MILLENNIUM CELL INC, S-1/A, 2000-08-03

MILLENNIUM CELL INC
S-1/A, 2000-08-03
MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 3, 2000

REGISTRATION NO. 333-37896
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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AMENDMENT NO. 4

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

<TABLE>
<S> <C> <C>
DELAWARE 8743 22-3726792
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

1 INDUSTRIAL WAY WEST
EATONTOWN, NEW JERSEY 07724
(732) 542-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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

STEPHEN S. TANG
CHIEF EXECUTIVE OFFICER
MILLENNIUM CELL INC.
1 INDUSTRIAL WAY WEST
EATONTOWN, NEW JERSEY 07724
(732) 542-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

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

COPIES TO:

<TABLE>
<S> <C>
MALCOLM I. ROSS, ESQ. ALAN P. BADEN, ESQ.
MICHAEL S. NOVINS, ESQ. VINSON & ELKINS L.L.P.
BAKER & MCKENZIE 1325 AVENUE OF THE AMERICAS
805 THIRD AVENUE 17TH FLOOR
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10019
(212) 751-5700 (917) 206-8000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------------

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION -- DATED AUGUST 3, 2000

PROSPECTUS
, 2000

[MILLENNIUM CELL LOGO]

3,700,000 SHARES OF COMMON STOCK

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

MILLENNIUM CELL INC.:

- We are an emerging technology company engaged in the development of a
patented alternative energy source based on boron chemistry.

- Millennium Cell Inc.
1 Industrial Way West
Eatontown, New Jersey 07724
(732) 542-4000

SYMBOL AND MARKET:

- MCEL/Nasdaq National Market (proposed)
THE OFFERING:

- We are offering 3,700,000 shares of our common stock.

- We have granted the underwriters an option to purchase an additional 555,000
shares of common stock to cover over-allotments.

- We currently anticipate that the public offering price will be between $10.00
to $12.00 per share.

- This is our initial public offering, and no public market currently exists
for our shares.

- We plan to use the net proceeds from this offering to expand our research and
product development efforts, including the construction of a pilot plant to
manufacture sodium borohydride and a prototype battery manufacturing line,
and for working capital and general corporate purposes.

- Closing: , 2000.

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting fees...........................................
Proceeds to Millennium Cell.................................
</TABLE>

THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
------------------------
Neither the SEC nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
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MORGAN KEEGAN & COMPANY, INC.

THE ROBINSON-HUMPHREY COMPANY
<PAGE> 3

[MILLENNIUM CELL LOGO]

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 4
Use of Proceeds............................................. 12
Dividend Policy............................................. 12
Capitalization.............................................. 13
Dilution.................................................... 14
Selected Financial Data..................................... 15
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 16
Business.................................................... 20
Management.................................................. 30
Certain Relationships and Related Transactions.............. 36
Principal Stockholders...................................... 37
Description of Capital Stock................................ 38
Shares Eligible for Future Sale............................. 41
Underwriting................................................ 42
Legal Matters............................................... 45
Experts..................................................... 45
Where You Can Find Additional Information................... 45
Index to Financial Statements............................... F-1
</TABLE>

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You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.

The name Millennium Cell and our logo are names and trademarks that belong
to us. This prospectus also contains the names of other entities which are the
property of their respective owners.

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PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information and our financial statements and the notes to those financial
statements appearing elsewhere in this prospectus. In addition to historical
information, the following summary and other parts of this prospectus contain
forward-looking statements that reflect our plans, estimates, intentions,
expectations and beliefs. Our actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those set forth
in the "Risk Factors" section and contained elsewhere in this prospectus.

OUR BUSINESS AND TECHNOLOGY

We are an emerging technology company engaged in the development of a
patented alternative energy source based on boron chemistry. Since our inception
in January 1999, we have not generated any revenues and have incurred operating
losses of $1,465,073.

Our proprietary system generates energy in the form of hydrogen or
electricity. Hydrogen is the most energy-rich element occurring in nature and is
highly regarded as a source of clean, efficient fuel for the alternative energy
markets. We have invented, patented and developed a proprietary chemical process
that generates pure hydrogen or electricity from sodium borohydride. Sodium
borohydride is a derivative of borax, a naturally occurring hydrated crystalline
compound used to make glass, detergents, ceramics and agricultural fertilizers.
Our Hydrogen on Demand(TM) system consists of a tank of aqueous sodium
borohydride solution, which is passed over a catalyst chamber via a pump. Once
in contact with the catalyst, the sodium borohydride reacts to form hydrogen
gas, which can be used immediately or stored in the tank.

We expect that our technology, which is currently under development, will
be able to be utilized as a:

- generator of hydrogen for use by internal combustion engines that have
been modified to accept hydrogen as fuel,

- generator of hydrogen for use by fuel cells, energy-generating devices
that use hydrogen to produce electricity,

- direct fuel cell (a fuel cell that uses sodium borohydride as a reactant
to produce electricity), or

- battery that can be configured into a wide variety of shapes and sizes.

We believe that our proprietary Hydrogen on Demand(TM) hydrogen generating
system offers significant advantages over other methods of utilizing hydrogen as
a fuel, such as:

- minimal storage, handling and cost problems,

- elimination of pollutants and emissions, and

- favorable energy density, power-to-weight and volume characteristics.

However, our Hydrogen on Demand(TM) hydrogen generating system currently
has disadvantages over other methods of utilizing hydrogen as a fuel, such as:

- it is significantly more expensive,

- its reliability has not been demonstrated, and

- it has not been commercially developed.

We are currently using our Hydrogen on Demand(TM) technology to provide
hydrogen to one prototype vehicle using a hydrogen-fueled internal combustion
engine which provides power to the vehicle's battery pack. This battery pack
provides power to the vehicle's direct current traction motor. This vehicle is
not currently commercially available. Our program to develop prototype vehicles
is not affiliated with the vehicles' manufacturers. We have also designed and
produced prototype direct fuel cells and

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batteries that utilize our proprietary system to provide electricity for the
portable power markets which may be adapted for use in:

- laptop computers,

- cellular telephones,

- hearing aids,

- personal organizers,

- power tools, and

- motorized transportation devices.

We have entered into a proprietary rights agreement with DaimlerChrysler
Corporation to participate in a program to test our sodium borohydride hydrogen
generating systems for vehicle applications.

OUR STRATEGY

Our goal is to convert our technology from the research and development
stage to commercialization. To achieve our goal, we intend to implement the
following strategies:

- build relationships with automotive manufacturers,

- pursue ventures with other fuel cell companies,

- develop strategic relationships with key battery manufacturers,

- build relationships with truck manufacturers,

- build manufacturing capabilities to demonstrate the ability to lower the
costs of sodium borohydride,

- continue research and development of our proprietary technology, and

- develop market awareness generally.
------------------------

We were formed as a Delaware limited liability company on December 17,
1998, organized and began operations on January 1, 1999 (inception date) and
were converted into a Delaware corporation on April 25, 2000. All of the
outstanding equity interests of the limited liability company were converted on
a one-for-one basis into shares of common stock of the corporation and as of
April 26, 2000 we effected a 2,492.6-for-one stock split of our outstanding
common stock. Unless otherwise indicated, all information that we present in
this prospectus for any date or period gives effect to the conversion and stock
split and all references to capital stock for periods before the conversion mean
our issued and outstanding membership interests. Our principal executive offices
are located at 1 Industrial Way West, Eatontown, New Jersey 07724 and our
telephone number at that location is (732) 542-4000. Our internet address is
www.millenniumcell.com. The information contained in or connected to our website
is not incorporated by reference in this prospectus.

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THE OFFERING

Common stock offered.......... 3,700,000 shares

Common stock outstanding after
this offering................. 27,515,681 shares

Use of proceeds............... Based on an estimated offering price of $11.00
per share, the mid-point of the range set forth
on the cover page of this prospectus, we
estimate that our net proceeds from this
offering will be approximately $36.9 million.
We intend to use these proceeds:

- to expand our research and product
development efforts, including the
construction of a pilot plant to manufacture
sodium borohydride and a prototype battery
manufacturing line, and

- for working capital and general corporate
purposes.

For a more detailed description of how we
intend to use the net proceeds from this
offering, see "Use of Proceeds."

Risk factors.................. See "Risk Factors" and other information
included in this prospectus for a discussion of
factors you should carefully consider before
deciding to invest in our common stock.

Proposed Nasdaq National
Market symbol................. MCEL

The number of shares of common stock outstanding after the offering
includes 759,368 shares of common stock issuable upon the automatic conversion
at the closing of this offering of our outstanding Series A preferred stock, and
excludes 555,000 shares of common stock issuable upon exercise of the
underwriters' over-allotment option and 3,473,071 shares of common stock
reserved for issuance upon exercise of options issued under our stock option
plan.

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<PAGE> 8

RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should carefully consider the risks and uncertainties described below and the
other information in this prospectus before deciding whether to invest in our
common stock. Our business and results of operations could be seriously harmed
by any of the following risks. The trading price of our common stock could
decline due to any of these risks, and you may lose part or all of your
investment.

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 are a development stage company that began operations in January 1999 to
further the research and development of fuel cell systems. Accordingly, there is
only a limited basis upon which you can evaluate our business and prospects. In
connection with your evaluation of us, you should be aware that many aspects of
our business plan rest on beliefs formed by our management and have not
necessarily been substantiated by independent sources. We have based these
beliefs on the experience of our management. These beliefs are not guarantees of
our future performance and are subject to the risks and uncertainties described
below. An investor in our common stock should consider the challenges, expenses
and difficulties that we will face as a development stage company seeking to
develop and manufacture a new product.

WE HAVE INCURRED SUBSTANTIAL LOSSES SINCE OUR INCEPTION AND WE EXPECT LOSSES FOR
THE FORESEEABLE FUTURE. ACCORDINGLY, WE MAY NOT BE ABLE TO ACHIEVE PROFITABLY,
AND EVEN IF WE DO BECOME PROFITABLE, WE MAY NOT BE ABLE TO SUSTAIN
PROFITABILITY. IF WE CONTINUE TO INCUR LOSSES, THE VALUE OF OUR COMMON STOCK
COULD DECLINE.

We have incurred substantial losses since we were founded and we anticipate
we will continue to incur substantial losses in the future. We had an
accumulated deficit of approximately $1.5 million as of March 31, 2000. The
auditor's report on our financial statements for the year ended December 31,
1999 has been prepared assuming we will continue as a going concern. More
specifically, their report states that since we are a development stage company
that has generated no revenue and incurred operating losses since inception,
substantial doubt exists about our ability to continue as a going concern. We
cannot assure you that the conditions that raise substantial doubt about our
ability to continue as a going concern will not persist. As a result, we cannot
assure you that our auditor's report on our future financial statements will not
include a similar qualification. This situation could adversely affect our
relationships with third parties and impair our ability to complete future
financings, both of which could significantly damage our business. We cannot
predict when we will operate profitably, if ever. We expect to continue to incur
net losses for the next several years, largely due to two factors. First, we
expect to continue to make significant investments in research and product
development activities. Second, we anticipate that we will continue to incur
losses until we can cost-effectively produce and sell our fuel cell systems to
the mass market, which we expect will take at least several years. Furthermore,
we expect to incur substantial non-cash charges of approximately $34.5 million
in the future, which will have the effect of increasing our losses or decreasing
our earnings, if any. Even if we do achieve profitability, we may be unable to
sustain or increase our profitability in the future. See "Selected Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and note 9 of notes to financial statements.

IF WE ARE NOT ABLE TO COMPLETE THE RESEARCH AND DEVELOPMENT OF A COMMERCIALLY
VIABLE FUEL CELL SYSTEM, WE WILL NOT BE ABLE TO BUILD OUR BUSINESS AS
ANTICIPATED.

We do not know when or whether we will successfully complete research and
development of a commercially viable sodium borohydride fuel cell system. We
have produced and are currently demonstrating a number of test and evaluation
systems and are continuing our efforts to decrease the costs of our systems'
components and subsystems, improve their overall reliability and efficiency and
ensure their safety. However, we must complete substantial additional research
and development on our systems before
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we will have any commercially viable products. In addition, while we are
conducting tests to predict the overall life of our systems, we will not have
used any of our systems over their projected useful life prior to
commercialization. See "Business -- Product Development and Commercialization
Process."

