems, (iii)
      competition from current, improving and alternate power technologies, (iv)
      our
      ability to raise capital at the times, in the amounts and at costs and terms
      that are acceptable to fund the development and commercialization of our
      hydrogen battery technology and hydrogen delivery system and our business plan,
      (v) our ability to protect our intellectual property, (vi) our ability to
      achieve budgeted revenue and expense amounts, (vii) our ability to generate
      revenues from the sale or license of, or provision of services related to,
      our
      technology, (viii) our ability to enter into agreements with collaborators
      and
      strategic partners and the failure of our collaborators and strategic partners
      to perform under their agreements with us, (ix) our ability to generate design,
      engineering or management services revenue opportunities in the hydrogen
      generation or fuel cell markets, (x) our ability to secure government funding
      of
      our research and development and technology demonstration projects and (xi)
      other factors discussed under the caption “Investment
      Considerations” in
      our
      Annual Report on Form 10-K for the year ended December 31, 2004.








**PART
      I - FINANCIAL INFORMATION**





**Item
      1.**  ***Financial
      Statements (Unaudited).***





**MILLENNIUM
      CELL INC.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**CONSOLIDATED
      BALANCE SHEETS**


**(Unaudited)**





**September
                30,**
            **December
                31,****2005**
            **2004****ASSETS**Current
                assets:Cash
                and cash equivalents
            $
                11,022,972
            $
                8,217,840Restricted
                cash
            2,484,467
            2,445,500Accounts
                receivable - trade
            111,399
            73,474Accounts
                receivable - government
            93,780
            372,776Prepaid
                expenses
            272,906
            261,467Deferred
                financing costs
            101,861
            97,366Total
                current assets
            14,087,385
            11,468,423Property
                and equipment, net
            503,877
            663,576Patents
                and licenses, net
            613,015
            538,802Restricted
                cash
            1,569,650
            589,521Deferred
                financing costs
            178,256
            —Security
                deposit
            45,676
            45,676$
                16,997,859
            $
                13,305,998**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Accounts
                payable
            $
                468,678
            $
                282,586Accrued
                expenses
            829,119
            593,698Accrued
                separation
            —
            318,368Short-term
                portion of capital lease obligation
            18,079
            37,036Short-term
                portion of refundable grant obligation
            28,766
            28,766Deferred
                compensation
            108,018
            65,037Convertible
                unsecured debentures, net of discount
            —
            5,137,335Deferred
                revenue
            85,000
            85,000Total
                current liabilities
            1,537,660
            6,547,826Convertible
                secured debentures, net of discount
            2,399,988
            2,399,988Redeemable
                Series C preferred stock, net of discount (Note 5)
            5,260,970
            —Refundable
                grant obligation
            177,174
            177,174Capital
                lease obligation and other long-term liabilities
            —
            2,669Commitments
                and contingenciesStockholders'
                equity:Preferred
                stockSeries
                A preferred stock, $.001 par value; 1,694,724 authorized shares,
                155,724
                issued and outstanding as of September 30, 2005
            2,413,722
            —Series
                B preferred stock, $.001 par value; 1,539,000 authorized shares,
                none
                issued and outstanding as of September 30, 2005.
            —
            —Common
                stock, $.001 par value; authorized 70,000,000 shares,46,229,717
                and 39,113,963 shares issued and outstandingas
                of September 30, 2005 and December 31, 2004, respectively.
            46,230
            39,114Additional
                paid-in capital
            99,389,929
            85,663,479Deferred
                compensation
            (630,603)
            (188,805)Deficit
                accumulated during development stage
            (93,597,211)
            (81,335,447)Total
                stockholders' equity
            7,622,067
            4,178,341$
                16,997,859
            $
                13,305,998





See
      notes
      to financial statements.











**MILLENNIUM
      CELL INC.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(Unaudited)**





**Three
                Months**
            **Three
                Months**
            **Nine
                months**
            **Nine
                months****Ended**
            **Ended**
            **Ended**
            **Ended**
            **Cumulative****September
                30,**
            **September
                30**
            **September
                30,**
            **September
                30,**
            **Amounts
                From****2005**
            **2004**
            **2005**
            **2004**
            **Inception**Revenue
            $
                140,148
            $
                10,000
            $
                268,475
            $
                125,000
            $
                1,653,200Cost
                of revenue
            100,673
            10,000
            229,000
            125,000
            1,526,982Gross
                margin
            39,475
            —
            39,475
            —
            126,218Product
                development and marketing
            867,219
            904,063
            2,747,853
            2,679,564
            22,740,228General
                and administrative(excluding
                non-cash charges)
            1,438,435
            782,676
            4,165,469
            3,023,682
            24,381,240Non-cash
                charges (Note 4)
            102,308
            126,356
            3,132,590
            718,358
            28,368,603Restructuring
                expense
            —
            —
            —
            —
            104,982Depreciation
                and amortization
            75,433
            128,477
            216,583
            420,817
            2,911,945Research
                and development
            98,984
            27,997
            524,162
            119,093
            9,110,885Total
                operating expenses
            2,582,379
            1,969,569
            10,786,657
            6,961,514
            87,617,883Loss
                from operations
            (2,542,904)
            (1,969,569)
            (10,747,182)
            (6,961,514)
            (87,491,665)Other
                income, net
            —
            —
            (15,989)
            —
            (15,989)Interest
                expense, net
            816,853
            365,364
            1,530,571
            1,666,747
            3,981,745Equity
                in losses of affiliates
            —
            —
            —
            —
            856,078Loss
                before income taxes
            (3,359,757)
            (2,334,933)
            (12,261,764)
            (8,628,261)
            (92,313,499)Benefit
                from income taxes
            —
            —
            —
            —
            (867,169)Net
                loss
            (3,359,757)
            (2,334,933)
            (12,261,764)
            (8,628,261)
            (91,446,330)Preferred
                stock amortization
            —
            —
            —
            —
            2,150,881Net
                loss applicable to common stockholders
            $
                (3,359,757)
            $
                (2,334,933)
            $
                (12,261,764)
            $
                (8,628,261)
            $
                (93,597,211)Loss
                per share -- basic and diluted
            $
                (.08)
            $
                (.06)
            $
                (.29)
            $
                (.24)
            $
                (3.09)Weighted
                -- average number of shares outstanding
            44,360,337
            37,701,400
            42,392,779
            36,696,629
            30,262,790








See
      notes
      to financial statements.

















