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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                            ------------------------

                                   FORM 10-K

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

     [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

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

                            ------------------------

                                   000-31083
                            (COMMISSION FILE NUMBER)

                              MILLENNIUM CELL INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<Table>
<S>                                                 <C>
                     DELAWARE                                           22-3726792
         (STATE OR OTHER JURISDICTION OF                             (I.R.S. EMPLOYER
          INCORPORATION OR ORGANIZATION)                          IDENTIFICATION NUMBER)
</Table>

<Table>
<S>                                                 <C>
   1 INDUSTRIAL WAY WEST, EATONTOWN, NEW JERSEY                           07724
     (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                           (ZIP CODE)
</Table>

                                 (732) 542-4000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  COMMON STOCK, $.001
PAR VALUE PER SHARE

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]

     The aggregate market value of the registrant's common stock held by
non-affiliates as of March 1, 2002 was $70,201,795.

     The number of shares outstanding of the registrant's common stock as of
March 1, 2002 was 27,307,077.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's definitive proxy statement dated March 25,
2002 to be delivered to stockholders in connection with the Annual Meeting of
Stockholders to be held April 18, 2002 is incorporated by reference into Part
III.

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<PAGE>

                               TABLE OF CONTENTS

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<Caption>
   ITEM                             DESCRIPTION                           PAGE
   ----                             -----------                           ----
<S>         <C>                                                           <C>
PART I
Item 1.     Business....................................................    1
Item 2.     Properties..................................................    9
Item 3.     Legal Proceedings...........................................    9
Item 4.     Submission of Matters to a Vote of Security Holders.........    9

PART II
Item 5.     Market for the Registrant's Common Equity and Related
            Shareholder Matters.........................................   10
Item 6.     Selected Financial Data.....................................   10
Item 7.     Management's Discussion and Analysis of Results of
            Operations and Financial Condition..........................   11
Item 8.     Financial Statements and Supplementary Data.................   17
Item 9.     Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure....................................   17

PART III
Item 10.    Directors and Executive Officers of the Registrant..........   17
Item 11.    Executive Compensation......................................   17
Item 12.    Security Ownership of Certain Beneficial Owners and
            Management..................................................   17
Item 13.    Certain Relationships and Related Party Transactions........   17

PART IV
Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form
            8-K.........................................................   18
</Table>

                                        i
<PAGE>

     This report contains forward-looking statements (within the meaning of the
Private Securities Litigation Reform Act of 1995) that are subject to risks and
uncertainties. Statements contained herein that are not statements of historical
fact may be deemed to be forward-looking information. When we use words such as
"plan," "believe," "expect," "anticipate," "intend" or similar expressions, we
are making forward-looking statements. You should not rely on forward-looking
statements because they are subject to a number of assumptions concerning future
events, and are subject to a number of uncertainties and other factors, many of
which are outside of our control, that could cause actual results to differ
materially from those indicated. Please note that we disclaim any intention or
obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise. These factors include,
but are not limited to, the following: (i) the cost and timing of development
and market acceptance of a commercially viable hydrogen fuel storage and
delivery system, (ii) the cost and commercial availability of components, parts
and quantities of raw materials required by the hydrogen fuel storage and
delivery systems, (iii) price competition from current, improving and alternate
power technologies, (iv) our ability to raise capital at the times, in the
amounts and at costs and terms that are acceptable to fund the development and
commercialization of our hydrogen fuel storage and delivery system, (v) our
ability to protect our intellectual property, (vi) our ability to achieve
budgeted revenue and expense amounts and (vii) other factors discussed herein
under the caption "Investment Considerations" and other factors detailed from
time to time in our filings with the Securities and Exchange Commission.

                                     PART I

ITEM 1.  BUSINESS.

GENERAL

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

OUR HYDROGEN STORAGE AND DELIVERY TECHNOLOGY

     We have developed and applied for patents for a proprietary process called
Hydrogen on Demand(TM) that safely generates pure hydrogen from environmentally
friendly raw materials. Our technology can be used to generate hydrogen for use
by fuel cells in the production of electricity, generate hydrogen for use by
modified internal combustion engines, and power longer-life batteries. In the
proprietary process, the energy potential of hydrogen is carried in the chemical
bonds of sodium borohydride, which in the presence of a catalyst releases
hydrogen or produces electricity. The primary input components of the reaction
are water and sodium borohydride, a derivative of borax, which is found in
substantial natural reserves globally.

     In its simplest form, our sodium borohydride technology provides the
ability to store and transport hydrogen in a liquid or solid substance. Because
hydrogen provides the energy used by fuel cells to create electricity, this is
the equivalent of transporting clean electricity as a liquid or solid -- safely
and conveniently. To put this in another perspective, an aqueous solution
containing 35% by weight sodium borohydride and water can fuel a fuel cell with
an energy density that is equal to or greater than that of gasoline for an
internal combustion engine.

     Our solution of sodium borohydride in water creates a fuel that delivers a
non-flammable, energy dense and convenient source of hydrogen to power fuel
cells or internal combustion engines. To generate hydrogen, the fuel is pumped
over a catalyst. The catalyst is typically a non-volatile noble metal, a
chemical group that includes ruthenium and cobalt. Once in contact with the
catalyst, the sodium borohydride reacts to form hydrogen gas, which can be used
immediately or stored in a tank. The byproducts of our hydrogen-generating
process are primarily heat and borax, a type of sodium borate, which can be
recycled to form sodium borohydride.

                                        1
<PAGE>

     The hydrogen-generating chemical reactions used in our process eliminate
the pollutants and undesirable emissions of typical hydrocarbon-based energy
systems, which combust fossil fuels such as gasoline, natural gas and diesel.
Sodium borohydride-based energy systems have favorable energy density,
power-to-weight and volume characteristics when compared to the mobile hydrogen
power sources now in use. Based on our laboratory tests, we believe that
batteries using our patented sodium borohydride process can deliver more
potential energy per unit of both weight and volume than batteries on the market
today.

     We have used our hydrogen generation system to power an operating
series-hybrid sports utility vehicle and two other vehicles, including a fuel
cell vehicle and a former New York City taxicab that burns hydrogen in its
internal combustion engine. We believe that sodium borohydride fuel could be
distributed for transportation purposes through fleet refueling centers, and
eventually in the future through the existing network of neighborhood gasoline
stations. We have also designed and produced single use power cells that use our
proprietary system that could provide electricity for the portable power
markets, including laptop computers, cellular telephones, hearing aids, personal
organizers and other portable devices.

ADVANTAGES OVER EXISTING HYDROGEN STORAGE TECHNOLOGIES

     We believe that the Company's hydrogen generation technology and its
underlying characteristics of safety, portability and environmental
compatibility make it an attractive alternative to existing technologies for
many applications. We believe our core competitive advantage is that our
technology solves two critical problems related to the use of hydrogen as a
fuel: generation and storage. Our Hydrogen on Demand(TM) system stores the
energy of hydrogen in the chemical, as a dry powder or an inert, non-flammable
liquid. Hydrogen is released only when it is needed, and because it is consumed
on demand, no storage technology is required. We believe that this is a
considerable advantage when compared to other means of generating and storing
hydrogen.

     We believe that our proprietary Hydrogen on Demand(TM) hydrogen generation
system offers advantages for use in fuel cells over other methods of generating
hydrogen fuel which often require the storage of hydrogen in bulky and
potentially explosive tanks or consume polluting hydrocarbon fuels in chemical
reformation processes. Current methods of storing significant amounts of
hydrogen in vehicles require use of large tanks of liquid (cryogenic) or
compressed gaseous hydrogen. For a 3,000-pound automobile to achieve a range of
300 miles using a proton exchange membrane ("PEM") fuel cell system, the
equivalent of 32 twenty-five pound tanks (weighing 800 lbs.) of compressed
gaseous hydrogen at 3,600 psi would be required. For cryogenically stored
hydrogen, the weight drops significantly. However, even though the weight of the
overall system decreases, the overall energy efficiency does too, as
approximately two-thirds of the total energy of the cryogenically stored
hydrogen is required to liquefy the hydrogen. Both of these systems are
cumbersome, voluminous and potentially hazardous, as an accident that damages a
full tank of either liquid or gaseous hydrogen might result in an extremely
powerful explosion. To date, we are unaware of any other methods for storing
significant amounts of hydrogen in a compact, lightweight and safe manner.

     Advantages of our system are both environmental and economic, as our system
is not complex and we envision the ability to retain in use much of the current
infrastructure now used for distribution of transportation fuels. The recycling
process to regenerate the spent fuel into sodium borohydride is envisioned to be
feed stock neutral -- meaning that the least 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
regeneration process, the emissions associated with these fuels are concentrated
locally and can be controlled as a single point source, unlike conventional
gasoline burning automobiles, which scatter emissions throughout an area with no
real method of control.

     Hydrocarbon fuels such as gasoline, when combusted, release into the
atmosphere carbon monoxide and carbon dioxide, both pollutants. Additional
pollutants are also created, such as oxides of nitrogen -- a key component of
smog. By contrast, our process uses no carbon, while still taking advantage of
the significant power potential of hydrogen. Neither of the reaction's
byproducts, water and borax, is a pollutant. There is no "exhaust" in the
conventional sense -- water is harmlessly vented into the air as steam. The
byproduct captured in our system can be recycled into sodium borohydride, the
key input in our process.

                                        2
<PAGE>

     Fossil fuel reformers produce hydrogen from methane, gasoline, natural gas
or other fossil fuels. As compared to Hydrogen on Demand(TM), this technology
results in lower purity hydrogen and creates polluting emissions from the
carbon, sulfur and nitrogen compounds inherent in the fossil fuel. Additionally,
hydrogen from reformers contains carbon monoxide, which if not removed, will
poison fuel cells. Reformers have high system complexity and correspondingly
high capital costs. Finally, hydrogen generated from fossil fuels must still be
stored, either compressed in cylinders or liquefied and stored as a cryogenic
liquid. Both of these storage mechanisms have limited consumer appeal,
particularly for transportation and residential power applications.

     Metal hydrides are another option for storing the energy produced by
hydrogen. However, metal hydride systems still require an infrastructure for
hydrogen gas and require a source of heat to desorb hydrogen. Electrolysis is
also used to generate hydrogen from water, but provides no means of storing it.
These systems also consume electricity in the process, with low conversion
efficiency and are designed only for stationary use.

MARKET OPPORTUNITY FOR OUR TECHNOLOGY

     The events of September 11(th) underscored the need for increased energy
independence in the United States and have contributed to the elevation of
energy issues in national priorities. President Bush's Freedom Car initiative
demonstrates the depth of the government's interest in fuel cell development for
transportation. The current administration has also announced a proposal for
overall reduction of CO2 emissions. With energy issues center stage both from a
geopolitical and an environmental standpoint, 2002 will be a year ripe with
opportunities to demonstrate how Hydrogen on Demand(TM) can contribute to both
national objectives: cleaner energy created within our own borders.

     Government authorities in North America, Europe and Japan continue to
impose stringent environmental standards generally and have increased support
for the development of clean and efficient technologies to significantly improve
or replace existing combustion-based technologies. While environmental
considerations provided the initial impetus for automobile manufacturers to seek
alternatives to the use of the internal combustion engine, we believe that these
manufacturers are beginning to recognize that fuel cell powered vehicles will
provide consumers with higher fuel efficiency, lower noise and vibration,
enhanced passenger comfort and performance and new vehicle design options, and
potentially lower capital and maintenance costs.

