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UNITEDSTATES SECURITIES AND EXCHANGE COMMISSIONWashington, DC20549

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FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THESECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year EndedDecember 31, 2003

    TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF1934

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000-31083(Commission File Number)

MILLENNIUM CELL INC.(Exact Name Of Registrant As Specified In ItsCharter)

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|------------------------------------------------------------------------------------|--|-------------------------------------------------|--|--|--|--|
| Delaware(Stateor Other Jurisdiction ofIncorporation orOrganization)                |  | 22-3726792(I.R.S. EmployerIdentificationNumber) |
| 1 IndustrialWay West, Eatontown, New Jersey(Address Of Principal ExecutiveOffices) |  | 07724 (ZipCode)                                 |
| (732)542-4000                                                                      |
| (Registrant's TelephoneNumber, Including Area Code)                                |
|                                                                                    |

Securitiesregistered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: CommonStock, $.001 par value per share

Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.Yes        No    

Indicate by check markif disclosure of delinquent filers pursuant to Item 405 of RegulationS-K is not contained herein, and will not be contained, to the best ofregistrant's knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule12b-2 of the Securities Exchange Act of 1934).Yes        No    

The aggregate marketvalue of the registrant's common stock held by non-affiliates asof March 1, 2004 was $74,397,268.

The number of sharesoutstanding of the registrant's common stock as of March 1, 2004was 35,374,906.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement datedMarch 18, 2004 to be delivered to stockholders in connection with theAnnual Meeting of Stockholders to be held on April 15, 2004 areincorporated by reference into PartIII.

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TABLE OF CONTENTS

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| Item     |  | Description                                                                                                    |  | Page   |
|     |  | **PARTI**                                                                                                      |  |
| Item1.   |  | Business                                                                                                       |  |   | 1                          |   |
| Item 2.  |  | Properties                                                                                                     |  |   | 12                         |   |
| Item3.   |  | Legal Proceedings                                                                                              |  |   | 12                         |   |
| Item4.   |  | Submission of Matters to a Vote of SecuritiesHolders                                                           |  |   | 12                         |   |
|     |  | **PARTII**                                                                                                     |  |
| Item5.   |  | Market for the Registrant's Common Equity, RelatedShareholder Matters and Issuer Purchases of EquitySecurities |  |   |     13 |   |
| Item6.   |  | Selected Financial Data                                                                                        |  |   | 14                         |   |
| Item7.   |  | Management's Discussion and Analysis of FinancialCondition and Results ofOperations                            |  |   | 14                         |   |
| Item 7A. |  | Quantitative and Qualitative Disclosure AboutMarket Risk                                                       |  |   | 23                         |   |
| Item 8.  |  | FinancialStatements and Supplementary Data                                                                     |  |   | 23                         |   |
| Item9.   |  | Changes in and Disagreements with Accountants on Accountingand FinancialDisclosure                             |  |   | 23                         |   |
| Item 9A. |  | Controls and Procedures                                                                                        |  |   | 23                         |   |
|     |  | **PARTIII**                                                                                                    |  |
| Item10.  |  | Directors and Executive Officers of theRegistrant                                                              |  |   | 24                         |   |
| Item 11. |  | ExecutiveCompensation                                                                                          |  |   | 24                         |   |
| Item 12. |  | SecurityOwnership of Certain Beneficial Owners and Management and RelatedStockholderMatters                    |  |   | 24                         |   |
| Item 13. |  | Certain Relationships and RelatedTransactions                                                                  |  |   | 24                         |   |
| Item 14. |  | PrincipalAccountant Fees and Services                                                                          |  |   | 24                         |   |
|     |  | **PARTIV**                                                                                                     |  |
| Item15   |  | Exhibits, Financial Statement Schedules, and Reports on Form8-K                                                |  |   | 25                         |   |
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This reportcontains forward-looking statements (within the meaning of the PrivateSecurities Litigation Reform Act of 1995) that are subject to risks anduncertainties. Statements contained herein that are not statements ofhistorical fact may be deemed to be forward-looking information. Whenwe use words such as "plan,""believe,""expect,""anticipate,""intend" or similar expressions, we aremaking forward-looking statements. You should not rely onforward-looking statements because they are subject to a number ofassumptions concerning future events, and are subject to a number ofuncertainties and other factors, many of which are outside of ourcontrol, that could cause actual results to differ materially fromthose indicated. Please note that we disclaim any intention orobligation to update or revise any forward-looking statements whetheras a result of new information, future events or otherwise. Thesefactors include, but are not limited to, the following: (i) the costand timing of development and market acceptance of, and theavailability of components and raw materials required by a hydrogenfuel storage and delivery system, (ii) competition from current,improving and alternate power technologies, (iii) our ability to raisecapital at the times, in the amounts and at costs and terms that areacceptable to fund our business plan, (iv) our ability to protect ourintellectual property, (v) our ability to achieve budgeted revenue andexpense amounts, (vi) our ability to generate revenues from the sale orlicense of, or provision of services related to, our technology , (vii)our ability to form strategic alliances or partnerships to help promoteour technology and achieve market acceptance, (viii) our ability togenerate design, engineering, or management services revenueopportunities in the hydrogen generation or fuel cell markets, and (ix)other factors discussed herein under the caption"Investment Considerations" and other factorsdetailed from time to time in our filings with the Securities andExchange Commission.

PART I

Item1.    Business.

General

We were formed as a Delawarelimited liability company in 1998, organized and began operations onJanuary 1, 1999 and converted into a Delaware corporation on April 25,2000. We are an emerging technology company engaged in the business ofdeveloping innovative fuel systems for the safe storage, transportationand generation of hydrogen for use as an energy source. We licenseenabling technologies for the hydrogen economy.

Our HydrogenStorage and Delivery Technology

We have developed and patenteda proprietary system called Hydrogen on DemandTM,which safely generates hydrogen from environmentally friendly rawmaterials. Our technology can be used to generate hydrogen for use byfuel cells in the production of electricity, generate hydrogen for useby modified internal combustion engines, and provide hydrogen for otherindustrial purposes. In the proprietary process, the energy potentialof hydrogen is carried in the chemical bonds of sodium borohydride,which in the presence of a catalyst, releases hydrogen. The primaryinput components of the reaction are water and sodium borohydride, ahigh-energy substance made from borax. Borax is a mineral found insubstantial natural reserves globally. According to Rio Tinto Borax,the world's leading borax miner, there is enough borax availablein the world today to provide for the most aggressive projections foruse of sodium borohydride in Hydrogen onDemandTM.

We believe Millennium Cell is uniqueamong hydrogen fuel companies because our technology is scalable toapplications from small (cellular phones, personal digital assistants,notebook PCs) to large (auxiliary power units, stationary power,automobiles), when the demands for volumetric energy density areparticularly difficult.

In its simplest form, our sodiumborohydride technology provides the ability to store and transporthydrogen in a liquid or solid form. Because hydrogen provides theenergy used by fuel cells to create electricity, Hydrogen onDemandTM technology enables the transport and use ofclean electricity as a liquid or solid — safely and conveniently.To put this in another perspective, an 

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aqueous solution containing 35% byweight sodium borohydride and water used as the hydrogen source topower a fuel cell can have an energy density that is equal to orgreater than that of the same volume of gasoline consumed in aninternal combustion engine.

Our solution of sodium borohydridein water creates a fuel that delivers a non-flammable, energy dense andconvenient source of hydrogen to power fuel cells or internalcombustion engines. To generate hydrogen, the fuel makes contact with acatalyst. The catalyst is typically a non-volatile metal that mayinclude ruthenium and/or cobalt. Once in contact with the catalyst, thesodium borohydride reacts to generate pure hydrogen gas, in acontrollable, heat-releasing reaction, which can be used immediately orstored in a tank. The byproducts of our hydrogen-generating process areprimarily heat and borax, a type of sodium borate, which can berecycled to form sodium borohydride or other useful products.

The hydrogen-generating chemical reaction used in our processeliminates the on-board pollutants and undesirable emissions of typicalhydrocarbon-based power systems, which combust fossil fuels such asgasoline, natural gas and diesel. Furthermore, no pollutants arereleased as a result of our hydrogen-generating chemical reaction.Sodium borohydride-based energy systems have favorable energy density,power-to-weight and volume characteristics when compared to the mobilehydrogen power sources now in use.

We have used our hydrogengeneration system to fuel an operating series-hybrid sports utilityvehicle and two other vehicles, including a fuel cell vehicle and aformer New York City taxicab that burns hydrogen in its internalcombustion engine. DaimlerChrysler has incorporated our Hydrogen onDemandTM system into its full size, fuel cell minivanthe Town and Country Natrium. PSA PeugeotCitroën debuted its H2O vehicle, powered by our Hydrogen onDemandTM fuel system at the Paris Auto Show in 2002. Webelieve that sodium borohydride fuel could be distributed fortransportation purposes through refueling centers similar totoday's neighborhood gasoline stations. These refueling stationswill serve the dual purpose of distributing fuel and collecting thedischarged fuel by product for return and regeneration.

Thefueling and refueling supply chain for consumer electronics and standbyapplications will evolve based on customer need and convenience.Similarly, consumer's electronic power requirements are satisfiedtoday by the purchase of self-contained solid-state disposablebatteries and rechargeable battery systems. Residential and commercialpower needs are met with propane tank exchange businesses and deliveryof home heating oil or gases. Millennium Cell's Hydrogen onDemandTM technology is designed to integrate well withdiverse customer fueling requirements because of the unique safety andconvenience in storing, transporting, distributing, and using ourwater-based sodium borohydride fuel.

Advantages OverExisting Hydrogen Storage Technologies

Millennium Cell'shydrogen generation technology with its underlying characteristics ofsafety, portability and environmental compatibility make it anattractive alternative to existing technologies for many applications.Our core competitive advantage is that our technology solves twocritical problems related to the use of hydrogen as a fuel: generationand storage. Our Hydrogen on DemandTM system storesthe energy of hydrogen in the chemical bonds of sodium borohydride, asa dry powder or a non-flammable liquid. Hydrogen is released only whenit is needed, and because it is consumed on demand, no costly storagetechnology is required. We believe that this is a considerableadvantage when compared to other means of generating and storinghydrogen, which often require the storage of high-pressure hydrogen inbulky and potentially explosive tanks, or which consume pollutinghydrocarbon fuels in high temperature reformation processes.

Forconsumer electronic applications, the energy density of our sodiumborohydride-based hydrogen fuel offers significant runtime advantagesover today's batteries. In standby power generation applications,the fuel's safety characteristics allow indoor operation andgreater commercial acceptance. Current methods of storing significantamounts of hydrogen in vehicles require use of large tanks of cryogenicliquid or compressed gaseous hydrogen. For a 3,000-pound automobile toachieve a range of 300 miles using a proton exchange membrane("PEM") fuel cell system, the 

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equivalent of four large tanks of compressedgaseous hydrogen at 5,000 psi would be required. These tanks take upvaluable space on the vehicle that was intended for passenger and/orcargo. Both of these systems are cumbersome, voluminous and potentiallyhazardous, as an accident that damages a full tank of either cryogenicliquid or gaseous hydrogen might result in an extremely powerfulexplosion. In contrast, equivalent hydrogen storage in a Hydrogen onDemandTM system weighs less, requires less volume, andtakes up none of the vehicle's original passenger or cargo space,while posing less flammability or explosion risk than gasoline,compressed, or cryogenic hydrogen.

Advantages of our system areboth environmental and economic, as our system is not complex. Fuelcartridges for consumer electronic applications can be distributed viaexisting battery distribution supply chains. For future transportationmarkets, we envision the ability to retain much of the currentinfrastructure now used for distribution of transportation fuels. Therecycling process to regenerate the discharged fuel into sodiumborohydride is envisioned to be feed stock neutral, meaning that theleast expensive locally available source of energy can be used,including natural gas, waste oil, coal, hydroelectric, geothermal,nuclear or solar energy. If carbon fuels are used in the regenerationprocess, the emissions associated with these fuels are concentratedlocally and can be controlled as a single point source, unlikeconventional gasoline burning automobiles, which scatter emissionsthroughout an area with no real method of control.

Hydrocarbonfuels such as gasoline, when combusted, release into the atmospherecarbon monoxide and carbon dioxide. Additional pollutants are alsocreated, such as oxides of nitrogen — a key component of smog. Bycontrast, our process uses no carbon, while still taking advantage ofthe significant power potential of hydrogen. Neither of thereaction's byproducts, water and borax, is a pollutant. There isno "exhaust" in the conventional sense— water is harmlessly vented into the air as vapor. The byproductcaptured in our system can be recycled into sodium borohydride, the keyinput in our process.

Fossil fuel reformers produce hydrogenfrom gasoline, natural gas (methane) or other fossil fuels. In contrastto Hydrogen on DemandTM technology, reformers providelower purity hydrogen and create polluting emissions from the carbon,sulfur and nitrogen compounds present in the fossil fuel. Additionally,hydrogen from reformers contains carbon monoxide, which if not removed,will poison fuel cells. Reformers have high system complexity andcorrespondingly high capital costs. Metal hydrides are another optionfor storing the energy produced by hydrogen. However, metal hydridesystems still require an infrastructure for hydrogen gas and require asource of heat to desorb hydrogen. Metal hydride technology is alsoquite heavy, making it a poor choice in applications where overallsystem weight is an important design factor. Electrolysis is also usedto generate hydrogen from water, but provides no means of storing it.These systems also consume electricity in the process, with lowconversion efficiency and are designed only for stationary use.

Market Opportunity for Our Technology

Theevents of September 11th underscored the need for increasedenergy independence in the United States and have contributed to theelevation of energy issues in national priorities. PresidentBush's call in the 2003 State of the Union address for increasedspending to accelerate the development of the hydrogen economy,specifically the Bush Administration's FreedomCAR and HydrogenFuel initiative demonstrate the depth of the government'sinterest in fuel cell development for transportation and distributedgeneration. The administration has also announced a proposal foroverall reduction of carbon dioxide emissions. With energy issuescenter stage both from a geopolitical and an environmental standpoint,the coming years should be replete with opportunities to demonstratehow Hydrogen on DemandTM can contribute to bothnational objectives: cleaner energy created within our own borders.

Government authorities in North America, Europe and Japan continueto impose stringent environmental standards generally and haveincreased support for the development of clean and efficienttechnologies to significantly improve or replace existingcombustion-based technologies. While environmental considerationsprovided the initial impetus for automobile manufacturers to seekalternatives to the use of the internal combustion engine, we believethat these manufacturers are 

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beginning to recognize that fuel cell poweredvehicles will provide consumers with higher fuel efficiency, lowernoise and vibration, enhanced passenger comfort and performance and newvehicle design options, and potentially lower capital and maintenancecosts.

An immediate market opportunity exists in the growingworldwide consumer demand for quiet, clean and environmentally friendlyproducts in the power generation markets. Promising applicationsinclude portable power and uninterruptible power source (UPS) productsfor use in densely populated areas where noise pollution is asignificant concern and for use indoors or in other areas where highnoise and high emissions of internal combustion engine generators posesignificant problems. We believe that public concern over pollution isfocusing attention on the use of environmentally cleaner methods ofpower generation that can use non-renewable natural resources moreefficiently.

Near-term markets: Consumer Electronics andStandby Power

Large, near-term market opportunities forhydrogen energy are emerging in consumer electronics and standby power.In these applications, the markets are ready now for the performanceand economic advantages offered by hydrogen fuel cells enabled byHydrogen on DemandTM systems over incumbenttechnology. Mature and vulnerable lithium ion (Li Ion) batteries limitadvances in consumer electronic products. Standby power choices arelimited to lead acid battery systems and gasoline, natural gas ordiesel generator sets, which suffer from expensive lifecycle costs toown and operate, poor reliability, and difficult maintenance.Millennium Cell has adopted a very aggressive marketing strategy to notonly capitalize on this market readiness, but also remain positionedfor the long-term transportation market.

Consumer ElectronicsMarket

We believe that the highest growth battery marketsegment is that which includes advanced rechargeable batterytechnologies powering portable consumer electronics products such ascell phones, portable computers and digital imaging devices. For thesedevices, hydrogen-fueled fuel cells offer the potential for longerruntimes and more convenient refueling than batteries.

Hydrogen on DemandTM systems have significantpotential in these markets due to their unique safety characteristics,high energy density and low fuel and system cost. with a hydrogen fuelcell can deliver up to 3 times Li Ion battery's typical run time.Hydrogen on DemandTM fuel cartridges provide consumersafety in sealed, disposable packages containing non-flammablewater-soluble hydrogen storage. The value of Hydrogen onDemandTM systems for consumer is driven by thecombination of longer runtimes in a low-cost fuel cartridge will resultin consumer preference over rechargeable batteries. And, fuel cellslast longer and deliver more power at higher efficiency withhigh-purity hydrogen from Hydrogen on DemandTMsystems vs. reformed hydrocarbon streams.

Our activities inthese markets include the development of partnerships with companieswho will commercialize our technology into these high value markets.Our partners include developers of compatible fuel cells, manufacturersof consumer electronics devices who are demanding longer runtimes withgreater functionality in streamlined product designs, and companieswhose strength in retail distribution will establish placement of fuelcartridges where consumers can conveniently purchase replacementfuel.

In April of 2003, we entered into a cooperativedevelopment agreement with Samsung Electronics Company, Ltd.,headquartered in South Korea. With this agreement, Millennium Cell andSamsung began development and evaluation of fuel cartridge designs withour technology for fuel Hydrogen on DemandTMcell-powered consumer electronics devices. In 2004, we expect toannounce several additional partnerships and to negotiate subsequentlicensing agreements that will allow our partners to market ourtechnology into the target markets.

Standby Power Markets

We believe the recent August 2003 "NortheastBlackout", which shut down several major cities in NorthAmerica, and the widespread power outages caused by Hurricane Isabel inSeptember, underscore the vulnerability of our electric powerinfrastructure and the need for standby power. The 

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first commercial application for fuel celltechnology was in standby electrical generators, led by smallcommercial generators, then large commercial installations andresidential stationary standby systems followed. In standby powerapplications, fuel cells and our fuel system are economically favorableto battery-based systems. This is partly attributable to our simplefuel system being more affordable than other hydrogen storagetechnologies.

There are a number of reasons many fuel cellcompanies are targeting standby power applications. First, there exista large number of standby power installations using lead-acid batteriesthat are expensive and must be replaced frequently. Secondly, thesebatteries have carved out a segment of the standby power market thatvalue clean and quiet operation for indoor and residentialapplications. Thirdly, the relatively infrequent usage this marketrequires from the source of power means that fuel cells will deliverten years of life and the cost of fuel is insignificant. To besuccessful in this market, a key commercial goal of fuel cell systemsis to achieve a lower cost of ownership and deliver more runtime in thesame footprint.

Stationary power generation has experiencedrapid growth due to the demand for reliable power for critical useapplications, primarily standby power for telecommunications systems,Internet data centers and health care facilities. For example, mosttelecom applications in which batteries are used typically are designedto deliver 4-8 hours of back-up time so that road crews can repairdowned power lines before telephone power is lost. While each industrylisted above has different back-up time requirements, the theme ofreliable power is consistent. At today's prices, hydrogen fueland fuel cells are capable of providing a more favorable economic andspace utilization solution than incumbent lead-acid batteries.

We believe our Hydrogen on DemandTM system candeliver a safe, high-energy density and low-cost solution to fuelingfuel cells for standby power applications. Our Hydrogen onDemandTM systems provide hydrogen for standby powerwithout maintaining large amounts of hydrogen gas, which allowsinstallation where fire codes prohibit compressed hydrogen cylinders.This could expand the market for fuel cell driven standby powersystems. Packaged fuel can be distributed and delivered via commoncarriers for easy on-site installation. Hydrogen onDemandTM systems supply hydrogen for standby power atoperating costs similar to industrial hydrogen in steel cylinders.System costs are lower than for electrolyzers and reformers. WithHydrogen on DemandTM systems, hydrogen is literallyavailable "on demand".

Millennium Cellis currently working with fuel cell companies to develop commercialstandby power fuel systems. This activity is expected to lead toinitial commercial license and catalyst revenues in 2005. The drivingforce behind this development is the ability of the Hydrogen onDemandTM technology to provide a hydrogen fuel systemthat can be readily sited in both indoor and outdoor locations withoutrestrictions imposed by fire codes on compressed hydrogen storage. Aswell, our fuel can be conveniently delivered to and refueled at alltypes of remote and easy-to-access installations throughout theexisting telecommunications infrastructure.

MilitaryMarkets

We believe the need for advanced energy storagetechnologies is increasingly important in military applications.National security considerations include the need to relieve ournation's dependence on foreign oil, to provide plentiful, securesources of power for our armed forces around the world and to provideenergy for consumers during emergencies. Our military consumes asignificant amount of the total petroleum used for American interests.This large and costly fuel consumption is the impetus behind efforts tofind alternative fuels to power our ever-increasing defense presencearound the world.

The military market is an early adopter of newtechnology. In 2002, we delivered two units to TACOM (U.S. ArmyTank-Automotive and Armaments Command), and we anticipate a continuingrelationship with them. We are part of three coalitions that are inconsideration to receive appropriated funding in the 2004 federalbudget: a fuel cell development project at an Air Force base, a fuelcell-powered military vehicle, and a fuel cell system to replace thehighest volume battery used by all branches of the U.S. military.Further information on contracts and funding will be announced asfunding agencies and our coalition partners permit us.

