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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
000-31083
(Commission File Number)
MILLENNIUM CELL INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-3726792
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
One Industrial Way West,
Eatontown, New Jersey 07724
(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (732) 542-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes |_| No
|X|
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 34,414,429 shares of
Common Stock, par value $.001, were outstanding on November 4, 2003.
MILLENNIUM CELL INC.
(a development stage enterprise)
Index
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet - September 30, 2003 and December 31, 2002...................... 1
Consolidated Statements of Operations - Three and nine months ended September 30, 2003
and 2002................................................................................... 2
Consolidated Statements of Cash Flows - Nine months ended September 30, 2003
and 2002................................................................................... 3
Notes to Consolidated Financial Statements - September 30, 2003............................ 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................. 14
Item 4. Controls and Procedures.................................................................... 14
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.................................................. 16
Item 6. Exhibits and Reports on Form 8-K........................................................... 16
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
MILLENNIUM CELL INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
September 30, December 31,
2003 2002
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 7,948,711 $ 7,987,127
Accounts receivable.......................................................... 198,287 234,015
Prepaid expenses............................................................. 481,930 337,589
Deferred financing costs..................................................... 154,090 313,690
---------------- ---------------
Total current assets............................................................ 8,783,018 8,872,421
Property and equipment, net..................................................... 1,090,354 1,526,983
Patents and licenses, net....................................................... 589,757 590,269
Investment in affiliate......................................................... -- 167,412
Restricted cash................................................................. 2,990,746 2,963,050
Security deposits............................................................... 45,676 45,676
---------------- ---------------
$ 13,499,551 $ 14,165,811
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................. $ 505,980 $ 612,651
Accrued expenses............................................................. 180,287 615,006
Convertible unsecured debentures, net of discount............................ 2,961,051 3,029,882
---------------- ---------------
Total current liabilities....................................................... 3,647,318 4,257,539
Convertible secured debentures.................................................. 2,399,988 2,399,988
Refundable grant obligation..................................................... 205,940 227,522
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 70,000,000 shares, 33,983,374 and
29,027,491 shares issued and outstanding
as of September 30, 2003 and December 31, 2002, respectively.............. 33,950 29,027
Additional paid-in capital................................................... 76,511,774 61,679,267
Deferred compensation........................................................ (376,942) --
Deficit accumulated during development stage................................. (68,922,477) (54,427,532)
---------------- ---------------
Total stockholders' equity...................................................... 7,246,305 7,280,762
---------------- ---------------
$ 13,499,551 $ 14,165,811
================ ===============
See notes to financial statements.
1
MILLENNIUM CELL INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended Cumulative
September 30, September 30, September 30, September 30, Amounts From
2003 2002 2003 2002 Inception
Revenue........................................ $ 102,605 $ 106,455 $ 395,914 $ 486,737 $ 1,115,306
Cost of revenue................................ 92,805 106,455 338,504 486,737 1,028,563
----------- ------------- ------------ ------------- ------------
Gross margin................................... 9,800 -- 57,410 -- 86,743
Product development and marketing.............. 1,496,724 1,312,558 4,019,356 4,511,502 15,320,843
General and administrative
(excluding non-cash charges)................. 736,620 891,083 2,841,389 3,370,239 14,959,221
Non-cash charges............................... 418,787 987,829 2,366,019 3,181,153 24,641,112
Restructuring expense.......................... -- -- -- 104,982 104,982
Depreciation and amortization.................. 153,173 180,195 494,744 534,639 1,992,577
Research and development....................... 221,982 249,008 798,380 1,153,848 7,890,391
----------- ------------- ------------ ------------- ------------
Total operating expenses....................... 3,027,286 3,620,673 10,519,888 12,856,363 64,909,126
----------- ------------- ------------ ------------- ------------
Loss from operations........................... (3,017,486) (3,620,673) (10,462,478) (12,856,363) (64,822,383)
Other income, net.............................. -- -- -- 234,963
Interest income (expense)...................... (1,918,690) 52,162 (3,544,103) 306,129 (1,328,098)
Equity in losses of affiliates................. -- -- (488,364) -- (856,078)
----------- ------------- ------------- ------------- -------------
Net loss....................................... (4,936,176) (3,568,511) (14,494,945) (12,550,234) (66,771,596)
Preferred stock amortization................... -- -- -- -- 2,150,881
----------- ------------- ------------ ------------- ------------
Net loss applicable to common stockholders..... $(4,936,176) $ (3,568,511) $(14,494,945) $ (12,550,234) $(68,922,477)
=========== ============= ============ ============= ============
Loss per share -- basic and diluted............ $ (.15) $ (.13) $ (.47) $ (.45) $ (2.59)
============ ============= ============ ============= =============
Weighted -- average number of shares outstanding 31,944,522 28,428,334 30,541,661 27,751,179 26,654,965
============ ============= ============ ============= =============
See notes to financial statements.