IF WE ARE UNABLE TO LOWER THE COST OF OUR FUEL CELL SYSTEMS AND DEMONSTRATE
THEIR RELIABILITY, IT IS UNLIKELY THAT THEY WILL GAIN ACCEPTANCE BY CONSUMERS,
WHICH WOULD SERIOUSLY HARM THE DEVELOPMENT OF OUR BUSINESS.

The sodium borohydride systems developed by us currently cost significantly
more than the cost of many established competing technologies, including
internal combustion engines. If we are unable to produce systems that are
competitive with competing technologies in terms of price, reliability and
longevity, consumers will be unlikely to buy products containing our fuel cells
and fuel cell systems.

The price of sodium borohydride systems is dependent largely on material
and manufacturing costs. We cannot guarantee that we will be able to lower these
costs to the level where we will be able to produce a competitive product or
that any product produced using lower cost materials and manufacturing processes
will not suffer from a reduction in performance, reliability and longevity.

IF WE DO NOT SUCCESSFULLY BUILD A PILOT PLANT FOR THE MANUFACTURE OF SODIUM
BOROHYDRIDE, OUR COMMERCIALIZATION PLANS WILL BE HINDERED.

In order to reduce the production costs of sodium borohydride and
demonstrate to large manufacturers the feasibility of sodium borohydride
production in mass quantities, we plan to build a pilot plant for the production
of sodium borohydride within nine months to one year from this offering. We
cannot guarantee that we will be successful in completing this plant within this
time period, if at all, and in accordance with our budgeted cost, nor can we
guarantee that we will successfully demonstrate the commercial efficacy of mass
producing sodium borohydride. If we are unable to successfully complete this
plant and demonstrate the commercial viability of the mass production of sodium
borohydride, we may not be able to convince large manufacturers to produce mass
quantities of sodium borohydride, which will limit the availability of sodium
borohydride to us and negatively effect our commercialization efforts.

WE HAVE NO EXPERIENCE MANUFACTURING FUEL CELLS AND FUEL CELL SYSTEMS ON A
COMMERCIAL BASIS. IF WE ARE UNABLE TO MANUFACTURE FUEL CELLS AND FUEL CELL
SYSTEMS ON A COMMERCIAL BASIS, OUR BUSINESS AND FINANCIAL RESULTS WILL BE
NEGATIVELY AFFECTED.

To date, we have focused primarily on research and development and have no
experience manufacturing fuel cells and fuel cell systems on a commercial basis.
In order to produce fuel cells and fuel cell systems at affordable prices, we
will have to make our fuel cells and fuel cell systems through high volume
automated processes. We do not know whether or when we will be able to develop
efficient, automated, low-cost manufacturing capability and processes that will
enable us to meet the quality, price, engineering, design and production
standards or production volumes required to successfully mass market our fuel
cells and fuel cell systems. Even if we are successful in developing our
manufacturing capability and processes, we do not know whether we will do so in
time to meet our product commercialization schedule or to satisfy the
requirements of our customers. Our failure to develop such manufacturing
processes and capabilities could have a negative effect on our business and
financial results.

WE HAVE NO EXPERIENCE MANUFACTURING BATTERIES ON A COMMERCIAL BASIS. THEREFORE,
WE MAY NOT BE ABLE TO COMPLETE OUR PROPOSED BATTERY LINE, WHICH WILL HARM OUR
COMMERCIALIZATION PLANS.

We plan to use $500,000 of the proceeds from this offering to build a
prototype battery manufacturing line in order to validate our technology,
generate interest in the consumer battery market and facilitate the
establishment of strategic relationships with other battery manufacturers. We
have no experience manufacturing batteries on a commercial basis. There can be
no assurance that we will be able to successfully complete our proposed battery
line, or that, if completed, it will achieve our goals.

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SODIUM BOROHYDRIDE MAY REQUIRE SPECIAL HANDLING AND MAY MAKE OUR HYDROGEN
GENERATION SYSTEMS MORE COSTLY THAN ALTERNATIVE SYSTEMS OFFERED BY OUR
COMPETITORS.

Sodium borohydride has a high pH level, and it may be corrosive and harmful
to human skin. Therefore, the processing and use of sodium borohydride may
require special handling and packaging, which may increase the costs of our
technology. If the cost of our technology is higher than the costs for
alternative technologies, our products may be less attractive.

THE RAW MATERIAL ON WHICH OUR SYSTEMS RELY IS EXPENSIVE AND HAS LIMITED
AVAILABILITY. 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.

Our systems' ability to produce energy depends on the availability of
sodium borohydride. Sodium borohydride 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. If the price of sodium
borohydride is such that the energy produced by our systems costs more than the
energy provided through conventional and other alternative systems, our systems
may be less attractive to potential users.

WE MAY BE UNABLE TO RAISE ADDITIONAL CAPITAL TO PURSUE OUR COMMERCIALIZATION
PLANS THROUGH TO LARGE SCALE, HIGH VOLUME COMMERCIAL PRODUCTION, AND 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.

Our product development and commercialization schedule could be delayed if
we are unable to fund our research and product development activities or the
development of our manufacturing capabilities. We do not know whether we will be
able to secure additional funding, or funding on terms acceptable to us, to
pursue our commercialization plans through to large scale, high volume
commercial production. If additional capital is raised through the issuance of
equity securities, the ownership interest of existing stockholders at the time
of issuance will be reduced. Any debt financing, if available, may involve
covenants limiting or restricting our operations or future opportunities or
pledging our assets as security for borrowings.

A MASS MARKET FOR SODIUM BOROHYDRIDE FUEL CELLS AND FUEL CELL SYSTEMS MAY NEVER
DEVELOP OR MAY TAKE LONGER TO DEVELOP THAN WE ANTICIPATE. IF A MASS MARKET FAILS
TO DEVELOP OR DEVELOPS MORE SLOWLY THAN WE ANTICIPATE, WE MAY BE UNABLE TO
RECOVER THE LOSSES WE WILL HAVE INCURRED IN THE DEVELOPMENT OF OUR PRODUCTS AND
MAY NEVER ACHIEVE PROFITABILITY.

A mass market may never develop for sodium borohydride fuel cell systems,
or may develop more slowly than we anticipate. Fuel cells and fuel cell systems
represent an emerging market, and we do not know whether end-users will want to
use them. The development of a mass market for our fuel cells and fuel cell
systems may be affected by many factors, some of which are beyond our control,
including:

- the cost competitiveness of fuel cell systems,

- the emergence of newer, more competitive technologies and products,

- the future cost of sodium borohydride,

- regulatory requirements,

- consumer perceptions of the safety of our products, and

- consumer reluctance to try a new product.

If a mass market fails to develop or develops more slowly than we
anticipate, we may be unable to recover the losses we will have incurred in the
development of our products and we may never achieve profitability.

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WE EXPECT THAT SOME OF OUR FUEL CELLS AND FUEL CELL SYSTEMS WILL ONLY BE
COMMERCIALLY VIABLE AS A COMPONENT OF OTHER COMPANIES' PRODUCTS, AND THESE OTHER
COMPANIES MAY NOT CHOOSE TO INCLUDE OUR FUEL CELLS OR FUEL CELL SYSTEMS IN THEIR
PRODUCTS.

To be commercially useful, some of our fuel cells and fuel cell systems
must be integrated into products manufactured by original equipment
manufacturers, which are known as OEMs. We can offer no guarantee that OEMs will
manufacture appropriate products or, if they do manufacture such products, that
they will choose to use our sodium borohydride fuel cells and fuel cell systems.
Any integration, design, manufacturing or marketing problems encountered by OEMs
could adversely affect the market for our fuel cells and fuel cell systems and
our financial results.

CHANGES IN ENVIRONMENTAL POLICIES COULD RESULT IN AUTOMOBILE MANUFACTURERS
ABANDONING THEIR INTEREST IN FUEL CELL POWERED VEHICLES. THIS WOULD
SUBSTANTIALLY LESSEN THE MARKET FOR OUR PRODUCTS AND SERIOUSLY HARM THE
DEVELOPMENT OF OUR BUSINESS.

To date, the interest by automobile manufacturers in fuel cell technology
has been driven in large part by environmental laws and regulations mainly in
California and, to a lesser extent, certain northeastern states. There can be no
guarantee that these laws and regulations will not change. Changes in these laws
and regulations could result in automobile manufacturers abandoning their
interest in fuel cell powered vehicles. In addition, if current laws and
regulations in California and the northeastern states are not kept in force or
if further environmental laws and regulations are not adopted in these
jurisdictions as well as in other jurisdictions, demand for vehicular fuel cells
may be limited.

Although the development of alternative energy sources, and in particular
fuel cells, has been identified as a significant priority by many governments,
we cannot assure you that governments will not change their priorities or that
any such change would not negatively affect our business or the development of
our products.

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.

It is possible to meet the zero emission vehicle requirements imposed by
California and certain northeastern states by using technologies other than our
sodium borohydride fuel cells. For example, vehicles powered by batteries can
receive full credit and vehicles powered by certain low emission internal
combustion engines and proton exchange membrane fuel cells can receive partial
credit toward the zero emission vehicle requirements. In addition, some major
automobile manufacturers are seeking to develop their own proprietary fuel cell
systems. For example, both of Ford Motor Company and DaimlerChrysler are working
together with Ballard Power Systems and General Motors is working together with
Toyota to develop their own proprietary fuel cell systems. We can offer no
assurance that automobile manufacturers will use our sodium borohydride
technology in their vehicles to meet regulatory requirements. Their failure to
do so could have a negative effect on our business and financial results.

WE CURRENTLY FACE, AND WILL CONTINUE TO FACE, SIGNIFICANT COMPETITION FROM
CURRENT POWER TECHNOLOGIES, FROM IMPROVEMENTS TO CURRENT POWER TECHNOLOGIES AND
FROM NEW ALTERNATIVE POWER TECHNOLOGIES, INCLUDING OTHER TYPES OF FUEL CELLS.
THIS COULD LIMIT THE NUMBER OF CUSTOMERS FOR OUR PRODUCTS.

Our products face and will continue to face significant competition. New
developments in technology may negatively affect the development or sale of some
or all of our products or make our products uncompetitive or obsolete. Other
companies, many of which have substantially greater resources than we do, are
currently engaged in the development of products and technologies that are
similar to, or may be competitive with, certain of our products and
technologies.

Because the fuel cell has the potential to replace existing power sources,
competition for our products will come from current power technologies, from
improvements to current power technologies and from new alternative power
technologies, including other types of fuel cells. Each of our target markets is
currently serviced by existing manufacturers with existing customers and
suppliers. These manufacturers use proven and widely accepted technologies, such
as internal combustion engines and turbines, as well as coal, oil and nuclear
powered generators. Additionally, there are competitors working on developing

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technologies other than sodium borohydride fuel cells, such as other types of
fuel cells, advanced batteries and engines, in each of our targeted markets.

A large number of corporations, national laboratories and universities in
the United States, Canada, Europe and Japan possess fuel cell technology and/or
are actively engaged in the development and manufacture of fuel cells. Each of
these competitors has the potential to capture market share in various markets,
which would have a negative effect on our position in the industry and our
financial results.

WE DEPEND ON OUR INTELLECTUAL PROPERTY AND OUR FAILURE TO PROTECT THAT
INTELLECTUAL PROPERTY COULD ADVERSELY AFFECT OUR FUTURE GROWTH AND SUCCESS.

Failure to protect our existing intellectual property rights may result in
the loss of our exclusivity or the right to use our technologies. If we do not
adequately ensure our freedom to use certain technology, we may have to pay
others for rights to use their intellectual property, pay damages for
infringement or misappropriation and/or be enjoined from using such intellectual
property. We rely on patent, trade secret, trademark and copyright law to
protect our intellectual property. The patents that we have obtained will expire
in 2015 and 2018. Some of our intellectual property is not covered by any patent
or patent application. As we further develop our system and related intellectual
property, we expect to seek additional patent protection. Our patent position is
subject to complex factual and legal issues that may give rise to uncertainty as
to the validity, scope and enforceability of a particular patent. Accordingly,
we cannot assure you that:

- any of the patents owned by us or other patents that third parties
license to us in the future will not be invalidated, circumvented,
challenged, rendered unenforceable or licensed to others, or

- any of our pending or future patent applications will be issued with the
breadth of claim coverage sought by us, if issued at all.