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The potential advantages of MillenniumCell's technology for military applications include highvolumetric and gravimetric storage density, ease of transport andrefueling, modular conceptual design, high purity hydrogen stream, zeroemissions at the point of use, quiet operation with a low thermalsignature and minimal parasitic load, long term fuel storage, simpleand robust design, and perhaps most compelling, the fact that ourhydrogen fuel system reduces flammability and explosion risks,providing safety advantages in transport and in combat. For tacticaland non-tactical ground transportation, for individual soldier power,for shipboard energy demands and in the air, Hydrogen onDemandTM has the potential to solve many of the energychallenges facing the military of the 21st century.

Transportation Markets

The transportation market hascaptured a large amount of public attention with nearly every majorautomaker involved in fuel cell vehicle research, development anddemonstration. Government public statements have also focused ontransportation, as evidenced by the U.S. Department of Energy'sbillion-dollar FreedomCAR and Hydrogen Fuel Initiatives. In 2003, wecontinued our relationship with DaimlerChrysler (which began in 2000)who formally agreed to fund the continued development of Hydrogen onDemandTM technology and identified a follow-on projectin which we are now engaged. We have also continued our cooperativeagreement with PSA Peugeot Citroën by agreeing to a second phaseproject to follow its hydrogen-powered vehicle, the H2O.Peugeot's use of the fuel cell and fuel system for rangeextension with a five-kilowatt fuel cell complements our work in thestandby stationary and auxiliary power markets.

Our current fuelformulation uses sodium hydroxide as a stabilizer. This results in thedischarged fuel having a pH above 12.5, which requires more specializedhandling when transported in accordance with Environmental ProtectionAgency ("EPA") guidelines. In 2003, the EPAagreed to allow the discharged material to be shipped to U.S. Borax forprocessing. We are working to develop alternative means ofstabilization so that the discharged fuel would have a pH below12.5.

One particular area of focus in the transportation marketwill be maritime applications as the ports of the world seek to reduceemissions created both on water and on the docks. In 2003, wesuccessfully demonstrated Hydrogen on DemandTM forthe primary propulsion market applications. The Duffy Electric Boatwater taxi launched in the fall in Newport Beach Harbor, CA, validatesthe clean emissions and quiet application of our fuel system used inconjunction with a fuel cell to replace a diesel generator for rangeextension of the electric boat.

Hydrogen-FuelInfrastructure

We were recently awarded a $3.5 million dollar,three-year U.S. Department of Energy (DOE) grant to support advancedsodium borohydride regeneration research. Funding from this grant willbe realized in the early part of 2004. In addition, we responded to theDOE Grand Challenge, a grant program aimed at defining and developingthe best hydrogen storage technologies. If successful, our proposalwould result in a $500,000 grant the first year. Notification of thisaward is expected in 2004.

Supply Chain

The economicsof sodium borohydride are a critical factor in our progress. The goalof our research and development efforts in the area of sodiumborohydride production is to lower raw costs by significantly reducingthe amount of energy that is required in the current manufacturingprocess. Sodium borohydride is currently a specialty chemical that isproduced by a few manufacturers located in the United States andEurope. To ensure the short-term and long-term supply of sodiumborohydride for energy applications, we are collaborating with large,industrial partners including borate producers, industrial hydrogenproviders, chemical providers, and major energy producers (includingoil, gas, and electricity companies), as well as with the U.S. DOE.These collaborations will lead to an affordable, adequate supply ofsodium borohydride to support commercialization of products that useour technology.

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Our Strategy

Ourgoal is to convert our high volumetric energy dense, safe, andconvenient hydrogen storage technology from the development anddemonstration stage to commercialization. We believe that there is agrowing need for a safe method of storing and releasing hydrogen acrossa variety of markets, a need for a higher energy output alternativefuel, and a growing recognition of the necessity of preserving theenvironment. We believe that the characteristics of our sodiumborohydride technology will capitalize on all three. To achieve ourgoal, we have implemented the following strategy with the objective ofearning revenue through license and royalty agreements:

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| •  | Build Relationships with Governmentand Military Agencies.    We are pursuing sources of governmentfunding, including grants, authorizations, appropriations and directsales, and working to build constructive relationships acrossgovernment agencies and legislative bodies. We believe that theincreased visibility of hydrogen in the national energy policy will beadvantageous as increased emphasis is placed on finding efficient andeffective hydrogen storage and delivery mechanisms. |

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| •  | Develop Strategic Relationships withKey Consumer Electronics Manufacturers.    We believe suchrelationships facilitate the commercialization, distribution andconsumer acceptance of our fuel technology into early fuel cell adoptermarkets for notebook personal computers("PCs"), mobile phones, and personal digitalassistants ("PDAs"). |

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| •  | Build Relationships with Standby PowerGeneration OEMs and System Integrators.    Our technology isuniquely positioned to deliver a safe, clean hydrogen source for indoorand outdoor power generation applications. We believe that ourHydrogen on DemandTM system, when used in conjunctionwith a fuel cell in a standby power system, will provide aneconomically favorable solution to lead acid battery systems that arecurrently being used. We also believe our technology can deliverhydrogen fuel to generators with modified internal combustion enginesthat will significantly reduce emissions currently created byhydrocarbon fuels. |

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| •  | Pursue Ventureswith Fuel Cell Companies.    We believe that our Hydrogen onDemandTM system will provide an optimal solution forexisting fuel cell companies whose products and markets require thesafe and efficient generation and storage of hydrogen. We will leveragethese relationships to further our brand awareness and decrease thelead-time to end-product commercialization. |

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| •  | Build Relationships with theTransportation Community.    We are pursuing relationships withautomotive and watercraft manufacturers and component system providersbecause we believe they will be the key to capitalizing ontransportation opportunities in the future. As many of the top tierglobal automotive and maritime manufacturers and fleet vehicleoperators continue to allocate resources to research the development ofzero-emission fuel technologies, we believe our technology will be anattractive choice in the alternative fuel market. |

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| •  | Lower the Cost of SodiumBorohydride.    Sodium borohydride is currently a specialtychemical that is produced by a few manufacturers located in the UnitedStates and Europe. The current process has been used for more than 60years with few significant process improvements in that time. Webelieve that we can compete in the consumer electronic and standbypower markets at the current price of sodium borohydride, but it willbe necessary to scale-up production while reducing the cost of thechemical to be competitive in transportation markets. We have beenawarded patents for the primary production and regeneration of sodiumborohydride and continue to actively research, develop, and fileadditional patent applications worldwide. We believe that this newchemistry will lower the cost of sodium borohydride by reducing oreliminating some of the costly raw materials that are required today tomanufacture sodium borohydride. |

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| •  | Advance our ProprietaryTechnology.    We have a formidable intellectual propertyportfolio comprised of both awarded and pending patents for keycomponents and systems that comprise Hydrogen onDemandTM technology. This includes all boronhydride-fueled hydrogen |

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|   | generator system designs that utilize asupported catalyst, various catalyst compositions, and essential systemdesign features that enable higher energy density, ease of use, systemcost reduction and reliability. We also have patents awarded andpending for novel processes to manufacture sodium borohydride moreenergy efficiently and with more effective use of raw materials thancurrent processes. In all of our technology development efforts, wehave developed expertise and know-how beyond our patented inventions.We believe that this guarded intellectual property, including tradesecrets, presents an effective barrier to entry for our technology. Wewill continue to advance these key aspects of our proprietarytechnology and apply it to our focused areas of commercializationeffort – military, consumer electronics, standby power, andtransportation. |

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| •  | Develop MarketAwareness Generally.    We have relationships with state andfederal governmental agencies for energy and environment policy andregulation and are also members and/or participants in severalhydrogen, fuel cell, renewable energy, military, chemical, andelectronic device industry trade associations and events. Through thesecontinuing relationships, we believe that our technology will becomemore visible to a broader group of individuals and companies in ourtarget markets. |

Intellectual Property Rights

Ourstrategy is to secure protection of key intellectual property that wehave developed in order to build a strong portfolio of marketablerights to manufacture and sell systems that use our inventions. Inaddition, we seek to use and assert such intellectual property to ourcompetitive advantage. We rely on a combination of patents, tradesecrets, trademarks, and license and nondisclosure agreements toprotect our proprietary technology.

We use patents as thefrontline means of protecting our technological advances andinnovations, such as our proprietary hydrogen generators, components,materials, operating techniques and systems and, therefore, theenforcement of our patents is critical to our business. We have adopteda proactive approach to identifying patentable inventions and securingpatent protection through the timely filing and aggressive prosecutionof patent applications. Patent applications are filed in the UnitedStates and internationally, in countries carefully chosen based on thelikely value and enforceability of intellectual property rights.

We own 24 U.S. and non-U.S. patents, which cover a wide variety ofdevices, systems, uses and applications for various boron chemistries.As of February 27, 2004, we have filed an additional 14 U.S. and 23non-U.S. patent applications. We have also filed three U.S. trademarkapplications. Our earliest patent expires in 2015 and the most recentlyfiled applications, if issued, will not expire until 2023.

Ourintellectual property program includes a strong competitor-monitoringelement. We actively monitor the patent position, technicaldevelopments and other activities of companies operating in all of thepotential markets for our products. We expect activities relating toassertion and enforcement of our intellectual property rights toincrease as the market develops.

Research

Our researchteam focuses on improving our sodium borohydride characteristics foruse as a hydrogen source as well as in direct fuel cell technology byworking to optimize cost performance of materials and processes. Inorder to most effectively achieve these plans, our facility inEatontown, New Jersey houses sophisticated research and developmentequipment. This research complements development in our Hydrogen onDemandTM systems and components for specific market andcustomer applications or performance feature.

Competition

Consumer Electronics

The primary fuel cell technologycompetition for consumer electronic applications is the Direct MethanolFuel Cell ("DMFC") system. This technologygained popularity when the hydrogen storage 

8

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choices were limited to compressed gas ormetal hydrides. It became clear that a fuel with higher energy densitywould be required to meet the needs of consumer electronic devices.Without any concerted development of sodium borohydride-based systems,methanol became a popular choice because of its potential for highenergy density. Now, several years later, DMFC systems have yet to becommercialized due to several significant disadvantages. Recently,Motorola, MTI and Casio have all announced publicly that they are nolonger pursuing DMFC technology for consumer electronics applicationsdue to this technology's inability to deliver the performancenecessary to surpass Li Ion batteries. Hydrogen fuel cells andHydrogen on DemandTM technology provide a solution tosome of the problems of the DMFCs because they are smaller, moreefficient, lower cost and safer.

Standby Power

Thereare several key specifications for standby power fuel systems that makeour technology an attractive alternative to competing technologies. Webelieve the strengths of our technology align well with the needs ofthis market while our competition has critical gaps in fuel sitingregulations, volumetric energy density, startup time, system cost,gravimetric energy density, and/or ease of refueling that may limittheir opportunity to be successful in standby power applications**.**Our current weakness is that our fuel is not yet broadlydistributed for this market. However, we have progressed inpartnerships with our prospective licensees to develop a fuel deliverysolution that leverages the ability for our fuel to be conveniently andsafely transported to even the most remote installations. This effortshould develop strength for our technology from a logisticalperspective. Fuel cost is not a critical issue for standby powerapplications due to the low number of hours of annual usage.

Thecommercial standby power market is large and dominated byValve-Regulated Lead Acid (VRLA) batteries for cable television,telecommunications and UPS applications. The key features of thesystem, including safety, energy density, quick start-up, and hydrogenpurity, are attractive to standby fuel cell customers. For typicalstandby power requirements, Hydrogen on DemandTMsystems have an advantage to compressed hydrogen in their system volumeand weight with reduced risk of explosion or flammability. Lead acidbatteries require close maintenance and regular replacement, areinclined to fail in extreme heat or cold, are difficult to monitor orpredict failure, the cost, weight and volume increases proportionate toquantity (i.e., no economies of scale), and their disposal is regulatedas hazardous material. For all these reasons, even at today'sprices with limited availability, fuel cells can be an economicalchoice compared to VRLA batteries for many standby power needs.

Transportation

Our current transportation fuel systemdesign compares favorably with our competitors' current andfuture technologies, including cryogenic liquid hydrogen storage,conventional and advanced compressed hydrogen gas storage, andconventional and advanced metal hydride storage systems.

Millennium Cell's future fuel system design will meet the DOEgoals for hydrogen storage. We believe the advantages of hydrogen-fuelstorage systems will become more apparent as automobile and maritimemanufacturers account for consumer preference and vehicleprofitability, and we believe that Hydrogen onDemandTM technology will become an attractive fuelsystem choice with our current partners, DaimlerChrysler, PSA PeugeotCitroën and Duffy Electric Boat, and perhaps other leading globalcompanies.

Raw Materials

Sodium borohydride ismanufactured from a natural mineral called borax. There areapproximately 600 million metric tons of borax raw materials worldwide,and the United States is among the largest holders of borax reserves inthe world. Borax is most commonly found in dried lake or sea beds, andit is mined at the surface using drag lines, whereby buckets arecontinuously dragged across the ground scraping borax from the surface.Currently, a few manufacturers make sodium borohydride as a specialtychemical. Despite the great quantities of reserves and current annualproduction of borax, there are few commercial applications that requiresodium borohydride today. The most common application for sodiumborohydride is for use as a bleaching agent in the paper industry. Upuntil now, the relatively limited commercial uses of sodium borohydridehave allowed manufacturing to continue using technology from the early1950s.

9

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Human Resources

As of February27, 2004, we had a total staff of 31 employees, of which 22 arescientists, engineers and other professionals. We have no plans toincrease our staff in 2004.

Where You Can Find OtherInformation

Our annual report on Form 10-K, quarterly reportson Form 10-Q, current reports on Form 8-K and amendments to thosereports are available without charge on our website,www.millenniumcell.com, under the heading "InvestorRelations" as soon as reasonably practicable after theyare filed electronically with the SEC. The public may read and copy anymaterials filed by the Company with the SEC at the SEC's PublicReference Room at 450 Fifth Street, NW, Washington, DC 20549. Thepublic may obtain information on the operation of the Public ReferenceRoom by calling the SEC at 1-800-SEC-0330. The SEC maintains anInternet site that contains reports, proxy and information statementsand other information regarding issuers that file electronically withthe SEC at http://www.sec.gov. The contents of these websites are notincorporated into this filing. Further, the Company's referencesto the URLs for these websites are intended to be inactive textualreferences only. We are providing the address to our Internet sitesolely for the information of investors. We do not intend the addressto be an active link or to otherwise incorporate the contents of thewebsite into this report.

Investment Considerations

Wehave decided to make disclosures of important qualitative risk factorsthat should be considered along with those described in our otherfilings with the Securities and Exchange Commission prior to making aninvestment in our common stock. Our business, the results of operationsand the trading price of our common stock could be harmed by any of thefollowing factors:

|              |                                                                                                                                                                                                                                                                                                |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We are adevelopment stage company, which has only been in business for a shorttime. In addition, many aspects of our business plan rest on beliefsformed by our management and have not necessarily been supported byindependent sources. As a result, your basis for evaluating us islimited. |

|              |                                                                                                                                                                                                                            |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We have incurred substantiallosses and expect losses for the foreseeable future. Accordingly, wemay not be able to achieve profitability, and even if we do becomeprofitable, we may not be able to sustain profitability. |

|              |                                                                                                                                                                                                             |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We expect our future operating results tovary significantly quarter to quarter, and increase the likelihood thatwe may fail to meet the expectations of securities analysts andinvestors at any given time. |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Asubstantial number of shares of common stock have been, and areexpected in the near future to be, registered for resale in connectionwith the issuance of common stock to private investors and the issuanceof our common stock after conversion of outstanding debentures andexercise of outstanding warrants. Resale of a significant number ofshares into the public markets could depress the trading price of ourcommon stock and make it more difficult for our stockholders to sellequity securities in the future. |

|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Ourdebentures are subject to a number of restrictive covenants, includinga requirement that our common stock remain listed on a NationalExchange. If we are unable to maintain a listing on either NASDAQNational Market or NASDAQ SmallCap Market, the debentures may be calledby the holders. Furthermore, if the NASDAQ National Market or SmallCaplisting is not maintained, shareholders might find it more difficult toliquidate their investment. |

|              |                                                                                                                                                                                                                                                                                                                                                                         |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We may berequired to issue more shares of common stock to the holders of thedebentures and the warrants as a result of the anti-dilution provisionsof the debentures and the warrants. In addition, subject to thesatisfaction of numerous conditions, we have the right to forceconversion of the unsecured debentures at a discount to current marketprices. Sales of |

10

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|        |                                                                                                                                                        |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | substantial amounts of common stock couldreduce the market price for our common stock and make it more difficultfor stockholders to sell their shares. |

|              |                                                                                                                                                                                         |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Failure to comply with certain financialconditions under the terms of the unsecured convertible debenture couldresult in an event of default under the unsecured convertibledebentures. |

|              |                                                                                                                                                                                                                |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We may need future capitalto complete our product development and commercialization plans. If weare able to raise additional capital, it may dilute your ownership orrestrict our ability to run our business. |

|              |                                                                                                                                                                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We may be subject to litigation if ourcommon stock price is volatile, which may result in substantial costsand a diversion of our management's attention and resources andcould have a negative effect on our business and results ofoperations. |

|              |                                                                                                                                                                                                   |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We may be unable tocontinue to complete prototype development and engineering ofcommercially viable hydrogen generation systems and, if not, may not beable to build our business as anticipated. |

|              |                                                                                                                                                                                                                                                    |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Failure to meet milestones andperformance goals with potential customers could delay or impedecommercialization of our technology and potential purchasers of oursystems may decline to purchase them or choose to purchase alternatetechnologies. |

|              |                                                                                                                                                                                       |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Our hydrogen generationsystems may only be commercially viable as a component of othercompanies' products and these companies may choose not to includeour systems in their products. |

|              |                                                                                                                                                                                        |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Anyperceived problem while conducting demonstrations of our technologycould hurt our reputation and the reputation of our products, whichwould impede the development of our business. |

|              |                                                                                                                                                                                                                                                                                                                                                      |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Some of the raw materials that thehydrogen generation systems use are expensive and are not manufacturedin large quantities and sell at high margin. Therefore, the energyproduced by our systems may cost more than energy provided throughconventional and alternative systems. Accordingly, our systems may beless attractive to potential users. |

|              |                                                                                                                                                 |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | If we cannot develop and demonstratelower cost processes for the manufacture of sodium borohydride, ourcommercialization plans may be hindered. |

|              |                                                                                                                                          |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------|
| •  | A mass market for fuel cells, hydrogengeneration systems or batteries may never develop or may take longer todevelop than we anticipate. |

|              |                                                                                                                                                                                                                                           |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We areheavily dependent on companies or governmental agencies that wouldinclude our hydrogen generation systems in their products and todevelop the infrastructure required to use of our technologies incertain applications or markets. |

|              |                                                                                                                         |
|--------------|-------------------------------------------------------------------------------------------------------------------------|
| •  | Weare dependent on government contracts business which is important tothe implementation of our commercializationplans. |

|              |                                                                                                                             |
|--------------|-----------------------------------------------------------------------------------------------------------------------------|
| •  | Failure to meet cost orperformance goals with potential customers could delay or impedecommercialization of our technology. |

|              |                                                                                                                                                                                                                                      |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Changes in environmental policies couldresult in automobile manufacturers abandoning their interest in fuelcell powered vehicles. This may substantially lessen the market for ourproducts and harm the development of our business. |

|              |                                                                                                                                                                  |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Since zero emission vehicle requirementscan be met without using fuel cells, automobile manufacturers may useother technologies to meet regulatory requirements. |

|              |                                                                                                                    |
|--------------|--------------------------------------------------------------------------------------------------------------------|
| •  | Any accidents involving our products orthe raw materials used in our products could impair their marketacceptance. |

|              |                                                                                                                           |
|--------------|---------------------------------------------------------------------------------------------------------------------------|
| •  | We will continue to faceintense competition from alternative power technologies and may beunable to compete successfully. |

11

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|              |                                                                                                                                                                                                                      |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | We depend onour intellectual property and may not be able to protect the rights tothat intellectual property. Our failure to protect this intellectualproperty could adversely affect our future growth and success. |

|              |                                                                                                  |
|--------------|--------------------------------------------------------------------------------------------------|
| •  | Our future plans could be adverselyaffected if we are unable to attract or retain key personnel. |

|              |                                       |
|--------------|---------------------------------------|
| •  | We do not intend to pay anydividends. |

Item 2.    Properties.

Our principaloffices are located at 1 Industrial Way West, Eatontown, New Jersey07724, currently occupying 32,500 square feet. Our amended lease willexpire in 2008, with five and three year options to renew through 2016.We believe that the current facilities will be sufficient for ouroperations in the foreseeable future.

Item 3.    LegalProceedings.

From time to time, we may be involved inlitigation relating to claims arising in the normal course of business.We do not believe that any such litigation would have a materialadverse effect on our results of operations or financial condition.

Item 4.    Submission of Matters to a Vote of SecurityHolders.

No matters were submitted to a vote of stockholdersduring the fourth quarter of the fiscal year covered by thisreport.