2
MILLENNIUM CELL INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Nine Months Nine Months Cumulative
Ended Ended Amounts from
September 30, 2003 September 30, 2002 Inception
OPERATING ACTIVITIES
Net loss.................................... $ (14,494,945) $ (12,550,234) $ (66,771,596)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization............... 494,743 534,649 1,992,577
Amortization of discount on debentures...... 1,543,038 -- 1,564,903
Beneficial conversion feature on debentures. 1,588,379 -- 1,588,379
Amortization of deferred financing costs.... 437,452 -- 452,042
Losses on investment in affiliate........... 488,364 -- 856,078
Non-cash charges............................ 2,366,019 3,181,153 24,641,112
Changes in operating assets and liabilities:
Accounts receivable......................... 35,728 47,546 (198,287)
Prepaid expenses and other assets........... (144,341) (467,270) (527,606)
Accounts payable and accrued expenses....... (292,168) (721,485) 1,017,863
Deferred royalty income..................... -- (120,000) --
------------- -------------- -------------
Net cash used in operating activities....... (7,977,731) (10,095,641) (35,384,535)
INVESTING ACTIVITIES
Purchase of property and equipment.......... (6,050) (1,017,406) (2,786,502)
Patent registration costs................... (51,553) (87,889) (636,186)
Investment in affiliate..................... (320,952) -- (856,078)
Maturity of investments..................... -- 11,067,175 --
------------- ------------- -------------
Net cash provided by/(used in) investing
activities.................................. (378,555) 9,961,880 (4,278,766)
FINANCING ACTIVITIES
Proceeds from issuance of common stock...... 145,000 81,201 35,139,850
Underwriting and other expenses of initial
public offering.......................... -- -- (3,669,613)
Proceeds from issuance of debentures........ 8,500,000 -- 14,399,988
Restricted cash............................. (27,696) 33,854 (2,990,746)
Proceeds from equity private placement...... -- 2,093,000 2,736,279
Deferred financing costs.................... (277,852) -- (606,132)
Proceeds from capital contribution.......... -- -- 500,000
Payment of note payable..................... -- -- (250,000)
Grant proceeds/(payments)................... (21,582) -- 205,940
Proceeds from sale of preferred stock....... -- -- 2,146,446
- ------------- ------------- -------------
Net cash provided by financing activities... 8,317,870 2,208,055 47,612,012
------------- ------------- -------------
Net change in cash and cash equivalents..... (38,416) 2,074,294 7,948,711
Cash and cash equivalents, beginning of
period................................... 7,987,127 6,348,763 --
------------- ------------- -------------
Cash and cash equivalents, end of period.... $ 7,948,711 $ 8,423,057 $ 7,948,711
============= ============= =============
Non-Cash Transactions:
The Company issued 84,672 shares of common stock valued at $143,224 to
employees as 401(k) Plan employer contributions during 2003. In 2002, the
Company issued 43,356 shares of stock valued at $82,375 for the 401(k) Plan.
See notes to financial statements.
3
MILLENNIUM CELL INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 1--BASIS OF PRESENTATION
The consolidated financial statements include the accounts of
Millennium Cell Inc. and its wholly owned subsidiary, MCE Ventures LLC ("MCE
Ventures"). MCE Ventures is a Delaware limited liability corporation that was
formed in 2002 to engage in limited strategic investment activities. All
significant inter-company transactions and accounts have been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles in the United States for complete financial statements. In the
opinion of management, all known adjustments (which consist primarily of normal
recurring adjustments) considered necessary for a fair presentation have been
included. The interim statements should be read in conjunction with our Annual
Report on Form 10-K for the year ended December 31, 2002. Reclassifications were
made to ensure consistency with current year presentation.
NOTE 2--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. All such securities were
anti-dilutive for all periods presented.
NOTE 3--STOCK BASED COMPENSATION
In December 2002, the Financial Accounting Standards Board ("FASB")
issued FAS No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure. FAS 148 amends FAS No. 123, Accounting for Stock-Based Compensation,
to provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, FAS 148 amends the disclosure requirements of FAS 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock based employee compensation and the effect of the
method used on reported results. The provisions of FAS 148 are effective for
financial statements for fiscal years and interim periods ending after December
15, 2002. The disclosure provisions of FAS 148 have been adopted by the Company.
FAS 148 did not require the Company to change to the fair value based method of
accounting for stock-based compensation.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation" encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has elected to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25").
4
The following table illustrates the effect on net income and earnings
per share if the Company had applied the fair value recognition provisions of
SFAS 123 to stock-based employee compensation:
Three Mos. Ended September 30, Nine Mos. Ended September 30,
------------------------------ -----------------------------
2003 2002 2003 2002
---- ---- ---- ----
Net loss attributable to common stockholders--
As reported.......................................... $(4,936,176) $(3,568,511) $(14,494,945) $(12,550,234)
Add: Total stock-based compensation expense
included in Net Loss................................. 418,787 987,829 2,366,019 3,181,153
Deduct: Total stock-based compensation expense
determined under fair value based method for all
stock option awards.................................. (1,083,587) (1,710,742) (5,263,423) (4,964,192)
Net loss attributable to common stockholders--
Pro forma............................................ $(5,600,976) $(4,291,424) $(17,392,349) $(14,333,273)
Net loss per share attributable to common
stockholders-- As reported........................... $(0.15) $(0.13) $(0.47) $(0.45)
Net loss per share attributable to common
stockholders-- Pro forma............................. $(0.18) $(0.15) $(0.57) $(0.52)
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions:
Three and Nine Mos. Ended September 30,
---------------------------------------
2003 2002
---- ----
Expected dividend yield............... -- --
Expected stock price volatility....... .69 .69
Risk-free interest rate............... 3.68% 3.68%
Expected option term.................. 5 years 5 years
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. The Company's options have characteristics significantly different
from those of traded options, and changes in the subjective input assumptions
can materially affect the fair value estimate. Based upon the above assumptions,
the weighted average fair value of stock options granted at market was $1.44 and
$3.10 in 2003 and 2002, respectively.