In addition, effective patent, trademark, copyright and trade secret
protection may be unavailable, limited or not applied for in certain foreign
countries.

We also seek to protect our proprietary intellectual property, including
intellectual property that may not be patented or patentable, in part by
confidentiality agreements. We cannot assure you that these agreements will not
be breached, that we will have adequate remedies for any breach or that such
persons will not assert rights to intellectual property arising out of these
relationships.

The members of our scientific advisory board are employed by entities other
than us, some of which may compete with us. We have not entered into
non-competition agreements with any of our scientific advisors. If any of them
were to consult with or become employed by any of our competitors, our business
could be negatively effected.

OUR FAILURE TO OBTAIN OR MAINTAIN THE RIGHT TO USE CERTAIN INTELLECTUAL PROPERTY
MAY NEGATIVELY AFFECT OUR BUSINESS BY LIMITING OUR ABILITY TO PREVENT THIRD
PARTIES FROM USING INTELLECTUAL PROPERTY DEVELOPED BY US AND LIMITING OUR
ABILITY TO USE INTELLECTUAL PROPERTY DEVELOPED BY OTHERS.

Our future success and competitive position depends in part upon our
ability to obtain or maintain certain proprietary intellectual property to be
used in our principal products. This may be achieved in part by prosecuting
claims against others who we believe are infringing on our rights and by
defending claims of intellectual property infringement by our competitors. While
we are not currently engaged in any material intellectual property litigation,
we could become subject to lawsuits in which it is alleged that we have
infringed the intellectual property rights of others or we could commence
lawsuits against others who we believe are infringing upon our rights. Our
involvement in intellectual property litigation could result in significant
expense to us, adversely affecting the development of sales of the challenged
product or intellectual property and diverting the efforts of our technical and
management personnel, whether or not

8
<PAGE> 13

such litigation is resolved in our favor. In the event of an adverse outcome as
a defendant in any such litigation, we may, among other things, be required to:

- pay substantial damages,

- cease the development, manufacture, use, sale or importation of products
that infringe upon other patented intellectual property,

- expend significant resources to develop or acquire non-infringing
intellectual property,

- discontinue processes incorporating infringing technology, or

- obtain licenses to the infringing intellectual property.

We cannot assure you that we would be successful in such development or
acquisition or that such licenses would be available upon reasonable terms. Any
such development, acquisition or license could require the expenditure of
substantial time and other resources and could have a negative effect on our
business and financial results.

OUR FIELD TESTS COULD REVEAL PROBLEMS WITH OUR SODIUM BOROHYDRIDE TECHNOLOGY.
ANY PROBLEM OR PERCEIVED PROBLEM DISCOVERED IN OUR FIELD TESTS COULD HURT OUR
REPUTATION AND THE REPUTATION OF OUR PRODUCTS, WHICH WOULD IMPEDE THE
DEVELOPMENT OF OUR BUSINESS.

We are currently field testing our sodium borohydride technology and we
plan to conduct additional field tests in the future. Although to date we have
not experienced any problems in our field testing, these field tests may
encounter problems and delays for a number of reasons, including the failure of
our technology, the failure of the technology of others, the failure to combine
these technologies properly and the failure to maintain and service the test
prototypes properly. Many of these potential problems and delays are beyond our
control. In addition, field test programs, by their nature, will involve delays
and modifications. Any problem or perceived problem with our field tests could
hurt our reputation and the reputation of our products.

IF OUR FUEL CELLS AND HYDROGEN GENERATION SYSTEMS EXHIBIT TECHNICAL DEFECTS OR
ARE UNABLE TO MEET COST OR PERFORMANCE GOALS, OUR COMMERCIALIZATION SCHEDULE
COULD BE DELAYED AND POTENTIAL PURCHASERS OF OUR INITIAL COMMERCIAL SYSTEMS MAY
DECLINE TO PURCHASE THEM OR CHOOSE TO PURCHASE ALTERNATIVE TECHNOLOGIES.

We have established product development and commercialization milestones
that we will use to assess our progress toward developing commercially viable
sodium borohydride fuel cells and hydrogen generation systems. These milestones
relate to technology and design improvements, as well as to dates for achieving
development goals. If our fuel cells and systems exhibit technical defects or
are unable to meet cost or performance goals, including power output, useful
life and reliability, our commercialization schedule could be delayed and
potential purchasers of our initial commercial systems may decline to purchase
them or choose to purchase alternative technologies.

OUR FUTURE PLANS COULD BE HARMED IF WE ARE UNABLE TO ATTRACT OR RETAIN KEY
PERSONNEL.

Our management team consists of only two executive officers, including
Stephen S. Tang, who became our chief executive officer and president in May
2000, and Steven C. Amendola, our executive vice president and chief technical
officer. We currently have 23 employees and we need to attract a highly skilled
management team and specialized workforce, including scientists, engineers,
researchers and manufacturing and marketing professionals. Based on our planned
expansion, we will require a significant increase in the number of our employees
and outside contractors. Our future success, therefore, will depend, in part, on
attracting and retaining additional qualified management and technical
personnel. We do not know whether we will be successful in hiring or retaining
qualified personnel. Our inability to hire qualified personnel on a timely
basis, or the departure of key employees, could harm our expansion and
commercialization plans.

9
<PAGE> 14

THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK AND AN ACTIVE TRADING
MARKET FOR OUR SHARES MAY NOT DEVELOP OR BE SUSTAINED FOLLOWING THIS OFFERING.
YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT PRICES EQUAL TO OR GREATER THAN THE
INITIAL PUBLIC OFFERING PRICE.

Before this offering, there has been no public market for our common stock.
Although we have applied to have our common stock quoted on the Nasdaq National
Market upon completion of this offering, an active trading market for our shares
may not develop or be sustained following this offering. Purchasers in this
offering may not be able to resell their shares at prices equal to or greater
than the initial public offering price. The initial public offering price will
be determined through negotiations between us and the underwriters and may not
be indicative of the market price for these shares following this offering. For
additional information on how we and the underwriters determined the initial
public offering price, see "Underwriting."

WE EXPECT OUR FUTURE OPERATING RESULTS TO VARY SIGNIFICANTLY FROM QUARTER TO
QUARTER, AND THAT IT IS LIKELY IN ONE OR MORE FUTURE QUARTERS OUR OPERATING
RESULTS WILL FALL BELOW THE EXPECTATIONS OF SECURITIES ANALYSTS AND INVESTORS.
IF THIS HAPPENS, THE TRADING PRICE OF OUR COMMON STOCK MAY DECLINE.

We expect our revenues and operating results to vary significantly from
quarter to quarter. As a result, quarter-to-quarter comparisons of our revenues
and operating results may not be meaningful. In addition, due to our stage of
development, we cannot predict our future revenues or results of operations
accurately. It is likely that in one or more future quarters our operating
results will fall below the expectations of securities analysts and investors.
If this happens, the trading price of our common stock may decline.

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
RESOURCES AND COULD HAVE A NEGATIVE EFFECT ON OUR BUSINESS AND RESULTS OF
OPERATIONS.

The stock market has, from time to time, experienced extreme price and
volume fluctuations. Many factors may cause the market price for our common
stock to decline, perhaps substantially, following this offering, including:

- failure to meet our product development and commercialization milestones,

- demand for our common stock,

- revenues and operating results failing to meet the expectations of
securities analysts or investors in any quarter,

- downward revisions in securities analysts' estimates or changes in
general market conditions,

- technological innovations by competitors or in competing technologies,

- investor perception of our industry or our prospects, or

- general technology or economic trends.

In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. We
may be involved in a securities class action litigation in the future. Such
litigation often results in substantial costs and a diversion of management's
attention and resources and could have a negative effect on our business and
results of operations.

YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.

The initial public offering price per share will be substantially higher
than the pro forma net tangible book value per share immediately after the
offering. If you purchase common stock in this offering at an assumed offering
price of $11.00 per share, the mid-point of the range set forth on the cover
page of this prospectus, you will incur immediate and substantial dilution of
$9.58 from the price per share you paid based on our as adjusted pro forma net
tangible book value at March 31, 2000. We have also granted stock options to
purchase our common stock with exercise prices significantly below the initial
public

10
<PAGE> 15

offering price of the common stock prior to this offering. To the extent these
options are exercised, there will be further dilution. For information on how
dilution is calculated, see "Dilution," and for information on our outstanding
stock options, see "Management -- Stock Option Plan."

FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE.

Substantial sales of our common stock in the public market following this
offering, or the perception by the market that such sales could occur, could
lower our stock price or make it difficult for us to raise additional equity
capital in the future. After this offering, we will have 27,515,681 shares of
common stock outstanding. Of these shares, the 3,700,000 shares sold in this
offering will be freely tradeable. In addition, we have agreed to register for
resale beginning 90 days after the date of this prospectus, 759,368 shares of
common stock issuable upon the automatic conversion at the completion of this
offering of our outstanding Series A preferred stock and 152,207 shares of
common stock held by three stockholders. Substantially all of the remaining
shares of common stock are subject to 180-day lock-up agreements. We cannot
predict if future sales of our common stock, or the availability of our common
stock for sale, will harm the market price of our common stock or our ability to
raise capital by offering equity securities.

WE WILL HAVE BROAD DISCRETION AS TO THE USE OF THE NET PROCEEDS FROM THIS
OFFERING AND MAY APPLY THESE PROCEEDS TO USES THAT DO NOT INCREASE OUR PROFITS
OR MARKET VALUE.

Our board of directors and management will have broad discretion over the
use of the net proceeds of this offering, and could spend the net proceeds in
ways that do not yield a favorable return or to which stockholders object.
Investors will be relying on the judgment of our board of directors and
management regarding the application of the net proceeds of this offering. For
more information on how we intend to use the net proceeds from this offering,
see "Use of Proceeds."

11
<PAGE> 16

USE OF PROCEEDS

We estimate that the net proceeds from this offering will be $36.9 million
(approximately $42.5 million if the underwriters' over-allotment option is
exercised in full), based on an assumed initial public offering price of $11.00
per share, the mid-point of the range set forth on the cover page of this
prospectus, after deducting underwriting discounts and commissions and our
estimated offering expenses. We intend to use the net proceeds as follows:

- $5.5 million to expand our research and product development efforts,
including:

-- approximately $5.0 million to build a pilot plant for the
manufacturing of sodium borohydride. We expect that it will take
between nine months and one year to complete the construction of this
plant. Based on our preliminary estimates, we expect that this
facility would be able to produce up to one ton per day of sodium
borohydride.

-- approximately $500,000 to build a prototype battery manufacturing
line for size AA and AAA sodium borohydride batteries. We expect that
it will take between six months and one year to complete the
construction of this battery line.

- the remainder for general corporate purposes, including working capital,
funds for operations, market development and capital expenditures.

Although we currently have specific uses for $5.5 million of the net
proceeds from this offering, we are seeking to raise significant additional
proceeds to fund our net losses over at least the next three years. We expect to
incur net losses for at least the next several years, largely due to two
factors. First, we expect to continue to make significant investments in
research and development activities, significantly expand the number of our
employees and increase our general and administrative expenses, which we will
fund from the net proceeds of this offering. Secondly, we expect that we will
continue to incur losses until we can cost-effectively produce and sell the
systems we develop to the mass market or broadly license our technology, both of
which we expect will take at least several years. We will retain broad
discretion in the allocation of the net proceeds of this offering. Pending their
use, we intend to invest these net proceeds in government securities and other
short-term, investment-grade securities.

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.