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PARTII

|               |                                                                                                                 |
|---------------|-----------------------------------------------------------------------------------------------------------------|
| Item 5.  | Market For TheRegistrant's Common Equity, Related Shareholder Matters andIssuer Purchases of Equity Securities. |

Market Price AndDividend Information

    Price Range of CommonStock

Our common stock is traded on the NASDAQ NationalMarket under the symbol "MCEL". The followingtable sets forth the high and low closing sale prices for our commonstock as reported by NASDAQ.

|                                         |  |                  |      |        |  |   |      |        |  |  |
|-----------------------------------------|--|------------------|------|--------|--|---|------|--------|--|--|
|                                    |  | CommonStockPrice |
| **FiscalYear Ending December 31,2003**  |  | High             |      | Low    |
| Fourthquarter                           |  | $                | 3.40 |   |  | $ | 2.31 |   |
| Thirdquarter                            |  | $                | 3.95 |   |  | $ | 1.62 |   |
| Secondquarter                           |  | $                | 2.08 |   |  | $ | 1.50 |   |
| Firstquarter                            |  | $                | 2.50 |   |  | $ | 1.53 |   |
|                                    |  |
| **FiscalYear Ending December 31, 2002** |  |
| Fourthquarter                           |  | $                | 2.83 |   |  | $ | 1.78 |   |
| Thirdquarter                            |  | $                | 3.01 |   |  | $ | 1.90 |   |
| Secondquarter                           |  | $                | 4.25 |   |  | $ | 2.77 |   |
| Firstquarter                            |  | $                | 6.48 |   |  | $ | 3.45 |   |
|                                         |

As of March 1,2004, there were approximately 282 holders of record of our commonstock. The closing sale price of our common stock on March 1, 2004 was$2.36 per share.

    Dividend Policy

Wehave never declared or paid any cash dividends on our common stock. Wecurrently intend to retain our future earnings, if any, to finance theexpansion of our business and do not expect to pay any dividends in theforeseeable future.

Payment of future cash dividends, if any,will be at the discretion of our board of directors after taking intoaccount various factors, including our financial condition, operatingresults, current and anticipated cash needs and plans forexpansion.

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Item 6.    Selected FinancialData.

The following table presents selected historicalfinancial data for the twelve months ended December 31, 2003, 2002,2001, 2000 and 1999 (year of inception). Our selected financial datashould be read in conjunction with "Management'sDiscussion and Analysis of Financial Condition and Results ofOperations" and the historical financial statements andrelated notes included elsewhere in this Form 10-K.

|                                          |  |                                |             |                                |  |                                |             |                                |  |                                                  |             |                                |  |        |             |         |  |        |            |         |  |        |             |         |  |  |
|------------------------------------------|--|--------------------------------|-------------|--------------------------------|--|--------------------------------|-------------|--------------------------------|--|--------------------------------------------------|-------------|--------------------------------|--|--------|-------------|---------|--|--------|------------|---------|--|--------|-------------|---------|--|--|
|                                     |  | TwelveMonthsEndedDec. 31, 2003 |             | TwelveMonthsEndedDec. 31, 2002 |  | TwelveMonthsEndedDec. 31, 2001 |             | TwelveMonthsEndedDec. 31, 2000 |  | Period FromJan. 1,1999(inception) toDec. 31,1999 |             | CumulativeAmountsFromInception |
| **Statementof OperationsData**           |  |
| Revenue                                  |  | $                              | 466,859     |                           |  | $                              | 719,392     |                           |  | $                                                | —     |                           |  | $      | —     |    |  | $      | —    |    |  | $      | 1,186,251   |    |
| Costof revenue                           |  |                           | 409,449     |                           |  |                           | 690,059     |                           |  |                                             | —     |                           |  |   | —     |    |  |   | —    |    |  |   | 1,099,508   |    |
| Grossmargin                              |  |                           | 57,410      |                           |  |                           | 29,333      |                           |  |                                             | —     |                           |  |   | —     |    |  |   | —    |    |  |   | 86,743      |    |
| Productdevelopment andmarketing          |  |                           | 5,294,419   |                           |  |                           | 5,788,315   |                           |  |                                             | 5,513,172   |                           |  |   | —     |    |  |   | —    |    |  |   | 16,595,906  |    |
| Generalandadministrative                 |  |                           | 3,835,873   |                           |  |                           | 4,052,943   |                           |  |                                             | 4,726,543   |                           |  |   | 3,173,393   |    |  |   | 164,953    |    |  |   | 15,953,705  |    |
| Restructuringexpense                     |  |                           | —     |                           |  |                           | 104,982     |                           |  |                                             | —     |                           |  |   | —     |    |  |   | —    |    |  |   | 104,982     |    |
| Non-cashcharges                          |  |                           | 2,164,634   |                           |  |                           | 4,148,251   |                           |  |                                             | 7,341,461   |                           |  |   | 10,785,381  |    |  |   | —    |    |  |   | 24,439,727  |    |
| Depreciationandamortization              |  |                           | 681,358     |                           |  |                           | 710,975     |                           |  |                                             | 473,031     |                           |  |   | 256,820     |    |  |   | 57,007     |    |  |   | 2,179,191   |    |
| Researchanddevelopment                   |  |                           | 1,020,102   |                           |  |                           | 1,515,376   |                           |  |                                             | 2,624,823   |                           |  |   | 2,131,684   |    |  |   | 820,128    |    |  |   | 8,112,113   |    |
| Totaloperatingexpenses                   |  |                           | 12,996,386  |                           |  |                           | 16,320,842  |                           |  |                                             | 20,679,030  |                           |  |   | 16,347,278  |    |  |   | 1,042,088  |    |  |   | 67,385,624  |    |
| Lossfromoperations                       |  |                           | (12,938,976 | )                         |  |                           | (16,291,509 | )                         |  |                                             | (20,679,030 | )                         |  |   | (16,347,278 | )  |  |   | (1,042,088 | )  |  |   | (67,298,881 | )  |
| Interestincome (expense),net             |  |                           | (2,897,077  | )                         |  |                           | 300,299     |                           |  |                                             | 1,226,701   |                           |  |   | 678,194     |    |  |   | 10,811     |    |  |   | (681,072    | )  |
| Equityin losses ofaffiliate              |  |                           | (488,364    | )                         |  |                           | (367,714    | )                         |  |                                             | —     |                           |  |   | —     |    |  |   | —    |    |  |   | (856,078    | )  |
| Lossbefore incometaxes                   |  |                           | (16,324,417 | )                         |  |                           | (16,358,924 | )                         |  |                                             | (19,452,329 | )                         |  |   | (15,669,084 | )  |  |   | (1,031,277 | )  |  |   | (68,836,031 | )  |
| Benefitfrom incometaxes                  |  |                           | 221,480     |                           |  |                           | 234,963     |                           |  |                                             | —     |                           |  |   | —     |    |  |   | —    |    |  |   | 456,443     |    |
| Netloss                                  |  |                           | (16,102,937 | )                         |  |                           | (16,123,961 | )                         |  |                                             | (19,452,329 | )                         |  |   | (15,669,084 | )  |  |   | (1,031,277 | )  |  |   | (68,379,588 | )  |
| Preferredstockamortization               |  |                           | —     |                           |  |                           | —     |                           |  |                                             | —     |                           |  |   | 2,150,881   |    |  |   | —    |    |  |   | 2,150,881   |    |
| Netloss applicable to commonstockholders |  | $                              | (16,102,937 | )                         |  | $                              | (16,123,961 | )                         |  | $                                                | (19,452,329 | )                         |  | $      | (17,819,965 | )  |  | $      | (1,031,277 | )  |  | $      | (70,530,469 | )  |
| Lossper share — basic anddiluted   |  | $                              | (.51        | )                         |  | $                              | (.58        | )                         |  | $                                                | (.71        | )                         |  | $      | (.69        | )  |  | $      | (.04       | )  |  | $      | (2.61       | )  |
|                                          |

|                           |  |                  |            |                  |  |   |            |        |  |  |
|---------------------------|--|------------------|------------|------------------|--|---|------------|--------|--|--|
|                      |  | December31, 2003 |            | December 31,2002 |
| Balance SheetData         |  |
| Totalassets               |  | $                | 10,984,672 |             |  | $ | 14,165,811 |   |
| Secureddebentures         |  | $                | 2,399,988  |             |  | $ | 2,399,988  |   |
| Refundablegrantobligation |  | $                | 187,266    |             |  | $ | 227,522    |   |
| Capitalleaseobligation    |  | $                | 31,909     |             |  | $ | —    |   |
|                           |

|              |                                                                                       |
|--------------|---------------------------------------------------------------------------------------|
| Item7.  | Management's Discussion and Analysis ofFinancial Condition and Results of Operations. |

The followingdiscussion should be read in conjunction with our financial statementsand the notes thereto appearing elsewhere in this Form 10-K.

General

We were formed as a Delaware limited liabilitycompany on December 17, 1998, and organized and began operations onJanuary 1, 1999 (inception date). We were converted into a Delawarecorporation on April 25, 2000 when all of the outstanding equityinterests of the limited liability company were converted into sharesof common stock of the corporation. Unless otherwise indicated, allinformation that we present in this Form 10-K for any date or periodgives effect to the conversion as if it had occurred on that date or asof the beginning of that period and all references to common stock forperiods before the conversion mean our issued and outstandingmembership interests.

14

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Overview

We have developed and patented a process called Hydrogen onDemand that safely generates pure hydrogen orelectricity from environmentally friendly raw materials. In theprocess, the energy potential of hydrogen is carried in the chemicalbonds of sodium borohydride, which in the presence of a catalystreleases hydrogen or produces electricity. The primary input componentsof the reaction are water and sodium borohydride, a derivative ofborax, which is found in substantial natural reserves globally.Hydrogen from this system can be used to power fuel cells, as well asfed directly to internal combustion engines. We also have patentscovering boron-based longer-life batteries. Our goal is to convert ourtechnology from the research and development stage tocommercialization.

Our losses have resulted primarily from costsassociated with product development and research and developmentactivities as well as non-cash amortization of preferred stock andnon-cash charges related to the issuance of stock options and warrantsto employees and third parties. As a result of planned expenditures inthe areas of research, product development and marketing and additionalnon-cash charges relating to employee stock options, we expect to incuradditional operating losses for the foreseeable future.

Resultsof Operations

Year Ended December 31, 2003 versus2002

Revenues.    We recorded $466,859 ofrevenues during the year ended December 31, 2003 compared with revenuesof $719,392 in 2002. The decline in revenue was attributable to fewersales of large prototype systems and services to the transportationmarkets and more sales of smaller systems designed for standby powerand consumer electronics markets.

In the near-term, revenues areexpected 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 royaltypayments or joint venture revenue from licensees or strategicpartnerships. Revenues will be recognized in the period in whichtechnology is delivered, licensing revenues are earned, or as servicesare performed.

Cost of Revenues.    We recorded cost ofrevenues of $409,449 during the year ended December 31, 2003, down from$690,059 for the year ended December 31, 2002. The decline in cost ofrevenue was attributable to fewer sales of large prototype systems andservices to the transportation markets and more sales of smallersystems designed for standby power and consumer electronics markets.Cost of revenues on prototype unit sales during the development stageare allocated from the Product Development and Marketing expense andResearch and Development expense line items on the income statementdepending on the nature of the project.

Product Developmentand Marketing Expense.    Product development and marketingexpenses for the year ended December 31, 2003 were $5,294,419 comparedto $5,788,315 for the year ended December 31, 2002, a decrease of$493,896. This decrease is mostly attributable to cost reductionefforts implemented throughout fiscal 2003.

General andAdministrative Expense.    General and administrative expenseswere $3,835,873 for the year ended December 31, 2003 compared to$4,052,943 for the year ended December 31, 2002, a decrease of$217,070. The decrease was a result of increased efficiency of ouradministrative and finance organizations as well as the impact ofheadcount reductions and other cost reduction activities.

Restructuring Expense.    There was no restructuringexpense in 2003. Restructuring expense was $104,982 for the year endedDecember 31, 2002. During the second quarter of 2002, the Companyincurred and paid restructuring expenses primarily for severance costsrelated to 14 employee separations.

Non-cashCharges.    Non-cash charges were $2,164,634 for the year endedDecember 31, 2003 as compared to $4,148,251 compared for the year endedDecember 31, 2002, a decrease of $1,983,617. The decrease was mostlyattributable to the completion of vesting in 2003 of below market valueoptions issued to employees during 2000.

15

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Depreciation andAmortization.    Depreciation and amortization was $681,358 forthe year ended December 31, 2003 compared to $710,975 for the yearended December 31, 2002, a decrease of $29,617. This was attributableto more assets being fully depreciated than were added during theyear.

Research and Development Expense.    Research anddevelopment expenses were $1,020,102 for the year ended December 31,2003 compared to $1,515,376 for the year ended December 31, 2002, adecrease of $495,274. The decrease is primarily attributable to thefull year impact of the restructuring announced in May 2002 as well asother cost reduction programs implemented in 2003.

InterestIncome (Expense), net.    Net interest expense was $2,897,077 forthe year ended December 31, 2003 compared to interest income of$300,299 for the year ended December 31, 2002, a change of $3,197,376.The increase in interest expense was attributable to the issuance andsubsequent conversion of the debentures issued in December 2002 andJanuary 2003 through a private placement financing. As the unsecureddebentures were converted into common shares, the pro rata portion ofthe discount and charges related to the beneficial conversion featureswas recorded as interest expense. As of December 31, 2003,approximately $11.3 million of the debentures issued in the privateplacement financing had been converted to common stock.

Thecomponents of interest expense were as follows for the year endedDecember 31, 2003 (in millions):

|                                 |  |        |     |        |  |  |
|---------------------------------|--|--------|-----|--------|--|--|
| Beneficialconversion feature    |  | $      | 1.4 |   |
| Amortization of debtdiscount    |  |   | 0.9 |   |
| Amortization of debt issuecosts |  |   | 0.6 |   |
| TotalInterestExpense            |  | $      | 2.9 |   |
|                                 |

Equityin Losses of Affiliate.    In July 2002, the Company agreed toacquire a 50% non-controlling interest in a European alkalinefuel cell company (the "Affiliate"). Duringthe period from July 2002 to June 2003, the Company directly andindirectly provided limited funding for their proportionate share ofthe Affiliate's operating expenses. As of June 30, 2003, theCompany had written off its Investment in Affiliate on the balancesheet and determined the fair value of the investment was zero. Duringthe third quarter of 2003, the Company decided to abandon its interestin the Affiliate and no gain or loss was recognized upon thisevent.

Benefit from Income Taxes.    Benefit fromincome taxes was $221,480 for the year ended December 31, 2003 ascompared to $234,963 in 2002. This income was derived from theCompany's participation in the New Jersey Emerging Technology andBiotechnology Financial Assistance Program. This program allows certaincompanies to transfer New Jersey net operating losses to othercompanies. This program, if continued by the state in future years, mayproduce similar cash inflows for the Company each year.

Year Ended December 31, 2002 versus 2001

Revenues.    We recorded $719,392 of revenues duringthe year ended December 31, 2002. The revenues were attributable tosales of prototype Hydrogen on Demandsystems and design and engineering services. There were no revenues in2001.

In the near-term, revenues are expected to be derivedsubstantially from up-front license fees, research contracts withvarious federal, state and local agencies, collaborations with othercompanies, management services, and royalty payments or joint venturerevenue from licensees or strategic partnerships. Revenues will berecognized in the period in which technology is delivered, licensingrevenues are earned, or as services are performed.

Cost ofRevenues.    We recorded cost of revenues of $690,059 during theyear ended December 31, 2002. Cost of revenues on prototype unit salesduring the development stage are allocated from the Product Developmentand Marketing expense and Research and Development expense line itemson the income statement depending on the nature of the project. Therewas no cost of revenues in the year ended December 31, 2001.

16

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Product Development and MarketingExpense.    Product development and marketing expenses for theyear ended December 31, 2002 were $5,788,315 compared to $5,513,172 forthe year ended December 31, 2001, an increase of $275,143. Thisincrease is mostly attributable to increased business developmentresources dedicated to penetrating markets in the portable power andmilitary applications in addition to spending on programs that supportour technology's continued evolution from research tocommercialization.

General and AdministrativeExpense.    General and administrative expenses were $4,052,943for the year ended December 31, 2002 compared to $4,726,543 for theyear ended December 31, 2001, a decrease of $673,600. The decrease wasa result of increased efficiency of our administrative and financeorganizations as well as the impact of headcount reductions in thoseorganizations during the second quarter of 2002.

Restructuring Expense.    Restructuring expense was$104,982 for the year ended December 31, 2002. During the secondquarter of 2002, the Company incurred and paid restructuring expensesprimarily for severance costs related to 14 employee separations. Therewas no restructuring expense in 2001.

Non-cashCharges.    Non-cash charges were $4,148,251 for the year endedDecember 31, 2002 compared to $7,341,461 for the year ended December31, 2001, a decrease of $3,193,210. The decrease was mostlyattributable to the substantial completion of vesting in 2001 ofwarrants issued to affiliates during 2000 and the forfeiture of certainunvested employee options during the fourth quarter of 2001. Includedin the charges was an accrual for approximately $225,000 for Board ofDirectors' compensation for meetings held in 2002 that will bepaid to the directors in shares of the Company's common stock in2003.

Depreciation and Amortization.    Depreciationand amortization was $710,975 for the year ended December 31, 2002compared to $473,031 for the year ended December 31, 2001, an increaseof $237,944. This increase reflects depreciation on our newly completedlab and facilities expansion program in 2002.

Research andDevelopment Expense.    Research and development expenses were$1,515,376 for the year ended December 31, 2002 compared to $2,624,823for the year ended December 31, 2001, a decrease of $1,109,447. Thedecrease is primarily attributable to the cost reduction effortsannounced in May 2002.

Interest Income, net.    Netinterest income was $300,299 for the year ended December 31, 2002compared to $1,226,701 for the year ended December 31, 2001, a decreaseof $926,402. The decrease in net interest income was the result ofdeclining average cash balances and interest rate decreases from 2001to 2002 in addition to interest expense and amortization of discountincurred on the $3.5 million unsecured debentures issued in December2002. The total interest expense incurred for the year ended December31, 2002 for the $3.5 million unsecured debentures was $39,176.

Equity in Losses of Affiliate.    In July 2002, the Companyagreed to acquire a 50% interest in a European alkaline fuelcell company (the "Affiliate"). TheCompany's investment is accounted for by the equity method.According to the purchase agreement, the Company was responsible torecord its portion of the Affiliate's losses from July 1, 2002through December 31, 2002. The losses recorded by the Company duringthis period were $367,714.

Benefit from IncomeTaxes.    Benefit from income taxes was $234,963 for the yearended December 31, 2002. This income was derived from theCompany's participation in the New Jersey Emerging Technology andBiotechnology Financial Assistance Program. This program allows certaincompanies to transfer New Jersey net operating losses to othercompanies. This program, if continued by the state in future years, mayproduce similar cash inflows for the Company each year.

Liquidity and Capital Resources

General

Since the inception date, we have financed our operations primarilythrough our initial public offering in August 2000 and privateplacements of equity and debt securities. In 1999, we issued

17

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$1,250,000 of membership interests inMillennium Cell LLC for cash, which subsequently were converted intoour common stock as of April 25, 2000. We also received a capitalcontribution of $500,000 in the first quarter of 2000, and in May 2000,we sold 759,368 shares of Series A preferred stock, which automaticallyconverted into 759,368 shares of common stock upon the completion ofour initial public offering. The net proceeds from our initial publicoffering totaled approximately $29.9 million and net proceeds fromprivate placement transactions in 2002 and 2003 totaling $14.1 million.In February 2004, the Company received net proceeds of approximately$5.6 million from a new private placement transaction.

Ballard Power Systems

In October 2000, wereceived $2.4 million in cash from Ballard Power Systems Inc. as anadvance for prospective royalties pursuant to a product developmentagreement between Ballard and us. In addition, we granted to Ballard awarrant to purchase up to 400,000 shares of our common stock, which wasterminated as part of the strategic investment discussed below. Uponcompletion of certain stages of product development, the parties agreedto negotiate in good faith for the grant of a license of our technologyto Ballard in certain fields of use, at which time prepaid royaltiesmay be earned and the warrants will be issued and recorded at fairvalue.

On November 8, 2002, we agreed with Ballard that theproduct development milestones have been achieved and agreed to convertthe $2.4 million refundable royalty payment into an investment in ourcompany in the form of secured convertible debentures due November 8,2005. The Ballard debentures are secured by a standby letter of creditissued by Wachovia Bank, National Association, with an aggregate faceamount equal to the outstanding principal. We pledged to the bank ascollateral $2.4 million of funds previously reported under cash andcash equivalents on the accompanying balance sheet. We will not havethe ability to use this cash until the bank pledges are released uponconversion of the Ballard debentures to common stock. The debenturesare convertible at a conversion price of $4.25, subject toanti-dilution adjustments and certain price protection in the event theCompany initiates the conversion. As part of the purchase agreemententered into between Ballard and us, Ballard retains the option tolicense the non-exclusive right to manufacture and sell products withour Hydrogen on Demand technology for specificportable fuel cell products and stationary internal combustion enginegenerators.

Private Placement Transactions

On June 19, 2002, the Company entered into a private placementfinancing transaction with two institutional and accredited investorspursuant to the terms of a securities purchase agreement among theCompany and the purchasers. The private placement was exempt fromregistration under the Securities Act of 1933, as amended, pursuant toSection 4(2) of such Act. The placement consisted of the sale of1,075,269 shares of common stock for gross proceeds of $3.0 million andwarrants to purchase 268,817 shares of common stock (with an exerciseprice of $3.93 per share).

On October 31, 2002, the Companyentered into a separate private placement financing transaction withthe same two institutional and accredited investors pursuant to theterms of a new purchase agreement among the Company and the purchasers.The private placement was exempt from registration under the SecuritiesAct of 1933, as amended, pursuant to Section 4(2) of such Act. Theplacement consisted of the sale of 588,790 shares of common stock andwarrants (with an exercise price of $2.32) to purchase 147,198 sharesof common stock of the Company for gross proceeds of $1.0 million.Pursuant to the terms of the purchase agreement, one of the investorsagreed to acquire $12 million of secured and unsecured debentures,convertible into common stock of the Company, subject to certain termsand conditions, and warrants.