NOTE 4--OPTIONS, WARRANTS AND NON-CASH CHARGES
In August 2003, the Company exchanged 835,500 eligible stock options
for 197,599 shares of restricted stock related to an exchange offer. This offer
allowed eligible plan participants to exchange options for restricted stock at
an exchange rate based on the calculated market value of the stock options using
a black-scholes model. For the third quarter of 2003, the Company recorded
$18,256 related to the vesting of the restricted stock. The Company will
recognize total non-cash charges in the amount of $395,198 ratably over the
remaining vesting period of the restricted stock (two years or sooner based on
certain events).
There are a number of outstanding stock warrants held by former
employees. The accounting methodology for these warrants requires a re-valuing
of the warrants at each period ending market price using a Black-Scholes pricing
model. In the third quarter of 2003, the Company recorded approximately $300,000
of non-cash charges for changes in the fair value of affiliates' warrants. Due
to the variable nature of this accounting methodology, it is difficult to
predict the amount of additional non-cash charges the Company will incur related
to these warrants during future periods.
NOTE 5--CONVERTIBLE DEBENTURES
In December 2002, the Company issued convertible unsecured debentures
with a principal amount of $3.5 million. As of June 30, 2003, the entire $3.5
million of unsecured debentures had been converted into 2,094,048 shares of
common stock.
5
On January 23, 2003, the Company's shareholders approved the issuance
of $8.5 million of secured convertible debentures and warrants to acquire
589,376 shares and the secured debentures were issued on January 30, 2003.
During the third quarter of 2003, the Company exchanged all outstanding secured
convertible debentures for unsecured convertible debentures and registered the
common shares underlying all of the unsecured convertible debentures. As a
result, the letter of credit securing the secured convertible debentures was
released. During the third quarter of 2003, the Company converted $5.0 million
of the unsecured convertible debentures into 2,379,525 shares of common stock.
As a result, $3.5 million of unsecured convertible debentures were outstanding
as of September 30, 2003. The due date for these debentures is March 31, 2004.
There were no secured convertible debentures related to the private equity
financing outstanding as of September 30, 2003.
At any time, the unsecured convertible debentures are convertible under
three different scenarios:
o At the option of the holder, at any time and from time to time at
$4.25 per share.
o At the option of the Company, if (1) the average closing prices of the
Company's common stock during any consecutive 30 trading days is equal
to or greater than $5.10 per share and (2) the closing price for each
of 15 trading days which need not be consecutive is equal to or greater
than $5.10.
o The Company may also convert $300,000 (or up to $2.5 million with
investor consent) of unsecured debentures each 10 trading days at an
adjusted conversion price equal to the volume weighted average of
current market prices discounted from 4% to 12%. The discount to the
adjusted conversion price depends on the cumulative amount of
debentures converted as of the respective dates of conversion.
In order to exercise the Company's options to convert the debentures,
certain equity conditions must be satisfied as follows:
(i) the number of authorized but unissued and otherwise unreserved shares
of common stock is sufficient for such issuance;
(ii) such shares of common stock are registered for resale pursuant
to an effective registration statement, and the prospectus
thereunder is available for use to sell such shares or all
such shares may be sold without volume restrictions pursuant
to Rule 144(k) under the Securities Act;
(iii) the common stock is listed or quoted (and is not suspended
from trading) on The NASDAQ National Market or SmallCap Market
or other eligible market and such shares of common stock are
approved for listing;
(iv) no event of default nor any event that with the passage of
time and without being cured would constitute an event of
default has occurred and not been cured, and
(v) no public announcement of a pending or proposed change of control
transaction has occurred that has not been consummated.
Warrants may not be exercised and debentures may not be converted to
the extent that a holder thereof would then beneficially own, together with its
affiliates, more than 9.999% of our common stock then outstanding subsequent to
the applicable conversion or exercise.
In accordance with APB No. 14, "Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants", the Company determined that the fair
value of both the $8.5 million secured debentures and $3.5 million unsecured
debentures was $9,895,057 upon issuance. The resulting discount is being
amortized as interest expense, using the effective interest method, over the
original maturity period of the debentures or ratably as they are converted,
whichever comes first. During the quarter ended September 30, 2003, the Company
recognized a non-cash charge to interest expense of $890,715 for amortization of
discount on debentures.
In accordance with Emerging Issues Task Force ("EITF") No. 00-27,
"Application of Issue No. 98-5 to Certain Convertible Instruments", and EITF No.
98-5, "Accounting for Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratios", and after considering the terms
of the transaction, the Company determined that the debentures contained a
beneficial conversion feature ("BCF"). The BCF existed because of a discount
that will be given to the investor in the event of a company-initiated
conversion of the debentures prior to maturity. These discounts will range from
4% to 12%, depending on the amount of debentures converted into common stock.
Accordingly, at time of conversion, the Company will record as interest expense
any applicable BCF based on the fair value of the conversion feature on that
date in the event of an early conversion of debentures into common stock. During
the quarter ended September 30, 2003, approximately $5.0 million of debentures
were 875,025 for the BCF during the period.