**MILLENNIUM
      CELL INC.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(unaudited)**


**Nine
                months**
            **Nine
                months**
            **Cumulative****Ended**
            **Ended**
            **Amounts
                from****September
                30,****2005**
            **September
                30,****2004**
            **Inception**OPERATING
                ACTIVITIESNet
                loss
            $
                (12,261,764)
            $
                (8,628,261)
            $
                (91,446,330)Adjustments
                to reconcile net loss tonet
                cash used in operating activities:Depreciation
                and amortization
            216,583
            420,817
            2,911,944Amortization
                of discount on debentures
            782,063
            660,793
            2,504,383Beneficial
                conversion feature on debentures
            168,000
            455,757
            2,022,582Amortization
                of deferred financing costs
            388,021
            474,569
            1,352,597Non-cash
                interest charges
            232,106
            —
            374,623Losses
                on investment in affiliate
            —
            —
            856,078Non-cash
                charges
            3,132,590
            718,358
            28,368,603Changes
                in operating assets and liabilities:Accounts
                receivable
            241,071
            (194,379)
            (205,179)Prepaid
                expenses and other assets
            (11,439)
            (133,775)
            (318,580)Accounts
                payable and accrued expenses
            500,239
            446,041
            2,346,258Deferred
                revenue
            —
            85,000
            2,484,988Net
                cash used in operating activities
            (6,612,530)
            (5,695,080)
            (48,748,033)INVESTING
                ACTIVITIESPurchase
                of property and equipment
            —
            (97,585)
            (2,885,446)Patent
                registration costs
            (131,097)
            (33,669)
            (839,378)Restricted
                cash
            (1,019,096)
            (21,179)
            (4,054,117)Investment
                in affiliate
            —
            —
            (856,078)Net
                cash used in investing activities
            (1,150,193)
            (152,433)
            (8,635,019)FINANCING
                ACTIVITIESProceeds
                from issuance of common stock
            1,172,755
            345,324
            39,394,208Underwriting
                and other expenses of initialpublic
                offering
            —
            —
            (3,669,613)Proceeds
                from issuance of debentures
            —
            9,428,806
            21,428,806Proceeds
                from redeemable Series C preferred stock
            10,000,000
            —
            10,000,000Deferred
                financing costs
            (583,272)
            (150,438)
            (1,281,656)Proceeds
                from capital contribution
            —
            —
            500,000Payment
                of note payable
            —
            —
            (250,000)Payment
                of capital lease obligation
            (21,626)
            (21,610)
            (68,107)Proceeds
                from grant, net
            —
            —
            205,940Proceeds
                from sale of preferred stock
            —
            —
            2,146,446Net
                cash provided by financing activities
            10,567,857
            9,602,082
            68,406,024Net
                change in cash and cash equivalents
            2,805,132
            3,754,569
            11,022,972Cash
                and cash equivalents, beginning ofperiod
            8,217,840
            6,004,173
            —Cash
                and cash equivalents, end of period
            $
                11,022,972
            $
                9,758,742
            $
                11,022,972





Supplemental
      cash flow information


Please
      see note 4 for more information


**MILLENNIUM
      CELL INC.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


(Unaudited)


**Additional**
            
            
            
            **Total****Common
                Stock**
            **Paid-In**
            **Deferred**
            **Series
                A**
            **Accumulated**
            **Stockholders’****Shares**
            **Amount**
            **Capital**
            **Compensation**
            **Preferred**
            **Deficit**
            **Equity****Balance
                at December 31, 2004**
            **39,113,963**
            **$
                39,114**
            **$
                85,663,479**
            **$
                (188,805)**
            **$
                —**
            **$
                (81,335,447)**
            **$
                4,178,341**Issuance
                of common stock from conversion of debentures
            5,475,205
            5,475
            9,618,523
            —
            —
            —
            9,623,998Beneficial
                conversion feature of debentures
            —
            —
            168,000
            —
            —
            —
            168,000Issuance
                of common stock for debt financing costs
            52,477
            53
            62,447
            —
            —
            —
            62,500Issuance
                of common stock from exercise of options
            120,288
            120
            288,571
            —
            —
            —
            288,691Issuance
                of common stock for Board of Director compensation
            97,202
            97
            158,091
            —
            —
            —
            158,188Issuance
                of common stock for Chief Executive Officer compensation
            50,000
            50
            85,450
            —
            —
            —
            85,500Amortization
                of restricted stock awards
            —
            —
            —
            602,762
            —
            —
            602,762Issuance
                of common stock for restricted stock awards
            474,800
            475
            1,044,085
            (1,044,560)
            —
            —
            —-Issuance
                of common stock for exercise of warrants
            589,376
            589
            883,475
            —
            —
            —
            884,064Issuance
                of common stock for interest payments
            145,454
            146
            231,960
            —
            —
            —
            232,106Issuance
                of stock for 401(k) plan matching contributions
            110,952
            111
            163,920
            —
            —
            —
            164,031Warrant
                coverage on Series C Preferred Stock
            —
            —
            1,021,928
            —
            —
            —
            1,021,928Issuance
                of Series A Preferred Stock to The Dow Chemical Company
            —
            —
            —
            —
            2,413,722
            —
            2,413,722Net
                loss
            _________
            _______
            ___________
            ___________
            _________
            (12,261,764)
            (12,261,764)**Balance
                at September 30, 2005**
            **46,229,717**
            **$
                46,230**
            **$
                99,389,929**
            **$
                (630,603)**
            **$
                2,413,722**
            **$
                (93,597,211)**
            **$
                7,622,067**











See
      notes
      to financial statements.







**MILLENNIUM
      CELL INC.**


**(A
      DEVELOPMENT STAGE ENTERPRISE)**


**NOTES
      TO FINANCIAL STATEMENTS**


**(unaudited)**








**NOTE
      1--BASIS OF PRESENTATION**





The
      consolidated financial statements include the accounts of Millennium Cell Inc.
      and its wholly owned subsidiary, MCE Ventures LLC. MCE Ventures is a Delaware
      limited liability company that was formed in 2002 to engage in limited strategic
      investment activities. All significant inter-company transactions and accounts
      have been eliminated.





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with U.S. generally accepted accounting principles for interim
      financial information and with the instructions to Form 10-Q and Article 10
      of
      Regulation S-X. Accordingly, they do not include all of the information and
      footnotes required by U.S. generally accepted accounting principles for complete
      financial statements. In the opinion of management, all known adjustments (which
      consist primarily of normal recurring adjustments) considered necessary for
      a
      fair presentation have been included. Certain 2004 amounts have been
      reclassified to conform to the 2005 presentation. The interim statements should
      be read in conjunction with our Annual Report on Form 10-K for the year ended
      December 31, 2004.





**NOTE
      2--EARNINGS PER SHARE**





Basic
      earnings per share (“EPS”) are computed by dividing income available to common
      stockholders by the weighted average number of common shares actually
      outstanding for the period. Diluted EPS reflects the potential dilution that
      could occur if securities or other contracts to issue common stock were
      exercised or converted into common stock or resulted in the issuance of common
      stock that then shared in the earnings of the Company. All such securities
      were
      anti-dilutive for all periods presented.





**NOTE
      3--STOCK BASED COMPENSATION**





Statement
      of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based
      Compensation” and FAS No. 148, “Accounting for Stock-Based
      Compensation-Transition and Disclosure”, encourages, but does not require,
      companies to record compensation cost for stock-based employee compensation
      plans at fair value. The Company has elected to account for stock-based
      compensation using the intrinsic value method prescribed in Accounting
      Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
      ("APB 25").