In December 2002, the Companyissued convertible unsecured debentures with a principal amount of $3.5million. As of June 30, 2003, the entire $3.5 million of unsecureddebentures had been converted into 2,094,048 shares of commonstock.

On January 23, 2003, the Company's shareholdersapproved the issuance of $8.5 million of secured convertible debenturesand warrants to acquire 589,376 shares. The secured debentures were

18

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issued on January 30, 2003. During the thirdquarter of 2003, the Company exchanged all outstanding securedconvertible debentures for unsecured convertible debentures andregistered the common shares underlying all of the unsecuredconvertible debentures. As a result, the letter of credit securing thesecured convertible debentures was released. During the third andfourth quarters of 2003, the Company converted approximately $7.8million of the unsecured convertible debentures into 3,373,953 sharesof common stock. As a result, approximately $0.7 million of unsecuredconvertible debentures were outstanding as of December 31, 2003. Thesedebentures were converted to common shares in January 2004.

Inaccordance with APB No. 14, "Accounting for ConvertibleDebt and Debt Issued with Stock Purchase Warrants", theCompany determined that the fair value of the debentures issued inDecember 2002 and in January 2003 (the "ConvertibleDebentures") were $11,036,195 upon issuance. The resultingdiscount is being amortized as interest expense, using the effectiveinterest method, over the original maturity period of the debentures orratably as they are converted, whichever comes first. During the yearended December 31, 2003, the Company recognized a non-cash charge tointerest expense of $926,832 for discount amortization ondebentures.

In accordance with Emerging Issues Task Force("EITF") No. 00-27, "Applicationof Issue No. 98-5 to Certain Convertible Instruments", andEITF No. 98-5, "Accounting for Convertible Securities withBeneficial Conversion Features or Contingently Adjustable ConversionRatios", and after considering the terms of theConvertible Debentures, the Company determined that the debenturescontained a beneficial conversion feature("BCF"). The BCF existed because of adiscount that was given to the investor for the company-initiatedconversion of the debentures. These discounts ranged from 4% to12%, depending on the amount of debentures converted into commonstock. Accordingly, at the time of conversion, the Company recorded asinterest expense the applicable BCF based on the fair value of theconversion feature on that date. During the year ended December 31,2003, approximately $11.3 million of debentures were converted at theoption of the Company and BCF charges of $1,356,825 were recorded.

In January 2004, the Company entered into a private placementfinancing transaction with an institutional and accredited investorpursuant to the terms of a securities purchase agreement between theCompany and the purchaser. The private placement was exempt fromregistration under the Securities Act of 1933, as amended, pursuant toSection 4(2) of such Act. Pursuant to the terms of the agreement, theinvestor was obligated, subject to satisfaction of certain conditionsthat were outside of its control, to purchase $6 million of unsecureddebentures and, at the Company's sole option, up to an additional$4 million of unsecured convertible debentures.

The registrationof shares underlying the $6.0 million of unsecured debentures wasdeclared effective by the SEC on February 17, 2004 and the debenturewas issued to the investor on that date at an initial conversion priceof $3.30, subject to certain terms and conditions. The additional $4million of unsecured convertible debentures will be issued to theinvestor at the sole option of the Company, provided that at least $4million of the $6 million debenture has been converted into commonstock in accordance with the terms of such debenture, and the Companyis in compliance in all material respects with the private placementdocuments. Under the terms of the agreement, cash fees of $400,000 werededucted from the initial proceeds and 140,180 shares of common stockwere issued to the holder of the debentures upon closing of thetransaction. The market value of these shares and the cash fees will berecorded as a discount on the debentures and amortized over the term ofthe debentures or as they are converted, whichever happens first. Thedebentures will mature in 18 months and are subject to six, 30-dayextensions and bear interest at 6% with payments duequarterly.

Sources and Uses of Cash

As ofDecember 31, 2003, we had $6,004,173 in cash and cash equivalents andrestricted cash of $2,998,379. Cash used in operations totaled$9,856,825, $11,388,768 and $11,139,147 in 2003, 2002 and 2001,respectively, and related to funding our net operating losses. Therestricted cash comprised $2.4 million of cash used for collateral inconnection with Ballard's strategic investment in the Company and$0.6 million of cash used for collateral as security deposit held byour landlord in connection with 

19

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the Company's amended lease agreement.These funds used will not be available for use in operations until theletters of credit have been reduced or terminated.

Investingactivities provided/(used) cash of $(441,281), $7,037,933 and$(12,751,441) in 2003, 2002 and 2001, respectively. Investingactivities in 2003 consisted primarily of an investment in andaffiliate (as described below under "Investment inAffiliate") and patent registration costs. In 2002 and2001, investment activities consisted mainly of maturities ofinvestments in high-grade government bonds and bank certificates ofdeposit and purchases of laboratory equipment necessary for thecontinuation of our research and development activities. We willcontinue to register, pursue and defend patents on our technology.

Investment in Affiliate

In July 2002, theCompany agreed to acquire a 50% non-controlling interest in aEuropean alkaline fuel cell company (the"Affiliate"). During the period from July2002 to June 2003, the Company directly and indirectly provided limitedfunding for their proportionate share of the Affiliate'soperating expenses. In the ordinary course of business, the Company hadrelated party transactions directly and indirectly with a member of theCompany's Board of Directors who provided professional servicesfor the Affiliate in 2002 and 2003. Such payments amounted to $45,000during the year ended December 31, 2003.

As of June 30, 2003,the Company had written off its Investment in Affiliate on the balancesheet and determined the fair value of the investment was zero. Duringthe third quarter of 2003, the Company decided to abandon its interestin the Affiliate and no gain or loss was recognized upon thisevent.

Commitments and Contingencies

In April2001, the Company amended its main operating lease to provide foradditional space for the Company's principal operating officesand laboratories. As of November 2001, we occupy all facilitiescontemplated in the lease agreement. The amended lease will expire in2008 and will contain options to renew for an additional 8 years andwill require the Company to pay its allocated share of taxes andoperating cost in addition to the annual base rent payment. Futureminimum annual lease commitments including estimated allocated taxesand maintenance under the amended operating leases are as follows:

|       |  |        |           |        |  |  |
|-------|--|--------|-----------|--------|--|--|
| 2004  |  |   | 484,310   |   |
| 2005  |  |   | 484,310   |   |
| 2006  |  |   | 484,310   |   |
| 2007  |  |   | 484,310   |   |
| 2008  |  |   | 443,950   |   |
| Total |  | $      | 2,381,190 |   |
|       |

Rentexpense under the operating lease was approximately $546,710, $507,310and $288,498 for the years ended December 31, 2003, 2002, and 2001,respectively.

In connection with the amended lease agreement,the Company issued a letter of credit to the landlord for $588,972 inlieu of a cash security deposit. The letter of credit wascollateralized with a portion of the Company's cash and isclassified as Restricted Cash. The funds used for collateral will notbe available for use in operations.

Between January 1999 andApril 2000, we received an aggregate of $227,522 from a recoverablegrant award from the State of New Jersey Commission on Science andTechnology. The funds were used to partially fund costs directlyrelated to development of our technology. The recoverable grant isrequired to be repaid when we generate net sales in a fiscal year. Therepayment obligation, which began in June 2001, ranges from 1%to 5% of net sales over a ten-year period. We are obligated torepay the unpaid amount of the original grant at the end of theten-year period. We repaid approximately $21,000 of the award duringthe second quarter of 2003, which represents 3% of the 2002 netsales. Based upon 4% of the 2003 net sales, $18,675 is due to berepaid in 2004.

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The Company received net proceeds from thesale of New Jersey net operating losses (NOL's) in conjunctionwith the New Jersey Emerging Technology and Biotechnology FinancialAssistance Program of $221,480 and $234,963 in 2003 and 2002,respectively. This program allows certain companies to apply totransfer New Jersey NOL's to other companies. This program, ifcontinued by the state in future years, may produce similar cashinflows for the Company.

We believe that our current cash andcash equivalents, together with the approximate $5.6 million cashavailable from the recent private placement financing, together withfuture expected conversions of unsecured debentures, and projected cashgenerated from our operations will be sufficient to satisfy anticipatedcash needs of our operations through at least the 2005 fiscal year. Wemay raise additional funds through public or private financing,collaborative relationships or other arrangements. We cannot be assuredthat additional funding, if sought, will be available or will be onterms favorable to us. Further, any additional equity financing may bedilutive to stockholders, and debt financing, if available, may involverestrictive covenants. Our failure to raise capital when needed mayharm our business and operating results.

Critical AccountingPolicies

Application of Critical AccountingPolicies

The discussion and analysis of our financialcondition and results of operations is based on our consolidatedfinancial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States. Thepreparation of these financial statements requires us to make estimatesand judgments that affect our reported assets and liabilities, revenuesand expenses, and other financial information. Actual results maydiffer significantly from these estimates under different assumptionsand conditions. In addition, our reported financial condition andresults of operations could vary due to a change in the application ofa particular accounting standard.

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

Our significant accounting policies are more fullydescribed in Note 2 to our consolidated financial statements. Not allof these significant accounting policies, however, require managementto make difficult, complex or subjective judgments or estimates. Ourmanagement has discussed our accounting policies with the auditcommittee of our board of directors, and we believe that our estimatesrelating to revenue recognition, convertible debt and stock optionsdescribed below fit the definition of "critical accountingestimates."

Revenue Recognition

The Company's near term revenues will be derived substantiallyfrom contracts that require the Company to deliver hydrogen generationtechnology, management services, system design and prototype systemsand licensing of technology for test and evaluation. It is anticipatedthat revenues will be recognized in the period in which the technologyis delivered or licensed revenue is earned.

Convertible Debt

The Company accounts for theissuance and conversion of convertible debt in accordance with APB No.14, "Accounting for Convertible Debt and Debt Issued withStock Purchase Warrants". As a result, the Company has andwill record original issue discounts to the extent the fair value ofthe debt is below the face value of the instrument and amortize thediscount over the life of the instrument. To the extent conversions ofdebt into common stock are made prior to the maturity date of theinstrument, the Company will record as interest expense a ratableproportion of the discount associated with the face value of the debtconverted.

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The Company accounts for issuances ofconvertible debt in accordance with Emerging Issues Task Force("EITF") No. 00-27, "Applicationof Issue No. 98-5 to Certain Convertible Instruments"("EITF No. 00-27"), and EITF No. 98-5,"Accounting for Convertible Securities with BeneficialConversion Features or Contingently Adjustable ConversionRatios" ("EITF No. 98-5"). As aresult of certain conversion price discounts included within theCompany's outstanding debt instruments, the Company will recordinterest expense resulting from Beneficial Conversion Features asdescribed under the caption "Liquidity and CapitalResources" above.

Stock Options

The Company has recorded non-cash charges in 2003, 2002 and 2001 tothe fair value of warrants issued to certain third parties. Certainparties have the ability to earn new awards based on defined milestonesand service periods. The accounting methodology requires a re-valuingof the related earned warrants at each reporting period using aBlack-Scholes pricing model. Due to this variable accountingmethodology, it is difficult to predict the amount of additionalnon-cash charges the company will incur related to these warrants.

The Company also records non-cash charges for the difference betweenthe grant price and market price on the date of grant related tocertain stock options issued to employees and elected directors belowmarket prices as defined by APB No. 25. The non-cash charge isrecognized ratably over the related vesting period of the respectiveoption contracts. As of June 30, 2003, all of these options werevested.

The Company also discloses pro forma informationregarding net income and earnings per share that is required by SFASNo. 148. This information is required to be determined as if theCompany had accounted for its employee stock options under the fairvalue method of that statement. The fair value of options granted forthe fiscal years ended December 31, 2003, 2002 and 2001 has beenestimated at the date of grant using a Black-Scholes option-pricingmodel.

The Black-Scholes option valuation model was developedfor use in estimating the fair value of traded options that have novesting restrictions and are fully transferable. In addition, optionvaluation models require the input of highly subjective assumptions,including the expected stock price volatility. The Company'soptions have characteristics significantly different from those oftraded options, and changes in the subjective input assumptions canmaterially affect the fair value estimate. Due to these highlysubjective assumptions, the non-cash charges incurred in 2003, 2002 and2001 for warrants issued to third parties and the pro forma disclosuresof net loss and loss per share for fiscal 2003, 2002 and 2001, are notlikely to be representative of non-cash charges and the pro formaeffects on net loss and loss per share, respectively, in futureyears.

Impact of Recently Issued Accounting Standards

In January 2003, the FASB issued Interpretation No. 46,"Consolidation of Variable Interest Entities"(FIN 46). FIN 46 addresses consolidation by business enterprises ofvariable interest entities with certain defined characteristics. Thisinterpretation applies immediately to variable interest entitiescreated after January 31, 2003, and to variable interest entities inwhich an enterprise obtains an interest after that date. It applies inthe first fiscal year or interim period beginning after December 15,2003, to variable interest entities in which an enterprise holds avariable interest that it acquired before February 1, 2003. The Companydetermined it had no variable interest entities and this interpretationdid not have any impact on the accompanying financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accountingfor Certain Financial Instruments with Characteristics of bothLiabilities and Equity." This Statement establishesstandards for how an issuer classifies and measures certain financialinstruments with characteristics of both liabilities and equity. Itrequires that an issuer classify a financial instrument that is withinits scope as a liability or an asset in some circumstances. ThisStatement is effective for financial instruments entered into ormodified after May 31, 2003, and otherwise is effective at thebeginning of the first interim period beginning after June 15, 2003.This Statement did not have a material impact on the Company'sfinancial statements.

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|               |                                                        |
|---------------|--------------------------------------------------------|
| Item7a.  | Quantitative and Qualitative Disclosure ofMarket Risk. |

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

Our systems' ability to produce energy dependson the availability of sodium borohydride, which has a limitedcommercial use and is not manufactured in vast quantities. There arecurrently only two major manufacturers of sodium borohydride and therecan be no assurance that the high cost of this specialty chemical willbe reduced. Once we commence full operations in the future, we may needto enter into long-term supply contracts to protect against priceincreases of sodium borohydride. There can be no assurance that we willbe able to enter into these agreements to protect against priceincreases.

|               |                                             |
|---------------|---------------------------------------------|
| Item 8.  | Financial Statementsand Supplementary Data. |

See Index to Financial Statements andFinancial Statement Schedule in Item 15.

|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| Item9.  | Changes in and Disagreements with Accountantson Accounting and Financial Disclosure. |

None.

|               |                          |
|---------------|--------------------------|
| Item9a.  | Controls and Procedures. |

(a)    Evaluation of Disclosure Controls andProcedures.

The Company's Chief Executive Officer andActing Chief Financial Officer has evaluated the effectiveness of theCompany's disclosure controls and procedures (as such term isdefined in Rules 13a-14(c) and 15d-14(c) under the Securities ExchangeAct of 1934, as amended) as of a date within 90 days prior to thefiling date of this annual report. Based on such evaluation, he hasconcluded that, as of the evaluation date, the Company'sdisclosure controls and procedures are effective in alerting him on atimely basis to material information relating to the Company requiredto be included in the Company's reports filed or submitted underthe Exchange Act.

(b)    Changes in InternalControls.

Since the evaluation date, there have not been anysignificant changes in the Company's internal controls or inother factors that could significantly affect suchcontrols.

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PART III

Item 10.    Directors and Executive Officers of theRegistrant.

Information regarding Section 16(a) compliance, theAudit Committee, the Company's Code of Conduct and background ofthe directors appearing under the captions "Election ofDirectors," "Common Stock Ownership ofPrincipal Stockholders and Management" and"Section 16(a) Beneficial Ownership ReportingCompliance" in the Company Proxy Statement for the 2004annual meeting is hereby incorporated by reference.

Item11.    Executive Compensation.

Information regardingexecutive compensation appearing under the caption"Executive Compensation" in theCompany's Proxy Statement for the 2004 annual meeting is herebyincorporated by reference.

Item 12.    SecurityOwnership of Certain Beneficial Owners and Management and RelatedStockholder Matters.

Equity Compensation Plan Information

|                                                           |  |                                                                                        |           |                                                                        |  |                                                                                                                                      |         |        |  |        |           |        |  |  |
|-----------------------------------------------------------|--|----------------------------------------------------------------------------------------|-----------|------------------------------------------------------------------------|--|--------------------------------------------------------------------------------------------------------------------------------------|---------|--------|--|--------|-----------|--------|--|--|
| Asof December 31, 2003                                    |  | Number ofSecuritiesto be issued upon exerciseof outstandingoptions,warrants and rights |           | Weighted-averageexerciseprice ofoutstanding options,warrants andrights |  | Number of securitiesremaining availableforfuture issuance underequity compensationplans(excluding securitiesreflected in column (a)) |
| PlanCategory                                              |  | (a)                                                                                    |           | (b)                                                                    |  | (c)                                                                                                                                  |
| Equity compensation plan approved by securityholders(1)   |  |                                                                                   | 4,619,631 |                                                                   |  | $                                                                                                                                    | 3.67    |   |  |   | 3,880,369 |   |
| Equity compensation plans not approved by securityholders |  |                                                                                   | —   |                                                                   |  |                                                                                                                                 | — |   |  |   | —   |   |
| Total                                                     |  |                                                                                   | 4,619,631 |                                                                   |  | $                                                                                                                                    | 3.67    |   |  |   | 3,880,369 |   |
|                                                           |

|  |
|--|
|  |  |
|  |

| (1) | Thisplan is our Amended and Restated 2000 Stock Option Plan and includesrestricted stock awards issued as part of the Tender Exchange Offer toemployees in August 2003. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Other information setting forththe security ownership of certain beneficial owners and managementappearing under the caption "Common Stock Ownership ofPrincipal Stockholders and Management" in the 2004 ProxyStatement is hereby incorporated by reference.

Item13.    Certain Relationships and Related Transactions.

None.

Item 14.    Principal Accountant Fees &Services.

Information appearing under the captions"Fees Paid to the Company's Auditors"in the 2004 Proxy Statement is hereby incorporated byreference.

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PART IV

Item 15.    Exhibits,Financial Statement Schedules, and Reports on Form 8-K.

|           |                                        |
|-----------|----------------------------------------|
| (a)  | Documents filed as part of this report |

|          |                      |
|----------|----------------------|
| 1.  | Financial Statements |

|        |                                                                                                               |
|--------|---------------------------------------------------------------------------------------------------------------|
|   | The financial statements and notes are listedin the Index to Financial Statements on page F-1 of this report. |

|          |                               |
|----------|-------------------------------|
| 2.  | Financial Statement Schedules |

|        |                                                                                                                                                               |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | None of the schedules for which provision ismade in the applicable accounting regulations under the SecuritiesExchange Act of 1934, as amended, are required. |

|          |          |
|----------|----------|
| 3.  | Exhibits |

The followingdocuments are filed as Exhibits to this report on Form 10-K orincorporated by reference herein. Any document incorporated byreference is identified by a parenthetical referencing the SEC filingwhich included suchdocument.

|               |  |         |  |                                                                                                                                                                                                                                              |  |  |  |  |  |  |
|---------------|--|---------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| ExhibitNo.    |  |    |  | Description                                                                                                                                                                                                                                  |
| 2.1†   |  | — |  | Certificateof Conversion of Millennium Cell LLC to Millennium Cell Inc.(incorporated by reference to the Registration Statement filed on FormS-1, Registration No.333-37896)                                                                 |
|          |  |    |  |                                                                                                                                                                                                                                         |
| 3.1†   |  | — |  | Certificateof Incorporation of Millennium Cell Inc. (incorporated by reference tothe Registration Statement filed on Form S-1, Registration No.333-37896)                                                                                    |
|          |  |    |  |                                                                                                                                                                                                                                         |
| 3.2†   |  | — |  | By-Lawsof Millennium Cell Inc. (incorporated by reference to the RegistrationStatement filed on Form S-1, Registration No.333-37896)                                                                                                         |
|          |  |    |  |                                                                                                                                                                                                                                         |
| 3.3†   |  | — |  | Certificateof Amendment to Certificate of Incorporation of Millennium Cell Inc.(incorporated by reference to the Registration Statement filed on FormS-1, Registration No.333-37896)                                                         |
|          |  |    |  |                                                                                                                                                                                                                                         |
| 3.4†   |  | — |  | CertificateEliminating Reference to the Series A Convertible Preferred Stock fromthe Certificate of Incorporation of Millennium Cell Inc. (incorporatedby reference to Exhibit 3.4 to the Quarterly Report on Form 10-Q filedon May 13,2002) |
|          |  |    |  |                                                                                                                                                                                                                                         |
| 3.5†   |  | — |  | Certificateof Amendment of Certificate of Incorporation of Millennium Cell Inc.(incorporated by reference to Exhibit 3.5 to the Quarterly Report onForm 10-Q filed on May 13,2002)                                                           |
|          |  |    |  |                                                                                                                                                                                                                                         |
| 4.2†   |  | — |  | Specimenstock certificate representing the Registrant's Common Stock(incorporated by reference to the Registration Statement filed on FormS-1, Registration No.333-37896)                                                                    |
|          |  |    |  |                                                                                                                                                                                                                                         |
| 4.5†   |  | — |  | FirstWarrant to Purchase 224,014 shares of Common stock dated June 19, 2002(incorporated by reference to Exhibit 4.5 to the Current Report on Form8-K filed on June 26,2002)                                                                 |
|          |  |    |  |                                                                                                                                                                                                                                         |
| 4.6†   |  | — |  | FirstWarrant to Purchase 44,803 shares of Common Stock dated June 19, 2002(incorporated by reference to Exhibit 4.6 to the Current Report on Form8-K filed on June 26,2002)                                                                  |
|          |  |    |  |                                                                                                                                                                                                                                         |
| 4.7.1† |  | — |  | ClosingWarrant No. 1 to purchase 73,599 shares of Common Stock dated October31, 2002 (incorporated by reference to Exhibit 4.7.1 to the AnnualReport on Form 10-K filed on March 17, 2003)                                                   |
|               |

