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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, 2004

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

000-31083
(Commission File Number)



MILLENNIUM CELL INC.
(Exact Name of Registrant as Specified in Its Charter)



Delaware
22-3726792
(State or Other Jurisdiction of
(I.R.S. Employer
Incorporation or Organization)
Identification Number)

One Industrial Way West,
Eatontown, New Jersey 07724
(Address of Principal Executive Offices) (Zip Code)

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


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

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 38,737,948 shares of Common Stock, par value $.001, were outstanding on November 8, 2004.

  
     
 

MILLENNIUM CELL INC.
(a development stage enterprise)
Index


PART I - FINANCIAL INFORMATION

   
Page
Item 1.
Financial Statements (Unaudited)
 
     
 
Consolidated Balance Sheet - September 30, 2004 and December 31, 2003
1
     
 
Consolidated Statements of Operations - Three and Nine months ended
 
 
September 30, 2004 and 2003
2
     
 
Consolidated Statements of Cash Flows - Nine months ended September 30, 2004 and 2003
3
     
 
Consolidated Statements of Stockholders’ Equity - Nine months ended
 
 
September 30, 2004
4
     
 
Notes to Consolidated Financial Statements - September 30, 2004
5
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
9
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
15
     
Item 4.
Controls and Procedures
15
     
     
PART II - OTHER INFORMATION
  
     
Item 1.
Legal Proceedings
16
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
16
     
Item 3.
Defaults Upon Senior Securities
16
     
Item 4.
Submission of Matters to a Vote of Security Holders
16
     
Item 5.
Other Information
16
     
Item 6.
Exhibits
17
     



 
     
 

 

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

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995). These forward-looking statements reflect our current view about future events and financial performance and are subject to risks and uncertainties. Statements contained herein that are not statements of historical fact may be deemed to be forward-looking information. When we use words such as “plan,” “believe,” “expect,” “anticipate,” “on target” and “intend” or similar expressions, we are making forward-looking statements. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations, and we expressly do not undertake any duty to update forward-looking statements or to publicly announce revisions to any of the forward-looking statements, whether as a result of new information, future events or otherwise. These factors include, but are not limited to, the following: (i) the cost and timing of development and market acceptance of, and the availability of components and raw materials required by, a hydrogen 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 the development and commercialization of our hydrogen fuel storage and delivery technology and our business plan, (iv) our ability to protect our intellectual p roperty, (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, (ix) our ability to secure government funding of our research and development and technology demonstration projects and (x) other factors discussed under the caption “Investment Considerations” in our Annual Report on Form 10-K for the year ended December 31, 2003.
 

 
     
 

 
 
 
PART I - FINANCIAL INFORMATION

Item 1.        Financial Statements (Unaudited).

MILLENNIUM CELL INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
(unaudited)

 
September 30,
December 31,
 
2004
2003
ASSETS
    
Current assets:
    
Cash and cash equivalents
$ 9,758,742
$ 6,004,173
Accounts receivable
235,623
41,244
Prepaid expenses
399,234
265,459
Deferred financing costs
134,185
22,663
Total current assets
10,527,784
6,333,539
Property and equipment, net
740,631
1,009,514
Patents and licenses, net
576,884
597,564
Restricted cash
3,019,558
2,998,379
Security deposits
45,676
45,676
 
$ 14,910,533
$ 10,984,672
     
LIABILITIES AND STOCKHOLDERS' EQUITY
    
Current liabilities:
    
Accounts payable
$ 204,922
$ 272,143
Accrued expenses
774,873
389,464
Short-term portion of capital lease obligation
33,950
37,036
Short-term portion of refundable grant obligation
18,675
18,675
Deferred compensation
32,315
32,315
Convertible unsecured debentures, net of discount
1,868,982
--
Deferred revenue
85,000
--
Total current liabilities
3,018,717
749,633
     
Convertible unsecured debentures, net of discount
3,755,522
684,791
Convertible secured debentures, net of discount
2,399,988
2,399,988
Refundable grant obligation
187,266
187,266
Capital lease obligation and other long-term liabilities
13,385
31,909
     
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,
  
38,324,333 and 35,029,052 shares issued and outstanding
   
as of September 30, 2004 and December 31, 2003, respectively
38,325
35,029
Additional paid-in capital
84,865,156
77,784,952
Deferred compensation
(209,096)
(358,427)
Deficit accumulated during development stage
(79,158,730)
(70,530,469)
Total stockholders' equity
5,535,655
6,931,085
 
$ 14,910,533
$ 10,984,672

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
 
2004
2003
2004
2003
Inception
           
Revenue
$ 10,000
$ 102,605
$ 125,000
$ 395,914
$ 1,311,251
Cost of revenue
10,000
92,805
125,000
338,504
1,224,508
Gross margin
--
9,800
--
57,410
86,743
           
Product development and marketing.
904,063
1,496,724
2,679,564
4,019,356
19,275,470
General and administrative
          
(excluding non-cash charges)
782,676
736,620
3,023,682
2,841,389
18,977,387
Non-cash compensation charges
126,356
418,787
718,358
2,366,019
25,158,085
Restructuring expense
--
--
--
--
104,982
Depreciation and amortization
128,477
153,173
420,817
494,744
2,600,008
Research and development
27,997
221,982
119,093
798,380
8,231,206
Total operating expenses
1,969,569
3,027,286
6,961,514
10,519,888
74,347,138
Loss from operations
(1,969,569)
(3,017,486)
(6,961,514)
(10,462,478)
(74,260,395)
Other income, net
--
--
--
--
456,443
Interest expense
365,364
1,464,068
1,666,747
2,318,303
2,347,819
Equity in losses of affiliates
--
--
--
488,364
856,078
Net loss.
(2,334,933)
(4,481,554)
(8,628,261)
(13,269,145)
(77,007,849)
Preferred stock amortization.
--
--
--
--
2,150,881
Net loss applicable to common stockholders
$ (2,334,933)
$ (4,481,554)
$ (8,628,261)
$ (13,269,145)
$ (79,158,730)
Loss per share -- basic and diluted
$ (.06)
$ (.14)
$ (.24)
$ (.43)
$ (2.80)
Weighted -- average number of shares outstanding
37,701,400
31,944,522
36,696,629
30,541,661
28,311,024
 
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, 2004
September 30, 2003
Inception
OPERATING ACTIVITIES
      
Net loss
$ (8,628,261)
$ (13,269,145)
$ (77,007,849)
Adjustments to reconcile net loss to
      
net cash used in operating activities:
      
Depreciation and amortization
420,817
494,744
2,600,008
Amortization of discount on debentures
660,793
749,246
1,609,490
Beneficial conversion feature on debentures
455,757
1,156,370
1,812,582
Amortization of deferred financing costs
474,569
437,452
1,071,213
Losses on investment in affiliate
--
488,364
856,078
Non-cash compensation charges
718,358
2,366,019
25,158,085
Changes in operating assets and liabilities:
      
Accounts receivable
(194,379)
35,728
(235,623)
Prepaid expenses and other assets
(133,775)
(144,341)
(444,910)
Accounts payable and accrued expenses.
446,041
(292,168)
1,537,217
Deferred revenue
85,000
--