The
      following table illustrates the effect on net loss and loss per share if the
      Company had applied the fair value recognition provisions of SFAS 123 to
      stock-based employee compensation:





**Three
                Mos. Ended Sept, 30,**
            **Nine
                Mos. Ended Sept, 30,****2005**
            **2004**
            **2005**
            **2004**Net
                loss attributable to common stockholders —As
                reported
            $(3,359,757)
            $(2,334,933)
            $(12,261,764)
            $(8,628,261)Add:
                Total stock-based compensation expense included in net
                loss
            102,308
            126,356
            718,868
            718,358Deduct:
                Total stock-based compensation expense determined under fair value
                based
                method for all stock option awards
            (115,204)
            (316,987)
            (645,785)
            (1,331,835)Net
                loss attributable to common stockholders — Pro forma
            $(3,372,653)
            $(2,525,563)
            $(12,188,681)
            $(9,241,738)Net
                loss per share attributable to common stockholders — As
                reported
            $(0.08)
            $(0.06)
            $(0.29)
            $(0.24)Net
                loss per share attributable to common stockholders — Pro
                forma
            $(0.08)
            $(0.07)
            $(0.29)
            $(0.25)











The
      fair
      value of each option grant was estimated on the date of grant using the
      Black-Scholes option-pricing model with the following weighted average
      assumptions:





**Three
                and Nine Mos. Ended September 30,****2005**
            **2004**Expected
                dividend yield
            —
            —Expected
                stock price volatility
            .80
            .57Risk-free
                interest rate
            4.89%
            3.48%Expected
                option term
            5
                years
            5
                years





The
      Black-Scholes option valuation model was developed for use in estimating the
      fair value of traded options that have no vesting restrictions and are fully
      transferable. In addition, option valuation models require the input of highly
      subjective assumptions, including the expected stock price volatility. The
      Company's options have characteristics significantly different from those of
      traded options, and changes in the subjective input assumptions can materially
      affect the fair value estimate. Based upon the above assumptions, the weighted
      average fair value of stock options granted at market was $1.22 and $1.20 in
      2005 and 2004, respectively.





In
      December 2004, the FASB issued SFAS No. 123 - Revised (SFAS
      No.123R),"Share-Based Payment." which revises SFAS No.123, "Accounting for
      Stock-Based Compensation", and supercedes APB No. 25, "Accounting for Stock
      Issued to Employees." Under SFAS No. 123R, the Company will measure the cost
      of
      employee services received in exchange for stock based on the grant-date fair
      value of stock-based compensation (with limited exceptions). That cost will
      be
      recognized over the period during which an employee is required to provide
      service in exchange for the stock award (usually the vesting period). The fair
      value of the stock award will be estimated using an option-pricing model, with
      excess tax benefits, as defined in SFAS No. 123R, being recognized as an
      addition to paid-in capital. The provisions of SFAS No. 123R are effective
      as of
      the beginning of the first annual reporting period that begins after June 15,
      2005. The Company has not yet determined the impact of implementation of this
      guidance.










**NOTE
      4--OPTIONS, WARRANTS AND NON-CASH CHARGES**





In
      August
      2003, the Company exchanged 835,500 eligible stock options for 197,599 shares
      of
      restricted stock pursuant to an exchange offer, which shares of restricted
      stock
      fully vested in August 2005. During the quarter ended September 30, 2005, the
      Company recorded the final charge of $49,400 for the non-cash charges related
      to
      the exchange offer. During the nine months ended September 30, 2005, the Company
      recorded $148,200 for the non-cash charges related to the exchange offer. A
      total non-cash charge of $395,200 has been recorded since August 2003 related
      to
      the exchange offer.





In
      March
      2005, the Company issued 474,800 shares of restricted stock to employees with
      a
      fair market value of $1,044,560. These shares will vest in five years, or
      earlier, upon meeting certain accelerated vesting criteria, as defined. During
      the nine months ended September 30, 2005, the
      Company recorded $511,835 in non-cash charges for restricted stock issued to
      employees that includes the amortization of restricted stock issued in March
      2005 and the vesting of 189,920 shares of restricted stock during March 2005
      based on the Company’s performance of certain acceleration of vesting features
      in the restricted stock plan. The
      Company will recognize additional non-cash charges of $31,337 in the remainder
      of 2005 and an additional $501,388 will be recorded through 2009, or earlier
      if
      other accelerated vesting features are met.





Th e
      Company
      issued 155,724 shares of Series A Convertible Preferred Stock (“Series A”
      or “Series A Preferred Stock”) on April 25, 2005 and recorded a $2,413,722
      non-cash charge to our Product Development department for this issuance (see
      Note 5 for more information). The Company made a one-time grant to David Ramm,
      Chief Executive Officer, of 50,000 shares of restricted stock in accordance
      with
      the restricted stock agreement in the third quarter of 2005 and recorded
      deferred compensation of $85,500 which is being amortized over six
      months.





The
      following is a breakdown by function of non-cash charges:





**Non-Cash
                Charges****Three
                Mos. Ended Sept, 30,**
            **Nine
                Mos. Ended Sept, 30,****2005**
            **2004**
            **2005**
            **2004**Product
                development and marketing
            $
                20,031
            $
                12,256
            $
                2,568,680
            $
                88,482General
                and administrative
            77,431
            111,135
            515,571
            608,469Research
                and development
            4,846
            2,965
            48,339
            21,407Total
            $
                102,308
            $
                126,356
            $
                3,132,590
            $
                718,358





**NOTE
      5—PRIVATE PLACEMENTS**





*2004
      Debentures*





In
      January 2004, the Company entered into a private placement financing transaction
      with an institutional and accredited investor pursuant to the terms of a
      securities purchase agreement between the Company and the purchaser. The Company
      relied on the exemption from registration under Section 4(2) of the Securities
      Act of 1933. Pursuant to the terms of the agreement, the investor agreed to
      acquire up to $10 million of unsecured debentures, convertible into common
      stock
      of the Company, subject to certain terms and conditions. The Securities and
      Exchange Commission (“SEC”) declared the registration of the resale of the
      shares underlying the debentures effective on February 17, 2004 and $6.0 million
      of unsecured debentures (the “First Debentures”) were issued to the investor on
      that date at an initial conversion price of $3.30, subject to certain terms
      and
      conditions. During the nine months ended September 30, 2005, the Company converted $1.4 million of the First Debentures
      into 664,008, and a BCF of $98,000 was recorded to additional paid in capital. As
      of
      September 30, 2005, all of the First Debentures have been converted into
      3,523,012 shares of the Company’s common stock.








In
      September 2004, the Company issued an additional $4.0 million of unsecured
      convertible debentures (“Additional Debentures”) under the private placement
      transaction that closed in February of 2004. Cash fees of $171,194 were deducted
      from the proceeds and 60,069 shares of common stock valued at $73,284 were
      issued to the holder of the debentures upon closing of the transaction. The
      market value of these shares and the cash fees were recorded as a discount
      on
      the debentures and are amortized over the term of the debentures or as they
      are
      converted, whichever happens first. The carrying value of the debentures was
      $3,755,522 at the time of issuance. The debentures mature 18 months after the
      date of issuance and are subject to six, 30-day extensions and bear interest
      at
      6% per annum with payments due quarterly. In
      the
      third quarter of 2005, the Company converted the remaining $1.0 million of
      Additional Debentures into 645,160 shares of common stock. During the nine
      months ended September 30, 2005, the Company converted all $4.0 million of the Additional
      Debentures into 2,637,454, and a BCF of $70,000 was recorded to additional
      paid
      in capital.





In
      accordance with APB No. 14, “Accounting for Convertible Debt and Debt Issued
      with Stock Purchase Warrants”, the Company amortizes discounts on its debentures
      as interest expense, over the original maturity period of the debentures or
      ratably as they are converted, whichever comes first. In the third quarter
      of
      2005, the Company recognized a non-cash charge to interest expense of $29,536
      for amortization of discount on debentures.