25

----

|                |  |         |  |                                                                                                                                                                                                                                                                   |  |  |  |  |  |  |
|----------------|--|---------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| ExhibitNo.     |  |    |  | Description                                                                                                                                                                                                                                                       |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.7.2†  |  | — |  | ClosingWarrant No. 2 to purchase 73,599 shares of Common Stock dated October31, 2002 (incorporated by reference to Exhibit 4.7.2 to the AnnualReport on Form 10-K filed on March 17,2003)                                                                         |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.8†    |  | — |  | FirstWarrant to purchase 242,678 shares of Common Stock dated December 26,2002 (incorporated by reference to Exhibit 4.8 to the Annual Report onForm 10-K filed on March 17,2003)                                                                                 |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.9†    |  | — |  | SecondWarrant to purchase 589,376 shares of Common Stock dated January 30,2003 (incorporated by reference to Exhibit 4.9 to the Annual Report onForm 10-K filed on March 17,2003)                                                                                 |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.10.1† |  | — |  | UnsecuredConvertible Debenture No. 1 dated December 26, 2002 (incorporated byreference to Exhibit 4.10.1 to the Annual Report on Form 10-K filed onMarch 17,2003)                                                                                                 |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.10.2† |  | — |  | UnsecuredConvertible Debenture No. 2 dated December 26, 2002 (incorporate byreference to Exhibit 4.10.2 to the Annual Report on Form 10-K filed onMarch 17,2003)                                                                                                  |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.11†   |  | — |  | SecuredConvertible Debenture in aggregate principal amount of $8.5 milliondated January 30, 2003 (incorporated by reference to Exhibit 4.12 tothe Annual Report on Form 10-K filed on March 17,2003)                                                              |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.12†   |  | — |  | SecuredConvertible Debenture issued to Ballard Power Systems, Inc.(incorporated by reference to Exhibit 4.13 to the Quarterly Report onForm 10-Q filed on November 14,2002)                                                                                       |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.13†   |  | — |  | LetterAmendment to Unsecured Convertible Debenture and Secured ConvertibleDebenture dated April 22, 2003 (incorporated by reference to ExhibitNo. 4.10.3 to Registration Statement No. 333-105582 on Form S-3 filedon May 27,2003)                                |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.14†   |  | — |  | ExchangeConvertible Debenture No. ED-1 in aggregate principal amount of $3million (incorporated by reference to Exhibit 4.13 to RegistrationStatement No. 333-108768 on Form S-3 filed on September 12,2003)                                                      |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.15†   |  | — |  | SecuredConvertible Debenture No. SD-2 in aggregate principal amount of $5.5million (incorporated by reference to Exhibit 4.14 to RegistrationStatement No. 333-108768 on Form S-3 filed on September 12,2003)                                                     |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.16†   |  | — |  | LetterAmendment to Exchange Convertible Debenture and Secured ConvertibleDebenture dated September 11, 2003 (incorporated by reference toExhibit 4.15 to Registration Statement No. 333-108768 on Form S-3 filedon September 12,2003)                             |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.17†   |  | — |  | Formof Unsecured Convertible Debenture (incorporated by reference toExhibit 4.16 to Registration Statement no. 333-112519 on Form S-3 filedon February 5,2004)                                                                                                    |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 4.18*          |  | — |  | UnsecuredConvertible Debenture No. 1 in aggregate principal amount of $6 milliondated February 17,2004                                                                                                                                                            |
|           |  |    |  |                                                                                                                                                                                                                                                              |
| 10.1†   |  | — |  | Agreementfor Recoverable Grant Award, dated as of April 1999, by and betweenState of New Jersey Commission on Science and Technology and MillenniumCell LLC (incorporated by reference to the Registration Statement filedon Form S-1, Registration No.333-37896) |
|           |  |    |  |                                                                                                                                                                                                                                                              |
|                |

26

----

|               |  |         |  |                                                                                                                                                                                                                                                    |  |  |  |  |  |  |
|---------------|--|---------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| ExhibitNo.    |  |    |  | Description                                                                                                                                                                                                                                        |
| 10.2†  |  | — |  | Amendedand Restated Agreement, dated as of August 1, 2000, by and amongMillennium Cell Inc., GP Strategies Corporation and Steve Amendola(incorporated by reference to the Registration Statement filed on FormS-1, Registration No.333-37896)     |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.3†  |  | — |  | Assignment,dated as of May 24, 2000, by Steven Amendola in favor of MillenniumCell Inc. (incorporated by reference to the Registration Statementfiled on Form S-1, Registration No.333-37896)                                                      |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.4†  |  | — |  | EmploymentAgreement, dated as of May 16, 2000, by and between Stephen S. Tang andMillennium Cell Inc. (incorporated by reference to the RegistrationStatement filed on Form S-1, Registration No.333-37896)                                        |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.5†  |  | — |  | EmploymentAgreement, dated as of August 2, 2000, by and between Steven C.Amendola and Millennium Cell Inc. (incorporated by reference to theRegistration Statement filed on Form S-1, Registration No.333-37896)                                   |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.6†  |  | — |  | Amendedand Restated Millennium Cell Inc. 2000 Stock Option Plan, Amendedeffective December 1, 2001 (incorporated by reference to Exhibit 10.6to the Annual Report on Form 10-K filed on March 25,2002)                                             |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.7†  |  | — |  | ProprietaryRights Agreement, effective as of May 1, 2000, between DaimlerChryslerCorporation and Millennium Cell Inc. (incorporated by reference to theRegistration Statement filed on Form S-1, Registration No.333-37896)                        |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.8†  |  | — |  | Assignmentand Assumption of License Agreement, dated as of December 17, 1998, byand between GP Strategies Corporation and Millennium Cell LLC(incorporated by reference to the Registration Statement filed on FormS-1, Registration No.333-37896) |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.9†  |  | — |  | EmploymentAgreement, dated as of September 6, 2000, by and between MillenniumCell Inc. and Norman R. Harpster, Jr. (incorporated by reference toExhibit 10.1 to the Quarterly Report on Form 10-Q filed on November 1,2000)                        |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.10† |  | — |  | FirstAmendment to Lease, dated as of April 4, 2001, by and betweenTen-Thirty Five Associates, Limited Partnership and Millennium CellInc. (incorporated by reference to Exhibit 10.1 to the Quarterly Reporton Form 10-Q filed on May 11,2001)     |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.11† |  | — |  | SeparationAgreement, dated as of December 11, 2001, by and between MillenniumCell Inc. and Steven C. Amendola (incorporated by reference to Exhibit10.11 to the Annual Report on Form 10-K filed on March 25,2002)                                 |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.12† |  | — |  | ConsultingAgreement, dated as of December 11, 2001, by and between MillenniumCell Inc. and Steven C. Amendola (incorporated by reference to Exhibit10.12 to the Annual Report on Form 10-K filed on March 25,2002)                                 |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.13† |  | — |  | ConfidentialityAgreement, dated as of December 11, 2001, by and between MillenniumCell Inc. and Steven C. Amendola (incorporated by reference to Exhibit10.13 to the Annual Report on Form 10-K filed on March 25,2002)                            |
|          |  |    |  |                                                                                                                                                                                                                                               |
| 10.14† |  | — |  | SecuritiesPurchase Agreement dated as of June 19, 2002 between the Company andthe Purchasers (incorporated by reference to Exhibit 4.3 to the CurrentReport on Form 8-K filed on June 26,2002)                                                     |
|          |  |    |  |                                                                                                                                                                                                                                               |
|               |

27

----

|               |  |         |  |                                                                                                                                                                                                                                                                                                                |  |  |  |  |  |  |
|---------------|--|---------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| ExhibitNo.    |  |    |  | Description                                                                                                                                                                                                                                                                                                    |
| 10.15† |  | — |  | RegistrationRights Agreement dated as of June 19, 2002 between the Company and thePurchasers (incorporated by reference to Exhibit 4.4 to the CurrentReport on Form 8-K filed on June 26,2002)                                                                                                                 |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.16† |  | — |  | SecuritiesPurchase Agreement dated as of October 31, 2002 among the Company andthe Purchasers named therein (incorporated by reference to Exhibit10.16 to Registration Statement No. 333-101061 on Form S-3 filed onNovember 7,2002)                                                                           |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.17† |  | — |  | RegistrationRights Agreement dated as of October 31, 2002 among the Company and thePurchasers named therein (incorporated by reference to Exhibit 10.17 toRegistration Statement No. 333-101061 on Form S-3 filed on November 7,2002)                                                                          |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.18† |  | — |  | OptionAgreement dated as of November 8, 2002, between the Company and BallardPower Systems, Inc. (incorporated by reference to Exhibit 10.18 to theQuarterly Report on Form 10-Q filed on November 14,2002)                                                                                                    |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.19† |  | — |  | SecuritiesPurchase Agreement dated as of November 8, 2002 Company and BallardPower Systems, Inc. (incorporated by reference to Exhibit 10.19 to theQuarterly Report on Form 10-Q filed on November 14,2002)                                                                                                    |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.20† |  | — |  | RegistrationRights Agreement dated as of November 8, 2002 between the Company andBallard Power Systems, Inc. (incorporated by reference to Exhibit 10.20to the Quarterly Report on Form 10-Q filed on November 14,2002)                                                                                        |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.21† |  | — |  | ContinuingLetter of Credit Agreement dated January 30, 2003 between the Companyand Wachovia Bank, National Association (incorporated by reference toExhibit 10.21 to Registration Statement No. 333-103104 on Form S-3filed February 11,2003)                                                                  |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.22† |  | — |  | SecurityAgreement dated January 30, 2003 between the Company and Wachovia Bank,National Association (incorporated by reference to Exhibit 10.22 to theRegistration Statement No. 333-103104 on Form S-3 filed on February 11,2003)                                                                             |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.23† |  | — |  | Letterof Credit securing $8.5 million Secured Convertible Debentures(incorporated by reference to Exhibit 10.23 to the RegistrationStatement No. 333-103104 on Form S-3 filed on February 11,2003)                                                                                                             |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.24† |  | — |  | Severance,Release and Consulting Agreement between the Company and Norman"Chip" Harpster, Jr. effective February 14,2003 (incorporated by reference to Exhibit 10.24 to the Annual Reporton Form 10-K filed on March 17,2003)                                                                                  |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.25† |  | — |  | Amendedand Restated Employment Agreement between the Company and Stephen S.Tang dated as of January 1, 2002 (incorporated by reference to Exhibit10.25 to the Annual Report on Form 10-K filed on March 17,2003)                                                                                               |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.26† |  | — |  | ContinuingLetter of Credit Agreement dated November 8, 2002 between the Companyand Wachovia Bank, National Association relating to the SecuredConvertible Debentures issued to Ballard Power Systems, Inc.(incorporated by reference to Exhibit 10.26 to the Annual Report onForm 10-K filed on March 17,2003) |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
| 10.27† |  | — |  | SecurityAgreement dated November 8, 2002 between the Company and Wachovia Bank,National Association relating to the Secured Convertible Debenturesissued to Ballard Power Systems, Inc. (incorporated by reference toExhibit 10.27 to the Annual Report on Form 10-K filed on March 17,2003)                   |
|          |  |    |  |                                                                                                                                                                                                                                                                                                           |
|               |

28

----

|               |  |         |  |                                                                                                                                                                                                                                                     |  |  |  |  |  |  |
|---------------|--|---------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| ExhibitNo.    |  |    |  | Description                                                                                                                                                                                                                                         |
| 10.28† |  | — |  | Letterof Credit securing $2.4 million Secured Convertible Debentures issuedfor the benefit of Ballard Power Systems, Inc. (incorporated byreference to Exhibit 10.28 to the Annual Report on Form 10-K filed onMarch 17,2003)                       |
|          |  |    |  |                                                                                                                                                                                                                                                |
| 10.29† |  | — |  | Change-in-ControlAgreement between the Company and Adam P. Briggs dated as of January 1,2003 and Schedule of Other Change-in-Control Agreements (incorporatedby reference to Exhibit 10.29 to the Annual Report on Form 10-K filedon March 17,2003) |
|          |  |    |  |                                                                                                                                                                                                                                                |
| 10.30† |  | — |  | Change-in-ControlAgreement by and between Millennium Cell Inc. and Roland E. Lefebvre(incorporated by reference to Exhibit 10.30 to the Quarterly Report onForm 10-Q filed on August 13,2003)                                                       |
|          |  |    |  |                                                                                                                                                                                                                                                |
| 10.31† |  | — |  | SecuritiesPurchase Agreement dated as of January 16, 2004 between the Company andthe purchaser named therein. (incorporated by reference to Exhibit10.24 to Registration Statement No. 333-112519 on Form S-3 filed onFebruary 5,2004)              |
|          |  |    |  |                                                                                                                                                                                                                                                |
| 10.32† |  | — |  | RegistrationRights Agreement dated as of January 16, 2004 between the Company andthe purchaser named therein. (incorporated by reference to Exhibit10.25 to Registration Statement No. 333-112519 on Form S-3 filed onFebruary 5,2004)              |
|          |  |    |  |                                                                                                                                                                                                                                                |
| 23.1*         |  | — |  | Consent of Ernst & YoungLLP                                                                                                                                                                                                                     |
| 31.1*         |  | — |  | Certification of Chief Executive Officer and Acting ChiefFinancial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of2002.                                                                                                                    |
|          |  |    |  |                                                                                                                                                                                                                                                |
| 32.1*         |  | — |  | Certification of Chief Executive Officer and Acting ChiefExecutive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of2002.                                                                                                                    |
|          |  |    |  |                                                                                                                                                                                                                                                |
| 99.1†  |  | — |  | License Agreement, dated July 31, 1997, by and between StevenC. Amendola and National Patent Development Corporation (incorporatedby reference to the Registration Statement filed on Form S-1,Registration No.333-37896)                           |
|               |

|  |
|--|
|  |  |
|  |

| † | Previouslyfiled. |
|----------|------------------|

| * | Filed herewith. |
|---|-----------------|

The Company will furnish, without charge, to a security holder uponrequest a copy of the proxy statement, portions of which areincorporated herein by reference thereto. The Company will furnish anyother exhibit at cost.

|           |                    |
|-----------|--------------------|
| (b)  | Reports on Form8-K |

|        |                                                                                                             |
|--------|-------------------------------------------------------------------------------------------------------------|
|   | The following reports were filed underForm 8-K during the last quarter of the period covered by thisreport: |

|                        |  |         |              |             |  |                                                                                                       |  |  |  |  |  |  |  |  |
|------------------------|--|---------|--------------|-------------|--|-------------------------------------------------------------------------------------------------------|--|--|--|--|--|--|--|--|
| DateFiled or Furnished |  | ItemNo. |              | Description |  |
| November 3,2003        |  |    | Item 12 |        |  | On October 22,2003, we reported our financial results for the fiscal quarterended September 30,2003.* |  |
|                        |

|  |
|--|
|  |  |
|  |

| * | This furnished 8-K isnot to be deemed filed or incorporated by reference into anyfiling. |
|---|------------------------------------------------------------------------------------------|

29

----

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

MILLENNIUM CELL INC.

|  | By: /s/    STEPHEN S.TANG |
|--|----------------------------------------------------|

|  |
|--|
|  |  |  |
|  |

|  | StephenS. Tang President, Chief Executive Officer, Acting ChiefFinancial Officer |
|--|----------------------------------------------------------------------------------|

Date:   March 18,2004

Pursuant to the requirements of the Securities and ExchangeAct of 1934, this report has been signed below by the following personson behalf of the registrant and in the capacities and on the datesindicated.

|                                                        |  |                                                                                |  |                |  |  |  |  |  |  |
|--------------------------------------------------------|--|--------------------------------------------------------------------------------|--|----------------|--|--|--|--|--|--|
| Signature                                              |  | Title                                                                          |  | Date           |
| /s/    STEPHENS. TANG         |  | President, ChiefExecutive Officer,Acting Chief Financial Officer, and Director |  | March 18, 2003 |
| Stephen S.Tang                                         |  |
| /S/    JOHN D. GIOLLI    |  | Controller and PrincipalAccountingOfficer                                      |  | March 18, 2003 |
| John D.Giolli                                          |  |
| /s/    G. CHRIS ANDERSEN |  | Director                                                                       |  | March 18, 2003 |
| G. ChrisAndersen                                       |  |                                                                           |  |           |
| /s/    KENNETHR. BAKER        |  | Director                                                                       |  | March 18, 2003 |
| Kenneth R.Baker                                        |  |                                                                           |  |           |
| /s/    ALEXANDERMACLACHLAN         |  | Director                                                                       |  | March 18, 2003 |
| AlexanderMacLachlan                                    |  |                                                                           |  |           |
| /s/    PETERA. MCGUIGAN       |  | Director                                                                       |  | March 18,2003  |
| Peter A.McGuigan                                       |  |                                                                           |  |           |
| /s/    ZOLTANMERSZEI               |  | Director                                                                       |  | March 18, 2003 |
| ZoltanMerszei                                          |  |                                                                           |  |           |
| /s/    H.DAVID RAMM           |  | Director                                                                       |  | March 18, 2003 |
| H. DavidRamm                                           |  |                                                                           |  |           |
| /s/    JAMESL. RAWLINGS       |  | Director                                                                       |  | March 18,2003  |
| James L.Rawlings                                       |  |                                                                           |  |           |
| /s/    RICHARDL. SANDOR       |  | Director                                                                       |  | March 18, 2003 |
| Richard L.Sandor                                       |  |                                                                           |  |           |
| /s/    JOHNR. WALLACE         |  | Director                                                                       |  | March 18, 2003 |
| John R.Wallace                                         |  |                                                                           |  |           |
|                                                        |

30

----

INDEX TOFINANCIAL STATEMENTS

|                                                                                           |  |        |     |        |  |  |
|-------------------------------------------------------------------------------------------|--|--------|-----|--------|--|--|
|                                                                                      |  | Page   |
| Report of Independent Auditors                                                            |  |   | F-2 |   |
| Balance Sheet as of December 31, 2003 and 2002                                            |  |   | F-3 |   |
| Statement of Operations for the fiscalyears ended December 31, 2003, 2002 and 2001        |  |   | F-4 |   |
| Statement of Stockholders' Equity for the period fromJanuary 1, 2001 to December 31, 2003 |  |   | F-5 |   |
| Statement of Cash Flows for the fiscal years ended December31, 2003, 2002 and 2001        |  |   | F-6 |   |
| Notes toFinancial Statements                                                              |  |   | F-7 |   |
|                                                                                           |

F-1

----

REPORTOF INDEPENDENT AUDITORS

The Board of Directorsand Stockholders Millennium Cell Inc.

We have audited theaccompanying consolidated balance sheets of Millennium Cell Inc. (adevelopment stage company) as of December 31, 2003 and 2002, and therelated consolidated statements of operations, stockholders'equity and cash flows for each of the three years then ended, and forthe period January 1, 1999 (inception) through December 31, 2003. Theseconsolidated financial statements are the responsibility of theCompany's management. Our responsibility is to express an opinionon these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standardsgenerally accepted in the United States. Those standards require thatwe plan and perform the audit to obtain reasonable assurance aboutwhether the consolidated financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the consolidated financialstatements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well asevaluating the overall consolidated financial statement presentation.We believe that our audits provide a reasonable basis for ouropinion.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, theconsolidated financial position of Millennium Cell Inc. at December 31,2003 and 2002, and the results of its consolidated operations and itscash flows for each of the three years then ended, and for the periodJanuary 1, 1999 (inception) through December 31, 2003, in conformitywith accounting principles generally accepted in the United States.