12
<PAGE> 17

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2000:

- on a historical basis, giving retroactive effect to our conversion from a
limited liability company to a corporation on April 25, 2000,

- on a pro forma basis to give effect to the issuance of our Series A
preferred stock in May 2000, the cancellation of 830,298 shares of common
stock in April 2000 and the issuance of 206,897 shares of common stock in
connection with the termination of a royalty agreement, and

- on a pro forma as adjusted basis to give effect to the sale of 3,700,000
shares at an assumed offering price of $11.00 per share, the mid-point of
the range set forth on the cover page of this prospectus, less
underwriting discounts and commissions and estimated offering expenses,
and the conversion upon completion of this offering of our outstanding
Series A preferred stock into 759,368 shares of common stock.

<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
-----------------------------------------
PRO FORMA
HISTORICAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
Stockholders' equity:
Common stock, $.001 par value; 40,000,000 shares
authorized; 23,679,714 shares issued and
outstanding historical; 23,056,313 shares
issued and outstanding pro forma; and
27,515,681 shares issued and outstanding pro
forma as adjusted.............................. $ 23,680 $ 23,056 $ 27,516
Series A preferred stock, $.001 par value;
5,000,000 shares authorized; none issued and
outstanding historical; 759,368 shares issued
and outstanding pro forma; and no shares issued
and outstanding pro forma as adjusted.......... -- 759 --
Additional paid-in capital........................ 1,726,320 6,201,103 43,048,403
Deficit accumulated during development stage...... (1,453,018) (3,728,885) (3,728,885)
----------- ----------- -----------
Total stockholders' equity and
capitalization............................... $ 296,982 $ 2,496,033 $39,347,034
=========== =========== ===========
</TABLE>

13
<PAGE> 18

DILUTION

As of March 31, 2000, we had a pro forma net tangible book value of
$2,238,886, or $.09 per share of common stock. Pro forma net tangible book value
per share is equal to our total tangible assets less total liabilities, divided
by the number of shares of our outstanding common stock after giving effect to
the automatic conversion upon completion of this offering of our outstanding
Series A preferred stock into 759,368 shares of common stock. After giving
effect to the sale of the 3,700,000 shares of common stock in this offering at
an assumed initial public offering price of $11.00 per share, the mid-point of
the range set forth on the cover page of this prospectus, and after deducting
underwriting discounts and commissions and our estimated offering expenses, our
as adjusted pro forma net tangible book value, as of March 31, 2000, would have
been $39,089,886, or $1.42 per share of common stock. This represents an
immediate increase in pro forma net tangible book value of $1.33 per share to
our existing stockholders, including stockholders who receive common stock upon
the automatic conversion of our Series A preferred stock, and an immediate
dilution of $9.58 per share to new investors in this offering. The following
table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Pro forma net tangible book value per share as of March
31, 2000............................................... $ .09
Increase per share attributable to this offering.......... 1.33
------
Pro forma as adjusted net tangible book value per share
after this offering....................................... 1.42
------
Dilution per share to new investors......................... $ 9.58
======
</TABLE>

The following table shows the difference between existing stockholders,
including stockholders who receive common stock upon the automatic conversion of
our Series A preferred stock, and new investors with respect to the number of
shares of common stock purchased, the total consideration paid and the average
price per share paid. If the underwriters' over-allotment option is exercised in
full, the percentage of the total number of shares of common stock held by
existing stockholders will decrease from 86.6% to 84.8% of the total number of
shares of common stock outstanding after the offering, and the percentage of the
total number of shares of common stock held by new investors will increase from
13.4% to 15.2% of the total number of shares of common stock outstanding after
the offering.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ 23,815,681 86.6% $ 6,201,103 13.2% $ .26
New investors........................ 3,700,000 13.4 40,700,000 86.8 $11.00
---------- ----- ----------- -----
Total.............................. 27,515,681 100.0% $46,901,103 100.0%
========== ===== =========== =====
</TABLE>

The table excludes up to 555,000 shares that may be issued by us pursuant
to the underwriters' over-allotment option and 3,473,071 shares of common stock
issuable upon exercise of outstanding stock options with a weighted average
exercise price of $3.72 per share. If the underwriters' over-allotment option is
exercised in full, the dilution to new investors would be $9.41 per share, and
if all of the outstanding options were also exercised as of March 31, 2000, the
dilution to new investors would be $9.17 per share. See "Management" and the
notes to our financial statements included elsewhere in this prospectus.

14
<PAGE> 19

SELECTED FINANCIAL DATA

The following table presents selected historical financial data for the
period from January 1, 1999 (inception) to December 31, 1999, the period from
January 1, 1999 (inception) to March 31, 1999 and the three month period ended
March 31, 2000. The balance sheet data as of December 31, 1999 and March 31,
2000 and the statement of operations data for the period from January 1, 1999
(inception) to December 31, 1999, the period from January 1, 1999 (inception) to
March 31, 1999 and the three month period ended March 31, 2000 have been derived
from our financial statements, which are set forth elsewhere in this prospectus.
The statement of operations data for the period from January 1, 1999 (inception)
to March 31, 1999, the three month period ended March 31, 2000 and the balance
sheet data as of March 31, 2000 are derived from our unaudited financial
statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of our results of operations and financial condition for those
periods. The data for the three month period ended March 31, 2000 is not
necessarily indicative of results for the year ending December 31, 2000 or any
future period.

Our selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements and related notes included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JANUARY 1, 1999 JANUARY 1, 1999 THREE MONTHS
(INCEPTION) TO (INCEPTION) TO ENDED
DECEMBER 31, 1999 MARCH 31, 1999 MARCH 31, 2000
----------------- ---------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Product development and engineering........... $ 820,128 $ 151,589 $ 284,419
General and administrative.................... 164,953 6,939 113,528
Depreciation and amortization................. 57,007 3,250 25,038
----------- --------- ----------
Total operating expenses...................... 1,042,088 161,778 422,985
Loss from operations.......................... (1,042,088) (161,778) (422,985)
Interest income, net.......................... 10,811 -- 1,244
----------- --------- ----------
Net loss...................................... $(1,031,277) $(161,778) $ (421,741)
=========== ========= ==========
Loss per share -- basic and diluted........... $ (.04) $ (.01) $ (.02)
=========== ========= ==========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA
Total assets................................................ $ 746,477 $ 847,619
</TABLE>

15
<PAGE> 20

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial
statements and the notes to those financial statements appearing elsewhere in
this prospectus. In addition to historical information, the following discussion
and other parts of this prospectus contain forward-looking statements that
reflect our plans, estimates, intentions, expectations and beliefs. Our actual
results could differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those set forth in the "Risk Factors" section and
contained elsewhere in this prospectus.

GENERAL

OVERVIEW

In July 1997, GP Strategies Corporation, which we refer to as GPS, entered
into a license agreement with Steven Amendola, our chief technical officer, and
received a perpetual exclusive license to exploit the sodium borohydride patent.
In order to exploit this technology, GPS formed a battery technology group,
which was funded by GPS until January 1, 1999. We have been advised by GPS that
they spent approximately $1.0 million on research and development in 1997 and
1998 related to its battery technology group. In December 1998, GPS contributed
its battery technology group (which consisted of only equipment and its license)
and the rights to its license to us in exchange for its equity ownership in us,
a note payable and certain royalty payments. Our initial business plan was to
conduct research and development on sodium borohydride with the purpose of
developing an alternative energy system to gasoline for use in automobile
engines. In the course of investigating the use of our energy system, we focused
initially on the development of a sodium borohydride fuel cell for potential
commercial application. As our research progressed, we realized that sodium
borohydride not only had the potential to produce a better fuel cell than
currently exists, but that sodium borohydride can also be used to generate
hydrogen. Further research indicated that our proprietary system could also be
used to make longer lasting disposable 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, 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. In an
article published in The IPO Reporter (June 5, 2000), Mr. Amendola speculated
that should we solidify an agreement with a major battery manufacturer for our
battery design and chemicals, we could generate revenue in the second half of
2000. We have been advised by Mr. Amendola that he made this speculation in
response to a hypothetical question posed by a reporter. We have not commenced
commercial discussions with any battery manufacturers, and we cannot assure you
that we will be able to enter into an agreement with any battery manufacturer in
the foreseeable future, or at all. We do not expect to generate commercial
revenue in the second half of 2000, and we cannot assure you that we will ever
generate any meaningful revenue in the future.

We incurred operating losses in 1999 and the three months ended March 31,
2000 of $1,042,088 and $422,985, and we had a net loss of $1,031,277 in 1999 and
$421,741 in the three months ended March 31,

16
<PAGE> 21

2000. As of March 31, 2000, we had an accumulated deficit of $1,453,018. Our
losses have resulted primarily from costs associated with research and
development activities. As a result of planned expenditures in the area of
research and development, we expect to incur additional operating losses for the
foreseeable future.

Our limited operating history makes the prediction of future operating
results difficult. We believe that period-to-period comparisons of our operating
results should not be relied upon as predictive of future performance. Our
prospects must be considered in light of the risks, expenses and difficulties
encountered by companies at an early stage of development, particularly
companies in new and rapidly evolving markets. We may not be successful in
addressing these risks and difficulties.

RESULTS OF OPERATIONS

Three months ended March 31, 2000 compared to the period from January 1, 1999
(inception) to March 31, 1999

Total Revenues. To date, we have not recognized any revenues related to
the sale or license of our technology.

Product Development and Engineering Expenses. Product development and
engineering expenses were $284,000 for the three months ended March 31, 2000
compared to $152,000 for the period from January 1, 1999 (inception) to March
31, 1999, an increase of $132,000. The increase in product development and
engineering expenses is primarily attributable to increased staffing required to
further the development of our technology.

General and Administrative Expenses. General and administrative expenses
were $114,000 for the three months ended March 31, 2000 compared to $7,000 for
the period from January 1, 1999 (inception) to March 31, 1999, an increase of
$107,000. The increase in general and administrative expenses primarily reflects
the move from a shared rental building to our current office location, which
represent $35,000 of the increase. In addition, there were increases in staffing
and support necessary to manage and facilitate our growth, which represent
$72,000 of the increase.

Depreciation and Amortization. Depreciation and amortization was $25,038
for the three months ended March 31, 2000 compared to $3,250 for the period from
January 1, 1999 (inception) to March 31, 1999, an increase of $21,788. This
increase in depreciation and amortization is related to depreciation of certain
laboratory equipment, which did not exist during the period from January 1, 1999
(inception) to March 31, 1999.

Interest Income. Interest income was $1,200 for the three months ended
March 31, 2000 compared to $0 for the period from January 1, 1999 (inception) to
March 31, 1999, an increase of $1,200. The increase in interest income is a
result of interest earned on the additional financing received from the original
investors during the three-month period ended March 31, 2000.

Period from January 1, 1999 (inception) to December 31, 1999

Total Revenues. To date, we have not recognized any revenues related to
the sale or license of our technology.

Product Development and Engineering Expenses. Product development and
engineering expenses were $820,000 in 1999 and were primarily attributable to
increased staffing required to further the development of our technology.

General and Administrative Expenses. General and administrative expenses
were $165,000 in 1999 and reflect increased lease costs in our current office
location that we moved into in January 1999. In addition, there were increases
in staffing and support necessary to manage and support our growth.

17
<PAGE> 22

Depreciation and Amortization. Depreciation and amortization was $57,007
in 1999 and related to depreciation of certain laboratory equipment and the
amortization of intangible assets.

Interest Income. Interest income was $11,000 in 1999 relating to interest
earned on the capital we received in January 1999.

LIQUIDITY AND CAPITAL RESOURCES

Since our organization effective January 1, 1999, we have primarily
financed our operations through private placements of equity securities. In
1999, we issued $1,250,000 of membership interests for cash, which subsequently
were converted into 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 will automatically
convert into 759,368 shares of common stock upon the completion of this
offering. As of March 31, 2000, we had $56,000 in cash and cash equivalents,
which does not include $2.2 million we received from our private placement of
Series A preferred stock in May 2000.

Cash used in operations totaled $953,000 and $385,000 for the period from
January 1, 1999 (inception) to December 31, 1999 and the three-month period
ended March 31, 2000, and related to funding our net operating losses.