In
      accordance with Emerging Issues Task Force (“EITF”) No. 00-27, “Application of
      Issue No. 98-5 to Certain Convertible Instruments”, and EITF No. 98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features or
      Contingently Adjustable Conversion Ratios”, and after considering the terms of
      the transaction, the Company determined that the debentures contained a
      beneficial conversion feature (“BCF”). The BCF existed because of a discount of
      7% that was given to the investor in the event of a company-initiated conversion
      of the debentures prior to maturity. Accordingly, at time of conversion, the
      Company recorded as interest expense any applicable BCF based on the fair value
      of the conversion feature on that date in the event of an early conversion
      of
      debentures into common stock.





*Series
      A Preferred Stock*





On
      April
      25, 2005, the Company consummated the first closing under a joint development
      arrangement with The Dow Chemical Company (“Dow”). In connection with the
      closing, the Company issued 155,724 shares of its Series A Preferred Stock
      to
      Dow, each of which is convertible into ten shares of common stock. As a result
      of the Series A issuance in exchange for services rendered by Dow in conjunction
      with the joint development arrangement, the Company recorded a non-cash charge
      of $2,413,722 as product development expense based on the market value of the
      common stock as of April 25, 2005. The Series A has substantially the same
      rights as the Company’s common stock, therefore the Series A was valued based on
      the closing sale price of the Company’s common stock on April 25, 2005. The
      Company relied on the exemption from registration under Section 4(2) of the
      Securities Act of 1933 in connection with the Series A
      issuance.





The
      purpose of the joint development arrangement is for the two companies to jointly
      develop portable power solutions based on the Company’s Hydrogen on Demand®
      energy systems coupled with a fuel cell. The Joint Development Agreement has
      a
      three year term and Dow may terminate the Joint Development Agreement if
      milestones are not met and under certain other conditions. The joint development
      arrangement contemplates a series of four milestones designed to culminate
      in a
      commercially available product. The milestones are focused on portable and/or
      consumer electronics applications. Achievement of milestones in either portable
      or consumer electronics applications will be sufficient to trigger equity
      transactions at Dow’s option to purchase an additional $1.25 million of the
      Company’s preferred stock based on the market value of the common stock as
      defined in the joint development arrangement.





For
      more
      information regarding the Dow joint development arrangement, the first closing
      thereunder and the Series A exchange offer conducted by the Company with respect
      to such shares, see the Company’s Current Reports on Form 8-K filed with the SEC
      on February 28, 2005, April 26, 2005 (first filing) and May 17,
      2005.





*Series
      C Preferred Stock*




On
      April
      25, 2005, the Company consummated a private placement financing transaction
      with
      seven institutional and accredited investors pursuant to the terms of a
      securities purchase agreement with such investors.  Pursuant to the
      terms
      of the agreement, the investors paid $10 million in cash for 10,000 shares
      of
      the Company’s redeemable Series C Convertible Preferred Stock (“Series C” or
“Series C Preferred Stock”). Each Series C share is convertible into five
      hundred shares of common stock of the Company, at any time, at an initial
      conversion price equal to $2 per share, or lower under certain conditions.
      The
      Series C bear a 7% cumulative dividend payable quarterly in shares of common
      stock or cash, at the Company’s option, and are junior to the Series A and
      Series B preferred stock in liquidation preference. The Series C is subject
      to
      mandatory redemption by the Company three years after issuance and can be
      settled in cash or the Company’s common stock. As a result, the Series C is
      recorded as a liability in accordance with FAS 150 (“ Accounting
      for Certain Financial Instruments with Characteristics of both Liabilities
      and
      Equity”). Additionally,
      the Company issued to the investors three-year warrants to purchase an aggregate
      of 1.25 million shares of the Company’s common stock at an exercise price equal
      to $2 per share, subject to adjustment based on customary antidilution terms.
      The warrants were valued at $1,021,928 at the date of issuance and recorded
      as a
      discount to debt and as additional paid-in-capital on the balance sheet and
      will
      be recorded as interest expense throughout the term of the Series C.





Under
      the Series
      C
      purchase agreement,
      the Company is required to restrict funds for future dividends to be paid to
      Series C holders. As a result, these funds, which amounted to approximately
      $1,800,000 at issuance, were classified as restricted cash on the balance sheet
      as of September 30, 2005. In the third quarter of 2005, the Company issued
      20,742 shares valued at $43,839 for the quarterly dividend payments with respect
      to Series C. The dividend was recorded as interest expense since the Series
      C
      was recorded as a liability as of September 30, 2005. According to the Series
      C
      purchase agreement, as dividends are issued or paid, and conversions are
      executed, the restricted cash is released ratably to the Company’s
      non-restricted cash accounts. The Company has transferred $796,286 from the
      non-restricted cash account during the nine months ended September 30,2005,
      $43,839 for the issuance of dividends and $752,447 for the conversions that
      were
      executed. As of September 30, 2005, $4.2 million of the Series C have been
      converted into 2,173,743 shares of the Company’s common stock.





The
      Company relied on the exemption from registration under Section 4(2) of the
      Securities Act in connection with the issuance. The Company filed a resale
      registration statement with the SEC, covering the resale of shares of common
      stock underlying the Series C and warrants issued to the Series C holders,
      and
      it was declared effective on July 27, 2005. For more information regarding
      the
      Series C private placement and the exchange offer conducted by the Company
      with
      respect to such shares, see the Company’s Current Reports on Form 8-K filed with
      the SEC on April 26, 2005 (second filing) and May 17, 2005.




**NOTE
      6—SUPPLEMENTAL CASH FLOW INFORMATION**





The
      Company issued 110,952 and 31,505 shares of common stock valued at $164,031
      and
      $63,010 to employees as 401(k) Plan employer matching contributions during
      the
      first nine months of 2005 and 2004, respectively. The Company also issued 97,202
      and 98,659 shares of common stock to Board of Directors members in lieu of
      cash
      compensation of $158,188 and $184,794 during the nine months ended September
      30,
      2005 and 2004, respectively.





During
      the nine months ended September 30, 2005 and 2004 respectively, the Company
      issued 524,800 and 64,480 shares of common stock valued at $1,130,060 and
      $153,277 to employees as restricted stock. The 2004 restricted stock vested
      upon
      issuance. See note 4 for vesting period of 2005 restricted stock issued to
      employees.





**NOTE
      7—RELATED PARTY TRANSACTIONS**





On
      August
      12, 2005, the Company entered into an Employment Agreement and a Restricted
      Stock Grant Agreement with Mr. H. David Ramm, the Chief Executive Officer,
      and
      an Agreement with DKRW Energy LLC (“DKRW”), a limited liability company of which
      Mr. Ramm is a member. Such employment agreement evidenced the appointment of
      Mr.
      Ramm as Chief Executive Officer of the Company as of April 25, 2005. The Company
      made a one-time grant to Mr. Ramm of 50,000 shares of restricted stock in
      accordance with the restricted stock agreement. Under the DKRW agreement, as
      compensation for DKRW’s consent to Mr. Ramm’s service as our Chief Executive
      Officer, the Company agreed to pay a monthly retainer of $12,500 to DKRW during
      the term of Mr. Ramm’s service as Chief Executive Officer. On December 31, 2005,
      the initial term of the agreement will be completed and going forward the
      agreement will automatically renew on a month-to-month basis unless terminated
      in writing by either party.