     An immediate market opportunity exists in the growing worldwide consumer
demand for quiet, clean and environmentally friendly products in the distributed
generation markets. Promising applications include portable power and
uninterrupted power source (UPS) products for use in densely populated areas
where noise pollution is a significant concern and for use indoors or in other
areas where high noise and high emissions of internal combustion engine
generators pose significant problems. We believe that public concern over
pollution is focusing attention on the use of environmentally cleaner methods of
power generation that can use non-renewable natural resources more efficiently.

  Transportation Markets

     The transportation market continues to be driven by mandates associated
with emissions. In North America, the California regulations (which mandate
certain percentages of automobiles sold in the state to meet zero and/or low
emissions levels), are motivating vehicle manufacturers worldwide to accelerate
efforts to produce environmentally-friendly, clean, and efficient vehicles such
as fuel cell powered vehicles and battery-powered vehicles. We expect further
mandates will impact marine vessels using diesel-powered engines and we are
focused on identifying opportunities where fuel cells and our very unique
hydrogen fuel proposition may be used.

     The year 2001 marked a number of accomplishments for the company in the
transportation market. In December, our partner DaimlerChrysler announced the
Natrium(R) Town and Country mini-van which is powered by a fuel cell using our
Hydrogen on Demand(TM) hydrogen storage fuel system. The announcement culminated
a year long effort to meet technical milestones and provide a fuel system fully
integrated on board which allows DaimlerChrysler to safely store the equivalent
of 300 miles worth of fuel with no loss of passenger storage space. In addition,
we have agreed to provide PSA Peugeot Citroen two prototype Hydrogen

                                        3
<PAGE>

on Demand(TM) fuel systems for onboard integration into their current all
battery-powered taxicab. This agreement should produce our first revenue from
the transportation segment. To date, we are meeting all of the identified
milestones in the program. The Hydrogen on Demand(TM) fuel system may provide
valuable range extension for the vehicle when used in conjunction with a small
fuel cell.

     Earlier in the year, we agreed to provide Ford Motor Company a prototype
Hydrogen on Demand(TM) fuel system for evaluation in the Ford Research
Laboratories. This program and discussions are ongoing.

     Our company has continued efforts internally to demonstrate feasibility of
Hydrogen on Demand(TM) fuel systems in transportation applications. During 2001,
we successfully completed the "Genesis" vehicle and were able to drive it more
than 400 miles on a combination of battery and fuel cell power on a single tank
of fuel. More than 300 of these 400 miles came from the Hydrogen on Demand(TM)
system alone.

     We continue to believe that the stream of hydrogen we produce from Hydrogen
on Demand(TM) fuel systems provides unique benefits when burned in an internal
combustion engine. The warm, 100% relative humidity stream, when combined with
our safe and highly efficient storage density, offers attributes which no other
hydrogen storage mechanism we are aware of can currently provide. In late 2001,
we completed the onboard integration of the Hydrogen on Demand(TM) fuel system
in a Crown Victoria vehicle that had originally been designed to run on
compressed natural gas. The vehicle is now being powered by hydrogen. We will
continue this effort to further determine the unique benefits that our stream of
hydrogen offers in reducing emissions.

     During 2002, we expect an on-road demonstration of Hydrogen on Demand(TM)
in the Natrium(R) at the California Fuel Cell Partnership. We are focused on
helping our partners, like DaimlerChrysler and PSA Peugeot Citroen, successfully
demonstrate vehicles and in forming new partnerships for future demonstrations
which build on these early successes. As we begin these demonstrations, we are
supporting our partners with the fuel infrastructure. We are also working to
provide mixed fuel at the point of use as well as providing for return of the
discharged fuel (borate solution) safely and in an environmentally correct way.
U.S. Borax, with whom we have a joint development agreement, has agreed to help
with the disposal of the borate solution by absorbing it into their operations
worldwide and re-using it. This agreement will be adequate to handle the
quantities of discharged fuel that are likely to be generated near-term.
Longer-term, as use of the fuel becomes widespread, we anticipate the
construction of recycling facilities to regenerate the borate solution into
fresh fuel.

     We will continue our efforts in 2002 to develop partnerships and to
participate in new demonstrations not only in automotive fuel cell applications,
but also in hydrogen burning internal combustion engine applications. We are
also working to develop applications in a number of different areas, including
marine, personal transportation (bicycles and scooters), heavy-duty truck
(onboard auxiliary power), and fuel cell powered bus fleets, golf carts and
forklift trucks.

  Distributed Generation Markets

     There is a growing worldwide consumer demand for quiet, clean power. The
largest applications include portable and stationary power generators and power
sources for small consumer electronics devices. In each of these markets, users
demand power that is clean, reliable, quiet, affordable and packaged
efficiently.

     Portable power generators are commonly used in densely populated areas
where noise pollution is a significant concern and indoors or in other areas
where the high noise and high emissions of internal combustion engine generators
pose significant problems. We believe that portable power generators fueled by
the Hydrogen on Demand(TM) system will have advantages over existing portable
generators and can provide consumers with the power they need in a package that
is small and durable with low noise and emissions, particularly in comparison to
diesel fueled generators.

     In October 2000, we entered into a product development agreement with
Ballard Power Systems to further develop our proprietary hydrogen generation
system for use with Ballard's portable power fuel cell products. As part of that
agreement, upon the successful commercial development effort, we will grant a
license to Ballard to use our hydrogen generation technology in its portable
products. Ballard has paid us

                                        4
<PAGE>

$2.4 million as an advance for prospective royalties under the license. Under
the agreement, we have granted Ballard a warrant to purchase up to 400,000
shares of our common stock.

     Stationary power generation has experienced rapid growth due to the demand
for reliable power to critical use applications. Primarily driven by standby
power for telecommunications systems, Internet data centers and health care
facilities, the reliable power market has increased demand by 30% annually(1).
Hydrogen fuel and fuel cells are capable of providing a more favorable economic
and space utilization solution than incumbent lead-acid batteries. We believe
our Hydrogen on Demand(TM) system can deliver a safe, high energy density and
low cost solution to fueling fuel cells for these applications.

     We believe that the highest growth battery segment is that which includes
advanced commercial rechargeable and disposable battery technologies powering
portable consumer electronics products such as cell phones, notebook computers
and digital imaging devices. For these devices, hydrogen-fueled fuel cells offer
the potential for longer runtimes and more convenient refueling than batteries.
We believe our Hydrogen on Demand(TM) system has significant potential in these
markets due to its unique safety characteristics, high energy density and low
fuel and system cost.

  Battery Markets

     Our boron-based technology may be adapted for production of batteries. We
believe that batteries based on our technology would have a higher energy
density by volume and weight than batteries currently in use, and thus would be
lighter and smaller. As a result, we believe our battery technology could
capitalize on the trend towards smaller and lighter products in the consumer
electronics industry.

     The initial markets for these technologies we intend to focus on will
likely be to meet the needs of military power sources where a premium is placed
on high performance. We believe there is also opportunity in the general-purpose
battery applications including hearing aids, consumer electronics and the latest
communications, imaging and portable computing devices that are projected to
demand continually higher energy density power sources.

  Supply Chain

     Our supply chain plan is focused primarily on the global joint development
and licensing of a proprietary process for the manufacture and regeneration of
sodium borohydride with large, industrial partners including borate producers,
industrial hydrogen providers, chemical providers, and major energy producers
(including oil, gas, and electricity companies). If market acceptance of our
technology increases in the transportation, portable power and battery markets,
we believe that this increase in demand for sodium borohydride will result in
the need for additional global manufacturing capacity. By licensing our process,
we believe a significant revenue stream could be generated. The goal of our
research and development efforts in the area of sodium borohydride production is
to lower raw material costs by significantly reducing the amount of sodium that
is required in the current manufacturing process, as sodium is an expensive
component of the process.

     We also seek to ensure the short-term and long-term supply of sodium
borohydride for energy applications. This will involve collaboration with
present and future producers of this chemical. In addition, we will continue to
evaluate ways to ensure an affordable supply of sodium borohydride to our
potential partners and customers. During 2001, we signed joint development
agreements with System Consulting, U.S. Borax and Air Products and Chemicals. We
believe partnerships like these may lead to an affordable, adequate supply of
sodium borohydride to support commercialization of products that utilize our
technology.

     Sodium borohydride is currently a specialty chemical that is produced by a
few manufacturers located in the United States and Europe. We believe that we
can successfully compete in the portable power markets with sodium borohydride
at its current price, however, it will be necessary to scale-up production of
the chemical to be cost competitive in the transportation markets. In 2002, we
plan to construct a process

---------------

(1) According to "From Fuel Cells to Flywheels", Thomas Weisel Partners, August
2001.

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demonstration unit to demonstrate the viability of cost-effective mass
production of sodium borohydride through economies of scale and improved
manufacturing efficiencies.

OUR STRATEGY

     Our goal is to convert what we believe to be a superior technology in our
sodium borohydride chemistry from the development and demonstration stage to
commercialization. We believe that the characteristics of our sodium borohydride
technology will capitalize on the growing need for a safe method of storing and
releasing hydrogen across a variety of markets, a higher energy output
alternative fuel and the necessity of preserving the environment. To achieve our
goal, we have implemented the following strategy:

     - Pursue Ventures with Fuel Cell Companies and Original Equipment
       Manufacturers (OEM) of Power Equipment.  We are pursuing ventures with
       manufacturers of fuel cells and power equipment. We believe that our
       Hydrogen on Demand(TM) system will provide a solution for existing fuel
       cell companies that cannot produce hydrogen as safely or as efficiently.
       We will seek to leverage these relationships to further our brand
       awareness and decrease the time to commercialization.

     - Continue to Build Relationships with the Transportation Manufacturing
       Community.  We are pursuing relationships with automotive manufacturers
       and component system providers because we believe they will be the key to
       capitalizing on transportation opportunities in the future. As many of
       the top tier global automotive manufacturers continue to allocate
       resources to research and development of alternative fuel technologies,
       we believe that our technology will be an attractive choice and could
       position our technology as a leader in the alternative fuel market.

     - Build Relationships with Stationary and Portable Power Generation OEMs
       and System Integrators. We plan to pursue relationships with
       manufacturers of portable power sources and standby power generators. We
       believe our technology can be used to deliver hydrogen as a fuel for
       modified internal combustion engines, which could significantly reduce
       emissions currently generated by diesel fuel. We also believe that our
       Hydrogen on Demand(TM) system, when used in conjunction with a small fuel
       cell can provide a more economically favorable solution than lead acid
       batteries. We believe our technology will be uniquely positioned to
       deliver a safe and clean hydrogen source for indoor and outdoor
       applications.

     - Build Relationships with Fleet Operators.  We plan to pursue
       opportunities with operators of fleets of vehicles. Fleet vehicle
       operations are an ideal application for our technology because of the
       high volume of consumption and the number of vehicles serviced through a
       single location.

     - Develop Strategic Relationships with Key Battery Manufacturers.  We are
       pursuing relationships with key battery manufacturers. We believe such
       relationships, if developed, could facilitate the commercialization,
       distribution and consumer acceptance of our fuel technology and batteries
       based on our boron chemistries that may be developed in the future.