Investing activities used cash of $448,000 for the period from January 1,
1999 (inception) to December 31, 1999 and $101,000 for the three-month period
ended March 31, 2000. Investing activities consisted primarily of purchases of
laboratory equipment and accessories necessary for the continuation of our
research and development activities and additional patent registration costs. We
expect to continue to make significant investments in research and development
equipment and our administrative infrastructure, including the purchase of
property, plant and equipment to support our expansion plans. We intend to use
$5.0 million of the net proceeds from this offering to build a pilot plant for
the manufacturing of sodium borohydride and $500,000 to build a prototype
battery manufacturing line, both of which we expect to complete in 2001.

In January 1999, we issued GPS a note payable for $250,000 in connection
with an agreement dated December 17, 1998 to purchase substantially all of the
assets of its battery technology group. The note payable bears interest at a
rate of 6% per annum and is payable with interest on September 25, 2001.

Between January 1999 and April 2000, we received an aggregate of $226,000
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 this offering, together with our
current cash and cash equivalents, will be sufficient to satisfy our anticipated
cash needs for at least the next three years. It is possible, however, that 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.

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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. We cannot assure you that we will be able to enter into
these agreements to protect against price increases.

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BUSINESS

We are an emerging technology company engaged in the development of a
patented alternative energy source based on boron chemistry. Our proprietary
system generates energy in the form of hydrogen, which is the most energy-rich
element occurring in nature and is highly regarded as a source of clean,
efficient fuel for the alternative energy markets, or electricity, and can be
utilized as a:

- generator of hydrogen for use by internal combustion engines that have
been modified to accept hydrogen as fuel,

- generator of hydrogen for use by fuel cells in the production of
electricity,

- direct fuel cell, or

- battery that can be configured into a wide variety of shapes and sizes.

We believe that our proprietary Hydrogen on Demand(TM) hydrogen generating
system offers significant advantages over other methods of utilizing hydrogen as
a fuel, which often require the storage of hydrogen in bulky and potentially
explosive tanks or involve the consumption of hydrocarbon fuels that produce
pollutants as byproducts. These advantages include minimal storage, handling and
cost problems, elimination of pollutants and emissions, and favorable energy
density, power-to-weight and volume characteristics. In an article published in
The IPO Reporter (June 5, 2000), Steven Amendola, our chief technical officer,
stated that "our system is the only one capable of storing an efficient amount
[of hydrogen] in a safe manner." We have been advised by Mr. Amendola that he
has formed this opinion based on his industry experience, and that he is not
aware of any independent sources that substantiate this statement. We have
designed and built a hydrogen generating system, which we have used to modify an
operating series-hybrid sports utility vehicle. We will use this vehicle to
demonstrate the ability of the Hydrogen on Demand(TM) technology to power a
vehicle using sodium borohydride as the base fuel. We believe that sodium
borohydride could be distributed through the existing network of neighborhood
gasoline stations. We have not, however, had any discussions with the owners of
gasoline stations and we cannot assure you that they will be willing to
distribute sodium borohydride. We have also designed and produced prototype
direct fuel cells and batteries that utilize our proprietary system to provide
electricity for the portable power markets for use in laptop computers, cellular
telephones, hearing aids, personal organizers and other portable devices.

OUR TECHNOLOGY

We have invented, patented and developed a proprietary chemical process
that generates pure hydrogen or electricity from environmentally friendly raw
materials. In our 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 in our fuel cell. The primary input
components of the reaction are water and sodium borohydride, a derivative of
borax, which is found in substantial natural reserves globally.

We believe that our system minimizes the storage, handling and cost
problems that are encountered with alternative hydrogen delivery systems. The
chemical reactions used in our process eliminate the undesirable pollutants and
emissions that are encountered in typical hydrocarbon-based energy production
systems, which use fossil fuels such as gasoline, natural gas and diesel. The
byproducts of our process are primarily heat and borax, which can be recycled to
form sodium borohydride. Sodium borohydride-based energy systems have favorable
energy density, power-to-weight and volume characteristics when compared to
mobile power sources now in use. Based on our laboratory tests, we believe that
sodium borohydride batteries, for example, can deliver substantially more
potential energy per unit of both weight and volume compared to the traditional
batteries in the commercial market today.

Gasoline, the primary fuel used in the transportation industry today,
consists of hydrogen and carbon chemically bound together. Gasoline is used as
fuel in processes that cause hydrogen and carbon to combine with oxygen. In
gasoline engines, hydrogen contributes more than half of the energy output while
carbon accounts for the rest. When carbon combines with oxygen, it releases
carbon monoxide and carbon dioxide, both of which are pollutants, into the
atmosphere. Moreover, the gasoline is not completely consumed in this process;
some of the resulting residue combines with other atmospheric components to

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<PAGE> 25

form additional pollutants, such as oxides of nitrogen, which are key
contributors to smog. By contrast, our process uses no carbon, while still
taking advantage of the vast power potential of hydrogen. Neither of the
reaction's byproducts, water and borax, is a pollutant. Furthermore, there is no
"exhaust" in the conventional sense -- water is ordinarily harmlessly vented
into the air as steam. Sodium metaborate is the byproduct captured in our system
and it can be converted back into sodium borohydride, the key input compound in
our process.

In addition to advantageous safety and environmental properties, our system
also possesses operating and manufacturing efficiencies that surpass those of
competitive technologies. In internal combustion engines, well-to-wheel
efficiency is a common measure of how much energy is lost in the process of
producing, refining, formulating and consuming a fuel. For example, consumption
of gasoline in an internal combustion engine results in a well-to-wheel
efficiency in the range of 8% to 16%. Approximately 20% of the energy of
gasoline is lost in the production, refinery and delivery phases, while another
64% to 72% of the energy is lost due to the operating inefficiency of the
internal combustion engine. Our testing to date indicates that a direct fuel
cell using sodium borohydride as its power source, and a sodium borohydride
system, when used as a hydrogen source to power a fuel cell, both have
well-to-wheel efficiencies more than twice that of gasoline in an internal
combustion engine.

Our manufacturing technology also utilizes more environmentally desirable
methods of energy input than traditional fuel technologies. The only
carbon-based raw material used in our sodium borohydride manufacturing process
is methane, which possesses only one carbon atom per molecule. When compared
with the multiple carbon atoms in high molecular weight fuels, such as gasoline
or diesel, our process significantly reduces the emissions of oxides of carbon,
nitrogen and sulfur per unit of energy generated. We believe that this aspect of
our technology, coupled with our more efficient well-to-wheel efficiencies, will
allow us to deliver energy in a cleaner and more efficient manner than
competitive fueling systems.

FUEL CELL TECHNOLOGY AND FUEL CELL SYSTEMS

A fuel cell is a device that combines hydrogen, derived from a fuel such as
natural gas, propane, methanol or gasoline, and oxygen from the air, to produce
electric power without combustion. The following table sets forth information
relating to the principal types of fuel cells.

<TABLE>
<CAPTION>
FUEL CELL TYPE PRINCIPAL APPLICATIONS INPUT FUEL OPERATING TEMPERATURE
--------------------------- --------------------------- --------------------------- ---------------------
<S> <C> <C> <C>
Alkaline fuel cells Small-size aerospace and Hydrogen (pure) 20 degreesC to 100
defense applications degreesC
Phosphoric acid fuel cells Mid- to large-size Hydrogen up to 200 degreesC
stationary power generation
applications
Molten carbonate fuel cells Large-size power generation Hydrogen or natural gas at least 650
applications degreesC
Solid oxide fuel cells Large- to very large- size Hydrogen, natural gas or at least 1000
stationary power generation fossil fuels degreesC
applications
Proton exchange membrane, Transportation, small- to Hydrogen (pure) up to 80 degreesC
or PEM, fuel cells mid- size stationary power
and portable power
generation applications
Sodium borohydride fuel Transportation, small- to Sodium borohydride solution up to 80 degreesC
cells very large-size stationary
power and portable power
generation applications
</TABLE>

In the small-scale commercial market, where sizes of fuel cells range from
25 watts to 250 kilowatts, the PEM fuel cell has been the type most tested and
utilized in the laboratories and in prototypical applications. The smaller size
and lower temperature characteristics make PEM fuel cells more optimal for use
in vehicles, and therefore, much of the current testing to date in the
transportation markets has involved this type of fuel cell.

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<PAGE> 26

The PEM fuel cell, as any fuel cell, requires hydrogen. We believe that the
only methods known today for storing significant amounts of hydrogen in vehicles
has been through large tanks of either liquid (cryogenic) or compressed gaseous
hydrogen. To put this in perspective, in order for a 3,000 pound automobile to
achieve a range of 300 miles using a PEM fuel cell system, the equivalent of 32
twenty-five pound tanks of compressed gaseous hydrogen would be required. For
cryogenically stored hydrogen, the weight drops significantly to 200 pounds.
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 system 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.

MARKET OPPORTUNITY FOR OUR TECHNOLOGY

Government authorities in North America, Europe and Japan have imposed
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
also have the potential to provide lower capital and maintenance costs.

In addition to the transportation markets, there is a growing worldwide
consumer demand for quiet, clean and environmentally friendly products in the
portable power markets. Promising applications include portable power 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
also 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. Within the portable power
markets, we believe that the battery market, fueled by technological
innovations, will continue to present a considerable market opportunity for more
durable and lighter power sources.

Transportation Markets

In the transportation market, the United States federal government,
California and several northeastern states, principally New York, Massachusetts
and Maine, have adopted laws and regulations establishing vehicle emission
standards and requirements for the sale, commencing in 2003, of low, ultra-low,
super ultra-low and zero emission vehicles, or ZEVs. Regulations adopted by
these states provide that 10% of the new vehicles sold in these states must meet
zero emission guidelines by 2003. It is possible to meet the ZEV requirements by
using different technologies. For example, vehicles powered by batteries can
receive full credit and vehicles powered by certain low emission internal
combustion engines and proton exchange membrane fuel cells can receive partial
credit toward the ZEV requirements. We believe that sodium borohydride-based
hydrogen generation systems, since they are similar to proton exchange membrane
fuel cells, will allow companies partial credit for lowering emissions from
vehicles. We cannot assure you, however, that sodium borohydride-based hydrogen
generation systems will allow this partial credit.

In our hybrid design, an automobile will be powered by an electric motor
which, in turn, will get its energy from conventional batteries. Our technology
will be used to generate the hydrogen that runs a hydrogen-fueled engine, which
will drive an alternator that will keep the batteries charged. We are currently
unable to build an automobile that will be powered directly by electrical energy
produced by our sodium borohydride direct fuel cell. Until such time, if ever,
as we are able to power an automobile with electrical energy provided by our
fuel cell, we intend to continue to pursue our research and development efforts
with respect to the hybrid design.
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The following diagram illustrates a sodium borohydride hydrogen generation
series hybrid system. As shown in the diagram below, our Hydrogen on Demand(TM)
system provides the hydrogen for a hydrogen-fueled internal combustion engine.
This internal combustion engine provides power to the alternator, which is an
electric generator that produces an alternating current. The alternator keeps
the automobile's battery pack charged, and this battery pack provides the power
to the automobile's direct current traction motor. Electrical energy produced by
the direct current traction motor provides power to the automobile's
differential gear, which runs the automobile.

[HYBRID AUTO SYSTEM GRAPHIC]

In May 2000, we entered into a proprietary rights agreement with
DaimlerChrysler Corporation to participate in a program to test our sodium
borohydride generating systems for vehicle applications. As part of that
agreement, we have granted a non-exclusive perpetual worldwide license to
DaimlerChrysler to use in its automotive business the technological benefits
that we jointly develop. In addition, we have agreed to license to
DaimlerChrysler, on reasonable terms and conditions, any of our technology that
we developed prior to the proprietary rights agreement, provided that our
obligation to license this technology will expire one year after the date we
deliver our first hydrogen generator to DaimlerChrysler. Under the agreement,
DaimlerChrysler will gain intellectual property rights to technology that it
will fund in the program.