6
NOTE 6 - PRODUCT DEVELOPMENT AGREEMENT
In October 2000, the Company received $2.4 million in cash from Ballard
Power Systems Inc. as an advance for prospective royalties pursuant to a product
development agreement between Ballard and the Company. In addition, the Company
granted to Ballard a warrant to purchase up to 400,000 shares of common stock,
which was terminated as part of the strategic investment discussed below. Upon
completion of certain stages of product development, the parties agreed to
negotiate in good faith for the grant of a license of our technology to Ballard
in certain fields of use, at which time prepaid royalties may be earned and the
warrants will be issued and recorded at fair value.
On November 8, 2002, the Company agreed with Ballard that the product
development milestones have been achieved and agreed to convert the $2.4 million
refundable royalty payment into an investment in the form of secured
convertible debentures due November 8, 2005. The Ballard debentures are secured
by a standby letter of credit issued by Wachovia Bank, National Association,
with an aggregate face amount equal to the outstanding principal. The Company
pledged to the bank as collateral $2.4 million of funds previously reported
under cash and cash equivalents on the accompanying balance sheet. The Company
will not have the ability to use this cash until the bank pledges are released
upon conversion of the Ballard debentures to common stock. The debentures are
convertible at a conversion price of $4.25, subject to anti-dilution adjustments
and certain price protection in the event the Company initiates the conversion.
As part of the purchase agreement entered into between Ballard and us, Ballard
retains the option to license the non-exclusive right to manufacture and sell
products with Hydrogen on DemandTM technology for specific portable fuel cell
products and stationary internal combustion engine generators.
NOTE 7 - INVESTMENT IN AFFILIATE
In July 2002, the Company agreed to acquire a 50% non-controlling
interest in a European alkaline fuel cell company (the "Affiliate"). During the
period from July 2002 to September 2003, the Company provided limited funding to
the Affiliate. As of June 30, 2003, the Company had written off its Investment
in Affiliate on the balance sheet and determined the fair value of the
investment was zero. During the third quarter of 2003, the Company decided to
divest its interest in the Affiliate. No gain or loss was recognized upon this
event.
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" (FIN 46). FIN 46 addresses consolidation by
business enterprises of variable interest entities with certain defined
characteristics. This interpretation applies immediately to variable interest
entities created after January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. It applies in the first
fiscal year or interim period beginning after December 15, 2003, to variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. The Company did not obtain an interest in any
variable interest entities after January 31, 2003. This interpretation is not
expected to have any impact on the accompanying financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability or an asset in some circumstances. This
Statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The Company does not expect this Statement
to have a material impact on the Company's financial statements.
NOTE 9 - SUBSEQUENT EVENTS
During October 2003, the Company converted approximately $1.3 million
of the remaining $3.5 million unsecured debentures into 420,884 shares of common
stock. Accordingly, the Company will recognize a charge to interest expense for
the value of the beneficial conversion feature the investor received on these
conversions.
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion should be read in conjunction with the
accompanying consolidated financial statements and notes thereto included within
this report. In addition to historical information, this Form 10-Q and the
following discussion contain forward-looking statements that reflect our plans,
estimates, intentions, expectations and beliefs. See the discussion contained
herein under the caption "Forward-Looking Statements" for more information. Our
actual results could differ materially from those discussed in the
forward-looking statements. The discussion below should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended December 31,
2002.
General
We were formed as a Delaware limited liability company on December 17,
1998, and organized and began operations on January 1, 1999 (inception date). We
were converted into a Delaware corporation on April 25, 2000 when all of the
outstanding equity interests of the limited liability company were converted
into shares of common stock of the corporation. Unless otherwise indicated, all
information that we present in this Form 10-Q for any date or period gives
effect to the conversion as if it had occurred on that date or as of the
beginning of that period and all references to common stock for periods before
the conversion mean our issued and outstanding membership interests.
Overview
We have developed a patented 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 from this system can be used
to power fuel cells, as well as fed directly to internal combustion engines. We
also have patents covering boron-based longer-life batteries and fuel cells. Our
goal is to convert our technology from the research and development stage to
commercialization.
Our losses have resulted primarily from costs associated with product
development and research and development activities as well as non-cash
amortization of preferred stock and non-cash charges related to the issuance of
stock options and warrants to employees and third parties. As a result of
planned expenditures in the areas of research, product development and marketing
and additional non-cash charges relating to employee stock options, we expect to
incur additional operating losses for the foreseeable future.
Results of Operations
Three Months Ended September 30, 2003 versus Three Months Ended
September 30, 2002
Revenues. Revenues for the three months ended September 30, 2003 were
$102,605 compared to $106,455 for the same period of 2002. In the near-term,
revenues are expected to be derived substantially from up-front license fees,
research contracts with various federal, state and local agencies,
collaborations with other companies, management and contract services, and
royalty payments or joint venture revenue from licensees or strategic
partnerships. Revenues will be recognized in the period in which technology is
delivered, licensing revenues are earned, or as services are performed.
Cost of Revenues. Cost of revenues for the three months ended September
30, 2003 were $92,805 compared to $106,455 for the same period of 2002. The
decrease in 2003 was a result of lower revenues and margins on service contracts
in the third quarter of 2003.
Product Development and Marketing Expense. Product development and
marketing expenses for the three months ended September 30, 2003 were $1,496,724
compared to $1,312,558 for the same period of 2002, an increase of $184,166.
This increase is mostly attributable to the development of a product management
organization to manage the commercialization of our technology during the third
quarter of 2003.