     - Lower the Costs of Sodium Borohydride.  Sodium borohydride is currently a
       specialty chemical that is produced by a few manufacturers located in the
       United States and Europe. We believe that we can compete in the portable
       power markets at the current price of sodium borohydride, but it will be
       necessary to scale-up production of the chemical to be cost competitive
       in the transportation markets. We have filed patent applications for the
       primary production and regeneration of sodium borohydride. We believe
       that this new chemistry will lower the cost of sodium borohydride by
       reducing or eliminating some of the costly raw materials that are
       required to manufacture sodium borohydride using the current process. In
       2002, we plan to construct a process demonstration unit. We plan to
       demonstrate the viability of cost-effective mass production of sodium
       borohydride through economies of scale and improved manufacturing
       efficiencies exhibited by our process demonstration unit.

     - Advance our Proprietary Technology.  Through commercial development, we
       continue to advance our proprietary technology. We believe that our
       continuing efforts in this area will allow us to establish technological
       leadership in our target markets, while also positioning us to
       potentially develop applications for other markets.
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<PAGE>

     - Develop Market Awareness Generally.  We have relationships with state and
       federal governmental agencies and are also involved in several hydrogen
       and environmentally conscious organizations and events. Through these
       continuing relationships, we believe that our technology will become more
       visible to a broader group of individuals and companies in our target
       markets.

INTELLECTUAL PROPERTY RIGHTS

     Our intellectual property strategy is to identify key intellectual property
developed by us in order to protect it appropriately. In addition, we seek to
use and assert such intellectual property to our competitive advantage. We rely
on a combination of patents, trade secrets, trademarks, and license and
nondisclosure agreements to protect our proprietary technology.

     We use patents as the frontline means of protecting our technological
advances and innovations, such as our proprietary hydrogen generators, fuel cell
designs, components, materials, operating techniques and systems and, therefore,
the enforcement of our patents is critical to our business. We have adopted a
proactive approach to identifying patentable inventions and securing patent
protection through the timely filing and aggressive prosecution of patent
applications. Patent applications are filed in the United States and
internationally, in countries carefully chosen based on the likely value and
enforceability of intellectual property rights.

     We own three U.S. and four non-U.S. patents, which cover a wide variety of
devices, systems, uses and applications for various boron chemistries. We have
filed an additional 10 U.S. and 29 non-U.S. patent applications. We have also
filed three U.S. trademark applications. Our earliest patent expires in 2015 and
the most recently filed applications, if issued, will not expire until 2021.

     Our intellectual property program includes a strong competitor-monitoring
element. We actively monitor the patent position, technical developments and
other activities of companies operating in all of the potential markets for our
products. We expect activities relating to assertion and enforcement of our
intellectual property rights to increase as the market develops.

COMMERCIALIZATION PROCESS

     In the near-term, we do not anticipate manufacturing on a large-scale. Our
initial focus is in the portable power and automotive areas, and is based on our
belief that we will be able validate our technology. Once this is accomplished,
we will seek partnerships with fuel cell companies and others in the portable
power market and with automotive original equipment manufacturers ("OEMs") or
their suppliers. Our business focus will be on licensing our hydrogen generation
technology with vehicle manufacturers, utilities and other companies requiring
fuel cell technologies. Over the next several years, our current plans for
commercialization are as follows:

     - Commercial Testing and Licensing for Hydrogen Generation Systems.  We
       intend to seek additional relationships, such as our agreements with
       DaimlerChrysler and Ballard, to test our system in vehicle and other fuel
       cell applications. If we can successfully complete demonstration units,
       we will attempt to develop stronger relationships with OEMs and with a
       view to entering into licensing arrangements.

     - Regeneration of Sodium Borohydride from Sodium Borate.  We believe we can
       develop a small-scale demonstration unit for regenerating sodium
       borohydride. This feature will be an important step in the effort to
       reduce overall cost of the sodium borohydride system, whether for
       vehicles or portable power. Development of the infrastructure for
       large-scale production of sodium borohydride would need to follow.

     - Distribution of Sodium Borohydride Fuel.  We are working to develop fuel
       distribution mechanisms for distributed generation and transportation
       applications. We believe that because our fuel is a liquid, much of the
       existing transportation fuel delivery infrastructure can be retained.

                                        7
<PAGE>

     - Research, Development and Engineering.  This is a current aspect of our
       business, and we will continue to pursue the research and development of
       sodium borohydride for the foreseeable future as a source of hydrogen,
       for use directly in fuel cells and for other potential markets.

RESEARCH AND DEVELOPMENT

     Our research team focuses on improving our sodium borohydride
characteristics for use as a hydrogen source as well as in direct fuel cell
technology by working to optimize cost performance of materials and processes.
In order to most effectively achieve these plans, our facility in Eatontown, New
Jersey houses sophisticated research and development equipment.

COMPETITION

     The Company's hydrogen generation and storage technology is versatile and
can be customized for use in many applications and geographic markets. Due to
the number of potential applications and markets in which the Company's
technology can be used, it is difficult to identify a specific competitor or
group of competitors or estimate the size of the eventual primary markets for
our technology. We evaluate new and interesting applications for our technology
on a continuous basis. As stated elsewhere in this Form 10-K, we intend to focus
in the near-term on developing and demonstrating our technology for use in
multiple markets, including the transportation, distributed generation and
battery markets. As our business development and product demonstration
activities continue, we may be able to better identify our primary markets and
our competitors within these markets.

     Due to political and environmental concerns, there is great interest in the
development of hydrogen technology and products. This interest may cause
companies and individuals to attempt to develop hydrogen generation and storage
technology, resulting in increased competition. These potential competitors may
possess significantly more resources, both financial and otherwise. As discussed
above, we believe that the Company's hydrogen generation technology possesses
attractive characteristics that give it a competitive advantage over many
alternative hydrogen technologies, however, there can be no assurances that we
will successfully compete with potential new technologies or be able to fund the
commercialization of our technology on a mass scale.

RAW MATERIALS

     Sodium borohydride is manufactured from a base material called borax. There
are approximately 600 million metric tons of borax raw materials worldwide, and
the United States is among the largest holders of borax reserves in the world.
Borax is most commonly found in dried lake or sea beds, and it is mined at the
surface using drag lines, whereby buckets are continuously dragged across the
ground scraping borax from the surface. Currently, a few manufacturers make
sodium borohydride as a specialty chemical. Despite the great quantities of
reserves and current annual production of borax, there are few commercial
applications that require sodium borohydride today. The most common application
for sodium borohydride is for use as a bleaching agent in the paper industry. Up
until now, the relatively limited commercial uses of sodium borohydride have
allowed manufacturing to continue using technology from the early 1900's.

     Inasmuch as we intend to focus primarily on research and development, and
not on large scale manufacturing, we do not believe that our costs to comply
with federal, state and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, will have a material effect on
our capital expenditures, earnings or competitive position.

HUMAN RESOURCES

     As of February 28, 2002, we had a total staff of 53 employees, including 52
full-time employees, of which 37 are scientists, engineers and other
professionals. We plan to increase our staff to 63 employees by the end of 2002.

                                        8
<PAGE>

ITEM 2.  PROPERTIES.

     Our principal offices are located at 1 Industrial Way West, Eatontown, New
Jersey 07724, currently occupying 32,500 square feet. In April 2001, we amended
our lease agreement to provide for the expansion of our principal offices in
adjacent facilities comprised of additional laboratories and offices. As of
November 2001, we occupied all facilities contemplated in the lease agreement.
We will need to purchase additional equipment and furnishings for our new labs
and to complete a process demonstration unit to produce sodium borohydride.

     Our amended lease will expire in 2008, with five and three year options to
renew through 2016. We believe that the current facilities will be sufficient
for our operations in the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS.

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

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     During the fourth quarter of the fiscal year ended December 31, 2001, no
matter was submitted to a vote of our stockholders.

                                        9
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.

MARKET PRICE AND DIVIDEND INFORMATION

  Price Range of Common Stock

     Our common stock has been quoted and traded on the NASDAQ National Market
under the symbol "MCEL" since August 9, 2000. The following table sets forth the
high and low closing sale prices for our common stock as reported by NASDAQ.

<Table>
                                                               COMMON STOCK
                                                                  PRICE
                                                              --------------
FISCAL YEAR ENDING DECEMBER 31, 2001                           HIGH     LOW
                                                              ------   -----
<S>                                                           <C>      <C>
                                                              $12.50   $6.09
First quarter...............................................
                                                              $12.70   $5.81
Second quarter..............................................
                                                              $ 9.50   $3.45
Third quarter...............................................
                                                              $ 6.00   $3.00
Fourth quarter..............................................

FISCAL YEAR ENDING DECEMBER 31, 2000
                                                              $24.00   $7.56
Third quarter (from August 9, 2000).........................
                                                              $23.19   $7.75
Fourth quarter..............................................
</Table>

     As of March 01, 2002, there were approximately 97 holders of record of our
common stock. The closing sale price of our common stock on March 1, 2002 was
$3.70 per share.

  Dividend Policy

     We have never declared or paid any cash dividends on our common stock. We
currently intend to retain our future earnings, if any, to finance the expansion
of our business and do not expect to pay any dividends in the foreseeable
future.

     Payment of future cash dividends, if any, will be at the discretion of our
board of directors after taking into account various factors, including our
financial condition, operating results, current and anticipated cash needs and
plans for expansion.

ITEM 6.  SELECTED FINANCIAL DATA.

     The following table presents selected historical financial data for the
twelve months ended December 31, 2001, 2000 and 1999 (year of inception). Our
selected financial data should be read in conjunction with

                                        10
<PAGE>

"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements and related notes included
elsewhere in this Form 10-K.

<Table>
<Caption>
                                                                           PERIOD FROM
                                  TWELVE MONTHS       TWELVE MONTHS      JANUARY 1, 1999     CUMULATIVE
                                      ENDED               ENDED          (INCEPTION) TO     AMOUNTS FROM
                                DECEMBER 31, 2001   DECEMBER 31, 2000   DECEMBER 31, 1999    INCEPTION
                                -----------------   -----------------   -----------------   ------------
<S>                             <C>                 <C>                 <C>                 <C>
STATEMENT OF OPERATIONS DATA
Product development and
  marketing...................    $  5,513,172        $         --         $        --      $  5,513,172
General and administrative....       4,726,543           3,173,393             164,953         8,064,889
Non-cash charges..............       7,341,461          10,785,381                  --        18,126,842
Depreciation and
  amortization................         473,031             256,820              57,007           786,858
Research and development......       2,624,823           2,131,684             820,128         5,576,635
                                  ------------        ------------         -----------      ------------
Total operating expenses......      20,679,030          16,347,278           1,042,088        38,068,396
                                  ------------        ------------         -----------      ------------
Loss from operations..........     (20,679,030)        (16,347,278)         (1,042,088)      (38,068,396)
Interest income, net..........       1,226,701             678,194              10,811         1,915,706
                                  ------------        ------------         -----------      ------------
Net loss......................     (19,452,329)        (15,669,084)         (1,031,277)      (36,152,690)
Preferred stock
  amortization................              --           2,150,881                  --         2,150,881
                                  ------------        ------------         -----------      ------------
Net loss applicable to common
  stockholders................    $(19,452,329)       $(17,819,965)        $(1,031,277)     $(38,303,571)
                                  ============        ============         ===========      ============
Loss per share -- basic and
  diluted.....................    $       (.71)       $       (.69)        $      (.04)     $      (1.51)
                                  ============        ============         ===========      ============
</Table>

<Table>
<Caption>
                                DECEMBER 31, 2001   DECEMBER 31, 2000
                                -----------------   -----------------
<S>                             <C>                 <C>                 <C>                 <C>
BALANCE SHEET DATA
Total assets..................    $ 20,239,973        $ 31,396,245
</Table>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.