We have installed our hydrogen generation systems in three prototype
vehicles: a Ford Explorer SUV, a Ford Crown Victoria sedan and the "Genesis"
vehicle. Our program to develop these prototype vehicles is not affiliated with
the vehicles' manufacturers. The SUV will accommodate all of the requisites for
an emission-free electric vehicle with virtually no loss of cabin space and no
material change in fully-fueled weight. To modify the SUV, we installed
reservoirs of sodium borohydride and water, a receiving tank for the resulting
sodium metaborate, as well as a chamber in which the hydrogen-producing reaction
takes place. The space required for our system is approximately the same size
that is required for a conventional internal combustion engine. A sodium
borohydride storage/borax collecting tank replaces the standard gasoline tank.
The internal combustion gasoline engine is replaced with a smaller hydrogen
engine/ alternator combination, and the transmission is completely removed,
because the electric motors that propel the car in our hybrid system are linked
directly to the drive train. The Crown Victoria, which has a conventional drive
train, has been modified to run on hydrogen and awaits the completion and
installation of its Hydrogen on Demand(TM) system. The "Genesis" vehicle is part
of a project operated by the New Jersey Department of Transportation. We have
already installed its Hydrogen on Demand(TM) system, which powers a proton
exchange membrane fuel cell. The completion and testing of the "Genesis"
vehicle, which is contingent on the installation of a battery pack by another
contractor, has been scheduled by the New Jersey Department of Transportation
for late 2000.

In the longer-term, we believe that fuel cell powered vehicles utilizing
the sodium borohydride technology will meet the performance requirements of
consumers and the regulatory requirement for a

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ZEV because a system using our proprietary process to generate electricity
directly in batteries or fuel cells would be even more efficient than a hybrid
system. Even though the zero emission guidelines can also be satisfied by
vehicles powered by other types of fuel cells, such as PEM fuel cell powered
vehicles, by other forms of ZEVs, such as a battery powered vehicle, or in part
by the sale of a large number of super ultra-low emission vehicles, such as
vehicles powered by improved internal combustion engines, we believe that our
technology will maintain the best overall performance and environmental
characteristics.

Portable Power Markets

Our sodium borohydride based process may be adapted for production of
batteries. We believe that our sodium borohydride batteries would have a higher
energy density by volume than batteries currently in use, and be more efficient.
As a result, we believe that our sodium borohydride batteries could be lighter
and smaller, embracing and advancing the trend towards smaller and lighter
products in consumer electronics.

In addition, there is a growing worldwide consumer demand for quiet, clean
portable generators. Promising applications include their use 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 powered by sodium borohydride fuel cells enjoy substantial 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.

We believe that portable sodium borohydride fuel cell power products could
provide clean, quiet, vibration-free electric power on demand for a variety of
applications. We believe that markets could develop where the attributes of
sodium borohydride fuel cell systems would provide a significant competitive
advantage over existing technologies. These markets would include recreational
vehicles, auxiliary power for boats and generators for densely populated areas
and other locations where noise pollution is a concern.

OUR STRATEGY

Our goal is to convert what we believe to be a superior technology in our
sodium borohydride chemistry from the research and development 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
hydrogen across a variety of markets, a higher energy output alternative fuel
and a desire to preserve the environment. To achieve our goal, we have
implemented the following strategy:

- Build Relationships with Automotive Manufacturers. We are pursuing
relationships with automotive manufacturers 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 substantial resources to research and development of alternative
fuel technologies, we believe that our technology will be an attractive
choice and will allow us to position our technology as a leader in the
alternative fuel market.

- Pursue Ventures with Other Fuel Cell Companies. We are pursuing ventures
with other manufacturers of fuel cells. We believe that our Hydrogen on
Demand(TM) system will provide a solution for existing fuel cell
companies that cannot produce hydrogen in a safe or efficient manner. We
will seek to leverage these relationships to further our brand awareness
and decrease the time to commercialization.

- Develop Strategic Relationships with Key Battery Manufacturers. We plan
to pursue in the near term the construction of a battery manufacturing
pilot plant for the manufacture of size AA and AAA batteries. We believe
that the production of prototypical batteries would enable us to validate
our technology, generate interest in the consumer battery market and
facilitate the establishment and development of strategic relationships
with other battery manufacturers.

- Build Relationships with Truck Manufacturers. We plan to pursue
relationships with manufacturers of heavy duty, over-the-road trucks. We
believe our technology can be used to deliver hydrogen

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<PAGE> 29

as a fuel for modified internal combustion truck engines, which could
significantly reduce emissions currently generated by diesel fuel. In
addition, we believe that this market is particularly suited to the
infrastructure requirements necessary to supply sodium borohydride as an
alternative fuel.

- Build Manufacturing Capabilities to Lower the Costs of Sodium
Borohydride. Sodium borohydride is currently a specialty chemical that
we believe is produced by only two manufacturers located in the United
States and Germany. We believe that we can successfully compete in the
battery 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. In late 2000, we plan to begin
construction of a pilot plant that we believe will cost approximately
$5.0 million to build and will take from nine months to one year to
complete. Our goal is to demonstrate that economies of scale and improved
manufacturing efficiencies exhibited in our pilot plant will verify the
viability of cost-effective mass production of sodium borohydride.

- Continue Research and Development of our Proprietary Technology. We plan
to continue our research and development of sodium borohydride based
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.

- 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 the areas we
are targeting. For example, we believe that our relationship with the New
Jersey Department of Transportation may lead to other types of state and
federal contracts involving all aspects of transportation, including
fleet demonstrations, commercial vehicles, highway signs and lighting.
Our relationship with the New Jersey Department of Transportation is
described under "-- Research and Development."

INTELLECTUAL PROPERTY RIGHTS

Our intellectual property strategy is to identify key intellectual property
developed by us in order to protect it in a timely and effective manner. In
addition, we seek to use and assert such intellectual property to our
competitive advantage. Our goal is to be first to market with superior
technology and to sustain a long-term competitive edge in the market. We rely on
a combination of patents, trade secrets, trademarks, copyrights and contracts to
protect our proprietary technology.

We use patents as the primary 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 protection 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 various jurisdictions
internationally, which are carefully chosen based on the likely value and
enforceability of intellectual property rights in those jurisdictions.

We own two U.S. and one non-U.S. patent which cover a wide variety of uses
and applications of various boron chemistries. We have filed an additional five
U.S. and 21 non-U.S. patent applications. Our earliest patent expires in 2015
and the most recently filed applications, if issued, not expiring until 2020.

Our intellectual property program includes a strong competitor monitoring
element. We actively monitor the patent position, technical developments and
market activities of our competitors. We expect activities relating to assertion
and enforcement of our intellectual property rights to increase as the market
develops.

PLAN OF OPERATION

We believe that the net proceeds from this offering, together with our
current cash and cash equivalents, will be sufficient to satisfy our anticipated
cash needs for at least the next three years, and we do not believe it will be
necessary to raise additional funds in the next six months to meet the
expenditures required for operating our business. During this three-year period,
we expect to pursue the research and

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development programs described in the subsection "-- Research and Development"
immediately below. During this period, we also intend to build a pilot plant to
manufacture sodium borohydride. Based on our preliminary estimates, we expect
that the capacity of this facility will be one ton per day of sodium
borohydride. Based on our planned expansion, we will require a significant
increase in the number of our employees during this period.

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 materials and processes. In order to most
effectively achieve these plans, our facility in Eatontown, New Jersey houses
key sophisticated research and development equipment. We are currently using a
scanning electron microscope with an X-ray attachment, a nuclear magnetic
resonance spectrograph with a broadband capability and a gas chromatograph/mass
spectrograph. We also have several potentiostats/galvanostats, a bi-potentiostat
for mechanistic studies and battery testers. Additionally, we have a fully
equipped chemical laboratory. We are purchasing additional equipment, including
an X-ray diffraction, Fourier transfer infra-red spectrometer, thermal
gravimetric analysis and ultraviolet visable spectrograph. These machines are
essential tools to improve synthesis and purity of sodium borohydride, to
produce better hydrogen generation catalysts and to develop better electrodes
for our batteries and fuel cells, all of which are key to accomplishing our
goals.

We believe that our hydrogen generation and direct fuel cell research and
development programs are at least several years from commercial viability,
although we cannot assure you that these programs will yield commercially viable
products within that time frame, if at all.

We have developed relationships with governmental agencies, including the
State of New Jersey Commission on Science and Technology. Between January 1999
and April 2000, we received an aggregate of $226,000 from a recoverable grant
award from that agency. These funds were used to partially fund costs directly
related to development of our fuel cell technology. In addition, we have worked
together with the New Jersey Department of Transportation to develop prototype
highway signs which are powered by third party fuel cells. The hydrogen for
these fuel cells was provided by our Hydrogen on Demand(TM) system.

Hydrogen Generation

As a generator of hydrogen, an aqueous solution of sodium borohydride is
passed over a catalyst via a pump. The catalyst is typically a non-volatile,
metallic chemical element such as ruthenium and/or 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 byproduct formed in this process is
borax.

[HYDROGEN GENERATION GRAPHIC]

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Direct Fuel Cell

In the direct fuel cell, the sodium borohydride is passed into the anode
compartment and interacts with our proprietary anode. Here, the sodium
borohydride is directly oxidized to borate, giving its electrons up directly to
the anode instead of the water.

[DIRECT FUEL CELL GRAPHIC]

We believe, based on our laboratory tests to date, that our sodium
borohydride cell has an overall fuel cell efficiency of over 60%, making it more
efficient in its energy extraction than other fuel cells. The cell also has cost
advantages as it requires a less expensive membrane than the costly
perfluorinated membranes used by most PEM fuel cells, and it does not require
platinum, an expensive precious metal, as a catalyst. Our laboratory tests also
indicate a higher open circuit voltage per cell of 1.55 volts compared to about
0.9 volts for PEM fuel cells. Since this system uses a liquid fuel, a separate
internal cooling system is not required, which allows for a simpler, cheaper
stack of fuel cells.

Since the fuel is an aqueous solution of sodium borohydride, which can be
easily stored in a tank, our laboratory tests indicate that this system provides
a fuel with an energy density in excess of 3,000 watt-hours per liter actually
produced by the cell at 60% efficiency, as compared to the 200 to 700 watt-hours
per liter energy density in many commercially available batteries. "Watt-hours
per liter" is used to measure the energy storage capacity in a battery.

COMMERCIALIZATION PROCESS

In the near-term, we do not anticipate manufacturing on a large-scale. Our
initial focus is in the automotive area, and is based on our belief that we can
develop prototypical vehicles to validate our technology. Once this is
accomplished, we will seek to interest automotive OEMs on licensing our hydrogen
generation technology, and, ultimately, our direct sodium borohydride fuel cell
technology. We will also seek to enter into licensing or joint ventures with
vehicle manufacturers, utilities and other companies requiring fuel cell
technologies. In addition to these areas, we plan on developing a replacement
for the current disposable batteries, either through small-scale manufacturing,
a joint venture or licensing

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<PAGE> 32

of the sodium borohydride technology for batteries. Over the next several years,
our current plans for commercialization are as follows:

- 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 that may
develop in the near future.

- Pre-Commercial Testing and Licensing for Hydrogen Generation Systems. We
intend to seek additional relationships, such as our proprietary rights
agreement with DaimlerChrysler, to test our system in vehicle
applications. We believe that the successful completion of our
demonstration vehicle will provide us with the opportunity to develop
stronger relationships with the automotive OEMs and enter into certain
licensing arrangements.

- Expansion into Battery Markets. We anticipate using a portion of the
proceeds from this offering to construct a battery manufacturing line for
a small number of prototype batteries. We believe that the production of
such prototypical batteries will enable us to validate our technology,
which in turn will generate interest in the overall battery market by
both consumers and manufacturers.

- Pre-Commercial Testing and Licensing for Direct Fuel Cells. We
anticipate that we will have a prototypical direct fuel cell using the
sodium borohydride technology within the next several years. At this
point, we will seek to forge strategic relationships, and we expect to
seek licensing arrangements for the direct fuel cell upon successful
direct fuel cell demonstration.

- Rechargability of Sodium Borohydride. We believe we can develop a
small-scale prototypical recharging machine for use with the sodium
borohydride batteries or the sodium borohydride vehicles. This recharging
feature is significant in that the overall cost of the sodium borohydride
system, whether for vehicles or portable power, will be significantly
decreased. The recharging infrastructure for large-scale production of
sodium borohydride should follow soon after this particular development.