**NOTE
      8—SUBSEQUENT EVENTS**





In
      October 2005, the Company converted $300,000 Series C into 150,000 shares of
      common stock. On November 8, 2005, the Company amended the terms of certain
      convertible debentures to cancel the letters of credit securing such
      instruments, lower the conversion price, extend the maturity date, provide
      for
      quarterly interest payments to the holders and amend certain conversion
      terms.





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





The
      following discussion should be read in conjunction with the accompanying
      consolidated financial statements and notes thereto included within this report.
      In addition to historical information, this Form 10-Q and the following
      discussion contain forward-looking statements that reflect our plans, estimates,
      intentions, expectations and beliefs. See the discussion contained herein under
      the caption “Forward-Looking Statements” for more information. Our actual
      results could differ materially from those discussed in the forward-looking
      statements. The discussion below should be read in conjunction with the
      Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004 .





**General**





We
      were
      formed as a Delaware limited liability company on December 17, 1998, and
      organized and began operations on January 1, 1999 (inception date). We were
      converted into a Delaware corporation on April 25, 2000 when all of the
      outstanding equity interests of the limited liability company were converted
      into shares of common stock of the corporation. Unless otherwise indicated,
      all
      information that we present in this Form 10-Q for any date or period gives
      effect to the conversion as if it had occurred on that date or as of the
      beginning of that period and all references to common stock for periods before
      the conversion mean our issued and outstanding membership interests.





**Overview**





We
      are
      engaged in the development of hydrogen battery technology for use primarily
      in
      portable electronic devices for the consumer, medical, military and industrial
      markets. We are developing this technology in partnership with corporate and
      government entities. Hydrogen on Demand® is the trademarked name for our
      proprietary hydrogen energy storage and delivery technology. Our technology
      is
      based on the culmination of work reflected in more than 30 patents (either
      granted or in application) that collectively provide us with a leading position
      in the system and fuel blend technology used to convert sodium borohydride
      to
      hydrogen energy for use in portable electronic device applications.







Our
      losses have resulted primarily from costs associated with product development
      and research and development activities as well as non-cash amortization of
      preferred stock and non-cash charges related to the issuance of stock options
      and warrants to employees and third parties. As a result of planned expenditures
      in the areas of research, product development and marketing and additional
      non-cash charges relating to employee stock options and restricted stock, we
      expect to incur additional operating losses for the foreseeable future.







**Results
      of Operations**





***Three
      Months Ended September 30, 2005 versus Three Months Ended September 30,
      2004***





*Revenues* .
      Revenues for the three months ended September 30, 2005 were $140,148 compared
      to
      $10,000 for the same period of 2004, an increase of $130,148. The increase
      was
      mainly attributable to our contract with Concurrent Technologies Corporation
      (“CTC”) that began in the fourth quarter of 2004. There was also a new contract
      signed with Electronic Machining s.r.l. in the third quarter of 2005 that
      provided us an additional $70,000 in design services revenue. While in the
      development stage, our revenue is expected to fluctuate from quarter to quarter
      with the timing of prototype development and design services.




In
      the
      near-term, revenues are expected to be derived substantially from up-front
      license fees, research contracts with various federal, state and local agencies,
      collaborations with other companies, management services, and royalty payments
      or joint venture revenue from licensees or strategic partnerships. Revenues
      will
      be recognized in the period in which technology is delivered, licensing revenues
      are earned, or as services are performed.




*Cost
      of Revenues.* Cost of
      revenues for the three months ended September 30, 2005 was $100,673 compared
      to
      $10,000 for the same period of 2004, an increase of $90,673.  The
      increase was mainly attributable to the addition of the CTC program in the
      fourth quarter of 2004. The gross margin realized in the third quarter of 2005,
      was a result of design services revenue from our contract with Electronic
      Machining that we did not have in prior quarters. Cost of revenues during the
      development stage are allocated from the Product Development and Marketing
      expense and Research and Development expense line items on the income statement
      depending on the nature of the project.





*Product
      Development and Marketing Expense* .
      Product
      development and marketing expenses for the three months ended September 30,
      2005
      were $867,219 compared to $904,063 for the same period of 2004, a decrease
      of
      $36,844. This decrease is mostly attributable to decreased professional fees.





*General
      and Administrative Expense* .
      General
      and administrative expenses for the three months ended September 30, 2005 were
      $1,438,435 compared to $782,676 for the same period of 2004, an increase of
      $655,759. The increase was mainly the result of the professional and
      compensation fees associated with the ongoing development and future
      commercialization of the Company, as well as less general and administration
      cost recovery associated with the Department of Energy cost sharing
      arrangement.





*Non-cash
      Charges* .
      Non-cash charges for restricted stock awards were $102,308 for the three months
      ended September 30, 2005 compared to $126,356 for the same period of 2004,
      a
      decrease of $24,048





The
      following is a breakdown by function of non-cash charges:





**Non-Cash
                Charges****Three
                Mos. Ended September, 30,****2005**
            **2004**Product
                development and marketing
            $
                20,031
            $
                12,256General
                and administrative
            77,431
            111,135Research
                and development
            4,846
            2,965Total
            $
                102,308
            $
                126,356





*Depreciation
      and Amortization* .
      Depreciation and amortization was $75,433 for the three months ended September
      30, 2005 compared to $128,477 for the same period of 2004, a decrease of
      $53,044. The decrease reflects the impact of assets that have recently been
      fully depreciated.





*Research
      and Development Expense* .
      Research and development expenses were $98,984 for the three months ended
      September 30, 2005 compared to $27,997 for the same period of 2004, an increase
      of $70,987. The increase is due to lower cost sharing receipts under the
      Department of Energy program during the third quarter of 2005. We are reimbursed
      for expenses under the Department of Energy program for the joint research
      of
      electrochemical pathways to manufacture sodium borohydride.





*Interest
      Expense, net* .
      Net
      interest expense was $816,853 for the three months ended September 30, 2005
      compared to $365,364 for the same period of 2004, an increase of $451,489.
      The
      increase was mainly attributable to the amortization of the discount associated
      with the Series C and the amortization of related deferred financing costs.
      Interest expense is comprised of interest on Series C Preferred Stock dividends,
      debenture principal, beneficial conversion features, amortization of original
      issue discounts and issue costs on our debentures. We converted $4,224,000
      in
      preferred stock and $1 **,** 000,000
      of unsecured debentures into common stock conversions during the third quarter
      of 2005 as compared to $1,000,000 of unsecured debenture
      conversions.





***Nine
      months Ended September 30, 2005 versus Nine months Ended September 30,
      2004***





*Revenues* .
      Revenues for the nine months ended September 30, 2005 were $268,475 compared
      to
      $125,000 for the same period of 2004, an increase of $143,475. The increase
      was
      mainly attributable to our contract with CTC that began in the fourth quarter
      of
      2004. While in the development stage, our revenue is expected to fluctuate
      from
      quarter to quarter with the timing of prototype development and design
      services.




In
      the
      near-term, revenues are expected to be derived substantially from up-front
      license fees, research contracts with various federal, state and local agencies,
      collaborations with other companies, management services, and royalty payments
      or joint venture revenue from licensees or strategic partnerships. Revenues
      will
      be recognized in the period in which technology is delivered, licensing revenues
      are earned, or as services are performed.