     The following discussion should be read in conjunction with our financial
statements and the notes thereto appearing elsewhere in this Form 10-K.

GENERAL

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

OVERVIEW

     We have patented and developed a proprietary process called Hydrogen on
Demand(TM) that safely generates pure hydrogen or electricity from
environmentally friendly raw materials. In the process, the energy potential of
hydrogen is carried in the chemical bonds of sodium borohydride, which in the
presence of a catalyst releases hydrogen or produces electricity. The primary
input components of the reaction are water and sodium borohydride, a derivative
of borax, which is found in substantial natural reserves globally. Hydrogen

                                        11
<PAGE>

from this system can be used to power fuel cells, as well as fed directly to
internal combustion engines. We also have a patented design for boron-based
longer-life batteries.

     Our goal is to convert our technology from the research and development
stage to commercialization. Such potential revenue for the next several years is
likely to include upfront license fees, sales of prototypes, research contracts
with various federal, state and local agencies or through collaborations with
other companies, and royalty payments or joint venture revenue from licensees or
strategic partnerships. We have not generated any commercial revenue to date but
expect to recognize our first revenue in the First Quarter of 2002.

     We incurred operating losses of $20,679,030, $16,347,278 and $1,042,088 in
2001, 2000 and 1999, respectively, and we had a net loss applicable to common
stockholders of $19,452,329, $17,819,965 and $1,031,277, respectively. As of
December 31, 2001 and 2000, we had an accumulated deficit of $38,303,571 and
$18,851,242, respectively. The following table disaggregates the Company's net
operating losses from incurred non-cash charges and preferred dividends:

<Table>
<Caption>
                                                    NET LOSS            NON-CASH
                                                   EXCLUDING           CHARGES AND       ACCUMULATED
                                                NON-CASH CHARGES   PREFERRED DIVIDENDS     DEFICIT
                                                ----------------   -------------------   ------------
<S>                                             <C>                <C>                   <C>
Period from January 1, 1999 (Inception) to
  June 30, 2000...............................    $ (2,237,759)       $ (1,424,757)      $ (3,662,516)
Period from July 1, 2000 to December 31,
  2000*.......................................      (3,677,221)        (11,511,505)       (15,188,726)
Period from January 1, 2001 to December 31,
  2001........................................     (12,110,868)         (7,341,461)       (19,452,329)
                                                  ------------        ------------       ------------
Cumulative amount from inception..............    $(18,025,848)       $(20,277,723)      $(38,303,571)
                                                  ============        ============       ============
</Table>

---------------
* Our initial public offering was completed on August 9, 2000.

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

RESULTS OF OPERATIONS

  YEAR ENDED DECEMBER 31, 2001 VERSUS 2000

     Total Revenues.  During 2001 and 2000, we did not recognize any revenues
related to the sale or license of our technology. We expect our first revenues
to be recorded in the first quarter of fiscal 2002.

     Product Development and Marketing Expenses.  Product development and
marketing expenses were $5,513,172 for the year ended December 31, 2001. These
expenses include business development and marketing activities and efforts to
customize our technology in accordance with agreements with partners as well as
for general business development. We did not incur product development and
marketing expenses in the year ended December 31, 2000.

     General and Administrative Expenses.  General and Administrative expenses
were $4,726,543 for the year ended December 31, 2001 compared to $3,173,393 in
2000, an increase of $1,553,150. This was due largely to the full year impact of
our financial, administrative and investor relation organizations (including
salary and related benefits costs) established during the latter half of 2000.
Occupancy costs also increased as we tripled the size of our facilities in 2001.
We do not expect significant future increases in general and administrative
expenses from those incurred in 2001.

     Non-cash Charges.  Non-cash charges were $7,341,461 for the year ended
December 31, 2001 compared to $10,785,381 in 2000, a decrease of $3,443,920.
Non-cash charges recorded in 2001 were related to continuing amortization of
below market options granted to employees and non-employee board members in

                                        12
<PAGE>

2000 of $5,875,136 and the fair value of warrants issued to affiliates in 2000
of $1,466,325. Non-cash charges for the year ended December 31, 2000 included a
non-cash compensation charge of $5,840,780 for the grant of company stock
options to employees and non-employee board members below market, the fair value
of warrants issued to affiliates of $2,875,631 and $2,068,970 for the issuance
of common stock in connection with the termination of the royalty agreement.

     Depreciation and Amortization.  Depreciation and amortization was $473,031
for the year ended December 31, 2001 compared to $256,820 in 2000, an increase
of $216,211. This increase in depreciation and amortization is related to the
addition of certain laboratory equipment and leasehold improvements in our newly
expanded facilities. We expect depreciation and amortization to continue to
increase as we invest in additional leasehold improvements and equipment to
support our lab expansion plans.

     Research and Development Expenses.  Research and development expenses were
$2,624,823 for the year ended December 31, 2001 compared to $2,131,684 in 2000,
an increase of $493,139. The increase is primarily attributable to increased
staffing and research projects as required to further the development of our
technology.

     Interest Income.  Net interest income was $1,226,701 for the year ended
December 31, 2001 compared to $678,194 in 2000, an increase of $548,507. The
increase in interest income is primarily the result of higher average balances
in 2001 resulting from the proceeds of the initial public offering in August
2000 coupled with our long-term investment strategy established in January 2001.

     Preferred Stock Amortization.  Preferred stock amortization of $2,150,881
for the year ended December 31, 2000 represents a non-cash charge to the common
stockholders in connection with the May 2000 issuance of the preferred stock at
less than the initial public offering price, which was converted into common
stock in August 2000.

  YEAR ENDED DECEMBER 31, 2000 VERSUS 1999

     Total Revenues.  During 2000 and 1999, we did not recognize any revenues
related to the sale or license of our technology.

     General and Administrative Expenses.  General and administrative expenses
were $3,173,393 for the year ended December 31, 2000 compared to $164,953 in
1999, an increase of $3,008,440. The increase in general and administrative
expenses was related to the development of a corporate infrastructure and
staffing to support regulatory reporting, benefit programs and investor
relations activities.

     Non-cash Charges.  Non-cash charges for the year ended December 31, 2000
included a non-cash compensation charge of $5,840,780 for the grant of company
stock options to employees and board members below market, the fair value of
warrants issued to affiliates of $2,875,631 and $2,068,970 for the issuance of
common stock in connection with the termination of the royalty agreement. There
were no such charges in 1999.

     Depreciation and Amortization.  Depreciation and amortization was $256,820
for the year ended December 31, 2000 compared to $57,007 in 1999, an increase of
$199,813. This increase in depreciation and amortization is related to the
addition of certain laboratory equipment.

     Research and Development Expenses.  Research and development expenses were
$2,131,684 for the year ended December 31, 2000 compared to $820,128 in 1999, an
increase of $1,311,556. The increase is primarily attributable to increased
staffing required to further the development of our technology.

     Interest Income.  Interest income was $678,194 for the year ended December
31, 2000 compared to $10,811 in 1999, an increase of $667,383. The change in net
interest income was primarily the result of higher interest income related to a
larger average cash balance resulting from the proceeds of the initial public
offering in August 2000.

     Preferred Stock Amortization.  Preferred stock amortization of $2,150,881
for the year ended December 31, 2000 represents a non-cash charge to the common
stockholders in connection with the May 2000

                                        13
<PAGE>

issuance of the preferred stock at less than the initial public offering price,
which was converted into common stock in August 2000.

LIQUIDITY AND CAPITAL RESOURCES

     Since the inception date, we have financed our operations primarily through
our initial public offering in August 2000 and private placements of equity
securities. In 1999, we issued $1,250,000 of membership interests in Millennium
Cell LLC for cash, which subsequently were converted into our common stock as of
April 25, 2000. We also received a capital contribution of $500,000 in the first
quarter of 2000, and in May 2000, we sold 759,368 shares of Series A preferred
stock, which automatically converted into 759,368 shares of common stock upon
the completion of our initial public offering. The net proceeds from our initial
public offering totaled approximately $29.9 million.

     In October 2000, we received $2.4 million in cash from Ballard Power
Systems Inc. ("Ballard") as an advance for prospective royalties pursuant to a
product development agreement between us and Ballard. Under certain
circumstances, a portion of this advance may be refundable to Ballard. In
addition, we have granted Ballard a warrant to purchase up to 400,000 shares of
our common stock. Upon completion of product development, these warrants will be
recorded at fair value.

     As of December 31, 2001, we had $17.4 million in cash and cash equivalents
and held-to-maturity investments. Cash used in operations totaled $11,139,147,
$1,525,538 and $953,363 in 2001, 2000 and 1999, respectively, and related to
funding our net operating losses, partially offset by the advance for
prospective royalties discussed above. In connection with the Company's amended
lease agreement, the Company issued a letter of credit to the landlord for
$588,972 in lieu of cash security deposit. The letter of credit was
collateralized with a portion of the Company's cash, which is classified as
Other Assets. The funds used for collateral will not be available for use in
operations.

     Investing activities used cash of $12,751,441, $701,659 and $448,094 in
2001, 2000 and 1999, respectively. Investing activities consisted primarily of
held-to-maturity investments in high-grade government bonds and bank
certificates of deposit, purchases of laboratory equipment necessary for the
continuation of our research and development activities, and additional patent
registration costs. We expect to continue to make significant investments in
product development, marketing, research and development, and leasehold
improvements to our facilities and equipment to complete our facilities
expansion. We will continue to register and pursue patents on our technology.

     Between January 1999 and April 2000, we received an aggregate of $227,522
from a recoverable grant award from the State of New Jersey Commission on
Science and Technology. The funds were used to partially fund costs directly
related to development of our fuel cell technology. The recoverable grant is
required to be repaid when we generate net income in a fiscal year. The
repayment obligation, which begins in June 2001, ranges from 1% to 5% of net
income over a ten-year period and shall not exceed 200% of the original grant.
We are obligated to repay the unpaid amount of the original grant at the end of
the ten-year period.

     We believe that the net proceeds from our initial public offering, together
with our current cash and cash equivalents, will be sufficient to satisfy
anticipated cash needs of our operations into 2003. We may seek additional
financing within this timeframe. We may raise additional funds through public or
private financings, collaborative relationships or other arrangements. We cannot
assure you that additional funding, if sought, will be available or, even if
available, will be on terms favorable to us. Further, any additional equity
financing may be dilutive to stockholders, and debt financing, if available, may
involve restrictive covenants. Our failure to raise capital when needed may harm
our business and operating results.

CRITICAL ACCOUNTING POLICIES

     Our financial statements are based on the selection and application of
significant accounting policies, which require management to make significant
estimates and assumptions. We believe that the following are

                                        14
<PAGE>

some of the more critical judgment areas in the application of our accounting
policies that currently affect our financial condition and results of
operations.