/s/ ERNST & YOUNG LLP

New York, New York February 6,2004

F-2

----

MILLENNIUMCELL INC. (a development stage enterprise)

BALANCESHEET

|                                                                                                                                                                    |  |                 |             |                 |  |        |             |         |  |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|-----------------|-------------|-----------------|--|--------|-------------|---------|--|--|
| Assets                                                                                                                                                             |  | December31,2003 |             | December31,2002 |
| Currentassets:                                                                                                                                                     |  |            |        |            |  |   |        |    |
| Cash andcashequivalents                                                                                                                                            |  | $               | 6,004,173   |            |  | $      | 7,987,127   |    |
| Accountsreceivable                                                                                                                                                 |  |            | 41,244      |            |  |   | 234,015     |    |
| Prepaidexpenses                                                                                                                                                    |  |            | 265,459     |            |  |   | 337,589     |    |
| Deferredfinancingcosts                                                                                                                                             |  |            | 22,663      |            |  |   | 313,690     |    |
| Totalcurrentassets                                                                                                                                                 |  |            | 6,333,539   |            |  |   | 8,872,421   |    |
|                                                                                                                                                               |  |            |        |            |  |   |        |    |
| Propertyand equipment,net                                                                                                                                          |  |            | 1,009,514   |            |  |   | 1,526,983   |    |
| Patentsand licenses,net                                                                                                                                            |  |            | 597,564     |            |  |   | 590,269     |    |
| Investmentinaffiliate                                                                                                                                              |  |            | —     |            |  |   | 167,412     |    |
| Restrictedcash                                                                                                                                                     |  |            | 2,998,379   |            |  |   | 2,963,050   |    |
| Securitydeposits                                                                                                                                                   |  |            | 45,676      |            |  |   | 45,676      |    |
|                                                                                                                                                               |  | $               | 10,984,672  |            |  | $      | 14,165,811  |    |
| **Liabilitiesand stockholders'equity**                                                                                                                             |  |            |        |            |  |   |        |    |
| Currentliabilities:                                                                                                                                                |  |            |        |            |  |   |        |    |
| Accountspayable                                                                                                                                                    |  | $               | 272,143     |            |  | $      | 612,651     |    |
| Accruedexpenses                                                                                                                                                    |  |            | 389,464     |            |  |   | 615,006     |    |
| Short-termportion of capital leaseobligation                                                                                                                       |  |            | 37,036      |            |  |   | —     |    |
| Short-termportion of refundable grant obligation                                                                                                                   |  |            | 18,675      |            |  |   | —     |    |
| Deferredcompensation                                                                                                                                               |  |            | 32,315      |            |  |   | —     |    |
| Convertibleunsecured debentures (net ofdiscount)                                                                                                                   |  |            | 684,791     |            |  |   | 3,029,882   |    |
| Totalcurrentliabilities                                                                                                                                            |  |            | 1,434,424   |            |  |   | 4,257,539   |    |
|                                                                                                                                                               |  |            |        |            |  |   |        |    |
| Convertiblesecureddebentures                                                                                                                                       |  |            | 2,399,988   |            |  |   | 2,399,988   |    |
| Refundablegrantobligation                                                                                                                                          |  |            | 187,266     |            |  |   | 227,522     |    |
| Capitalleaseobligation                                                                                                                                             |  |            | 31,909      |            |  |   | —     |    |
|                                                                                                                                                               |  |            |        |            |  |   |        |    |
| Commitmentsandcontingencies                                                                                                                                        |  |            |        |            |  |   |        |    |
|                                                                                                                                                               |  |            |        |            |  |   |        |    |
| Stockholders'equity:                                                                                                                                               |  |            |        |            |  |   |        |    |
| Preferred stock, $.001 parvalue; 5,000,000 authorized shares, none issued andoutstanding                                                                           |  |            | —     |            |  |   | —     |    |
| Commonstock, $.001 par value; authorized 70,000,000 shares and35,029,052 and 29,027,491 shares issued and outstanding as ofDecember 31, 2003 and 2002,respectively |  |            | 35,029      |            |  |   | 29,027      |    |
| Additionalpaid-incapital                                                                                                                                           |  |            | 77,784,952  |            |  |   | 61,679,267  |    |
| Deferredcompensation                                                                                                                                               |  |            | (358,427    | )          |  |   | —     |    |
| Deficitaccumulated during developmentstage                                                                                                                         |  |            | (70,530,469 | )          |  |   | (54,427,532 | )  |
| Totalstockholders'equity                                                                                                                                           |  |            | 6,931,085   |            |  |   | 7,280,762   |    |
|                                                                                                                                                               |  | $               | 10,984,672  |            |  | $      | 14,165,811  |    |
|                                                                                                                                                                    |

Seeaccompanying notes.

F-3

----

MILLENNIUM CELL INC. (a developmentstage enterprise)

STATEMENT OFOPERATIONS

|                                                     |  |                                   |             |                                   |  |                                  |             |                                |  |        |             |         |  |        |             |         |  |  |
|-----------------------------------------------------|--|-----------------------------------|-------------|-----------------------------------|--|----------------------------------|-------------|--------------------------------|--|--------|-------------|---------|--|--------|-------------|---------|--|--|
|                                                |  | TwelveMonthsEndedDecember 31,2003 |             | TwelveMonthsEndedDecember 31,2002 |  | TwelveMonthsEndedDecember31,2001 |             | CumulativeAmountsFromInception |
| Revenue                                             |  | $                                 | 466,859     |                              |  | $                                | 719,392     |                           |  | $      | —     |    |  | $      | 1,186,251   |    |
| Cost ofrevenue                                      |  |                              | 409,449     |                              |  |                             | 690,059     |                           |  |   | —     |    |  |   | 1,099,508   |    |
| Grossmargin                                         |  |                              | 57,410      |                              |  |                             | 29,333      |                           |  |   | —     |    |  |   | 86,743      |    |
| Productdevelopment andmarketing                     |  |                              | 5,294,419   |                              |  |                             | 5,788,315   |                           |  |   | 5,513,172   |    |  |   | 16,595,906  |    |
| Generalandadministrative                            |  |                              | 3,835,873   |                              |  |                             | 4,052,943   |                           |  |   | 4,726,543   |    |  |   | 15,953,705  |    |
| Restructuringexpense                                |  |                              | —     |                              |  |                             | 104,982     |                           |  |   | —     |    |  |   | 104,982     |    |
| Non-cashcharges                                     |  |                              | 2,164,634   |                              |  |                             | 4,148,251   |                           |  |   | 7,341,461   |    |  |   | 24,439,727  |    |
| Depreciationandamortization                         |  |                              | 681,358     |                              |  |                             | 710,975     |                           |  |   | 473,031     |    |  |   | 2,179,191   |    |
| Researchanddevelopment                              |  |                              | 1,020,102   |                              |  |                             | 1,515,376   |                           |  |   | 2,624,823   |    |  |   | 8,112,113   |    |
| Totaloperatingexpenses                              |  |                              | 12,996,386  |                              |  |                             | 16,320,842  |                           |  |   | 20,679,030  |    |  |   | 67,385,624  |    |
| Lossfromoperations                                  |  |                              | (12,938,976 | )                            |  |                             | (16,291,509 | )                         |  |   | (20,679,030 | )  |  |   | (67,298,881 | )  |
| Interestincome (expense),net                        |  |                              | (2,897,077  | )                            |  |                             | 300,299     |                           |  |   | 1,226,701   |    |  |   | (681,072    | )  |
| Equityin losses ofaffiliates                        |  |                              | (488,364    | )                            |  |                             | (367,714    | )                         |  |   | —     |    |  |   | (856,078    | )  |
| Lossbefore incometaxes                              |  |                              | (16,324,417 | )                            |  |                             | (16,358,924 | )                         |  |   | (19,452,329 | )  |  |   | (68,836,031 | )  |
| Benefitfrom incometaxes                             |  |                              | 221,480     |                              |  |                             | 234,963     |                           |  |   | —     |    |  |   | 456,443     |    |
| Netloss                                             |  |                              | (16,102,937 | )                            |  |                             | (16,123,961 | )                         |  |   | (19,452,329 | )  |  |   | (68,379,588 | )  |
| Preferredstockamortization                          |  |                              | —     |                              |  |                             | —     |                           |  |   | —     |    |  |   | 2,150,881   |    |
| Netloss applicable to commonstockholders            |  | $                                 | (16,102,937 | )                            |  | $                                | (16,123,961 | )                         |  | $      | (19,452,329 | )  |  | $      | (70,530,469 | )  |
| Lossper share — basic anddiluted              |  | $                                 | (.51        | )                            |  | $                                | (.58        | )                         |  | $      | (.71        | )  |  | $      | (2.61       | )  |
| Weighted— average number of sharesoutstanding |  |                              | 31,564,345  |                              |  |                             | 28,022,872  |                           |  |   | 27,217,591  |    |  |   | 27,052,976  |    |
|                                                     |

Seeaccompanying notes.

F-4

----

MILLENNIUM CELL INC. (a developmentstage enterprise)

STATEMENT OF STOCKHOLDERS'EQUITY

|                                                               |  |             |            |                          |  |                      |         |                    |  |                          |            |         |  |        |          |         |  |        |             |         |  |        |             |         |  |  |
|---------------------------------------------------------------|--|-------------|------------|--------------------------|--|----------------------|---------|--------------------|--|--------------------------|------------|---------|--|--------|----------|---------|--|--------|-------------|---------|--|--------|-------------|---------|--|--|
|                                                          |  | CommonStock |            | AdditionalPaid-inCapital |  | DeferredCompensation |         | AccumulatedDeficit |  | TotalStockholders'Equity |
|                                                          |  | Shares      |            | Amount                   |  |
| Balance at January 1,2001                                     |  |        | 27,167,981 |                     |  |                 | 27,168  |               |  |                     | 46,658,927 |    |  |   | —  |    |  |   | (18,851,242 | )  |  |   | 27,834,853  |    |
| Issuanceof common stock from exercise ofoptions               |  |        | 48,500     |                     |  |                 | 48      |               |  |                     | 140,602    |    |  |   | —  |    |  |   | —     |    |  |   | 140,650     |    |
| Issuanceof common stock from exercise ofwarrants              |  |        | 75,596     |                     |  |                 | 76      |               |  |                     | (76        | )  |  |   | —  |    |  |   | —     |    |  |   | —     |    |
| Non-cashcompensation charges for issuance of stockoptions     |  |        | —    |                     |  |                 | — |               |  |                     | 7,341,461  |    |  |   | —  |    |  |   | —     |    |  |   | 7,341,461   |    |
| Netloss                                                       |  |        | —    |                     |  |                 | — |               |  |                     | —    |    |  |   | —  |    |  |   | (19,452,329 | )  |  |   | (19,452,329 | )  |
| Balanceat December 31,2001                                    |  |        | 27,292,077 |                     |  |                 | 27,292  |               |  |                     | 54,140,914 |    |  |   | —  |    |  |   | (38,303,571 | )  |  |   | 15,864,635  |    |
| Issuanceof common stock in private placementtransactions      |  |        | 1,664,058  |                     |  |                 | 1,664   |               |  |                     | 2,959,615  |    |  |   | —  |    |  |   | —     |    |  |   | 2,961,279   |    |
| Fairvalue of warrants issued with unsecureddebentures         |  |        | —    |                     |  |                 | — |               |  |                     | 491,983    |    |  |   | —  |    |  |   | —     |    |  |   | 491,983     |    |
| Issuanceof common stock fromexercise ofoptions                |  |        | 28,000     |                     |  |                 | 28      |               |  |                     | 81,172     |    |  |   | —  |    |  |   | —     |    |  |   | 81,200      |    |
| Issuanceof common stock for401(k)                             |  |        | 43,356     |                     |  |                 | 43      |               |  |                     | 82,332     |    |  |   | —  |    |  |   | —     |    |  |   | 82,375      |    |
| Non-cashcompensation charges for issuance of stockoptions     |  |        | —    |                     |  |                 | — |               |  |                     | 3,923,251  |    |  |   | —  |    |  |   | —     |    |  |   | 3,923,251   |    |
| Netloss                                                       |  |        | —    |                     |  |                 | — |               |  |                     | —    |    |  |   | —  |    |  |   | (16,123,961 | )  |  |   | (16,123,961 | )  |
| Balanceat December 31,    2002            |  |        | 29,027,491 |                     |  |                 | 29,027  |               |  |                     | 61,679,267 |    |  |   | —  |    |  |   | (54,427,532 | )  |  |   | 7,280,762   |    |
| Issuanceof common stock upon conversion ofdebentures          |  |        | 5,468,001  |                     |  |                 | 5,468   |               |  |                     | 11,294,533 |    |  |   | —  |    |  |   | —     |    |  |   | 11,300,001  |    |
| Beneficialconversion feature on private placementtransactions |  |        | —    |                     |  |                 | — |               |  |                     | 1,356,825  |    |  |   | —  |    |  |   | —     |    |  |   | 1,356,825   |    |
| Fairvalue of warrants issued with secureddebentures           |  |        | —    |                     |  |                 | — |               |  |                     | 471,923    |    |  |   | —  |    |  |   | —     |    |  |   | 471,923     |    |
| Issuanceof common stock fromexercise ofoptions                |  |        | 50,000     |                     |  |                 | 50      |               |  |                     | 144,950    |    |  |   | —  |    |  |   | —     |    |  |   | 145,000     |    |
| Issuanceof restricted stock in conjunction with exchangeoffer |  |        | 197,599    |                     |  |                 | 198     |               |  |                     | 395,000    |    |  |   | (395,198 | )  |  |   | —     |    |  |   | —     |    |
| Commonstock under deferred compensationplan                   |  |        | —    |                     |  |                 | — |               |  |                     | —    |    |  |   | (32,315  | )  |  |   | —     |    |  |   | (32,315     | )  |
| Amortizationof deferred compensation for restrictedstock      |  |        | —    |                     |  |                 | — |               |  |                     | —    |    |  |   | 69,086   |    |  |   | —     |    |  |   | 69,086      |    |
| Issuanceof common stock to Board ofDirectors                  |  |        | 201,289    |                     |  |                 | 201     |               |  |                     | 404,354    |    |  |   | —  |    |  |   | —     |    |  |   | 404,555     |    |
| Issuanceof common stock for401(k)                             |  |        | 84,672     |                     |  |                 | 85      |               |  |                     | 143,139    |    |  |   | —  |    |  |   | —     |    |  |   | 143,224     |    |
| Non-cashcompensation charges for issuance of stockoptions     |  |        | —    |                     |  |                 | — |               |  |                     | 1,894,961  |    |  |   | —  |    |  |   | —     |    |  |   | 1,894,961   |    |
| Netloss                                                       |  |        | —    |                     |  |                 | — |               |  |                     | —    |    |  |   | —  |    |  |   | (16,102,937 | )  |  |   | (16,102,937 | )  |
| Balanceat December 31,2003                                    |  |        | 35,029,052 |                     |  | $                    | 35,029  |               |  | $                        | 77,784,952 |    |  | $      | (358,427 | )  |  | $      | (70,530,469 | )  |  | $      | 6,931,085   |    |
|                                                               |

Seeaccompanying notes.

F-5

----

MILLENNIUM CELL INC. (a developmentstage enterprise)

STATEMENT OF CASH FLOWS

|                                                                           |  |                                   |             |                                   |  |                                  |             |                                |  |        |             |         |  |        |             |         |  |  |  |  |  |  |  |  |  |  |
|---------------------------------------------------------------------------|--|-----------------------------------|-------------|-----------------------------------|--|----------------------------------|-------------|--------------------------------|--|--------|-------------|---------|--|--------|-------------|---------|--|--|--|--|--|--|--|--|--|--|
|                                                                      |  | TwelveMonthsEndedDecember 31,2003 |             | TwelveMonthsEndedDecember 31,2002 |  | TwelveMonthsEndedDecember31,2001 |             | CumulativeAmountsFromInception |  |
| **Operatingactivities**                                                   |  |                              |        |                              |  |                             |        |                           |  |   |        |    |  |   |        |    |  |
| Netloss                                                                   |  | $                                 | (16,102,937 | )                            |  | $                                | (16,123,961 | )                         |  | $      | (19,452,329 | )  |  | $      | (68,379,588 | )  |  |
| Adjustmentsto reconcile net loss to net cash used in operatingactivities: |  |                              |        |                              |  |                             |        |                           |  |   |        |    |  |   |        |    |  |
| Depreciationandamortization                                               |  |                              | 681,358     |                              |  |                             | 710,975     |                           |  |   | 473,031     |    |  |   | 2,179,191   |    |  |
| Amortizationof discount on unsecureddebentures                            |  |                              | 926,832     |                              |  |                             | 21,865      |                           |  |   | —     |    |  |   | 948,697     |    |  |
| Amortizationof deferred financingcosts                                    |  |                              | 582,054     |                              |  |                             | 14,590      |                           |  |   | —     |    |  |   | 596,644     |    |  |
| Beneficialconversion feature on PIPEfinancing                             |  |                              | 1,356,825   |                              |  |                             | —     |                           |  |   | —     |    |  |   | 1,356,825   |    |  |
| Losseson investment inaffiliate                                           |  |                              | 488,364     |                              |  |                             | 367,714     |                           |  |   | —     |    |  |   | 856,078     |    |  |
| Non-cashcharges                                                           |  |                              | 2,164,634   |                              |  |                             | 4,148,251   |                           |  |   | 7,341,461   |    |  |   | 24,439,727  |    |  |
| Changesin operating assets andliabilities:                                |  |                              |        |                              |  |                             |        |                           |  |   |        |    |  |   |        |    |  |
| Accountsreceivable                                                        |  |                              | 192,771     |                              |  |                             | (105,015    | )                         |  |   | (129,000    | )  |  |   | (41,244     | )  |  |
| Prepaidexpenses and otherassets                                           |  |                              | 72,130      |                              |  |                             | 14,609      |                           |  |   | (186,256    | )  |  |   | (311,135    | )  |  |
| Accountspayable and accruedexpenses                                       |  |                              | (218,856    | )                            |  |                             | (308,796    | )                         |  |   | 684,946     |    |  |   | 1,091,176   |    |  |
| Deferredincome                                                            |  |                              | —     |                              |  |                             | (129,000    | )                         |  |   | 129,000     |    |  |   | 2,399,988   |    |  |
| Netcash used in operatingactivities                                       |  |                              | (9,856,825  | )                            |  |                             | (11,388,768 | )                         |  |   | (11,139,147 | )  |  |   | (34,863,641 | )  |  |
| **Investingactivities**                                                   |  |                              |        |                              |  |                             |        |                           |  |   |        |    |  |   |        |    |  |
| Purchaseof property andequipment                                          |  |                              | (7,409      | )                            |  |                             | (999,939    | )                         |  |   | (956,854    | )  |  |   | (2,787,861  | )  |  |
| Patentregistrationcosts                                                   |  |                              | (77,591     | )                            |  |                             | (120,099    | )                         |  |   | (138,440    | )  |  |   | (662,224    | )  |  |
| Investmentinaffiliate                                                     |  |                              | (320,952    | )                            |  |                             | (535,126    | )                         |  |   | —     |    |  |   | (856,078    | )  |  |
| Increasein restrictedcash                                                 |  |                              | (35,329     | )                            |  |                             | (2,374,078  | )                         |  |   | (588,972    | )  |  |   | (2,998,379  | )  |  |
| (Purchase)/redemptionof held-to-maturity investments,net                  |  |                              | —     |                              |  |                             | 11,067,175  |                           |  |   | (11,067,175 | )  |  |   | —     |    |  |
| Netcash provided by (used in) investingactivities                         |  |                              | (441,281    | )                            |  |                             | 7,037,933   |                           |  |   | (12,751,441 | )  |  |   | (7,304,542  | )  |  |
| **Financingactivities**                                                   |  |                              |        |                              |  |                             |        |                           |  |   |        |    |  |   |        |    |  |
| Proceedsfrom sale of commonstock                                          |  |                              | 145,000     |                              |  |                             | 81,200      |                           |  |   | 140,650     |    |  |   | 35,139,850  |    |  |
| Underwritingand other expenses of initial publicoffering                  |  |                              | —     |                              |  |                             | —     |                           |  |   | —     |    |  |   | (3,669,613  | )  |  |
| Proceedsfrom issuance of secureddebentures                                |  |                              | 8,500,000   |                              |  |                             | —     |                           |  |   | —     |    |  |   | 8,500,000   |    |  |
| Proceedsfrom issuance of unsecureddebentures                              |  |                              | —     |                              |  |                             | 3,500,000   |                           |  |   | —     |    |  |   | 3,500,000   |    |  |
| Proceedsfrom equity privateplacement                                      |  |                              | —     |                              |  |                             | 2,736,279   |                           |  |   | —     |    |  |   | 2,736,279   |    |  |
| Deferredfinancingcosts                                                    |  |                              | (291,027    | )                            |  |                             | (328,280    | )                         |  |   | —     |    |  |   | (619,307    | )  |  |
| Capitallease obligationpayments                                           |  |                              | (17,239     | )                            |  |                             | —     |                           |  |   | —     |    |  |   | (17,239     | )  |  |
| Proceedsfrom capitalcontribution                                          |  |                              | —     |                              |  |                             | —     |                           |  |   | —     |    |  |   | 500,000     |    |  |
| Paymentof notepayable                                                     |  |                              | —     |                              |  |                             | —     |                           |  |   | —     |    |  |   | (250,000    | )  |  |
| Proceedsfrom grant,net                                                    |  |                              | (21,582     | )                            |  |                             | —     |                           |  |   | —     |    |  |   | 205,940     |    |  |
| Proceedsfrom sale of preferredstock                                       |  |                              | —     |                              |  |                             | —     |                           |  |   | —     |    |  |   | 2,146,446   |    |  |
| Netcash provided by financingactivities                                   |  |                              | 8,315,152   |                              |  |                             | 5,989,199   |                           |  |   | 140,650     |    |  |   | 48,172,356  |    |  |
| Netincrease (decrease) in cash and cashequivalents                        |  |                              | (1,982,954  | )                            |  |                             | 1,638,364   |                           |  |   | (23,749,938 | )  |  |   | 6,004,173   |    |  |
| Cashand cash equivalents, beginning ofperiod                              |  |                              | 7,987,127   |                              |  |                             | 6,348,763   |                           |  |   | 30,098,701  |    |  |   | —     |    |  |
| Cashand cash equivalents, end ofperiod                                    |  | $                                 | 6,004,173   |                              |  | $                                | 7,987,127   |                           |  | $      | 6,348,763   |    |  | $      | 6,004,173   |    |  |
|                                                                           |

SupplementalCash Flow Data:

Interest paid during 2003 and 2002 totaled$104,337 and $2,722, respectively. There was no interest paid in2001.