COMPETITION

As our sodium borohydride power generation system has the potential to
replace existing power sources, competition will come from current power
technologies, improvements to current power technologies and from new
alternative power technologies. Each of our target markets is currently serviced
by existing manufacturers with existing customers and suppliers. These
manufacturers use proven and widely accepted technologies. Additionally, there
are competitors working on developing technologies other than fuel cells in each
of our targeted markets.

We believe that PEM fuel cell technology is likely to be our most direct
competitor. Ballard Power Systems and Plug Power Inc., two publicly traded
companies with PEM fuel cell technology, have significant histories,
field-testing experience and greater financial and personnel resources than we
have. A number of corporations, national laboratories and universities in the
United States, Canada, Europe and Japan possess PEM fuel cell technology. Most
have financial, technological and personnel resources greater than ours. Other
companies, such as FuelCell Energy, Inc., SatCon Technology Corporation and a
number of energy concerns, including utilities, have been developing other types
of fuel cell technologies and have greater access to capital and personnel.
However, we believe that our sodium borohydride based technology is superior to
the demonstrated technology of our PEM fuel cell competitors and other fuel cell
designs, and we plan to maintain our technological advantage by diligently
prosecuting patents, improving our system's designs, using fewer and lower cost
materials, eventually developing volume manufacturing processes and forming
strategic relationships with suppliers and leading companies within each of the
industry groups that constitute our target markets.

In the hydrogen generation segment, there are several competitors that
utilize different methods to generate hydrogen. One such company, Natex
Corporation, generates hydrogen by using a sharp tool to slice small sodium
hydride balls in the presence of water to create hydrogen. Sodium hydride is a
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<PAGE> 33

hazardous material which causes burning if it comes into contact with skin.
Another company, Ovonics Battery Company, a subsidiary of Energy Conversion
Devices, Inc., generates hydrogen by utilizing nickel-metal hydride technology
in its storage batteries. This technology is more expensive than ours, and the
overall efficiency of the system decreases as more hydrogen is stored, making
this an unfavorable option for practical use. There are several other companies
in the energy and oil and gas industry that utilize reformers to create
hydrogen. Reformers use methanol, gasoline, natural gas or some other fossil
fuel to generate hydrogen. All of these types of fuels pollute the atmosphere
because of the nitrogen oxides emitted into the air. We believe our sodium
borohydride is a safer solution than any other hydrogen generation system
currently available.

RAW MATERIALS

Sodium borohydride is manufactured from the base material borax. There is a
significant global supply of borax, and the United States is believed to be the
largest holder 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, sodium borohydride is made as a specialty chemical by two
manufacturers. 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.

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.

FACILITIES

Our principal offices are located at 1 Industrial Way West, Eatontown, New
Jersey 07724, occupying 9,700 square feet. Our lease expires at the end of 2004,
with an option to renew through 2009. While our current facility contains
substantial laboratory space for our employees, as well as a 2,400 square foot
area used exclusively for the completion of our demonstration vehicle, we do not
believe that our current facilities and equipment will be sufficient through the
market introduction of our products. We will need to purchase additional
equipment and expand the physical area.

We anticipate using a portion of the net proceeds from this offering to
construct a prototypical sodium borohydride manufacturing facility, which we
believe will demonstrate a cheaper and cleaner method of producing sodium
borohydride than the current method. We believe that such a facility will cost
approximately $5.0 million and take nine months to one year to complete. This
type of facility would require approximately six people to operate and it would
produce at least one ton per day of sodium borohydride. We believe that this
facility would demonstrate the viability of mass production of sodium
borohydride and generate interest to attract larger potential manufacturers of
our material which should increase the overall demand for sodium borohydride and
decrease the costs associated with its production.

HUMAN RESOURCES

We have a total staff of 23 employees, including 22 full-time employees, of
which 17 are scientists, engineers and other professionals.

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<PAGE> 34

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors are listed below.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
G. Chris Andersen.................... 62 Chairman of the Board of Directors
Stephen S. Tang...................... 39 President, Chief Executive Officer and Director
Steven C. Amendola................... 45 Executive Vice President, Chief Technical Officer and Director
Kenneth R. Baker..................... 53 Director
William H. Fike...................... 64 Director
Alexander MacLachlan................. 67 Director
Zoltan Merszei....................... 77 Director
H. David Ramm........................ 48 Director
James L. Rawlings.................... 55 Director
</TABLE>

G. CHRIS ANDERSEN has served as the chairman of our board of directors
since April 2000. Mr. Andersen is currently a general partner of Andersen,
Weinroth & Co., a merchant banking firm. From 1990 to 1995, Mr. Andersen was
vice chairman and head of international investment banking at PaineWebber
Incorporated. Previously, Mr. Andersen was a managing director for 15 years at
Drexel Burnham Lambert, Incorporated and a member of its board of directors. He
is currently a director of Terex Corporation, Headway Corporate Resources Inc.,
GP Strategies Corporation and Sunshine Mining and Refining Company.

STEPHEN S. TANG, PH.D. has served as our president and chief executive
officer and a member of our board of directors since May 2000. From January 1996
to June 2000, Dr. Tang was vice president and global leader of the
pharmaceutical and health care industry practice for the management consultancy
A.T. Kearney, Inc., a wholly owned subsidiary of Electronic Data Systems, Inc.,
where he directed global business development and marketing. Dr. Tang previously
served as co-leader of the global chemical and environmental practice for the
management consulting firm, Gemini Consulting, Inc., a wholly owned subsidiary
of Cap Gemini. Prior to that, he was the president and founder of Tangent
Technologies, a technical consulting firm to chemical, pharmaceutical and
biotechnology companies, and senior research engineer and assistant director of
Lehigh University's Center of Molecular Bioscience and Biotechnology. Dr. Tang
received his B.S. in chemistry from the College of William and Mary, an M.S. and
Ph.D. in chemical engineering from Lehigh University and an M.B.A. from the
Wharton School of Business at the University of Pennsylvania.

STEVEN C. AMENDOLA has served as our executive vice president and chief
technical officer since April 2000, and, prior to that time, he served as our
chief scientist since our inception in December 1998. Mr. Amendola has been
issued more than 20 patents in the petroleum processing, pollution control and
energy recovery areas, including our patent to produce hydrogen and electricity.
From May 1997 to December 1998, Mr. Amendola served as vice president of
National Patent Development Corporation (now known as GP Strategies
Corporation), where he headed their research and development effort of sodium
borohydride. From September 1996 to April 1997, Mr. Amendola served as vice
president of research and development for Nextcell Inc., where he supervised and
researched new battery chemistry. From February 1995 to September 1996, he was
involved in process development chemistry at RFE Industries Inc. Mr. Amendola
completed graduate courses in chemistry at Ohio State University, where he
developed new, high-energy explosives under a grant from the U.S. Army. He holds
a B.S. in Chemistry from The Kings College in New York.

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<PAGE> 35

KENNETH R. BAKER has served on our board of directors since July 2000. Mr.
Baker has served as president, chief executive officer and a member of the board
of trustees of the Environmental Research Institute of Michigan since November
1999. From 1969 to 1999, Mr. Baker served in various executive positions with
General Motors Corporation, including vice president and general manager of the
GM Distributed Energy Business Unit, vice president and general manager of GM
Research and Development and program manager of GM Electric Vehicles. Following
his retirement in February 1999, Mr. Baker served as vice chairman and chief
executive officer of Energy Conversion Devices, Inc. Mr. Baker currently serves
as director of AeroVironment, Inc.

WILLIAM H. FIKE has served on our board of directors since May 2000. Mr.
Fike retired as the vice-chairman and executive vice president of Magna
International, Inc., an automotive parts manufacturer based in Ontario, Canada,
in February 1999. Prior to joining Magna in 1994, Mr. Fike was employed by Ford
Motor Company from 1966 to 1994, where he served most recently as President of
Ford Europe. Mr. Fike currently serves as a director of Magna and AGCO
Corporation, a manufacturer of farm equipment.

ALEXANDER MACLACHLAN, PH.D. has served on our board of directors since May
2000. He is currently chairman of the National Research Council's project to
evaluate the U.S. Department of Transportation's Intelligent Vehicle Initiative.
Prior to his retirement in March 1996, Dr. MacLachlan was the Deputy Under
Secretary for R&D Management at the U.S. Department of Energy and held various
other positions in the Department of Energy. Prior to his employment at the
Department of Energy, Mr. MacLachlan was employed by DuPont for 36 years, where
he was Senior Vice President for Research and Development and Chief Technical
Officer from 1986 to 1993, and a member of DuPont's Operating Group from 1990 to
1993.

ZOLTAN MERSZEI has served on our board of directors since May 2000. Mr.
Merszei retired as the president, chairman and chief executive officer of The
Dow Chemical Company in March 1980. From August 1974 to March 1980, he served as
president and chief executive officer of Dow Chemical Europe. From May 1980 to
May 1988, Mr. Merszei served in various executive positions with Occidental
Petroleum Corporation, including chairman and chief executive officer of
Occidental Chemical, chairman of Occidental Research and president and chief
executive officer, and subsequently, vice chairman of the board of directors of
Occidental Petroleum. Mr. Merszei currently serves as a director of The Budd
Company, Dole Food Company Inc., Thyssen Industrie AG (Germany) and Thyssen
Henschel America.

H. DAVID RAMM has served on our board of directors since June 2000. Mr.
Ramm has served as president, chief executive officer and a director of
Integrated Electrical Services since April 2000. From 1997 to March 2000, he was
employed by Enron, most recently as the president of Enron Wind Corp., which is
engaged in environmentally benign power generation. Prior to his employment at
Enron, Mr. Ramm worked for 14 years at United Technologies Corporation, where he
held several senior management positions, including chairman and chief executive
officer of International Fuel Cells Corporation.

JAMES L. RAWLINGS has served on our board of directors since April 2000.
Mr. Rawlings is a partner at Andersen, Weinroth & Co. Prior to joining Andersen,
Weinroth, he was a managing director, principal and member of the board of
directors of Schooner Asset Management Co. LLC, an asset management firm. Before
joining Schooner, he was a managing director of Robert Fleming & Co., a London
based investment bank, where he was responsible for investment banking
activities in North and South America. He was a managing director in the
corporate finance department with Drexel Burnham Lambert, Incorporated from 1979
to 1988.

SCIENTIFIC ADVISORY BOARD

We have recently organized a scientific advisory board, currently
consisting of three individuals, whom we refer to as our scientific advisors. At
our request, the scientific advisors will review and evaluate our

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<PAGE> 36

research programs, advise us with respect to technical matters in fields in
which we are involved and recommend personnel to us.

All of our scientific advisors are employed by entities other than us, some
of which may in the future compete with us, and are expected to devote only a
small portion of their time to us. They are not expected to participate actively
in our affairs or in the development of our technology. The institutions with
which our scientific advisors are affiliated may adopt new regulations or
policies that limit the ability of the scientific advisors to consult with us.
In addition, since we have not entered into non-competition agreements with any
of the members of our scientific advisory board, if any scientific advisor were
to consult with or become employed by any of our competitors, our business could
be negatively affected.

We granted to each of our scientific advisors five-year options to purchase
25,000 shares of our common stock, which are exercisable at $2.90 per share and
which will vest immediately upon the closing of this offering.

ANDREW B. BOCARSLY, PH.D. has been a Professor of Chemistry at Princeton
University since 1994, and has taught at the school since 1980 after receiving
his Ph.D. in Physical Inorganic Chemistry from the Massachusetts Institute of
Technology. Dr. Bocarsly is a member of the Electrochemical Society and the
American Chemical Society.

SHELDON L. GLASHOW, PH.D. is the Higgins Professor of Physics and the
Mellon Professor of Sciences at Harvard University. He was the recipient of the
Nobel Prize in Physics in 1971. He has been a director of GSE Systems, Inc., a
company engaged in the business of real time simulation and process automation
in the power and process industries, since 1995, and a director of Interferon
Sciences, Inc., a biopharmaceutical company, since 1991. Dr. Glashow is a
foreign member of the Russian Academy of Sciences.

ROALD HOFFMANN, PH.D. has been the John Newman Professor of Physical
Science at Cornell University since 1974. Dr. Hoffmann is a member of the
National Academy of Sciences and the American Academy of Arts and Sciences. In
1981, he shared the Nobel Prize in Chemistry.