  Revenue Recognition

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

  Stock Options

     The Company has recorded non-cash charges in 2001 and 2000 to the fair
value of warrants issued to certain affiliates and third parties. Certain
affiliates have the ability to earn new awards based on defined milestones and
service periods. The accounting methodology requires a re-valuing of the related
earned warrants at each reporting period using a Black-Scholes pricing model.
Due to this variable accounting methodology, it is difficult to predict the
amount of additional non-cash charges the company will incur related to these
warrants. The fair value of the Company's options and warrants issued to
affiliates was estimated at the date of grant using a Black-Scholes
option-pricing model.

     The Company also records non cash charges for the difference between the
grant price and market price on the date of grant related to certain stock
options issued to employees and elected directors below market prices as defined
by APB No. 25. The non-cash charge is recognized ratably over the related
vesting period of the respective option contracts.

     The Company also discloses pro forma information regarding net income and
earnings per share is required by SFAS No. 123. This information is required to
be determined as if the Company had accounted for its employee stock options
under the fair value method of that statement. The fair value of options granted
for the fiscal years ended December 31, 2001 and 2000 has been estimated at the
date of grant using a Black-Scholes option-pricing model.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. The Company's options have characteristics significantly different
from those of traded options, and changes in the subjective input assumptions
can materially affect the fair value estimate. Due to these highly subjective
assumptions, the non-cash charges incurred in 2001 and 2000 for warrants issued
to affiliates and the pro forma disclosures of net loss and loss per share for
fiscal 2001, 2000 and 1999, are not likely to be representative of non-cash
charges and the pro forma effects on net loss and loss per share, respectively,
in future years.

DISCLOSURE ABOUT MARKET RISK

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

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

                                        15
<PAGE>

INVESTMENT CONSIDERATIONS

     The Company has decided to make disclosures in accordance with Item 303 of
SEC Regulation S-K of important qualitative risk factors which should be
considered along with those described in the Company's other filings with the
Securities and Exchange Commission prior to making an investment in our common
stock. Our business, the results of operations and the trading price of our
common stock could be harmed by any of the following factors:

     - We are a development stage company, which has only been in business for a
       short time. In addition, many aspects of our business plan rest on
       beliefs formed by our management and have not necessarily been supported
       by independent sources. As a result, your basis for evaluating us is
       limited.

     - We have incurred substantial losses and expect losses for the foreseeable
       future. Accordingly, we may not be able to achieve profitability, and
       even if we do become profitable, we may not be able to sustain
       profitability.

     - We expect our future operating results to vary significantly quarter to
       quarter, and increase the likelihood that we may fail to meet the
       expectations of securities analysts and investors at any given time.

     - Future issuances of our common stock could adversely affect the trading
       price of our common stock.

     - We may be subject to litigation if our common stock price is volatile,
       which may result in substantial costs and a diversion of our management's
       attention and resource and could have a negative effect on our business
       and results of operations.

     - We may be unable to raise additional capital to complete our product
       development and commercialization plans. Even if we are able to raise
       additional capital, it may be on unacceptable terms to us, may dilute
       your ownership or may restrict our ability to run our business.

     - We may be unable to complete development of commercially viable hydrogen
       generation systems.

     - Our hydrogen generation systems may only be commercially viable as a
       component of other companies' products, and these companies may choose
       not to include our systems in their products.

     - The cost of our hydrogen generation systems needs to be lowered and we
       need to demonstrate their reliability or our commercialization plans may
       be hindered.

     - Any perceived problem while conducting demonstrations of our technology
       could hurt our reputation and the reputation of our products, which would
       impede the development of our business.

     - Some of the raw materials that the hydrogen generation systems use are
       expensive and are not manufactured in large quantities. Therefore, the
       energy produced by our systems may cost more than energy provided through
       conventional and alternative systems. Accordingly, our systems may be
       less attractive to potential users.

     - If we cannot develop and demonstrate lower cost processes for the
       manufacture of sodium borohydride, our commercialization plans may be
       hindered.

     - A mass market for sodium borohydride fuel cells, hydrogen generation
       systems or batteries may never develop or may take longer to develop than
       we anticipate.

     - We are heavily dependent on companies or governmental agencies that would
       include our hydrogen generation systems in their products and to develop
       the infrastructure required to use of our technologies in certain
       applications or markets.

     - Failure to meet cost or performance goals with potential customers could
       delay or impede commercialization of our technology.

                                        16
<PAGE>

     - Changes in environmental policies could result in automobile
       manufacturers abandoning their interest in fuel cell powered vehicles.
       This may substantially lessen the market for our products and harm the
       development of our business.

     - Since zero emission vehicle requirements can be met without using our
       sodium borohydride fuel cells, automobile manufacturers may use other
       technologies to meet regulatory requirements.

     - Any accidents involving our products or the raw materials used in our
       products could impair their market acceptance.

     - We have no experience manufacturing batteries on a commercial basis.
       Therefore, we may be unable to complete a commercially acceptable
       battery.

     - We will continue to face intense competition from alternative power
       technologies and may be unable to compete successfully.

     - We depend on our intellectual property and may not be able to protect the
       rights to that intellectual property. Our failure to protect this
       intellectual property could adversely affect our future growth and
       success.

     - Our future plans could be adversely affected if we are unable to attract
       or retain key personnel.

     - We do not intend to pay any dividends.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     See Index to Financial Statements and Financial Statement Schedule in Item
14.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Incorporated herein by reference is the information appearing under the
caption "Election of Directors" in the Company's definitive proxy statement for
its 2002 Annual Meeting of Stockholders.

ITEM 11.  EXECUTIVE COMPENSATION.

     Incorporated herein by reference is the information appearing under the
caption "Executive Compensation" in the Company's definitive proxy statement for
its 2002 Annual Meeting of Stockholders.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Incorporated herein by reference is the information appearing under the
caption "Common Stock Ownership of Principal Stockholders and Management" in the
Company's definitive proxy statement for its 2002 Annual Meeting of
Stockholders.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.

     Incorporated herein by reference is the information appearing under the
caption "Certain Transactions" in the Company's definitive proxy statement for
its 2002 Annual Meeting of Stockholders.

                                        17
<PAGE>

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

     (a) Documents filed as part of this report

        Financial Statements

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

        Financial Statement Schedules

        None of the schedules for which provision is made in the applicable
        accounting regulations under the Securities Exchange Act of 1934, as
        amended, are required.

        14(a)(3) Exhibits

     The following documents are filed as Exhibits to this report on Form 10-K
or incorporated by reference herein. Any document incorporated by reference is
identified by a parenthetical referencing the SEC filing which included such
document.

<Table>
<Caption>
EXHIBIT
  NO.                                  DESCRIPTION
-------                                -----------
<C>       <C>  <S>
  2.1+     --  Certificate of Conversion of Millennium Cell LLC to
               Millennium Cell Inc. (incorporated by reference to the
               Registration Statement filed on Form S-1, Registration No.
               333-37896)
  3.1+     --  Certificate of Incorporation of Millennium Cell Inc.
               (incorporated by reference to the Registration Statement
               filed on Form S-1, Registration No. 333-37896)
  3.2+     --  By-Laws of Millennium Cell Inc. (incorporated by reference
               to the Registration Statement filed on Form S-1,
               Registration No. 333-37896)
  3.3+     --  Certificate of Amendment to Certificate of Incorporation of
               Millennium Cell Inc. (incorporated by reference to the
               Registration Statement filed on Form S-1, Registration No.
               333-37896)
  4.1+     --  Certificate of Designations, Preferences and Relative,
               Participating, Optional and Other Special Rights of
               Preferred Stock and Qualifications, Limitations and
               Restrictions of Series A Convertible Preferred Stock of
               Millennium Cell Inc. (incorporated by reference to the
               Registration Statement filed on Form S-1, Registration No.
               333-37896)
  4.2+     --  Specimen stock certificate representing the Registrant's
               Common Stock (incorporated by reference to the Registration
               Statement filed on Form S-1, Registration No. 333-37896)
 10.1+     --  Agreement for Recoverable Grant Award, dated as of April
               1999, by and between State of New Jersey Commission on
               Science and Technology and Millennium Cell LLC (incorporated
               by reference to the Registration Statement filed on Form
               S-1, Registration No. 333-37896)
 10.2+     --  Amended and Restated Agreement, dated as of August 1, 2000,
               by and among Millennium Cell Inc., GP Strategies Corporation
               and Steven Amendola (incorporated by reference to the
               Registration Statement filed on Form S-1, Registration No.
               333-37896)
 10.3+     --  Assignment, dated as of May 24, 2000, by Steven Amendola in
               favor of Millennium Cell Inc. (incorporated by reference to
               the Registration Statement filed on Form S-1, Registration
               No. 333-37896)
 10.4+     --  Employment Agreement, dated as of May 16, 2000, by and
               between Stephen S. Tang and Millennium Cell
               Inc.(incorporated by reference to the Registration Statement
               filed on Form S-1, Registration No. 333-37896)
 10.5+     --  Employment Agreement, dated as of August 2, 2000, by and
               between Steven C. Amendola and Millennium Cell Inc.
               (incorporated by reference to the Registration Statement
               filed on Form S-1, Registration No. 333-37896)
</Table>

                                        18
<PAGE>

<Table>
<Caption>
EXHIBIT
  NO.                                  DESCRIPTION
-------                                -----------
<C>       <C>  <S>
 10.6      --  Amended and Restated Millennium Cell Inc. 2000 Stock Option
               Plan, Amended effective December 1, 2001
 10.7+     --  Proprietary Rights Agreement, effective as of May 1, 2000,
               between DaimlerChrysler Corporation and Millennium Cell Inc.
               (incorporated by reference to the Registration Statement
               filed on Form S-1, Registration No. 333-37896)
 10.8+     --  Assignment and Assumption of License Agreement, dated as of
               December 17, 1998, by and between GP Strategies Corporation
               and Millennium Cell LLC (incorporated by reference to the
               Registration Statement filed on Form S-1, Registration No.
               333-37896)
 10.9+     --  Employment Agreement, dated as of September 6, 2000, by and
               between Millennium Cell Inc. and Norman R. Harpster, Jr.
               (incorporated by reference to the Quarterly Report filed on
               November 1, 2000 on Form 10-Q)
 10.10+    --  Lease Agreement, dated as of April 4, 2001, by and between
               Millennium Cell Inc. and Ten-Thirty Five Associates, Limited
               Partnership (incorporated by reference to the Quarterly
               Report filed on May 11, 2001 on Form 10-Q)
 10.11     --  Separation Agreement, dated as of December 11, 2001, by and
               between Millennium Cell Inc. and Steven C. Amendola
 10.12     --  Consulting Agreement, dated as of December 11, 2001, by and
               between Millennium Cell Inc. and Steven C. Amendola
 10.13     --  Confidentiality Agreement, dated as of December 11, 2001, by
               and between Millennium Cell Inc. and Steven C. Amendola
 23.1      --  Consent of Ernst & Young
 99.1+     --  License Agreement, dated July 31, 1997, by and between
               Steven C. Amendola and National Patent Development
               Corporation (incorporated by reference to the Registration
               Statement filed on Form S-1, Registration No. 333-37896)
</Table>

---------------
+ Previously filed.