General and Administrative Expense. General and administrative expenses
for the three months ended September 30, 2003 were $736,620 compared to $891,083
for the same period of 2002, a decrease of $154,463. The decrease was a result
of decreased headcount in the general and administrative functions and other
active cost management initiatives.
8
Non-cash Charges. Non-cash charges were $418,787 for the three months
ended September 30, 2003 compared to $987,829 for the same period of 2002, a
decrease of $569,042. The non-cash charges in 2002 were primarily related to
options issued below market to employees in 2000 and warrants issued to
affiliates and other third parties for services rendered. During the second
quarter of 2003, the Company completed the amortization of the non-cash charges
for options issued below market value and that is the reason for the decline.
This decline was slightly offset by the issuance of common stock as compensation
to the members of the Company's Board of Directors in lieu of cash during the
third quarter of 2003.
Depreciation and Amortization. Depreciation and amortization was
$153,173 for the three months ended September 30, 2003 compared to $180,195 for
the same period of 2002, a decrease of $27,022. The decrease reflects the impact
of assets that have recently been fully depreciated.
Research and Development Expense. Research and development expenses
were $221,982 for the three months ended September 30, 2003 compared to $249,008
for the same period of 2002, a decrease of $27,026. The decrease is primarily
attributable to slightly reduced research program spending as compared to the
same period of 2002.
Interest Income/Expense. Net interest expense was $1,918,690 for the
three months ended September 30, 2003 compared to interest income of $52,162 for
the same period of 2002, a change of $1,970,852. The increase in net interest
expense was mainly the result of interest expense, amortization of original
issue discounts, issue costs and charges for beneficial conversion features on
the conversion of the Company's unsecured and secured debentures issued in
December 2002 and January 2003, respectively. We expect the remaining deferred
financing and related interest charges associated with the debentures to be
recognized in the fourth quarter of 2003.
Nine Months Ended September 30, 2003 versus Nine Months Ended September 30, 2002
Revenues. Revenues for the nine months ended September 30, 2003 were
$395,914 compared to $486,737 for the same period of 2002. Revenues declined
because revenues for the first three months of 2002 included the sale of large,
prototype systems which were not recurring in the first half of 2003. Revenues
in the first nine months of 2003 were derived primarily from design services and
the sale of prototype systems to customers.
In the near-term, revenues are expected to be derived substantially
from up-front license fees, research contracts with various federal, state and
local agencies, collaborations with other companies, management and contract
services, and royalty payments or joint venture revenue from licensees or
strategic partnerships. Revenues will be recognized in the period in which
technology is delivered, licensing revenues are earned, or as services are
performed.
Cost of Revenues. Cost of revenues for the nine months ended September
30, 2003 were $338,504 compared to $486,737 for the same period of 2002. Cost of
revenues on prototype unit sales during the development stage are allocated from
the Product Development and Marketing expense and Research and Development
expense line items on the income statement depending on the nature of the
project. The decline in cost of revenues was due to the sale in the first nine
months of 2002 of large, prototype systems which were not recurring in the first
nine months of 2003. In addition, we provided services to customers in 2003
which resulted in positive margins.
Product Development and Marketing Expense. Product development and
marketing expenses for the nine months ended September 30, 2003 were $4,019,356
compared to $4,511,502 for the same period of 2002, a decrease of $492,146. This
decrease is mostly attributable to the cost reduction program implemented during
the second quarter of 2002.
General and Administrative Expense. General and administrative expenses
for the nine months ended September 30, 2003 were $2,841,389 compared to
$3,370,239 for the same period of 2002, a decrease of $528,850. The decrease was
a result of increased efficiency of our administrative and finance organizations
as well as the cost reduction program implemented during the second quarter of
2002.
Non-cash Charges. Non-cash charges were $2,366,019 for the nine months
ended September 30, 2003 compared to $3,181,153 for the same period of 2002, a
decrease of $815,134. The non-cash charges were primarily related to options
issued below market to employees in 2000 and warrants issued to affiliates and
other third parties for services rendered. During the second quarter of 2003,
the Company completed the amortization of the non-cash charges for options
issued below market value and that is the reason for the decline from the first
nine months of 2002 to the same period of 2003.
9
This decline was slightly offset by the issuance of common stock as
compensation to the members of the Company's Board of Directors in lieu of cash
during the third quarter of 2003.
Depreciation and Amortization. Depreciation and amortization was
$494,744 for the nine months ended September 30, 2003 compared to $534,639 for
the same period of 2002, a decrease of $39,895. The decrease reflects the impact
of assets that have recently been fully depreciated.
Research and Development Expense. Research and development expenses
were $798,380 for the nine months ended September 30, 2003 compared to
$1,153,848 for the same period of 2002, a decrease of $355,468. The decrease is
primarily attributable to the cost reduction program implemented during the
second quarter of 2002.
Interest Income/Expense. Net interest expense was $3,544,103 for the
nine months ended September 30, 2003 compared to interest income of $306,129 for
the same period of 2002, a change of $3,850,232. The increase in net interest
expense was mainly the result of interest expense, amortization of original
issue discounts, issue costs and charges for beneficial conversion features on
the conversion of the Company's unsecured and secured debentures issued in
December 2002 and January 2003, respectively. We expect the remaining deferred
financing and related interest charges associated with the debentures to be
recognized in the fourth quarter of 2003.