*Cost
      of Revenues.* Cost of
      revenues for the nine months ended September 30, 2005 was $229,000 compared
      to
      $125,000 for the same period of 2004, an increase of 104,000. The increase
      was
      mainly attributable to our contract with CTC that began in the fourth quarter
      of
      2004. The gross margin realized in the third quarter of 2005, was a result
      of
      design services revenue from our contract with Electronic Machining that we
      did
      not have in prior quarters. Cost of revenues during the development stage are
      allocated from the Product Development and Marketing expense and Research and
      Development expense line items on the income statement depending on the nature
      of the project.





*Product
      Development and Marketing Expense* .
      Product
      development and marketing expenses for the nine months ended September 30,
      2005
      were $2,747,853 compared to $2,679,564 for the same period of 2004, an increase
      of $68,289. This increase is mostly attributable to increase in the marketing
      staff in the first quarter of 2005.





*General
      and Administrative Expense* .
      General
      and administrative expenses for the nine months ended September 30, 2005 were
      $4,165,469 compared to $3,023,682 for the same period of 2004, an increase
      of
      $1,141,787. The increase was mainly the result of the professional and
      compensation fees associated with the consummation of the joint development
      arrangement with Dow and the Series C private placement, the exchange offers
      with respect to the Series A Preferred Stock and Series C Preferred Stock,
      and
      NASDAQ compliance matters in connection with such private placement
      transactions. We also recovered less general and administration cost recovery
      associated with the Department of Energy cost sharing arrangement *.*





*Non-cash
      Charges* .
      Non-cash charges were $3,132,590 for the nine months ended September 30, 2005
      compared to $718,358 for the same period of 2004, an increase of $2,414,232.
      The
      non-cash charges increased as a result of the joint development agreement with
      Dow. On April 25, we issued 155,724 shares of Series A Preferred Stock and
      recorded a $2,413,722 non-cash charge as a product development expense for
      this
      issuance.





The
      following is a breakdown by function of non-cash charges:








**Non-Cash
                Charges****Nine
                Mos. Ended, September 30,****2005**
            **2004**Product
                Development
            $
                2,568,680
            $
                88,482General
                and Administrative
            515,571
            608,469Research
                and Development
            48,339
            21,407Total
            $
                3,132,590
            $
                718,358








*Depreciation
      and Amortization* .
      Depreciation and amortization was $216,583 for the nine months ended September
      30, 2005 compared to $420,817 for the same period of 2004, a decrease of
      $204,234. The decrease reflects the impact of assets that have recently been
      fully depreciated.





*Research
      and Development Expense* .
      Research and development expenses were $524,162 for the nine months ended
      September 30, 2005 compared to $119,093 for the same period of 2004, an increase
      of $405,069. The increase is due to lower cost sharing receipts under the
      Department of Energy program during the second quarter of 2005, mainly due
      to
      decreased billings by the subcontractor on the program. We are reimbursed for
      expenses under the Department of Energy program for the joint research of
      electrochemical pathways to manufacture sodium borohydride.





*Interest
      Expense, net* .
      Net
      interest expense was $1,530,571 for the nine months ended September 30, 2005
      compared to $1,666,747 for the same period of 2004, a decrease of $136,176.
      The
      decrease in net interest expense was caused mainly by a lower amount of debt
      issue costs, and discount amortization as a result of declining remaining
      balance on the debentures and lower conversions of debentures into common stock
      during 2005. Interest expense is comprised of interest on Series C Preferred
      Stock dividend, debenture principal, beneficial conversion features,
      amortization of original issue discounts and issue costs on our debentures.





**Liquidity
      and Capital Resources**





*General*





Since
      our
      inception, we have financed our operations primarily through our initial public
      offering in August 2000 and private placements of equity and debt securities.
      In
      1999, we issued $1.25 million of membership interests in Millennium Cell LLC
      for
      cash, which subsequently were converted into shares of our common stock as
      of
      April 25, 2000. We also received a capital contribution of $0.5 million in
      the
      first quarter of 2000, and in May 2000, we sold 759,368 shares of Series A
      Preferred Stock, which automatically converted into 759,368 shares of common
      stock upon the completion of our initial public offering. The net proceeds
      from
      our initial public offering totaled approximately $29.9 million and we generated
      net proceeds from private placement transactions in 2002 and 2003 totaling
      $14.1
      million. In 2004, we received net proceeds of approximately $9.4 million from
      a
      new private placement transaction. In April 2005, we received net proceeds
      of
      approximately $7,788,000 for the issuance of redeemable Series C Preferred
      Stock.




*Ballard
      Power Systems*




On
      November 8, 2002, we issued to the Ballard Power Systems Inc. (“Ballard”) a
      $2.4 million secured convertible debenture with a maturity date of November
      8, 2005. On September 30, 2005, Ballard transferred its debenture in equal
      amounts to three accredited institutional investors (the “Investors”) in a
      private transaction. In connection with such transfer, the Company issued an
      $800,000 secured convertible debenture, in substance identical to the Ballard
      debenture, to each of the Investors. On
      November 8, 2005, the Company issued an amended and restated convertible
      debenture (each, a “New Debenture”) to each of the Investors as consideration
      for the Investors’ agreement to surrender their original debentures and cancel
      the standby letters of credit issued by Wachovia Bank, National Association,
      that secured such original debentures, thus enabling the Company to use the
      formerly restricted cash for
      its
      operations. The principal amendments to the debentures consisted of reducing
      the
      conversion price, extending the maturity date, and providing for quarterly
      interest payments to the holders. We relied on the exemption from registration
      under Section 3(a)(9) of the Securities Act in connection with the issuance
      of the New Debentures.





*Private
      Placement Transaction 2002, 2003, and 2004*




During
      2002, 2003 and 2004, we entered into a series of private placement financing
      transactions with three different institutional and accredited investors
      pursuant to the terms of separate securities purchase agreements among the
      Company and the purchasers. The private placements were exempt from registration
      under the Securities Act of 1933, as amended, pursuant to Section 4(2) of such
      Act. The placements collectively raised $26.0 million dollars through the sale
      of $4.0 million in common stock and the issuance of $22.0 million in convertible
      debentures. As of September 30, 2005, all $22.0 million of debentures had been
      converted into 11,931,537 shares of common stock. See Note 5 of the notes to
      financial statements for more information about the private placement
      transactions.







*Series
      C Preferred Stock*




On
      April
      25, 2005, we consummated a private placement financing transaction with seven
      institutional and accredited investors pursuant to the terms of a securities
      purchase agreement with such investors.  Pursuant to the terms of the
      agreement, the investors paid $10 million in cash for 10,000 shares of our
      redeemable Series C Preferred Stock. Each Series C share is convertible into
      five hundred shares of common stock of the Company, at any time, at an initial
      conversion price equal to $2 per share, or lower under certain conditions.
      The
      Series C bear a 7% cumulative dividend payable quarterly in shares of common
      stock or cash, at our option and are junior to the Series A and Series B
      preferred stock in liquidation preference. The Series C is subject to mandatory
      redemption by the Company three years after issuance and can be settled in
      cash
      or with our common stock. Additionally, we issued to the investors three-year
      warrants to purchase an aggregate of 1.25 million shares of our common stock
      at
      an exercise price equal to $2 per share, subject to adjustment based on
      customary antidilution terms. The warrants were valued at $1,021,928 at the
      date
      of issuance and recorded as a discount to debt and as additional paid-in-capital
      on the balance sheet and will be recorded as interest expense throughout the
      term of the Series C.