     The Company will furnish, without charge, to a security holder upon request
a copy of the proxy statement, portions of which are incorporated herein by
reference thereto. The Company will furnish any other exhibit at cost.

     (b) Reports on Form 8-K

        There following report was filed under Form 8-K during the last quarter
        of the period covered by this report:

           ITEM 5.  OTHER EVENTS AND REGULATION FD DISCLOSURE.

           On December 4, 2001, Millennium Cell, Inc. announced it is making
           organizational changes designed to support business objectives.
           Included in this announcement was a change in status of our chief
           scientific advisor from Vice President to consultant.

                                        19
<PAGE>

                                   SIGNATURES

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

                                          MILLENNIUM CELL INC.

                                          By: /s/ NORMAN R. HARPSTER, JR.
                                            ------------------------------------
                                            Norman R. Harpster, Jr.
                                            Vice President -- Finance and
                                            Chief Financial Officer

Date: March 25, 2002

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<Table>
<Caption>
                     SIGNATURE                                    TITLE                      DATE
                     ---------                                    -----                      ----
<C>                                                  <S>                                <C>




                /s/ STEPHEN S. TANG                  Chief Executive Officer,           March 25, 2002
---------------------------------------------------    President and Director
                  Stephen S. Tang




            /s/ NORMAN R. HARPSTER, JR.              Chief Financial Officer            March 25, 2002
---------------------------------------------------
              Norman R. Harpster, Jr.




                /s/ JOHN D. GIOLLI                   Controller                         March 25, 2002
---------------------------------------------------
                  John D. Giolli




              /s/ STEVEN C. AMENDOLA                 Director                           March 25, 2002
---------------------------------------------------
                Steven C. Amendola




               /s/ G. CHRIS ANDERSEN                 Director                           March 25, 2002
---------------------------------------------------
                 G. Chris Andersen




               /s/ KENNETH R. BAKER                  Director                           March 25, 2002
---------------------------------------------------
                 Kenneth R. Baker




                /s/ WILLIAM H. FIKE                  Director                           March 25, 2002
---------------------------------------------------
                  William H. Fike




             /s/ ALEXANDER MACLACHLAN                Director                           March 25, 2002
---------------------------------------------------
               Alexander MacLachlan




                /s/ ZOLTAN MERSZEI                   Director                           March 25, 2002
---------------------------------------------------
                  Zoltan Merszei




                 /s/ H. DAVID RAMM                   Director                           March 25, 2002
---------------------------------------------------
                   H. David Ramm




               /s/ JAMES L. RAWLINGS                 Director                           March 25, 2002
---------------------------------------------------
                 James L. Rawlings
</Table>

                                        20
<PAGE>

                         INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Auditors..............................  F-2
Balance Sheet as of December 31, 2001 and 2000..............  F-3
Statement of Operations for the twelve months ended December
  31, 2001, 2000 and 1999...................................  F-4
Statement of Stockholders' Equity for the period from
  January 1, 1999 to December 31, 2001......................  F-5
Statement of Cash Flows for the twelve months ended December
  31, 2001, 2000 and 1999...................................  F-6
Notes to Financial Statements...............................  F-7
</Table>

                                       F-1
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Millennium Cell Inc.

     We have audited the accompanying balance sheets of Millennium Cell Inc. (a
development stage company) as of December 31, 2001 and 2000, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Millennium Cell Inc. at
December 31, 2001 and 2000 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001 in conformity
with accounting principles generally accepted in the United States.

                                          /s/ ERNST & YOUNG LLP

New York, New York
January 25, 2002

                                       F-2
<PAGE>

                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                                 BALANCE SHEET

<Table>
<Caption>
                                                              DECEMBER 31,    DECEMBER 31,
ASSETS                                                            2001            2000
------                                                        ------------    ------------
<S>                                                           <C>             <C>
Current assets:
  Cash and cash equivalents.................................  $  6,348,763    $ 30,098,701
  Accounts receivable.......................................       129,000              --
  Prepaid expenses..........................................       352,198         188,874
  Held-to-maturity investments..............................    11,067,175              --
                                                              ------------    ------------
Total current assets........................................    17,897,136      30,287,575
Property and equipment, net.................................     1,177,483         645,852
Intangible assets, net......................................       530,706         440,074
Other assets................................................       634,648          22,744
                                                              ------------    ------------
                                                              $ 20,239,973    $ 31,396,245
                                                              ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $    223,101    $     11,435
  Accrued employee compensation.............................       940,837         248,010
  Accrued expenses..........................................       454,890         674,437
  Deferred income...........................................     2,528,988       2,399,988
                                                              ------------    ------------
Total current liabilities...................................     4,147,816       3,333,870

Refundable grant obligation.................................       227,522         227,522

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.001 par value; 5,000,000 authorized
     shares, none issued and outstanding....................            --              --
  Common stock, $.001 par value; authorized 40,000,000
     shares and 27,292,077 and 27,167,981 shares issued and
     outstanding as of December 31, 2001 and 2000,
     respectively...........................................        27,292          27,168
  Additional paid-in capital................................    54,140,914      46,658,927
  Deficit accumulated during development stage..............   (38,303,571)    (18,851,242)
                                                              ------------    ------------
Total stockholders' equity..................................    15,864,635      27,834,853
                                                              ------------    ------------
                                                              $ 20,239,973    $ 31,396,245
                                                              ============    ============
</Table>

                            See accompanying notes.
                                       F-3
<PAGE>

                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                            STATEMENT OF OPERATIONS

<Table>
<Caption>
                                                                        PERIOD FROM
                                      TWELVE MONTHS   TWELVE MONTHS   JANUARY 1, 1999
                                          ENDED           ENDED       (INCEPTION) TO      CUMULATIVE
                                      DECEMBER 31,    DECEMBER 31,     DECEMBER 31,      AMOUNTS FROM
                                          2001            2000             1999           INCEPTION
                                      -------------   -------------   ---------------    ------------
<S>                                   <C>             <C>             <C>                <C>
Product development and marketing...  $  5,513,172    $         --     $         --      $  5,513,172
General and administrative..........     4,726,543       3,173,393          164,953         8,064,889
Non-cash charges....................     7,341,461      10,785,381               --        18,126,842
Depreciation and amortization.......       473,031         256,820           57,007           786,858
Research and development............     2,624,823       2,131,684          820,128         5,576,635
                                      ------------    ------------     ------------      ------------
Total operating expenses............    20,679,030      16,347,278        1,042,088        38,068,396
                                      ------------    ------------     ------------      ------------
Loss from operations................   (20,679,030)    (16,347,278)      (1,042,088)      (38,068,396)
Interest income, net................     1,226,701         678,194           10,811         1,915,706
                                      ------------    ------------     ------------      ------------
Net loss............................   (19,452,329)    (15,669,084)      (1,031,277)      (36,152,690)
Preferred stock amortization........            --       2,150,881               --         2,150,881
                                      ------------    ------------     ------------      ------------
Net loss applicable to common
  stockholders......................  $(19,452,329)   $(17,819,965)    $ (1,031,277)     $(38,303,571)
                                      ============    ============     ============      ============
Loss per share -- basic and
  diluted...........................  $       (.71)   $       (.69)    $       (.04)     $      (1.51)
                                      ------------    ------------     ------------      ------------
Weighted -- average number of shares
  outstanding.......................    27,217,591      25,787,672       23,679,714        25,293,074
                                      ============    ============     ============      ============
</Table>

                            See accompanying notes.

                                       F-4
<PAGE>

                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                       STATEMENT OF STOCKHOLDERS' EQUITY

<Table>
<Caption>
                                           COMMON STOCK          PREFERRED STOCK      ADDITIONAL                       TOTAL
                                       --------------------   ---------------------     PAID-IN     ACCUMULATED    STOCKHOLDER'S
                                         SHARES     AMOUNT     SHARES      AMOUNT       CAPITAL       DEFICIT         EQUITY
                                       ----------   -------   --------   ----------   -----------   ------------   -------------
<S>                                    <C>          <C>       <C>        <C>          <C>           <C>            <C>
January 1, 1999 (inception)..........          --   $    --   $     --   $       --   $        --   $         --   $         --
  Issuance of common stock...........  17,494,392    17,494         --           --     1,232,506             --      1,250,000
  Issuance of common stock to GPS in
    exchange for assets..............   6,185,322     6,186         --           --        (6,186)            --             --
  Net loss...........................          --        --         --           --            --     (1,031,277)    (1,031,277)
                                       ----------   -------   --------   ----------   -----------   ------------   ------------
Balance at December 31, 1999.........  23,679,714    23,680         --           --     1,226,320     (1,031,277)       218,723
  Capital contribution...............          --        --         --           --       500,000             --        500,000
  Redemption of common stock held by
    GPS and termination of royalty
    agreement........................    (623,401)     (623)        --           --     2,068,763             --      2,068,140
  Issuance of preferred stock........          --        --    759,368    2,146,446            --             --      2,146,446
  Conversion of preferred stock to
    common stock.....................     759,368       759   (759,368)  (2,146,446)    2,145,687             --             --
  Amortization of preferred stock....          --        --         --           --     2,150,881     (2,150,881)            --
  Issuance of common stock from
    initial public offering..........   3,352,300     3,352         --           --    29,850,865             --     29,854,217
  Non-cash compensation charges for
    issuance of stock options........          --        --         --           --     8,716,411             --      8,716,411
  Net loss...........................          --        --         --           --            --    (15,669,084)   (15,669,084)
                                       ----------   -------   --------   ----------   -----------   ------------   ------------
Balance at December 31, 2000.........  27,167,981    27,168         --           --    46,658,927    (18,851,242)    27,834,853
  Issuance of common stock from
    exercise of options..............      48,500        48         --           --       140,602             --        140,650
  Issuance of common stock from
    exercise of warrants.............      75,596        76         --           --           (76)            --             --
  Non-cash compensation charges for
    issuance of stock options........          --        --         --           --     7,341,461             --      7,341,461
  Net loss...........................          --        --         --           --            --    (19,452,329)   (19,452,329)
                                       ----------   -------   --------   ----------   -----------   ------------   ------------
Balance at December 31, 2001.........  27,292,077   $27,292   $     --   $       --   $54,140,914   $(38,303,571)  $ 15,864,635
                                       ==========   =======   ========   ==========   ===========   ============   ============
</Table>

                            See accompanying notes.