Equity in Losses of Affiliate. In July 2002, the Company agreed to
acquire a 50% non-controlling interest in a European alkaline fuel cell company
(the "Affiliate"). The Company's investment was accounted for by the equity
method. During the period from July 2002 to September 2003, the Company provided
limited funding to the Affiliate. As of June 30, 2003, the Company had written
off its Investment in Affiliate on the balance sheet and determined the fair
value of the investment was zero. During the third quarter of 2003, the Company
decided to divest its interest in the Affiliate. No gain or loss was recognized
upon this event.
Liquidity and Capital Resources
General
Since the inception date, we have financed our operations primarily
through our initial public offering in August 2000 and private placements of
equity and debt securities. In 1999, we issued $1,250,000 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 and the net proceeds from the private equity
placement and convertible debentures totaled $14.1 million.
Convertible Debentures
In December 2002, the Company issued convertible unsecured debentures
with a principal amount of $3.5 million. As of June 30, 2003, the entire $3.5
million of unsecured debentures had been converted into 2,094,048 shares of
common stock.
On January 23, 2003, the Company's shareholders approved the issuance
of $8.5 million of secured convertible debentures and warrants to acquire
589,376 shares and the secured debentures were issued on January 30, 2003.
During the third quarter of 2003, the Company exchanged all outstanding secured
convertible debentures for unsecured convertible debentures and registered the
common shares underlying all of the unsecured convertible debentures. As a
result, the letter of credit securing the secured convertible debentures was
released. During the third quarter of 2003, the Company converted $5.0 million
of the unsecured convertible debentures into 2,379,525 shares of common stock.
As a result, $3.5 million of unsecured convertible debentures were outstanding
as of September 30, 2003. The due date for these debentures is March 31, 2004.
There were no secured convertible debentures related to the private equity
financing outstanding as of September 30, 2003.
At any time, the unsecured convertible debentures are convertible under
three different scenarios:
o At the option of the holder, at any time and from time to time at $4.25 per
share.
10
o At the option of the Company, if (1) the average closing prices of the
Company's common stock during any consecutive 30 trading days is equal
to or greater than $5.10 per share and (2) the closing price for each
of 15 trading days which need not be consecutive is equal to or greater
than $5.10.
o The Company may also convert $300,000 (or up to $2.5 million with
investor consent) of unsecured debentures each 10 trading days at an
adjusted conversion price equal to the volume weighted average of
current market prices discounted from 4% to 12%. The discount to the
adjusted conversion price depends on the cumulative amount of
debentures converted as of the respective dates of conversion.
In order to exercise the Company's options to convert the debentures,
certain equity conditions must be satisfied as follows:
(vi) the number of authorized but unissued and otherwise unreserved shares
of common stock is sufficient for such issuance;
(vii) such shares of common stock are registered for resale pursuant
to an effective registration statement, and the prospectus
thereunder is available for use to sell such shares or all
such shares may be sold without volume restrictions pursuant
to Rule 144(k) under the Securities Act;
(viii) the common stock is listed or quoted (and is not suspended
from trading) on The NASDAQ National Market or SmallCap Market
or other eligible market and such shares of common stock are
approved for listing;
(ix) no event of default nor any event that with the passage of
time and without being cured would constitute an event of
default has occurred and not been cured, and
(x) no public announcement of a pending or proposed change of control
transaction has occurred that has not been consummated.
Warrants may not be exercised and debentures may not be converted to
the extent that a holder thereof would then beneficially own, together with its
affiliates, more than 9.999% of our common stock then outstanding subsequent to
the applicable conversion or exercise.
In accordance with APB No. 14, "Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants", the Company determined that the fair
value of both the $8.5 million secured debentures and $3.5 million unsecured
debentures was $9,895,057 upon issuance. The resulting discount is being
amortized as interest expense, using the effective interest method, over the
original maturity period of the debentures or ratably as they are converted,
whichever comes first. During the quarter ended September 30, 2003, the Company
recognized a non-cash charge to interest expense of $890,715 for amortization of
discount on debentures.
In accordance with Emerging Issues Task Force ("EITF") No. 00-27,
"Application of Issue No. 98-5 to Certain Convertible Instruments", and EITF No.
98-5, "Accounting for Convertible Securities with Beneficial Conversion Features
or Contingently Adjustable Conversion Ratios", and after considering the terms
of the transaction, the Company determined that the debentures contained a
beneficial conversion feature ("BCF"). The BCF existed because of a discount
that will be given to the investor in the event of a company-initiated
conversion of the debentures prior to maturity. These discounts will range from
4% to 12%, depending on the amount of debentures converted into common stock.
Accordingly, at time of conversion, the Company will record as interest expense
any applicable BCF based on the fair value of the conversion feature on that
date in the event of an early conversion of debentures into common stock. During
the quarter ended September 30, 2003, approximately $5.0 million of debentures
were 875,025 for the BCF during the period.
Ballard Power Systems Investment
In October 2000, the Company received $2.4 million in cash from Ballard
Power Systems Inc. as an advance for prospective royalties pursuant to a product
development agreement between Ballard and the Company. In addition, the Company
granted to Ballard a warrant to purchase up to 400,000 shares of common stock,
which was terminated as part of the strategic investment discussed below. Upon
completion of certain stages of product development, the parties agreed to
negotiate in good faith for the grant of a license of our technology to Ballard
in certain fields of use, at which time prepaid royalties may be earned and the
warrants will be issued and recorded at fair value.