Non-Cash Transactions:

The Companyfunded the vested matching contributions to the plan with 84,672 and43,356 shares of common stock with an issued market value of $143,224and $82,375 in fiscal 2003 and 2002, respectively. The Company obtaineda capital lease for software purchases in the amount of $86,184 in2003. In November 2002, the Company and Ballard Power Systems agreed toconvert a cash advance for deferred royalty income paid by Ballard inOctober 2000 to a strategic investment in the form of SecuredDebentures of $2.4 million.

See accompanyingnotes.

F-6

----

MILLENNIUMCELL INC. (a development stageenterprise)    

NOTESTO FINANCIAL STATEMENTS

Note 1 — Basis ofPresentation

Millennium Cell Inc. (the"Company"), which was formed to acquiresubstantially all of the assets of the Battery Technology Group of GPStrategies Corporation ("GPS"), wasincorporated on December  17, 1998 and organized on January 1,1999 (inception).

The Company is a development stage company, asdefined in Statement of Financial Accounting Standards No. 7,"Accounting and Reporting by Development StageEnterprises." The Company was formed based on an invented,patented and developed proprietary chemical process("Invention") that generates hydrogen andelectricity from safe, environmentally friendly raw materials. TheCompany's core capability is in the design of a sodiumborohydride process which can generate hydrogen as a high-energy fuelfor the transportation and fuel cell markets. The Company has alsodesigned and produced prototype direct fuel cells and batteries thatutilize the sodium borohydride process to provide electricity for theportable and stationary power markets.

Note 2 —Significant Accounting Policies

Principles ofConsolidation

The consolidated financial statements include theaccounts of Millennium Cell Inc. and its wholly owned subsidiary, MCEVentures LLC. MCE Ventures is a Delaware limited liability corporationthat was formed in 2002 to engage in limited strategic investmentactivities. All significant inter-company transactions and accountshave been eliminated.

Cash and Cash Equivalents

TheCompany considers all highly liquid instruments purchased with aninitial maturity of three months or less to be cash equivalents.

Concentration of Credit Risk

Financial instruments, whichpotentially expose the Company to concentrations of credit risk,consist principally of cash investments and trade receivables. TheCompany places its cash investments with highly rated financialinstitutions. At times, such investments may be in excess of the FDICinsurance limit. The Company's limited customer base increasesits concentrations of credit risk with respect to trade receivables.The Company routinely assesses the financial strength of itscustomers.

Long-Lived Assets

The Company recordsimpairment losses on long-lived assets when events and circumstancesindicate that the assets might be impaired and the undiscountedestimated cash flows to be generated by the related assets are lessthan the carrying amount of those assets. To date, no impairments haveoccurred.

Property and Equipment

Property and equipmentare stated at cost. The Company provides for depreciation andamortization using the straight-line method over their estimated usefullives as follows:

|                        |  |                       |  |  |  |  |
|------------------------|--|-----------------------|--|--|--|--|
| AssetClassification    |  | Estimated Useful Life |
| Machinery andequipment |  | 3years                |
| Furniture and fixtures |  | 3years                |
| Leasehold improvements |  | 7years                |
|                        |

F-7

----

MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

Leasehold improvements are amortized overthe estimated useful lives of the assets or related lease terms,whichever is shorter. Repairs and maintenance are charged to expense asincurred.

Patents and Licenses

Certain costs associatedwith obtaining and licensing patents and trademarks are capitalized asincurred and are amortized on a straight-line basis over theirestimated useful lives of 10 to 17 years, unless the asset isdetermined to be impaired. Amortization of such costs begins once thepatent has been issued. The Company evaluates the recoverability of itspatent costs when events and circumstances indicate that the assetsmight be impaired and the undiscounted estimated cash flows to begenerated by the related assets are less than the carrying amount ofthose assets.

Investment in Affiliate

In July 2002, theCompany agreed to acquire a 50% non-controlling interest in aEuropean alkaline fuel cell company (the"Affiliate"). During the period from July2002 to June 2003, the Company directly and indirectly provided limitedfunding for their proportionate share of the Affiliate'soperating expenses. In the ordinary course of business, the Company hadrelated party transactions directly and indirectly with a member of theCompany's Board of Directors who provided professional servicesfor the Affiliate in 2002 and 2003. Such payments amounted to $45,000during the year ended December 31, 2003.

As of June 30, 2003,the Company had written off its Investment in Affiliate on the balancesheet and determined the fair value of the investment was zero. Duringthe third quarter of 2003, the Company decided to abandon its interestin the Affiliate and no gain or loss was recognized upon thisevent.

Restricted Cash

Cash that is pledged ascollateral under the Company's amended facilities lease agreementand the secured debentures issued to Ballard Power Systems isclassified as restricted cash on the balance sheet.

RevenueRecognition

Revenues for the year ended December 31, 2003 werederived primarily from engineering and design services and sales ofprototype systems to customers to evaluate and demonstrate theCompany's technology.

The Company's near termrevenues will be derived substantially from contracts that require theCompany to deliver engineering, design and management services,hydrogen generation technology, prototype systems and licensing oftechnology. Revenues will be recognized in the period in which theservices are performed, technology and/or prototype is delivered orlicensed revenue is earned.

Product Development and MarketingCosts

Product development and marketing costs are expensed asincurred.

Research and Development Costs

Research anddevelopment costs are expensed as incurred.

Stock BasedCompensation

In December 2002, the Financial AccountingStandards Board ("FASB") issued FAS No. 148,Accounting for Stock-Based Compensation-Transition and Disclosure. FAS148 amends FAS No. 123, Accounting for Stock-Based Compensation, toprovide alternative methods of transition for a voluntary change to thefair value based method of accounting for stock-based employee

F-8

----

MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

compensation. In addition, FAS 148 amends thedisclosure requirements of FAS 123 to require prominent disclosures inboth annual and interim financial statements about the method ofaccounting for stock based employee compensation and the effect of themethod used on reported results. The provisions of FAS 148 areeffective for financial statements for fiscal years and interim periodsending after December 15, 2002. The disclosure provisions of FAS 148have been adopted by the Company. FAS 148 did not require the Companyto change to the fair value based method of accounting for stock-basedcompensation.

Statement of Financial Accounting Standards (SFAS)No. 123, "Accounting for Stock-BasedCompensation" encourages, but does not require, companiesto record compensation cost for stock-based employee compensation plansat fair value. The Company has elected to account for stock-basedcompensation using the intrinsic value method prescribed in AccountingPrinciples Board Opinion No.  25, "Accounting forStock Issued to Employees" ("APB25").

The following table illustrates the effect onnet loss and loss per share if the Company had applied the fair valuerecognition provisions of SFAS 123 to stock-based employeecompensation:

|                                                                                   |
|-----------------------------------------------------------------------------------|
|                                                                                   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                              |  | YearsEnded December31, |
|                                                                              |  | 2003 |  | 2002 |  | 2001 |
| Netloss attributable to common stockholders — Asreported                    |  | $ | (16,102,937 | )  |  | $ | (16,123,961 | )  |  | $ | (19,452,329 | )  |
| Plus:Stock-based compensation expense included in reported netloss                |  |   | 2,164,634 |   |  |   | 4,148,251 |   |  |   | 7,341,461 |   |
| Less:Total stock-based compensation expense determined using the fair valuemethod |  |   | (6,125,215 | )  |  |   | (6,907,045 | )  |  |   | (7,182,134 | )  |
| Netloss attributable to common stockholders — Proforma                      |  | $ | (20,063,518 | )  |  | $ | (18,882,755 | )  |  | $ | (19,293,002 | )  |
| Netloss per share attributable to common stockholders — Asreported          |  | $ | (0.51 | )  |  | $ | (0.58 | )  |  | $ | (0.71 | )  |
| Netloss per share attributable to common stockholders — Proforma            |  | $ | (0.64 | )  |  | $ | (0.67 | )  |  | $ | (0.71 | )  |
|                                                                                   |

Thefair value of each option grant was estimated on the date of grantusing the Black-Scholes option-pricing model with the followingweighted average assumptions:

|                               |
|-------------------------------|
|                               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                          |  | YearsEnded December31, |
|                          |  | 2003 |  | 2002 |  | 2001 |
| Expecteddividendyield         |  | — |  | — |  | — |
| Expectedstock pricevolatility |  | .69 |  | .69 |  | .83 |
| Risk-freeinterestrate         |  | 3.68% |  | 3.68% |  | 3.07%– 4.79% |
| Expected option term          |  | 5years |  | 5 years |  | 3 years |
|                               |

TheBlack-Scholes option valuation model was developed for use inestimating the fair value of traded options that have no vestingrestrictions and are fully transferable. In addition, option valuationmodels require the input of highly subjective assumptions, includingthe expected stock price 

F-9

----

MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

volatility. The Company's options havecharacteristics significantly different from those of traded options,and changes in the subjective input assumptions can materially affectthe fair value estimate. Based upon the above assumptions, the weightedaverage fair value of stock options granted at market was $1.44, $3.10and $4.13 in fiscal 2003, 2002 and 2001, respectively.

EarningsPer Share

Basic earnings per share (EPS) is computed bydividing income available to common stockholders by the weightedaverage number of common shares actually outstanding for the period.Diluted EPS reflects the potential dilution that could occur ifsecurities or other contracts to issue common stock were exercised orconverted into common stock or resulted in the issuance of common stockthat then shared in the earnings of the Company. Basic and diluted EPSwere the same for all periods presented herein.

Options topurchase 4,422,476, 4,345,829 and 4,766,720 shares of common stock havenot been included in the computation of diluted net loss per share forthe years ended December 31, 2003, 2002 and 2001, respectively, astheir effects would have been antidilutive.

Warrants to purchase1,248,069, 658,693 and 400,000 shares of common stock have not beenincluded in the computation of diluted net loss per share for the yearsended December 31, 2003, 2002 and 2001, respectively, as their effectswould have been antidilutive.

Income Taxes

The Companyuses the liability method of accounting for income taxes.  Underthis method, deferred tax assets and liabilities are determined basedon the differences between financial statement and tax bases of assetsand liabilities and are measured using the enacted tax rates and lawsthat are expected to be in effect when the differences are expected toreverse.  Recognition of deferred tax assets is limited toamounts considered by management to be more likely than not realized infuture periods.

Use of Accounting Estimates

Thepreparation of financial statements in conformity with accountingprinciples generally accepted in the United States requires managementto make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates.

Reclassifications

Amounts previously reported as"Product Development and Engineering" havebeen reclassified and shown as "Research andDevelopment" for all periods presented. Additionally,sales of net operating losses in the State of New Jersey previouslyrecorded as "Other Income" have beenreclassified and shown as "Benefit from IncomeTaxes" for all periods presented. Certain other amountshave been reclassified to conform to the current year'spresentation.

F-10

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MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

Note 3 — Income Taxes

Thecomponents of the provision (benefit) for income taxes are asfollows:

|                    |
|--------------------|
|                    |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|               |  | YearEnded December31, |
|               |  | 2003 |  | 2002 |  | 2001 |
| Currentbenefit:    |  |
| Federal            |  | $ | — |   |  | $ | — |   |  | $ | — |   |
| State              |  |   | (221,480 | )  |  |   | (234,963 | )  |  |   | — |   |
| Deferredprovision: |  |
| Federal            |  |   | — |   |  |   | — |   |  |   | — |   |
| State              |  |   | — |   |  |   | — |   |  |   | — |   |
| Total              |  | $ | (221,480 | )  |  | $ | (234,963 | )  |  | $ | — |   |
|                    |

Theincome tax benefits recorded for the years ended December 31, 2003 and2002 were derived from the Company's participation in the NewJersey Emerging Technology and Biotechnology Financial AssistanceProgram. This program allows certain qualified companies to becompensated for the transfer of their New Jersey net operating lossesto other companies.

Significant components of theCompany's net deferred taxes as of December 31, 2003 and 2002 areasfollows:

|                                |
|--------------------------------|
|                                |  |  |  |  |  |  |  |  |  |  |
|                           |  | December31, |
|                           |  | 2003 |  | 2002 |
| Deferredtaxassets:             |  |   |   |   |  |   |   |   |
| Stockbasedcompensation         |  | $ | 8,457,000 |   |  | $ | 7,734,000 |   |
| Netoperating losscarryforwards |  |   | 15,907,000 |   |  |   | 10,641,000 |   |
| Researchand developmentcredits |  |   | 920,000 |   |  |   | 728,000 |   |
| Depreciation                   |  |   | 396,000 |   |  |   | 151,000 |   |
| Deferredrevenue                |  |   | 827,000 |   |  |   | 827,000 |   |
| Other                          |  |   | 200,000 |   |  |   | 191,000 |   |
| Valuationreserve               |  |   | (26,707,000 | )  |  |   | (20,272,000 | )  |
| Netdeferred taxassets          |  | $ | — |   |  | $ | — |   |
|                                |

Asof December 31, 2003, the Company had available net operating losscarryforwards of approximately $40,000,000 for federal income taxpurposes and approximately $34,000,000 for state income tax purposes.The federal carryforwards will begin to expire in 2020, and the statecarryforwards will begin to expire in 2007. In addition, at December31, 2003 the Company also had available federal research anddevelopment tax credit carryforwards of approximately $920,000 thatbegin to expire in 2020.

The reconciliation of income taxexpense computed at the U.S. federal statutory rate to the recordedprovision (benefit) for income taxes is as follows:

F-11

----

MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

|                                              |  |                       |            |         |  |        |       |          |  |        |            |         |  |        |       |          |  |        |            |         |  |        |         |          |  |  |
|----------------------------------------------|--|-----------------------|------------|---------|--|--------|-------|----------|--|--------|------------|---------|--|--------|-------|----------|--|--------|------------|---------|--|--------|---------|----------|--|--|
|                                         |  | YearEnded December31, |
|                                         |  | 2003                  |            | 2002    |  | 2001   |
| Taxat U.S. statutoryrate                     |  | $                     | (5,636,000 | )  |  |   | (35.0 | )%  |  | $      | (5,643,000 | )  |  |   | (35.0 | )%  |  | $      | (6,808,000 | )  |  |   | (35.0   | )%  |
| Statetax (benefit), net of Federal taxeffect |  |                  | (942,000   | )  |  |   | (5.8  | )   |  |   | (943,000   | )  |  |   | (5.8  | )   |  |   | (1,138,000 | )  |  |   | (5.8    | )   |
| Researchand experimentation taxcredits       |  |                  | (193,000   | )  |  |   | (1.2  | )   |  |   | (248,000   | )  |  |   | (1.5  | )   |  |   | (359,000   | )  |  |   | (1.8    | )   |
| Other                                        |  |                  | 94,000     |    |  |   | .5    |     |  |   | 113,000    |    |  |   | .7    |     |  |   | 160,000    |    |  |   | .8      |     |
| Valuationallowance                           |  |                  | 6,455,520  |    |  |   | 40.1  |     |  |   | 6,486,037  |    |  |   | 40.2  |     |  |   | 8,145,000  |    |  |   | 41.8    |     |
| Provision(benefit) for incometaxes           |  | $                     | (221,480   | )  |  |   | (1.4  | )%  |  | $      | (234,963   | )  |  |   | (1.4  | )%  |  | $      | —    |    |  |   | — | %   |
|                                              |

Note 4 — Property andEquipment

Property and equipment consist of the following atDecember 31:

|                           |  |        |            |         |  |        |            |         |  |  |
|---------------------------|--|--------|------------|---------|--|--------|------------|---------|--|--|
|                      |  | 2003   |            | 2002    |
| Machineryandequipment     |  | $      | 1,232,070  |    |  | $      | 1,144,527  |    |
| Furnitureandfixtures      |  |   | 402,125    |    |  |   | 402,125    |    |
| Leaseholdimprovements     |  |   | 1,290,078  |    |  |   | 1,284,028  |    |
|                      |  |   | 2,924,273  |    |  |   | 2,830,680  |    |
| Accumulateddepreciation   |  |   | (1,914,759 | )  |  |   | (1,303,697 | )  |
| Propertyand equipment,net |  | $      | 1,009,514  |    |  | $      | 1,526,983  |    |
|                           |

TheCompany recorded depreciation expense of $611,062, $650,439, and$425,223 for the fiscal years ended December 31, 2003, 2002 and 2001,respectively.

In the second quarter of 2003, the Company enteredinto a three-year capital lease for approximately $86,000 to purchasesoftware. The software is classified as machinery and equipment and theamortization of the leased assets are included in depreciation expensein the accompanying financial statements. The lease term is 3 years andcontains a bargain purchase option at the end of the lease.

Note 5 — Patents and Licenses

Patent and licensecosts consist of the following at December 31:

|                         |  |        |          |         |  |        |          |         |  |  |
|-------------------------|--|--------|----------|---------|--|--------|----------|---------|--|--|
|                    |  | 2003   |          | 2002    |
| Patentand licensecosts  |  | $      | 812,224  |    |  | $      | 734,633  |    |
| Accumulatedamortization |  |   | (214,660 | )  |  |   | (144,364 | )  |
|                    |  | $      | 597,564  |    |  | $      | 590,269  |    |
|                         |

TheCompany recorded amortization expense of $70,296, $60,536, and $47,808for the fiscal years ended December 31, 2003, 2002 and 2001,respectively. Amortization of patents and licenses is estimated to beapproximately $69,000 per year over the next five years and $253,000thereafter.

Note 6 — Product Development Agreement

In October 2000, the Company received $2.4 million in cash fromBallard Power Systems Inc. as an advance for prospective royaltiespursuant to a product development agreement between Ballard

F-12

----

MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

and the Company. In addition, the Companygranted to Ballard a warrant to purchase up to 400,000 shares of commonstock, which was terminated as part of the strategic investmentdiscussed below. Upon completion of certain stages of productdevelopment, the parties agreed to negotiate in good faith for thegrant of a license of the Company's technology to Ballard incertain fields of use, at which time prepaid royalties may be earnedand the warrants will be issued and recorded at fair value.

OnNovember 8, 2002, the Company agreed with Ballard that the productdevelopment milestones have been achieved and agreed to convert the$2.4 million refundable royalty payment into an investment in theCompany in the form of secured convertible debentures due November 8,2005. The Ballard debentures are secured by a standby letter of creditissued by Wachovia Bank, National Association, with an aggregate faceamount equal to the outstanding principal. The Company pledged to thebank as collateral $2.4 million of funds previously reported under cashand cash equivalents on the accompanying balance sheet. The Companydoes not have the ability to use this cash until the bank pledges arereleased upon conversion of the Ballard debentures to common stock. Thedebentures are convertible at a conversion price of $4.25, subject toanti-dilution adjustments and certain price protection in the event theCompany initiates the conversion. As part of the purchase agreemententered into between Ballard and the Company, Ballard retains theoption to license the non-exclusive right to manufacture and sellproducts with the Company's Hydrogen on DemandTMtechnology for specific portable fuel cell products and stationaryinternal combustion engine generators.

Note 7 — GrantObligation

Between January 1999 and April 2000, the Companyreceived an aggregate of $227,522 from a recoverable grant award fromthe State of New Jersey Commission on Science and Technology. The fundswere used to partially fund costs directly related to development ofour technology. The recoverable grant is required to be repaid when theCompany generates net sales in a fiscal year. The repayment obligation,which began in June 2001, ranges from 1% to 5% of netsales over a ten-year period. The Company is obligated to repay theunpaid amount of the original grant at the end of the ten-year period.The Company repaid approximately $21,000 of the award during the secondquarter of 2003, which represents 3% of the 2002 net sales.Based upon 4% of the 2003 net sales, $18,675 is due to be repaidin 2004.

Note 8 — Commitments And Contingencies

In April 2001, the Company amended its main operating lease toprovide for additional space for the Company's principaloperating offices and laboratories. The amended lease will expire in2008 and will contain options to renew for an additional 8 years andwill require the Company to pay its allocated share of taxes andoperating cost in addition to the annual base rent payment. Futureminimum annual lease commitments including estimated allocated taxesand maintenance under the amended operating leases are as follows:

|       |  |        |           |        |  |  |
|-------|--|--------|-----------|--------|--|--|
| 2004  |  |   | 484,310   |   |
| 2005  |  |   | 484,310   |   |
| 2006  |  |   | 484,310   |   |
| 2007  |  |   | 484,310   |   |
| 2008  |  |   | 443,950   |   |
| Total |  | $      | 2,381,190 |   |
|       |

Rentexpense under the operating lease was $546,710, $507,310 and $288,498for the years ended December 31, 2003, 2002, and 2001,respectively.

F-13

----

MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

In connection with the amended leaseagreement, the Company issued a letter of credit to the landlord for$588,972 in lieu of a cash security deposit. The letter of credit wascollateralized with a portion of the Company's cash and isclassified as Restricted Cash. The funds used for collateral will notbe available for use in operations.

From time to time, theCompany is involved in litigation relating to claims arising in thenormal course of business. The Company does not believe that any suchlitigation would have a material adverse effect on our results ofoperations or financial condition.

Note 9 — CapitalTransactions

In May 2000, in exchange for approximately $2.2million, the Company sold 759,368 shares of Series  A preferredstock, which automatically converted into 759,368 shares of commonstock upon completion of the Company's initial public equityoffering in August 2000. As the issuance price was substantially lessthan the initial public offering price the Company incurred additionalpreferred dividends of approximately $2.2 million from the date ofissuance to the initial public offering.

Also in May 2000 (asamended in August 2000), the Company terminated a royalty agreementwith GPS and Steven Amendola by issuing to them options to purchase250,000 common shares at the initial public offering price and 206,897shares of common stock, respectively. These agreements resulted in anon-cash charge of approximately $2.8 million.