Under
      the
      Series C purchase agreement, we are required to restrict funds for future
      dividends to be paid to Series C holders. As a result, these funds, which
      amounted to approximately $1,800,000 at issuance, were classified as restricted
      cash on the balance sheet as of September 30, 2005. In the third quarter of
      2005, we issued 20,742 shares valued at $43,839 for the quarterly dividend
      payments with respect to Series C. The dividend was recorded as interest expense
      since the Series C was recorded as a liability as of September 30, 2005.
      According to the Series C purchase agreement, as dividends are issued or paid,
      and conversions are executed, the restricted cash is released ratably to our
      non-restricted cash accounts. To date, we have transferred $796,286 from the
      restricted cash account, $43,839 for the issuance of dividends and $752,447
      for
      the conversions that were executed. As of September 30, 2005, approximately
      $4.2
      million of the Series C have been converted into 2,173,743 shares of our common
      stock.





We
      relied
      on the exemption from registration under Section 4(2) of the Securities Act
      in
      connection with the Series C issuance. We filed a resale registration
      statement with the SEC, covering the resale of shares of common stock underlying
      the Series C and warrants issued to the Series C holders, and it was declared
      effective on July 27, 2005. For more information regarding this transaction,
      see
      our Current Reports on Form 8-K filed with the SEC on April 26, 2005 (second
      filing) and May 17, 2005.





*Series
      A Preferred Stock*





On
      April
      25, 2005, we consummated the first closing under a joint development arrangement
      with Dow. In connection with the closing, we issued 155,724 shares of its Series
      A to Dow, each of which is convertible into ten shares of common stock. As
      a
      result of the Series A issuance in exchange for services rendered by Dow in
      conjunction with the joint development arrangement, we recorded a non-cash
      charge of $2,413,722 as product development expense based on the market value
      of
      the common stock as of April 25, 2005. The Series A has substantially the same
      rights of our common stock, therefore the Series A was valued based on the
      close
      of our common stock on April 25, 2005. We relied on the exemption from
      registration under Section 4(2) of the Securities Act of 1933 in connection
      with
      the issuance.





The
      purpose of the joint development arrangement is for the two companies to jointly
      develop portable power solutions based on our Hydrogen on Demand® energy systems
      coupled with a fuel cell. The Joint Development Agreement has a three year
      term
      and Dow may terminate the Joint Development Agreement if milestones are not
      met
      and under certain other conditions. The joint development arrangement
      contemplates a series of four milestones designed to culminate in a commercially
      available product. The milestones are focused on portable and/or consumer
      electronics applications. Achievement of milestones in either portable or
      consumer electronics applications will be sufficient to trigger equity
      transactions at Dow’s option to purchase an additional $1.25 million of our
      preferred stock based on the market value of the common stock as defined in
      the
      joint development arrangement.





For
      more
      information regarding the Dow joint development arrangement, the first closing
      thereunder and the Series A exchange offer conducted by the Company with respect
      to such shares, see our Current Reports on Form 8-K filed with the SEC on
      February 28, 2005, April 26, 2005 (first filing) and May 17, 2005.





*Sources
      and Uses of Cash*





As
      of
      September 30, 2005, we had $11,022,972 in cash and cash equivalents and
      restricted cash of $4,054,117. Cash used in operations totaled $6,612,530 and
      $5 ,695,080 during
      the nine months ended September 30, 2005 and 2004, respectively, and related
      to
      funding our net operating losses.





Excluding
      changes in restricted cash, investing activities used cash of $131,097
      and $ 131 ,256 in
      the
      first nine months of 2005 and 2004, respectively. Investing activities in 2005
      consisted of patent registration costs while in 2004 we purchased laboratory
      equipment to support our research. Restricted cash is comprised of $2.4 million
      of cash used for collateral in connection with Ballard's strategic investment
      in
      us, $1.0 million as security on Series C Preferred dividends and $0.6 million
      of
      cash used for collateral as security deposit held by our landlord in connection
      with the amended lease agreement. These funds used will not be available for
      use
      in operations until the letters of credit have been reduced or terminated.
      On
      November 8, 2005, the Ballard note was modified and as a result, the $2.4
      million of cash is no longer restricted and can be used to fund our operations
      in the near. The $1.0 million of restricted cash related to the Series C
      Preferred will be available to us ratably as dividends are paid to the holders
      or as they are converted, whichever comes first.





*Commitments
      and Contingencies*





In
      April
      2001, we amended our main operating lease to provide for additional space for
      our principal operating offices and laboratories. The amended lease will expire
      in 2008 and contains options to renew for an additional eight years and requires
      us to pay our allocated share of taxes and operating costs in addition to the
      annual base rent payment.





In
      connection with the amended lease agreement, we issued a letter of credit to
      the
      landlord for $588,972 in lieu of a cash security deposit. The letter of credit
      was collateralized with a portion of our cash and is classified as Restricted
      Cash. The funds used for collateral will not be available for use in operations.





Between
      January 1999 and April 2000, we received an aggregate of $227,522 from a
      recoverable grant award from the State of New Jersey Commission on Science
      and
      Technology. The funds were used to partially fund costs directly related to
      development of our technology. The recoverable grant is required to be repaid
      when we generate net sales in a fiscal year. The repayment obligation, which
      began in March 2001, ranges from 1% to 5% of net sales over a ten-year period.
      We are obligated to repay the unpaid amount of the original grant at the end
      of
      the ten-year period. We repaid approximately $21,000 of the award during the
      second quarter of 2003, which represents 3% of our 2002 net sales. Based upon
      4%
      of our 2003 net sales, $18,675 is due to be repaid in 2005. In addition, based
      upon 5% of our 2004 net sales, $10,091 is due to be repaid in 2005.



















**Payment
                due in fiscal years****Contractual
                Obligations**
            **Total**
            **2005
                (remaining 3 months)**
            **2006**
            **2007**
            **2008**
            **2009**Operating
                Lease - Facility
            $
                1,533,648
            $
                121,078
            $
                484,310
            $
                484,310
            $
                443,950
            $3⁄4Refundable
                grant obligation
            205,940
            28,766
            3⁄4
            3⁄4
            3⁄4
            177,174Capital
                lease obligations
            18,079
            18,079
            —
            3⁄4
            3⁄4
            3⁄4Convertible
                secured debentures
            2,399,988
            2,399,988
            3⁄4
            3⁄4
            3⁄4
            3⁄4Redeemable
                Series C preferred stock (1)
            5,260,970
            —
            —
            —
            5,260,970
            —Total
            $9,418,625
            2,567,911
            $
                484,310
            $
                484,310
            $
                5,704,920
            $
                177,174




Our
      contractual obligations are outlined below:











*(1)*  *Redeemable
      Series C Preferred Stock are convertible into common stock or can be satisfied
      with cash at the Company’s option.*





We
      believe that our current cash and cash equivalents will be sufficient to satisfy
      anticipated cash needs of our operations through 2007. We may raise additional
      funds through public or private financing, collaborative relationships or other
      arrangements. Additional funding, if sought, may not be available or, if
      available, may be offered at terms not favorable to us. Further, any additional
      equity financing may be dilutive to stockholders, and debt financing, if
      available, may involve restrictive covenants. Our failure to raise capital
      when
      needed may harm our business and operating results.