11
On November 8, 2002, the Company agreed with Ballard that the product
development milestones have been achieved and agreed to convert the $2.4 million
refundable royalty payment into an investment in the form of secured
convertible debentures due November 8, 2005. The Ballard debentures are secured
by a standby letter of credit issued by Wachovia Bank, National Association,
with an aggregate face amount equal to the outstanding principal. The Company
pledged to the bank as collateral $2.4 million of funds previously reported
under cash and cash equivalents on the accompanying balance sheet. The Company
will not have the ability to use this cash until the bank pledges are released
upon conversion of the Ballard debentures to common stock. The debentures are
convertible at a conversion price of $4.25, subject to anti-dilution adjustments
and certain price protection in the event the Company initiates the conversion.
As part of the purchase agreement entered into between Ballard and us, Ballard
retains the option to license the non-exclusive right to manufacture and sell
products with Hydrogen on DemandTM technology for specific portable fuel cell
products and stationary internal combustion engine generators.
Sources and Uses of Cash
As of September 30, 2003, we had $7,948,711 in cash and cash
equivalents and restricted cash of $2,990,746. Cash used in operations during
the first nine months of 2003 and 2002 totaled $7,977,731 and $10,095,641,
respectively, and related to funding our net operating losses. The decrease as
compared to the first nine months of 2002 was mainly a result of the Company's
cost reduction program implemented during the second quarter of 2002. The
restricted cash comprised $2.4 million of cash used for collateral for a letter
of credit issued in connection with a strategic investment by Ballard Power
Systems Inc. in the Company in November 2002 and $0.6 million of cash used for
collateral as security deposit held by our landlord in connection with the
Company's amended lease agreement. These funds used will not be available for
use in operations until the letters of credit have been reduced or terminated.
Investing activities used cash of $378,555 during the first nine months
of 2003 and provided cash $9,961,880 in the first nine months of 2002. Cash
provided by Investing activities in the first nine months of 2002 was a result
of maturities of held-to-maturity investments. Excluding the maturity of these
investments, investing activities in both years consisted primarily of purchases
of laboratory equipment necessary for the continuation of our research and
development activities and patent registration costs.
In July 2002, the Company agreed to acquire a 50% non-controlling
interest in a European alkaline fuel cell company. The Company's investment is
accounted for by the equity method. During the first six months of 2003, the
Company had provided cash contributions of $320,952 to the Affiliate for use in
operating activities. As of June 30, 2003, the Company had written off its
Investment in Affiliate on the balance sheet and determined the fair value of
the investment was zero. During the third quarter of 2003, the Company decided
to divest its interest in the Affiliate. No gain or loss was recognized upon
this event.
In April 2001, the Company amended its main operating lease to provide
for additional space for the Company's principal operating offices and
laboratories. The amended lease will expire in 2008 and contains options to
renew 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. Future minimum annual lease commitments including allocated taxes and
maintenance under the amended operating leases are as follows:
2003 (remaining three months)............ $ 121,077
2004..................................... 484,310
2005..................................... 484,310
2006..................................... 484,310
2007..................................... 484,310
Thereafter............................. 443,950
-------
Total................................... $ 2,502,267
============
Between January 1999 and April 2000, we received an aggregate of
$227,522 from a recoverable grant award from the State of New Jersey Commission
on Science and Technology. The funds were used to partially fund costs directly
related to development of our technology. The recoverable grant is required to
be repaid when we generate net sales in a fiscal year. The repayment obligation,
which began in June 2001, ranges from 1% to 5% of net sales over a ten-year
period. We are obligated to repay the unpaid amount of the original grant at the
end of the ten-year period. We repaid approximately $21,000 of the award during
the second quarter of 2003, which represents 3% of the 2002 net sales.
12
We believe that our current cash and cash equivalents, together with
cash available from the financing together with future expected conversions of
unsecured debentures, and projected cash generated from our operations will be
sufficient to satisfy anticipated cash needs of our operations through at least
the next twelve months. We may raise additional funds through public or private
financing, collaborative relationships or other arrangements. We cannot be
assured that additional funding, if sought, will be available or 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
Application of Critical Accounting Policies
The discussion and analysis of our financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect our reported assets and liabilities,
revenues and expenses, and other financial information. Actual results may
differ significantly from these estimates under different assumptions and
conditions. In addition, our reported financial condition and results of
operations could vary due to a change in the application of a particular
accounting standard.
We regard an accounting estimate underlying our financial statements as
a "critical accounting estimate" if the accounting estimate requires us to make
assumptions about matters that are highly uncertain at the time of estimation
and if different estimates that reasonably could have been used in the current
period, or changes in the estimate that are reasonably likely to occur from
period to period, would have had a material effect on the presentation of
financial condition, changes in financial condition, or results of operations.
Not all of these significant accounting policies, however, require
management to make difficult, complex or subjective judgments or estimates. Our
management has discussed our accounting policies with the audit committee of our
board of directors, and we believe that our estimates relating to revenue
recognition, convertible debt and stock options described below fit the
definition of "critical accounting estimates."
Revenue Recognition
The Company's near term revenues will be derived substantially from
contracts that require the Company to deliver hydrogen generation technology,
management services, system design and prototype systems and licensing of
technology for test and evaluation. It is anticipated that revenues will be
recognized in the period in which the technology is delivered or licensed
revenue is earned.