In September2000, the Company completed its initial public offering issuing3,352,300 shares resulting in net proceeds to the Company ofapproximately $29.9 million.

In December 2001, the Companyentered into a separation agreement with Steven C. Amendola, its thenchief scientific advisor ("CSA") and alsoentered into a consulting agreement and a confidentiality agreementwith a company wholly owned by the CSA, which expired in September2002. The significant terms of the agreements are:

|              |                                                   |
|--------------|---------------------------------------------------|
| •  | $230,000 of severance to the CSA was paidin 2001. |

|              |                                                                                                                                                                                                                                                                                                                                                       |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Accelerated vesting of 166,607stock options initially granted to the CSA while he was an employee ofthe Company under the Amended and Restated 2000 Stock Option Plan. Thisresulted in a non-cash charge of $142,602. Forfeiture by the CSA ofapproximately 503,321 unvested options. CSA's total vestedoptions equaled 503,322 at December 31, 2001. |

|              |                                                                               |
|--------------|-------------------------------------------------------------------------------|
| •  | The agreements also require the CSA tohonor certain non-compete restrictions. |

On June 19, 2002, theCompany entered into a private placement financing transaction with twoinstitutional and accredited investors pursuant to the terms of asecurities purchase agreement among the Company and the purchasers. Theprivate placement was exempt from registration under the Securities Actof 1933, as amended, pursuant to Section 4(2) of such Act. Theplacement consisted of the sale of 1,075,269 shares of common stock forgross proceeds of $3.0 million and warrants to purchase 268,817 sharesof common stock (with an exercise price of $3.93 per share).

OnOctober 31, 2002, the Company entered into a separate private placementfinancing transaction with the same two institutional and accreditedinvestors pursuant to the terms of a new purchase agreement among theCompany and the purchasers. The private placement was exempt fromregistration under the Securities Act of 1933, as amended, pursuant toSection 4(2) of such Act. The placement consisted of the sale of588,790 shares of common stock and warrants (with an exercise price of$2.32) to purchase 147,198 shares of common stock of the Company forgross proceeds of $1.0 million. Pursuant to the terms of the purchaseagreement, one of the investors agreed to acquire $12 million ofsecured and unsecured debentures, convertible into common stock of theCompany, subject to certain terms and conditions, and warrants.

F-14

----

MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

In December 2002, the Company issuedconvertible unsecured debentures with a principal amount of $3.5million. As of June 30, 2003, the entire $3.5 million of unsecureddebentures had been converted into 2,094,048 shares of commonstock.

On January 23, 2003, the Company's shareholdersapproved the issuance of $8.5 million of secured convertible debenturesand warrants to acquire 589,376 shares. The secured debentures wereissued on January 30, 2003. During the third quarter of 2003, theCompany exchanged all outstanding secured convertible debentures forunsecured convertible debentures and registered the common sharesunderlying all of the unsecured convertible debentures. As a result,the letter of credit securing the secured convertible debentures wasreleased. During the third and fourth quarters of 2003, the Companyconverted approximately $7.8 million of the unsecured convertibledebentures into 3,373,953 shares of common stock. As a result,approximately $0.7 million of unsecured convertible debentures wereoutstanding as of December 31, 2003. These debentures were converted tocommon shares in January  2004.

In accordance with APB No.14, "Accounting for Convertible Debt and Debt Issued withStock Purchase Warrants", the Company determined that thefair value of the debentures issued in December 2002 and in January2003 (the "Convertible Debentures") were$11,036,195 upon issuance. The resulting discount is being amortized asinterest expense, using the effective interest method, over theoriginal maturity period of the debentures or ratably as they areconverted, whichever comes first. During the year ended December 31,2003, the Company recognized a non-cash charge to interest expense of$926,832 for discount amortization on debentures.

In accordancewith Emerging Issues Task Force ("EITF") No.00-27, "Application of Issue No. 98-5 to CertainConvertible Instruments", and EITF No. 98-5,"Accounting for Convertible Securities with BeneficialConversion Features or Contingently Adjustable ConversionRatios", and after considering the terms of theConvertible Debentures, the Company determined that the debenturescontained a beneficial conversion feature("BCF"). The BCF existed because of adiscount that was given to the investor for the company-initiatedconversion of the debentures. These discounts ranged from 4% to12%, depending on the amount of debentures converted into commonstock. Accordingly, at the time of conversion, the Company recorded asinterest expense the applicable BCF based on the fair value of theconversion feature on that date. During the year ended December 31,2003, approximately $11.3 million of debentures were converted at theoption of the Company and BCF charges of $1,356,825 were recorded.

Note 10 — Rabbi Trust

In 2003, the Companyestablished a deferred compensation arrangement whereby a portion ofcertain Board of Directors fees could be withheld and placed in a RabbiTrust at their option. The Company adopted the provisions of EmergingIssues Task Force (EITF) 97-14 "Accounting for DeferredCompensation Arrangement Where Amounts are Earned and Held in a RabbiTrust and Invested" which requires the Company toconsolidate into its financial statements the net assets of the trust.The deferred compensation obligation has been classified as a currentliability. The total value of the Rabbi Trust was $32,315 and isincluded in Additional Paid-in Capital at December 31, 2003 as thedeferred compensation is in the form of the Company's commonstock.

Note 11 — Stock Options and Employee BenefitPlans

2000 Stock Option Plan

In July 2000, the Companyadopted the Amended and Restated 2000 Stock Option Plan. 8,500,000shares of common stock have been reserved for issuance under the plan.The plan provides for the granting of the following types of awards:stock options, stock warrants, stock appreciation 

F-15

----

MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

rights, restricted stock awards, performanceunit awards and stock bonus awards. Options and warrants issued underthis plan have a life of ten years and generally vest ratably overthree years. The specific terms and conditions of awards granted underthe plan are specified in a written agreement between the Company andthe participant.

The following table summarizes option andwarrant activity under the Plan:

|                              |  |                             |           |                                          |  |        |      |        |  |  |
|------------------------------|--|-----------------------------|-----------|------------------------------------------|--|--------|------|--------|--|--|
|                         |  | NumberOfOptionsAnd Warrants |           | Weighted AverageExercise Price Per Share |
| Balance at December 31,2000  |  |                        | 3,684,471 |                                     |  | $      | 3.87 |   |
| Granted at fair value        |  |                        | 1,714,166 |                                     |  |   | 7.21 |   |
| Forfeited or terminated      |  |                        | (507,821  | )                                   |  |   | 2.91 |   |
| Exercised                    |  |                        | (124,096  | )                                   |  |   | 2.90 |   |
| Balance at December 31, 2001 |  |                        | 4,766,720 |                                     |  |   | 5.09 |   |
| Granted at fair value        |  |                        | 5,000     |                                     |  |   | 5.16 |   |
| Forfeited or terminated      |  |                        | (397,891  | )                                   |  |   | 5.57 |   |
| Exercised                    |  |                        | (28,000   | )                                   |  |   | 2.90 |   |
| Balance at December 31, 2002 |  |                        | 4,345,829 |                                     |  |   | 5.06 |   |
| Granted at fair value        |  |                        | 1,122,840 |                                     |  |   | 2.30 |   |
| Forfeited orterminated       |  |                        | (996,093  | )                                   |  |   | 7.46 |   |
| Exercised                    |  |                        | (50,000   | )                                   |  |   | 2.90 |   |
| Balance at December 31, 2003 |  |                        | 4,422,576 |                                     |  | $      | 3.84 |   |
|                              |

The following is additional informationrelating to options and warrants granted and outstanding under the planas of December 31,2003:

|                                      |  |                    |           |                              |  |                                     |       |                    |  |                              |     |        |  |        |           |        |  |        |       |        |  |  |
|--------------------------------------|--|--------------------|-----------|------------------------------|--|-------------------------------------|-------|--------------------|--|------------------------------|-----|--------|--|--------|-----------|--------|--|--------|-------|--------|--|--|
| ExercisePriceRange                   |  | OptionsOutstanding |           | WeightedAverageExercisePrice |  | RemainingWeightedAverageLife(Years) |       | OptionsExercisable |  | WeightedAverageExercisePrice |
| $  2.01 -$  2.90 |  |               | 3,526,438 |                         |  | $                                   | 2.72  |               |  |                         | 7.9 |   |  |   | 3,018,157 |   |  | $      | 2.79  |   |
| $  4.00-$  9.58  |  |               | 444,272   |                         |  |                                | 5.89  |               |  |                         | 8.0 |   |  |   | 372,304   |   |  |   | 6.19  |   |
| $10.00-$19.63                        |  |               | 451,866   |                         |  |                                | 10.57 |               |  |                         | 7.1 |   |  |   | 451,866   |   |  |   | 10.57 |   |
|                                 |  |               | 4,422,576 |                         |  | $                                   | 3.84  |               |  |                         | 7.8 |   |  |   | 3,842,327 |   |  | $      | 4.03  |   |
|                                      |

Thestock option tables above exclude 197,599 shares of restricted stockissued under the 2000 Stock Option Plan in conjunction with the tenderexchange offer in August 2003, of which 197,055 shares are outstandingbut not exercisable. The shares vest ratably over 2 years or when theclosing price of the Company's common stock reaches $4.25 (first50% vests immediately) and $5.10 (second 50% vestsimmediately).

The Company recorded non-cash charges ofapproximately $1.7 million, $3.8 million and $5.9 million in 2003,2002, and 2001, respectively, related to options issued below market toemployees and the Board of Directors in 2000 and charges related torestricted stock issued in conjunction with our tender offer in August2003 as discussed below under the heading "Tender ExchangeOffer."

The Company also incurred non-cash chargesof $0.5 million, $0.1 million and $1.4 million in 2003, 2002, and 2001,respectively, related to the fair value of warrants issued toaffiliates. The accounting methodology for these warrants requires are-valuing of the warrants at each period ending market price using aBlack-Scholes pricing model. Due to the variable nature of thisaccounting 

F-16

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MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

methodology, it is difficult to predict theamount of additional non-cash charges the Company will incur related tothese warrants during future periods.

The fair value of eachoption grant was estimated on the date of grant using the Black-Scholesoption-pricing model with the following weighted averageassumptions:

|                               |  |                        |  |         |  |                    |  |  |  |  |  |  |  |  |
|-------------------------------|--|------------------------|--|---------|--|--------------------|--|--|--|--|--|--|--|--|
|                          |  | YearsEnded December31, |
|                          |  | 2003                   |  | 2002    |  | 2001               |
| Expecteddividendyield         |  | —                |  | — |  | —            |
| Expectedstock pricevolatility |  | .69                    |  | .69     |  | .83                |
| Risk-freeinterestrate         |  | 3.68%                  |  | 3.68%   |  | 3.07%– 4.79% |
| Expected option term          |  | 5years                 |  | 5 years |  | 3 years            |
|                               |

SavingsPlan

In December 2000, the Company enacted a savings plan thatcomplies with Section 401(k) of the Internal Revenue Code. The planallows employees to contribute a portion of their compensation on apre-tax and/or after-tax basis in accordance with specified guidelines.The Company matches in company stock in July and December of eachfiscal year, on a one to one basis the vested portion of employeecontributions up to 6% of eligible compensation. Employeecontributions to this plan began in January 2001. Employer matchingstock contributions vest ratably over 3 years based on the length ofservice of the employee. The Company funded the vested matchingcontributions to the plan with 84,672 and 43,356 shares of common stockwith an issued market value of $143,224 and $82,375 in fiscal 2003 and2002, respectively. The Company has reserved 180,000 shares of commonstock for the 401(k) plan.

Tender Exchange Offer

InAugust 2003, the Company exchanged 835,500 eligible stock options for197,599 shares of restricted stock related to an exchange offer. Thisoffer allowed eligible plan participants to exchange options forrestricted stock at an exchange rate based on the calculated marketvalue of the stock options using a black-scholes model. In fiscal 2003,the Company recorded $67,656 related to the vesting of the restrictedstock. The Company will recognize total non-cash charges in the amountof $395,198 ratably over the remaining vesting period of the restrictedstock (two years or upon the closing price of the Company'scommon stock reaching $4.25 (first 50% vests immediately) and$5.10 (second 50% vests immediately)).

Note 12 —Related Party Transaction

In the ordinary course of business,the Company had related party transactions directly and indirectly witha member of the Company's Board of Directors who providedprofessional services for an affiliate of the Company. Such paymentsamounted to $45,000 during the year ended December 31, 2003.

Note 13 —Subsequent Financing Event

In January 2004,the Company entered into a private placement financing transaction withan institutional and accredited investor pursuant to the terms of asecurities purchase agreement among the Company and the purchaser. Theprivate placement was exempt from registration under the Securities Actof 1933, as amended, pursuant to Section 4(2) of such Act. Pursuant tothe terms of the agreement, the investor agreed to acquire up to $10million of unsecured debentures, convertible into common stock of theCompany, subject to certain terms and conditions.

Theregistration of shares underlying the debentures was declared effectiveby the SEC on February  17, 2004 and a $6.0 million unsecureddebenture was issued to the investor on that date at 

F-17

----

MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

an initial conversion price of $3.30,subject to certain terms and conditions. The additional $4 million ofunsecured convertible debentures will be issued to the investor at thesole option of the Company, provided that at least $4 million of the $6million debenture has been converted into common stock in accordancewith the terms of such debenture, and the Company is in compliance inall material respects with the private placement documents. Under theterms of the agreement, cash fees of $400,000 were deducted from theinitial proceeds and 140,180 shares of common stock were issued to theholder of the debentures upon closing of the transaction. The marketvalue of these shares and the cash fees will be recorded as a discounton the debentures and amortized over the term of the debentures or asthey are converted, whichever happens first. The debentures will maturein 18 months and are subject to six, 30-day extensions and bearinterest at 6% with payments due quarterly.

F-18

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MILLENNIUMCELL INC. (a development stageenterprise)    **NOTES TO FINANCIAL STATEMENTS — (Continued)**

Note 14 — Quarterly Information(Unaudited) (1)

|                                                     |  |                                    |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |  |  |  |  |  |
|-----------------------------------------------------|--|------------------------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|--|--|--|--|
|                                                |  | FiscalYearQuarters                 |         |
|                                                |  | First                              |         | Second  |  | Third  |         | Fourth  |  | Total  |         |
|                                                |  | (in000's, except per shareamounts) |         |
| Fiscal Year ended December 31,2003                  |  |                               |    |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   |    |    |  |
| Revenue                                             |  | $                                  | 55      |    |  | $      | 238     |    |  | $      | 103     |    |  | $      | 71      |    |  | $      | 467     |    |  |
| Costofrevenue                                       |  |                               | 55      |    |  |   | 190     |    |  |   | 93      |    |  |   | 70      |    |  |   | 409     |    |  |
| GrossMargin                                         |  |                               | — |    |  |   | 48      |    |  |   | 10      |    |  |   | — |    |  |   | 57      |    |  |
| Productdevelopment &marketing                   |  |                               | 1,231   |    |  |   | 1,291   |    |  |   | 1,497   |    |  |   | 1,275   |    |  |   | 5,294   |    |  |
| Generalandadministrative                            |  |                               | 1,070   |    |  |   | 1,034   |    |  |   | 737     |    |  |   | 995     |    |  |   | 3,836   |    |  |
| Non-cashcharges                                     |  |                               | 1,095   |    |  |   | 852     |    |  |   | 419     |    |  |   | (201    | )  |  |   | 2,165   |    |  |
| Depreciationandamortization                         |  |                               | 175     |    |  |   | 166     |    |  |   | 153     |    |  |   | 186     |    |  |   | 681     |    |  |
| Researchanddevelopment                              |  |                               | 305     |    |  |   | 271     |    |  |   | 222     |    |  |   | 222     |    |  |   | 1,020   |    |  |
| Totaloperatingexpenses                              |  |                               | 3,878   |    |  |   | 3,614   |    |  |   | 3,027   |    |  |   | 2,476   |    |  |   | 12,996  |    |  |
| Lossfromoperations                                  |  |                               | (3,878  | )  |  |   | (3,567  | )  |  |   | (3,017  | )  |  |   | (2,476  | )  |  |   | (12,939 | )  |  |
| Interestincome (expense)(2)                         |  |                               | (516    | )  |  |   | (338    | )  |  |   | (1,464  | )  |  |   | (579    | )  |  |   | (2,897  | )  |  |
| Equityin losses ofaffiliates                        |  |                               | (294    | )  |  |   | (194    | )  |  |   | — |    |  |   | — |    |  |   | (488    | )  |  |
| Lossbefore incometaxes                              |  |                               | (4,688  | )  |  |   | (4,099  | )  |  |   | (4,481  | )  |  |   | (3,055  | )  |  |   | (16,324 | )  |  |
| Benefitfrom incometaxes                             |  |                               | — |    |  |   | — |    |  |   | — |    |  |   | 221     |    |  |   | 221     |    |  |
| Netloss                                             |  |                               | (4,688  | )  |  |   | (4,099  | )  |  |   | (4,481  | )  |  |   | (2,834  | )  |  |   | (16,103 | )  |  |
| Lossper share — basic anddiluted              |  | $                                  | (.16    | )  |  | $      | (.13    | )  |  | $      | (.14    | )  |  | $      | (.08    | )  |  | $      | (.51    | )  |  |
| Weighted— average number of sharesoutstanding |  |                               | 29,402  |    |  |   | 30,452  |    |  |   | 31,945  |    |  |   | 34,555  |    |  |   | 31,564  |    |  |
|                                                     |

|                                                     |  |                                    |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |  |  |  |  |  |
|-----------------------------------------------------|--|------------------------------------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|--|--|--|--|
|                                                |  | First                              |         | Second  |  | Third  |         | Fourth  |  | Total  |         |
|                                                |  | (in000's, except per shareamounts) |         |
| Fiscal Year ended December 31,2002                  |  |                               |    |    |  |   |    |    |  |   |    |    |  |   |    |    |  |   |    |    |  |
| Revenue                                             |  | $                                  | 360     |    |  | $      | 20      |    |  | $      | 106     |    |  | $      | 233     |    |  | $      | 719     |    |  |
| Costofrevenue                                       |  |                               | 360     |    |  |   | 20      |    |  |   | 106     |    |  |   | 204     |    |  |   | 690     |    |  |
| GrossMargin                                         |  |                               | — |    |  |   | — |    |  |   | — |    |  |   | 29      |    |  |   | 29      |    |  |
| Productdevelopment &marketing                   |  |                               | 1,729   |    |  |   | 1,470   |    |  |   | 1,313   |    |  |   | 1,277   |    |  |   | 5,788   |    |  |
| Generalandadministrative                            |  |                               | 1,498   |    |  |   | 981     |    |  |   | 891     |    |  |   | 683     |    |  |   | 4,053   |    |  |
| Restructuringexpense                                |  |                               | — |    |  |   | 105     |    |  |   | — |    |  |   | — |    |  |   | 105     |    |  |
| Non-cashcharges                                     |  |                               | 1,118   |    |  |   | 1,075   |    |  |   | 988     |    |  |   | 967     |    |  |   | 4,148   |    |  |
| Depreciationandamortization                         |  |                               | 174     |    |  |   | 181     |    |  |   | 180     |    |  |   | 176     |    |  |   | 711     |    |  |
| Researchanddevelopment                              |  |                               | 364     |    |  |   | 541     |    |  |   | 249     |    |  |   | 362     |    |  |   | 1,515   |    |  |
| Totaloperatingexpenses                              |  |                               | 4,883   |    |  |   | 4,353   |    |  |   | 3,621   |    |  |   | 3,465   |    |  |   | 16,321  |    |  |
| Lossfromoperations                                  |  |                               | (4,883  | )  |  |   | (4,353  | )  |  |   | (3,621  | )  |  |   | (3,436  | )  |  |   | (16,292 | )  |  |
| Interestincome(expense)                             |  |                               | 158     |    |  |   | 96      |    |  |   | 52      |    |  |   | (6      | )  |  |   | 300     |    |  |
| Equityin losses ofaffiliates                        |  |                               | — |    |  |   | — |    |  |   | — |    |  |   | (368    | )  |  |   | (368    | )  |  |
| Lossbefore incometaxes                              |  |                               | (4,725  | )  |  |   | (4,256  | )  |  |   | (3,569  | )  |  |   | (3,809  | )  |  |   | (16,359 | )  |  |
| Benefitfrom incometaxes                             |  |                               | — |    |  |   | — |    |  |   | — |    |  |   | 235     |    |  |   | 235     |    |  |
| Netloss                                             |  |                               | (4,725  | )  |  |   | (4,256  | )  |  |   | (3,569  | )  |  |   | (3,574  | )  |  |   | (16,124 | )  |  |
| Lossper share — basic anddiluted              |  | $                                  | (.17    | )  |  | $      | (.15    | )  |  | $      | (.13    | )  |  | $      | (.12    | )  |  | $      | (.58    | )  |  |
| Weighted— average number of sharesoutstanding |  |                               | 27,306  |    |  |   | 27,507  |    |  |   | 28,428  |    |  |   | 28,829  |    |  |   | 28,023  |    |  |
|                                                     |

|  |
|--|
|  |  |
|  |

| (1) | Somecolumns and rows may not foot or cross-foot due to rounding. |
|-----|------------------------------------------------------------------|

| (2) | In the fourth quarter of 2003,the Company determined that non-cash interest expense was overstated by$.01 per share in the first and third quarters of 2003 and $.02 pershare in the second quarter of 2003. Accordingly, non-cash interestexpense was cumulatively adjusted in the fourth quarter. Managementbelieves the impact to each of the quarters was notmaterial. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

F-19

----