                                       F-5
<PAGE>

                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                            STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                                         PERIOD FROM
                                     TWELVE MONTHS    TWELVE MONTHS    JANUARY 1, 1999
                                         ENDED            ENDED        (INCEPTION) TO      CUMULATIVE
                                     DECEMBER 31,     DECEMBER 31,      DECEMBER 31,      AMOUNTS FROM
                                         2001             2000              1999           INCEPTION
                                     -------------    -------------    ---------------    ------------
<S>                                  <C>              <C>              <C>                <C>
OPERATING ACTIVITIES
Net loss...........................  $(19,452,329)    $(15,669,084)      $(1,031,277)     $(36,152,690)
Adjustments to reconcile net loss
  to net cash used in operating
  activities:
Depreciation and amortization......       473,031          256,820            57,007           786,858
Non-cash charges...................     7,341,461       10,785,381                --        18,126,842
Changes in operating assets and
  liabilities:
Accounts receivable................      (129,000)              --                --          (129,000)
Prepaid expenses and other
  assets...........................      (186,256)        (148,393)          (63,225)         (397,874)
Accounts payable and accrued
  expenses.........................       684,946          879,750            54,132         1,618,828
Due to affiliate...................            --          (30,000)           30,000                --
Deferred income....................       129,000        2,399,988                --         2,528,988
                                     ------------     ------------       -----------      ------------
Net cash used in operating
  activities.......................   (11,139,147)      (1,525,538)         (953,363)      (13,618,048)

INVESTING ACTIVITIES
Purchase of property and
  equipment........................      (956,854)        (493,568)         (330,091)       (1,780,513)
Patent registration costs..........      (138,440)        (208,091)         (118,003)         (464,534)
Cash restricted for lease
  deposit..........................      (588,972)              --                --          (588,972)
Purchase of held-to-maturity
  investments, net.................   (11,067,175)              --                --       (11,067,175)
                                     ------------     ------------       -----------      ------------
Net cash used in investing
  activities.......................   (12,751,441)        (701,659)         (448,094)      (13,901,194)

FINANCING ACTIVITIES
Proceeds from sale of common
  stock............................       140,650       33,523,000         1,250,000        34,913,650
Underwriting and other expenses of
  initial public offering..........            --       (3,669,613)               --        (3,669,613)
Proceeds from capital
  contribution.....................            --          500,000                --           500,000
Payment of note payable............            --         (250,000)               --          (250,000)
Proceeds from grant................            --           33,900           193,622           227,522
Proceeds from sale of preferred
  stock............................            --        2,146,446                --         2,146,446
                                     ------------     ------------       -----------      ------------
Net cash provided by financing
  activities.......................       140,650       32,283,733         1,443,622        33,868,005
                                     ------------     ------------       -----------      ------------
Net increase in cash and cash
  equivalents......................   (23,749,938)      30,056,536            42,165         6,348,763
Cash and cash equivalents,
  beginning of period..............    30,098,701           42,165                --                --
                                     ------------     ------------       -----------      ------------
Cash and cash equivalents, end of
  period...........................  $  6,348,763     $ 30,098,701       $    42,165      $  6,348,763
                                     ============     ============       ===========      ============
</Table>

                            See accompanying notes.

                                       F-6
<PAGE>

                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- BASIS OF PRESENTATION

     Millennium Cell Inc. (the "Company"), which was formed to acquire
substantially all of the assets of the Battery Technology Group of GP Strategies
Corporation ("GPS"), was incorporated on December 17, 1998 and organized on
January 1, 1999 (inception), with an initial cash capital contribution of $1.25
million of which GPS contributed $50,000.

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

     On December 17, 1998, the Company entered into an agreement ("Agreement")
with GPS pursuant to which in January 1999 substantially all of the assets of
its Battery Technology Group (which consisted only of a license ("License") and
equipment) were exchanged for approximately 6.2 million shares of common stock
and a note payable to GPS for $250,000. The value allocated to the assets
acquired was limited to the $250,000 note payable. Approximately $100,000 has
been allocated to equipment (which is the basis at which it was recorded on the
books of GPS) and the remaining $150,000 to the License.

     The License covers the use of the Invention to make, use and sell licensed
products within the licensed territory in perpetuity.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

  Cash and Cash Equivalents

     The Company considers all highly-liquid instruments purchased with an
initial maturity of three months or less to be cash equivalents.

  Other Assets

     Other assets primarily consist of deposits with certain vendors and
landlords.

  Property and Equipment

     Property and equipment are stated at cost. The Company provides for
depreciation and amortization using the straight-line method over their
estimated useful lives as follows:

<Table>
<Caption>
                                                               ESTIMATED
ASSET CLASSIFICATION                                          USEFUL LIFE
--------------------                                          -----------
<S>                                                           <C>
Machinery and equipment.....................................    3 years
Furniture and fixtures......................................    3 years
Leasehold improvements......................................    3 years
</Table>

     Leasehold improvements are amortized over the estimated useful lives of the
assets or related lease terms, whichever is shorter.

     Repairs and maintenance are charged to expense as incurred.

                                       F-7
<PAGE>
                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  Long-Lived Assets

     The Company records impairment losses on long-lived assets when events and
circumstances indicate that the assets might be impaired and the undiscounted
estimated cash flows to be generated by the related assets are less than the
carrying amount of those assets. To date, no impairments have occurred.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". This standard addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of". This standard is effective for fiscal
years beginning after December 15, 2001. The adoption of SFAS No. 144 is not
expected to have a material effect on the Company's financial position or
results of operations.

  Intangible Assets

     Certain costs associated with obtaining and licensing patents and
trademarks are capitalized as incurred and are amortized on a straight-line
basis over their estimated useful lives of 10 to 17 years, unless the asset is
determined to be impaired. Amortization of such costs begins once the patent has
been issued. The Company evaluates the recoverability of its patent costs at
each balance sheet date based on estimated undiscounted future cash flows.

     In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets". This standard addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB Opinion No. 17
"Intangible Assets". This standard is effective for fiscal years beginning after
December 15, 2001. However, this standard is immediately effective in cases
where goodwill and intangible assets are acquired after June 30, 2001. Under
this standard, goodwill and intangible assets deemed to have indefinite lives
will no longer be amortized but will be subject to annual impairment tests. The
adoption of SFAS No. 142 is not expected to have a material effect on the
Company's financial position or results of operations.

  Revenue Recognition

     The Company's near term revenues will be derived substantially from
contracts that require the Company to deliver hydrogen generation technology,
prototype systems and licensing of technology. It is anticipated that revenues
will be recognized in the period in which the technology is delivered or
licensed revenue is earned.

  Product Development and Marketing Costs

     Product development and marketing costs are expensed as incurred.

  Research and Development Costs

     Research and development costs are expensed as incurred.

  Stock Based Compensation

     The Company accounts for its stock options under the provisions of APB
Opinion No. 25 "Accounting for Stock Issued to Employees" and complies with the
disclosure requirements of FASB Statement No. 123 "Accounting for Stock Based
Compensation."

                                       F-8
<PAGE>
                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

  Earnings Per Share

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

  Income Taxes

     The Company is subject to state and federal income taxes and accounts for
income taxes under the liability method. Accordingly, net deferred tax assets
and an offsetting valuation allowance of $7,780,932 and $6,267,634 at December
31, 2001 and 2000, respectively have been recorded due to the uncertainty
regarding the realization of such deferred tax assets. The significant items
giving rise to the deferred income taxes were primarily tax loss and credit
carry forwards and depreciation.

  Use of Accounting Estimates

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

  Reclassifications

     Amounts previously reported as "Product Development and Engineering" have
been reclassified and shown as "Research and Development" for all periods
presented. Certain other amounts have been reclassified to conform to the
current year's presentation.

NOTE 3 -- INVESTMENTS

     At December 31, 2001, the Company held $11.1 million of held-to-maturity
investments in U.S. government agency bonds stated at amortized cost, with a
weighted-average yield of 5.1%. At December 31, 2001, amortized cost
approximated fair value. Interest income is recognized using the straight-line
method over the lives of the securities. The face value of the securities, all
of which mature in the Second Quarter of 2002 is $11.0 million.

NOTE 4 -- PROPERTY AND EQUIPMENT

     Property and equipment consist of the following at December 31:

<Table>
<Caption>
                                                                 2001         2000
                                                              ----------    ---------
<S>                                                           <C>           <C>
Machinery and equipment.....................................  $1,106,981    $ 716,632
Furniture and fixtures......................................     356,340       55,283
Leasehold improvements......................................     367,420      101,972
                                                              ----------    ---------
                                                               1,830,741      873,887
Accumulated depreciation....................................    (653,258)    (228,035)
                                                              ----------    ---------
Property and equipment, net.................................  $1,177,483    $ 645,852
                                                              ==========    =========
</Table>

                                       F-9
<PAGE>
                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5 -- INTANGIBLE ASSETS

     Patent and license costs consist of the following at December 31:

<Table>
<Caption>
                                                                2001        2000
                                                              --------    --------
<S>                                                           <C>         <C>
Patent and license costs....................................  $614,534    $476,094
Accumulated amortization....................................   (83,828)    (36,020)
                                                              --------    --------
                                                              $530,706    $440,074
                                                              ========    ========
</Table>

NOTE 6 -- PRODUCT DEVELOPMENT AGREEMENT

     In October 2000, the Company entered into a joint development agreement
("Agreement") with Ballard Power Systems, Inc. ("Ballard") to incorporate the
Company's hydrogen generation system into portable power systems manufactured
and sold by Ballard.

     On the date of the Agreement, the Company received $2.4 million
representing an advance of future license revenue relates to the future sale of
power systems by Ballard to OEM's. The advance royalty payment is recorded as a
current liability in the accompanying balance sheet and is refundable upon
request of Ballard at any time after December 31, 2002 if the joint development
date ("JDD") is not yet achieved.

     The Agreement provides Ballard warrants to purchase up to 400,000 shares of
the Company's common stock upon achievement of the JDD (as defined), which is
expected to be achieved in 2002. The warrants will be recorded at their fair
value on the JDD. The Company will recognize royalty revenue upon the
aforementioned license Agreement when the aggregate revenue exceeds the fair
value of the warrants on the JDD.

     The Agreement was amended on October 24, 2001 to extend the expiration date
to April 30, 2003. If the JDD is not achieved prior to expiration of the
Agreement, the Company may have to refund the advance royalty payment.

NOTE 7 -- GRANT OBLIGATION

     In April 1999, the Company received a recoverable grant award from the
State of New Jersey Commission on Science and Technology ("NJS&T"). The funds
were used to partially fund costs directly related to the Borohydride Fuel Cell
technology development. The recoverable grant is required to be repaid to NJS&T
upon the Company generating net income in a fiscal year. The repayment
obligation ranges from 1% to 5% of net income over a ten-year period and shall
not exceed 200% of the original grant. If at the end of the tenth year the
Company has not repaid at least 100% of the original grant, the Company is
obligated to repay the difference between that amount and the cumulative
repayments made to date. The original grant amount has been recorded as a
liability. Additional liability, if any, will be recorded upon the attainment of
net income in excess of the amount required to establish such additional
liability.

NOTE 8 -- COMMITMENTS AND CONTINGENCIES

     In April 2001, the Company amended its main operating lease to provide for
additional space for the Company's principal operating offices and laboratories.
As of November 2001, we occupy all facilities contemplated in the lease
agreement. The amended lease will expire in 2008 and will contain options to
renew

                                       F-10
<PAGE>
                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

for an additional 8 years and will require the Company to pay its allocated
share of taxes and operating cost in addition to the annual base rent payment.
We expect future minimum annual lease commitments including allocated taxes and
maintenance under existing and amended operating leases to be as follows:

<Table>
<S>                                                           <C>
2002........................................................  $  484,310
2003........................................................     484,310
2004........................................................     484,310
2005........................................................     484,310
2006........................................................     484,310
Thereafter..................................................     928,260
                                                              ----------
     Total..................................................  $3,349,810
</Table>

     Rent expense under the operating lease was approximately $288,498, $128,435
and $23,000 for the years ended December 31, 2001, 2000, and 1999, respectively.