Convertible Debt
The Company accounts for the issuance and conversion of convertible
debt in accordance with APB No. 14, "Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants". As a result, the Company records original
issue discounts to the extent the fair value of the debt is below the face value
of the instrument and amortizes the discount over the life of the instrument. To
the extent conversions of debt into common stock are made prior to the maturity
date of the instrument, the Company will record as interest expense a ratable
proportion of the discount associated with the face value of the debt converted.
The Company accounts for issuances of convertible debt in accordance
with Emerging Issues Task Force ("EITF") No. 00-27, "Application of Issue No.
98-5 to Certain Convertible Instruments", and EITF No. 98-5, "Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios". As a result of certain conversion price discounts
included within the Company's outstanding debt instruments, the Company will
record interest expense resulting from Beneficial Conversion Features as
described under the caption "Liquidity and Capital Resources" above.
Stock Options
The Company has recorded non-cash charges in 2003 and 2002 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.
13
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 that is required by SFAS No. 148. 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 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 the first nine months of 2003 and
2002 for warrants issued to affiliates and the pro forma disclosures of net loss
and loss per share for the first nine months of 2003 and 2002, 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 periods.
FORWARD-LOOKING STATEMENTS
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, and the availability of components and
raw materials required by a hydrogen fuel storage and delivery system, (ii)
competition from current, improving and alternate power technologies, (iii) our
ability to raise capital at the times, in the amounts and at costs and terms
that are acceptable to fund our business plan, (iv) our ability to protect our
intellectual property, (v) our ability to achieve budgeted revenue and expense
amounts, (vi) our ability to generate revenues from the sale or license of, or
provision of services related to, our technology , (vii) our ability to form
strategic alliances or partnerships to help promote our technology and achieve
market acceptance, (viii) our ability to generate design, engineering, or
management services revenue opportunities in the hydrogen generation or fuel
cell markets, and (ix) other factors discussed under the caption "Investment
Considerations" in our Annual Report on Form 10-K for the year ended December
31, 2002.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Market risk represents the risk of loss that may impact our financial
position, operating results or cash flows due to changes in U.S. interest rates.
This exposure is directly related to our normal operating activities. Our cash
and cash equivalents are invested with high quality issuers and are generally of
a short-term nature. As a result, we do not believe that near-term changes in
interest rates will have a material effect on our future results of operations.
Our systems' ability to produce energy depends on the availability of
sodium borohydride, which has a limited commercial use and is not manufactured
in vast quantities. There are currently only two major manufacturers of sodium
borohydride and there can be no assurance that the high cost of this specialty
chemical will be reduced. Once we commence full operations in the future, we may
need to enter into long-term supply contracts to protect against price increases
of sodium borohydride. There can be no assurance that we will be able to enter
into these agreements to protect against price increases.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures.
14
The Company's Chief Executive Officer and Acting Chief Financial
Officer has evaluated the effectiveness of the Company's disclosure controls and
procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934, as amended) as of the end of the period covered
by this quarterly report. Based on such evaluation, the Company's Chief
Executive Officer and Acting Chief Financial Officer has concluded that, as of
the end of the period covered by this quarterly report, the Company's disclosure
controls and procedures were effective to provide reasonable assurance that
material information relating to the Company is made known to management,
including the Company's Chief Executive Officer and Acting Chief Financial
Officer, particularly during the period when our periodic reports are being
prepared.
(b) Changes in Internal Controls.
Since the evaluation date, there have not been any significant changes
in the Company's internal controls or in other factors that could significantly
affect such controls.
15
PART II
Item 2. .........Changes in Securities and Use of Proceeds.
(a) None.
(b) None.
(c) In the third quarter of 2003, the Company issued the following shares of its
common stock ("Shares") to an institutional and accredited investor ("Investor")
upon conversion of an aggregate amount of $5,000,000 principal amount of the
Company's unsecured convertible debentures owned by the Investor:
Amount of Unsecured Convertible Number of Shares
Date Debentures of Common Stock Issued
---- ---------- ----------------------
8/11/03 $300,000 193,548
8/20/03 $600,000 379,747
8/28/03 $600,000 352,941
9/4/03 $300,000 167,598
9/5/03 $700,000 368,421
9/9/03 $500,000 239,234
9/22/03 $2,000,000 678,036
The issuances of the shares of Common Stock listed above were made by
the Company in reliance upon the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended. The resale of the Shares by the
Investor is registered pursuant to a registration statement declared effective
by the Securities and Exchange Commission.
(d) None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
31.1 -- Certification of Chief Executive Officer Pursuant to Section 302 of
Sarbanes-Oxley Act of 2002.
31.2 -- Certification of Acting Chief Financial Officer Pursuant to Section
302 of Sarbanes-Oxley Act of 2002.
32.1 -- Certification of Chief Executive Officer and Acting Chief Executive
Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
On July 23, 2003, the Company filed a Form 8-K under Item 9
(Information Provided Under Item 12 (Results of Financial Condition)) to
announce its financial results for the fiscal quarter ended June 30, 2003.
On September 12, 2003, the Company filed a Form 8-K under Item 9
(Regulation FD Disclosure) to provide a copy of the Company's investor
presentation materials that were presented at Morgan Keegan, Inc. investor
meetings from September 9, 2003 through September 12, 2003.
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MILLENNIUM CELL INC.
(Registrant)
By: /s/ Stephen S. Tang
-----------------------------
Stephen S. Tang
President, Chief Executive Officer and
Acting Chief Financial Officer
November 14, 2003
17