**Critical
      Accounting Policies**





*Application
      of Critical Accounting Policies*




The
      discussion and analysis of our financial condition and results of operations
      is
      based on our consolidated financial statements, which have been prepared in
      accordance with U.S. generally accepted accounting principles. The preparation
      of these financial statements requires us to make estimates and judgments that
      affect our reported assets and liabilities, revenues and expenses, and other
      financial information. Actual results may differ significantly from these
      estimates under different assumptions and conditions. In addition, our reported
      financial condition and results of operations could vary due to a change in
      the
      application of a particular accounting standard.






We
      regard
      an accounting estimate underlying our financial statements as a "critical
      accounting estimate" if the accounting estimate requires us to make assumptions
      about matters that are highly uncertain at the time of estimation and if
      different estimates that reasonably could have been used in the current period,
      or changes in the estimate that are reasonably likely to occur from period
      to
      period, would have had a material effect on the presentation of financial
      condition, changes in financial condition, or results of operations.






Not
      all
      of these significant accounting policies, however, require management to make
      difficult, complex or subjective judgments or estimates. Our management has
      discussed our accounting policies with the audit committee of our Board of
      Directors, and we believe that our estimates relating to revenue recognition,
      convertible debt and stock options described below fit the definition of
      "critical accounting estimates."




*Revenue
      Recognition*




Our
      near
      term revenues will be derived substantially from contracts that require the
      Company to deliver hydrogen generation technology, management services, system
      design and prototype systems and licensing of technology for test and
      evaluation. We anticipate that revenues will be recognized in the period in
      which the technology is delivered or licensed revenue is earned.




*Convertible
      Debt and Series C Preferred Stock*




We
      account for the issuance and conversion of convertible debt in accordance with
      APB No. 14, "Accounting for Convertible Debt and Debt Issued with Stock Purchase
      Warrants". As a result, we have and will record original issue discounts to
      the
      extent the fair value of the debt is below the face value of the instrument
      and
      amortize the discount over the life of the instrument. To the extent conversions
      of debt into common stock are made prior to the maturity date of the instrument,
      we will record as interest expense a ratable proportion of the discount
      associated with the face value of the debt converted.






We
      account for the Beneficial Conversion Feature (“BCF”) of convertible debt and
      Series C Preferred Stock in accordance with Emerging Issues Task Force ("EITF")
      No. 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments"
      ("EITF No. 00-27"), and EITF No. 98-5, "Accounting for Convertible Securities
      with Beneficial Conversion Features or Contingently Adjustable Conversion
      Ratios" ("EITF No. 98-5"). As a result of certain conversion price discounts
      included within our outstanding debt instruments, we will record interest
      expense resulting from BCFs as described under the caption "Liquidity and
      Capital Resources" above.




*Stock
      Options*




We
      disclose pro forma information regarding net income and earnings per share
      that
      is required by SFAS No. 148. This information is required to be determined
      as if
      we had accounted for its employee stock options under the fair value method
      of
      that statement. We have estimated the fair value of options granted at the
      date
      of grant using a Black-Scholes option-pricing model.






The
      Black-Scholes option valuation model was developed for use in estimating the
      fair value of traded options that have no vesting restrictions and are fully
      transferable. In addition, option valuation models require the input of highly
      subjective assumptions, including the expected stock price volatility. Our
      options have characteristics significantly different from those of traded
      options, and changes in the subjective input assumptions can materially affect
      the fair value estimate. Due to these highly subjective assumptions, the pro
      forma disclosures of net loss and loss per share for those periods are not
      likely to be representative the pro forma effects on net loss and loss per
      share
      in future years.










**Item
      3.**   ***Quantitative
      and Qualitative Disclosures about Market Risk.***





Market
      risk represents the risk of loss that may impact our financial position,
      operating results or cash flows due to changes in U.S. interest rates. This
      exposure is directly related to our normal operating activities. Our cash and
      cash equivalents are invested with high quality issuers and are generally of
      a
      short-term nature. As a result, we do not believe that near-term changes in
      interest rates will have a material effect on our future results of
      operations.





Our
      systems' ability to produce energy depends on the availability of sodium
      borohydride, which has a limited commercial use and is not manufactured in
      vast
      quantities. There are currently only two major manufacturers of sodium
      borohydride and there can be no assurance that the high cost of this specialty
      chemical will be reduced. Once we commence full operations in the future, we
      may
      need to enter into long-term supply contracts to protect against price increases
      of sodium borohydride. There can be no assurance that we will be able to enter
      into these agreements to protect against price increases.





**Item
      4.**   ***Controls
      and Procedures.***





(a)
      Evaluation of Disclosure Controls and Procedures





Our
      Chief
      Executive Officer and Chief Financial Officer have evaluated the effectiveness
      of our disclosure controls and procedures (as such term is defined in Rules
      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended)
      as of the end of the period covered by this quarterly report. Based on such
      evaluation, our Chief Executive Officer and our Chief Financial Officer have
      concluded that, as of the end of the period covered by this quarterly report,
      our disclosure controls and procedures were effective to provide reasonable
      assurance that material information relating to us and our business is made
      known to management, including our Chief Executive Officer and our Chief
      Financial Officer, particularly during the period when our periodic reports
      are
      being prepared.








(b)
      Changes in Internal Controls





Since
      the
      evaluation date, there have not been any significant changes in our internal
      controls or in other factors that could significantly affect such
      controls.










































































**PART
      II**





**Item
      2.**   ***Unregistered
      Sales of Equity Securities and Use of Proceeds*** **.**




During
      the third quarter of 2005, we issued the following 2,818,903 shares of our
      common stock (“Shares”) to an institutional and accredited investor (“Investor”)
      upon conversion of an aggregate amount of $5,223,998.55 principal amount of
      our
      unsecured convertible debentures owned by the Investor:




**Date**
            **Amount
                of Unsecured****Convertible Debentures**
            **Number
                of Shares of Common Stock****Issued**Additional
                Debentures
              
              
              August
                4, 2005
              
              
              August
                29, 2005
              
              
              First
                Debentures
              
              
              August
                10, 2005
              
              
              August
                25,2005
              
              
              August
                26, 2005
              
              
              August
                29, 2005
              
              
              August
                30, 2005
              
              
              August
                31, 2005
            $500,000.55
              
              
              $499,988.00
              
              
              
              
              
              $172,500.00
              
              
              $335,000.00
              
              
              $674,000.00
              
              
              $1,377,500.00
              
              
              $900,000.00
              
              
              $765,000.00
            322,581
              
              
              322,579
              
              
              
              
              
              93,975
              
              
              176,329
              
              
              353,602
              
              
              717,337
              
              
              450,000
              
              
              382,500







We
      issued
      the Shares in reliance upon the exemption from registration under Section 4(2)
      of the Securities Act of 1933. The resale of the Shares by the Investor is
      registered pursuant to registration statements (File Nos. 333-112519 and
      333-120301) that have been declared effective by the Securities and Exchange
      Commission.







**Item
      6.**   ***Exhibits*** **.** ******




(a)
            Exhibits







10.1†
            —
            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 with the SEC on August 12,
                2005).10.2†
            —
            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 with the SEC
                on
                August 12, 2005).10.3†
            —
            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 with the SEC on August 12,
                2005).31.1*
            —
            Certification
                of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley
                Act
                of 200231.2*
            —
            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.














**SIGNATURES**








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





MILLENNIUM
      CELL INC.


(Registrant)






By:
      /s/ H. David
      Ramm


H.
      David
      Ramm


Chief Executive Officer





November
      14, 2005