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

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

NOTE 9 -- CAPITAL TRANSACTIONS

     In May 2000, in exchange for approximately $2.2 million, the Company sold
759,368 shares of Series A preferred stock, which automatically converted into
759,368 shares of common stock upon completion of the Company's initial public
equity offering in August 2000. As the issuance price was substantially less
than the initial public offering price the Company incurred additional preferred
dividends of approximately $2.2 million from the date of issuance to the initial
public offering.

     Also in May 2000 (as amended in August 2000), the Company terminated a
royalty agreement with GPS and Steven Amendola by issuing to them options to
purchase 250,000 common shares at the initial public offering price and 206,897
shares of common stock, respectively. These agreements resulted in a non-cash
charge of approximately $2.8 million.

     In September 2000, the Company completed its initial public offering
issuing 3,352,300 shares resulting in net proceeds to the Company of
approximately $29.9 million.

     In December 2001, the Company entered into a separation agreement with
Steven C. Amendola, its chief scientific advisor ("CSA") and also entered into a
consulting agreement and a confidentiality agreement with a company wholly owned
by the CSA, which expires in September 2002. The significant terms of the
agreements are:

     - $230,000 of severance to the CSA was paid in 2001.

     - Accelerated vesting of 166,607 stock options initially granted to the CSA
       while he was an employee of the Company under the Amended and Restated
       2000 Stock Option Plan. This resulted in a non-cash charge of $142,602.

     - Forfeiture by the CSA of approximately 503,321 unvested options. CSA's
       total vested options equaled 503,322 at December 31, 2001.

                                       F-11
<PAGE>
                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The agreements require the CSA to advise the Company as it sees fit for the
benefit of the Company and contains certain other non-compete restrictions.
Additionally, the Company has the right to require CSA's full-time participation
in Company research activities during the contract period at its discretion.

NOTE 10 -- STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS

  2000 Stock Option Plan

     In July 2000, the Company adopted the Amended and Restated 2000 Stock
Option Plan. 5,500,000 shares 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 rights, restricted
stock awards, performance unit awards and stock bonus awards. Options and
warrants issued under this plan have a life of ten years and generally vest
ratably over three years. The specific terms and conditions of awards granted
under the plan are specified in a written agreement between the Company and the
participant.

     The following table summarizes activity under the Plan:

<Table>
<Caption>
                                                                               WEIGHTED
                                                              NUMBER OF        AVERAGE
                                                               OPTIONS      EXERCISE PRICE
                                                             AND WARRANTS     PER SHARE
                                                             ------------   --------------
<S>                                                          <C>            <C>
Balance at December 31, 1999...............................          --         $   --
  Granted below fair value.................................   3,227,321           2.90
  Granted at fair value....................................     457,150          10.72
  Forfeited or terminated..................................          --             --
                                                              ---------         ------
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
                                                              =========         ======
</Table>

     The following is additional information relating to options and warrants
granted and outstanding under the plan as of December 31, 2001:

<Table>
<Caption>
                                                               REMAINING
                                                WEIGHTED        WEIGHTED                      WEIGHTED
                                 OPTIONS        AVERAGE         AVERAGE        OPTIONS        AVERAGE
EXERCISE PRICE RANGE           OUTSTANDING   EXERCISE PRICE   LIFE (YEARS)   EXERCISABLE   EXERCISE PRICE
--------------------           -----------   --------------   ------------   -----------   --------------
<S>                            <C>           <C>              <C>            <C>           <C>
$ 2.90 - $ 2.90..............   2,728,592        $ 2.90           8.5         1,555,594        $ 2.90
  2.91 -   7.85..............     794,816          4.64           9.9            31,728          4.35
  7.86 -  11.77..............   1,170,925          9.81           9.1           371,353         10.13
 11.78 -  19.63..............      72,387         15.93           8.9            15,415         17.88
                                ---------        ------           ---         ---------        ------
                                4,766,720        $ 5.09           8.9         1,974,090        $ 4.40
                                =========        ======           ===         =========        ======
</Table>

     The Company recorded non-cash charges of approximately $5.9 million and
$5.8 million in 2001 and 2000, respectively, related to options issued below
market to employees and the Board of Directors in 2000. The Company will incur
additional non-cash charges of approximately $6.2 million for these options over
the vesting period as follows: 2002-$4.1 million and 2003-$2.1 million.

     The Company also incurred non-cash charges of $1.4 million and $2.9 million
in 2001 and 2000, respectively, related to the fair value of warrants issued to
affiliates. Certain affiliates have the ability to earn

                                       F-12
<PAGE>
                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

new awards based on certain milestones and service periods. The accounting
methodology requires a re-valuing of certain earned warrants at each period
ending market price using a Black-Scholes pricing model. Due to this variable
accounting methodology, it is difficult to predict the amount of additional
non-cash charges the company will incur related to these warrants. The fair
value of the Company's options and warrants issued to affiliates was estimated
at the date of grant using a Black-Scholes option pricing model with the
following assumptions: volatility = .92, contractual term = 10 years, expected
option life = 0-3 years, expected rate of return = 6.25%.

  Accounting For Stock-Based Compensation

     Pro forma information regarding net income and earnings per share is
required by SFAS No. 123. This information is required to be determined as if
the Company had accounted for its employee stock options under the fair value
method of that statement. The fair value of options granted for the fiscal years
ended December 31, 2001 and 2000 reported below has been estimated at the date
of grant using a Black-Scholes option pricing model with the following
assumptions: volatility = .83 in 2001 and .92 in 2000, contractual term = 10 yrs
in 2001 and 2000, expected option life = 3 yrs in 2001 and 0-3 yrs in 2000,
expected dividend rate was 0% in 2001 and 2000 and expected rate of return =
3.07% - 4.79% in 2001 and 6.25% in 2000.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. The Company's options have characteristics significantly different
from those of traded options, and changes in the subjective input assumptions
can materially affect the fair value estimate. Based upon the above assumptions,
the weighted average fair value of stock options granted during fiscal 2001 was
$4.13 per share. The fair value of the stock options granted below market value
in 2000 was $8.39 per share and the fair value of the stock options granted at
market value in 2000 was $4.09 per share.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period. Had the Company's stock
option plan been accounted for under SFAS No. 123, net loss and loss per share
would have been increased to the following pro forma amounts:

<Table>
<Caption>
                                       NET LOSS --    NET LOSS --    LOSS PER SHARE --   LOSS PER SHARE --
YEAR ENDED DECEMBER 31,                AS REPORTED     PRO FORMA        AS REPORTED          PRO FORMA
-----------------------                ------------   ------------   -----------------   -----------------
<S>                                    <C>            <C>            <C>                 <C>
2001.................................  $(19,452,329)  $(21,157,380)       $(0.71)             $(0.78)
2000.................................  $(17,819,965)  $(18,458,948)       $(0.69)             $(0.72)
1999.................................  $ (1,031,277)  $ (1,031,277)       $(0.04)             $(0.04)
</Table>

     The effects of applying SFAS No. 123 on pro forma disclosures of net loss
and loss per share for fiscal 2001, 2000 and 1999 are not likely to be
representative of the pro forma effects on net loss and loss per share in future
years for the following reasons: 1) the number of future shares to be issued
under this plan is not known, 2) the assumptions used to determine the fair
value can vary significantly.

  Savings Plan

     In December 2000, the Company enacted a savings plan that complies with
Section 401(k) of the Internal Revenue Code. The plan allows employees to
contribute a portion of their compensation on a pre-tax and/or after-tax basis
in accordance with specified guidelines. The Company matches in company stock in
July and December of each fiscal year, on a one to one basis the employee
contributions up to 6% of eligible compensation. Employee contributions to this
plan began in January 2001. Employer matching stock contributions vest ratably
over 3 years, beginning one year from the date of the first employer match,
which was July 2001. During the year ended December 31, 2001, employer
contributions to the plan were $201,908, all of which were unvested. At an
average common stock price of $6.76 for fiscal 2001, 29,883 shares will be
transferred into the plan upon vesting during 2002.

                                       F-13
<PAGE>
                              MILLENNIUM CELL INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- QUARTERLY INFORMATION (UNAUDITED)

<Table>
<Caption>
                                                          FISCAL YEAR QUARTERS
                                          ----------------------------------------------------
                                           FIRST     SECOND      THIRD     FOURTH      TOTAL
                                          -------    -------    -------    -------    --------
                                                  (IN 000'S, EXCEPT PER SHARE AMOUNTS)
<S>                                       <C>        <C>        <C>        <C>        <C>
Fiscal Year ended December 31, 2001
Product development & marketing.........  $   861    $ 1,307    $ 1,504    $ 1,841    $  5,513
General and administrative..............      849      1,368      1,279      1,231       4,727
Non-cash charges........................    2,525      1,943      1,667      1,206       7,341
Depreciation and amortization...........       94        113        116        150         473
Research and development................      490        633        907        595       2,625
                                          -------    -------    -------    -------    --------
Total operating expenses................    4,819      5,364      5,473      5,023      20,679
                                          -------    -------    -------    -------    --------
Loss from operations....................   (4,819)    (5,364)    (5,473)    (5,023)    (20,679)
Interest income.........................      399        326        248        254       1,227
                                          -------    -------    -------    -------    --------
Net loss................................   (4,420)    (5,038)    (5,225)    (4,769)    (19,452)
                                          =======    =======    =======    =======    ========
Loss per share -- basic and diluted.....  $  (.16)   $  (.19)   $  (.19)   $  (.17)   $   (.71)
                                          =======    =======    =======    =======    ========
Weighted -- average number of shares
  outstanding...........................   27,168     27,183     27,253     27,265      27,218
                                          =======    =======    =======    =======    ========
</Table>

<Table>
<Caption>
                                                         FISCAL YEAR QUARTERS
                                         -----------------------------------------------------
                                          FIRST     SECOND      THIRD      FOURTH      TOTAL
                                         -------    -------    --------    -------    --------
                                                 (IN 000'S, EXCEPT PER SHARE AMOUNTS)
<S>                                      <C>        <C>        <C>         <C>        <C>
Fiscal Year Ended December 31, 2000
General and administrative.............  $   114    $   352    $  1,017    $ 1,691    $  3,173
Non-cash charges.......................       --         --       8,947      1,838      10,785
Depreciation and amortization..........       25         36          99         97         257
Research and development...............      284        377         668        803       2,132
                                         -------    -------    --------    -------    --------
Total operating expenses...............      423        764      10,731      4,429      16,347
                                         -------    -------    --------    -------    --------
Loss from operations...................     (423)      (764)    (10,731)    (4,429)    (16,347)
Interest income(expense), net..........        1        (21)        230        467         678
                                         -------    -------    --------    -------    --------
Net loss...............................     (422)      (785)    (10,501)    (3,962)    (15,669)
Preferred stock amortization...........       --      1,425         726         --       2,151
                                         -------    -------    --------    -------    --------
Net loss applicable to common
  stockholders.........................  $  (422)   $(2,209)   $(11,227)   $(3,962)   $(17,820)
                                         =======    =======    ========    =======    ========
Loss per share -- basic and diluted....  $  (.02)   $  (.09)   $   (.45)   $  (.15)   $   (.69)
                                         =======    =======    ========    =======    ========
Weighted -- average number of shares
  outstanding..........................   23,680     23,680      25,221     27,168      25,788
                                         =======    =======    ========    =======    ========
</Table>

                                       F-14