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee

Our board has established an audit committee consisting of William H. Fike
and Zoltan Merszei, both of whom are independent directors. We also intend to
appoint one additional independent director to our audit committee within 90
days of this offering. The audit committee is responsible for reviewing and
inquiring into matters affecting financial reporting, the system of internal
accounting, financial controls and procedures and audit procedures and audit
plans. Furthermore, the audit committee approves the quarterly financial
statements and also recommends to the board of directors, for approval, the
annual financial statements, the annual report and certain other documents
required by regulatory authorities.

Compensation Committee

Our board has established a compensation committee consisting of Alexander
MacLachlan, H. David Ramm and James L. Rawlings, all of whom are independent
directors. The compensation committee reviews and acts on matters relating to
compensation levels and benefit plans for our executive officers and key
employees, including salary and stock options. The compensation committee is
also responsible for granting stock options and stock appreciation rights and
other awards to be made under our stock option plan.

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<PAGE> 37

Executive Committee

Our board has established an executive committee consisting of G. Chris
Andersen, James L. Rawlings and Stephen S. Tang. The principal functions of the
executive committee include exercising the powers of the board of directors
during intervals between board meetings and acting as an advisory body to the
board of directors by reviewing various matters prior to their submission to the
board.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Our compensation committee consists of Alexander MacLachlan, H. David Ramm
and James L. Rawlings. We formed this committee in June 2000. During 1999, Mr.
Rawlings served as our acting chief executive officer. There were no
deliberations during 1999 by our board of directors or compensation committee
concerning executive officer compensation.

DIRECTOR COMPENSATION

We granted to each of our independent directors, except G. Chris Andersen
and James L. Rawlings, five-year options to purchase 75,000 shares of our common
stock that will vest immediately upon the closing of this offering and which are
exercisable at $2.90 per share.

EXECUTIVE COMPENSATION

During 1999, James L. Rawlings served as our acting chief executive
officer, without compensation. In May 2000, Stephen S. Tang became our chief
executive officer and president. For information on our employment arrangements
with Mr. Tang, please see "-- Employment Agreements."

EMPLOYMENT AGREEMENTS

In May 2000, we entered into an employment agreement with Stephen S. Tang,
our chief executive officer and president. Mr. Tang's employment agreement
provides for a base salary of $225,000 per year, increasing to $250,000 upon the
closing of this offering or January 1, 2001, whichever occurs earlier. In
addition, it provides for a bonus of 50% of his base salary, half of which is
guaranteed and the remaining half will be guaranteed upon the closing of this
offering or January 1, 2001, whichever occurs earlier. Upon joining us, Mr. Tang
was paid half of his $135,000 signing bonus, with the other half payable upon
the closing of this offering or January 1, 2001, whichever occurs earlier. Mr.
Tang was granted 1,012,500 options at an exercise price of $2.90 per share, with
a term of five years. One third of these options vest at the end of each year of
employment for the first three years. In the event that Mr. Tang's employment is
terminated involuntarily or without cause, 945,000 of his options will vest as
if he were employed throughout the entire year, 67,500 options will vest in
accordance with the terms of our stock option plan, and all options will have a
term of one year. Furthermore, Mr. Tang will be entitled to receive a severance
payment in the amount of his base salary at that time plus a one year bonus
which will be the greater of half of his base salary at that time or the actual
bonus received by Mr. Tang for the full year prior to such termination.

In July 2000, we entered into an employment agreement with Steven C.
Amendola, our executive vice president and chief technical officer. We amended
this agreement in August 2000. Mr. Amendola's employment agreement provides for
a base salary of $200,000 per year, increasing to $225,000 upon the closing of
this offering or January 1, 2001, whichever occurs earlier. In addition, it
provides for a yearly bonus of 50% of his base salary, half of which is
guaranteed and the remaining half will be guaranteed upon the closing of this
offering or January 1, 2001, whichever occurs earlier. Upon the closing of this
offering, Mr. Amendola will receive a signing bonus of $250,000. Furthermore,
Mr. Amendola was granted 1,006,643 options at an exercise price of $2.90 per
share, which will vest ratably over three years. In the event that Mr.
Amendola's employment agreement is terminated involuntarily or without cause,
all of his options will vest as if he were employed throughout the entire year.
Mr. Amendola will also be entitled to receive a severance payment in the amount
of his annual base salary at that time plus a one year bonus.

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<PAGE> 38

STOCK OPTION PLAN

2000 STOCK OPTION PLAN

We adopted our Amended and Restated 2000 Stock Option Plan in July 2000.
The plan is administered by our board of directors or by a committee formed by
our board in its sole discretion. 5,500,000 shares of common stock have been
reserved for issuance under the plan. As of August 2, 2000, options to purchase
3,473,071 shares of common stock were outstanding under the plan with a weighted
average exercise price of $3.72 per share.

Our plan provides for the granting of the following types of awards: stock
options, stock appreciation rights, restricted stock awards, performance unit
awards and stock bonus awards. The terms and conditions of each type of award
granted under the plan will be specified by our board, in its sole discretion,
in a written agreement between us and the participant. These awards may be
granted to any of our employees, directors, officers or scientific advisors, or
any of our other key advisers or consultants who are responsible for or
contribute to our management, growth or success. Consultants and advisors must
render bona fide services not in connection with the offer and sale of our
securities in a capital-raising transaction or relating to the promotion or
maintenance of a market for our securities.

Stock options. A stock option may be an incentive stock option or a
non-qualified stock option. Only our employees will be eligible to receive
incentive stock options. The incentive stock option exercise price will in no
event be less than 100% of the fair market value of the shares of common stock
subject to the option on the date of grant. The non-qualified stock option
exercise price will be fixed by our board, but in no event will it be less than
the par value of the shares of common stock subject to the option on the date of
grant.

Our plan includes change in control provisions that may result in the
accelerated vesting of outstanding options. For purposes of the plan, "change of
control" means the occurrence of any of the following:

- any consolidation or merger of us pursuant to which less than 50% of the
outstanding voting securities of the surviving or resulting company are
owned by individuals or entities that were our shareholders prior to the
consolidation or merger,

- any sale, lease, exchange or other transfer, in one transaction or a
series of related transactions, of all, or substantially all, of our
assets, other than any sale, lease, exchange or other transfer to any
company where we own, directly or indirectly, 100% of the outstanding
voting securities of such company after any such transfer,

- any person, as defined in Section 13(d) of the Securities Exchange Act of
1934, other than one or more of our current stockholders, us or any of
our subsidiaries or one or more employee benefit plans established by us
for the benefit of our employees, shall become the beneficial owner, of
35% or more of our outstanding common stock, other than as the result of
this offering, or

- commencement by any entity, person or group (including any of their
affiliates), other than us, of a tender offer or exchange offer where the
offeror acquires more than 50% of our outstanding voting securities.

Stock appreciation rights. Stock appreciation rights entitle participants
to increases in the fair market value of shares of common stock. Stock
appreciation rights entitle a participant to receive an award equal to all, or a
portion of the excess of, the fair market value of a specified number of shares
of common stock at the time of exercise over a specified price, which shall not
be less than 100% of the fair market value of the common stock at the time the
right is granted or, if connected with a previously issued stock option, not
less than 100% of the fair market value of the common stock at the time such
stock option was granted. We may pay such amount in cash or in common stock,
valued at its then fair market value, or both.

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<PAGE> 39

Each agreement will state the period of time within which the stock
appreciation right may be exercised, in whole or in part, subject to such terms
and conditions prescribed for such purpose by our board of directors, provided
that no stock appreciation right shall be exercisable prior to six months nor
after ten years from the date of grant. Our board of directors has the
discretion to permit an acceleration of previously established exercise terms.
In the event of a change of control, the participant shall have the right to
exercise the vested portion of his or her unexercised stock appreciation right
for the lesser of three months after termination or the remainder of their term.

Performance unit awards. Performance unit awards entitle participants to
future payments based upon the achievement of preestablished long-term
performance objectives. Our board of directors shall establish with respect to
each performance unit award a performance period and a value. It will also
establish maximum and minimum performance targets to be achieved during the
applicable performance period. The achievement of maximum targets entitles a
participant to payment with respect to the full value of a performance unit
award. The achievement of less than the maximum targets, but in excess of the
minimum targets, entitles a participant to payment with respect to a portion of
a performance unit.

Restricted stock awards. Restricted stock awards consist of shares of
common stock restricted against transfer and subject to a substantial risk of
forfeiture. Shares awarded, and the right to vote such shares and to receive
dividends, may not be sold or otherwise transferred during the restriction
period, except as provided in an agreement between a participant and us. The
participant will have all the other rights of a stockholder, including the right
to receive dividends and the right to vote such shares.

Stock bonus awards. Our board of directors may grant a stock bonus award
based upon performance in terms of growth in gross revenue, earnings per share
or ratios of earnings to equity or assets or, with respect to participants not
subject to Section 162(m) of the Internal Revenue Code, such other measures or
standards determined by our board of directors. Performance objectives may be
reduced or eliminated, but not increased, in order to take into account
unforeseen events or changes in circumstances.

Loans. Our board may, in its sole discretion and to further the purpose of
the plan, provide for loans to persons in connection with all or any part of an
award under the plan. Loans will be evidenced by a loan agreement, promissory
note or other instruments containing terms and conditions relating to interest,
payment, schedules, collateral, forgiveness and acceleration as our board will
prescribe from time to time.

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<PAGE> 40

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH STEVEN AMENDOLA AND GP STRATEGIES CORPORATION RELATED TO OUR
PATENTS

After developing the proprietary technology for energy generation based on
the use of sodium borohydride, Steven C. Amendola, our executive vice president
and chief technical officer, entered into a license agreement with GP Strategies
Corporation, or GPS, in July 1997. In accordance with that license agreement,
Mr. Amendola granted an exclusive license to make, use and sell the proprietary
technology he developed.

When we acquired certain assets of the battery technology group of GPS, we
issued 6,185,322 shares of common stock to GPS in January 1999, of which 830,298
were subsequently canceled, and issued to them a note payable in the amount of
$250,000. At that time, we also issued 669,344 shares of common stock to GPS for
$50,000. As contemplated in the original acquisition of the license to the
intellectual property by us, royalty agreements with GPS and Mr. Amendola were
terminated in May 2000 (as amended in July 2000). In consideration for
terminating the royalty agreements, GPS was granted immediately exercisable
options to purchase 250,000 shares of common stock at the initial public
offering price. Furthermore, Mr. Amendola and GPS terminated their original
license agreement and we acquired ownership of the patent rights relating to the
proprietary technology. In addition, in a separate assignment executed
concurrently with the omnibus agreement, Mr. Amendola assigned to us the
ownership of any future inventions as well as pending patent applications and
future patents. Furthermore, Mr. Amendola has granted to us a right of first
refusal for all unrelated inventions that he conceives. In consideration of the
foregoing transactions, we issued 206,897 shares of common stock to Mr.
Amendola, 152,207 of which were subsequently transferred by him.

LOAN FROM GPS

OPTION ISSUANCE TO EXECUTIVE SEARCH FIRM

In connection with our search for a chief executive officer, we retained
the services of the Whitney Group, an executive search firm. In consideration of
their services, we paid them $150,000 and issued to them options exercisable at
$2.90 per share to purchase up to 108,750 shares of common stock. We believe
that the compensation we paid to the Whitney Group was at fair market value.
Andersen, Weinroth & Co. is a less than a five percent stockholder of the parent
company of the Whitney Group. G. Chris Andersen, our chairman, James L.
Rawlings, one of our directors, and E. Alan Brumberger and Stephen D. Weinroth,
both of whom are principal stockholders of us, are each a principal in Andersen,
Weinroth & Co.

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<PAGE> 41

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock by the following as of August 2, 2000 and as
adjusted to reflect the sale of common stock in this offering and the conversion
of our Series A preferred stock into 759,368 shares of common stock upon
completion of this offering:

- all persons known by us to own beneficially 5% or more of our common
stock,

- each of our directors,

- our chief executive officer, and

- all directors and executive officers as a group.

Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares of common stock beneficially owned
by the stockholder.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES OUTSTANDING
NAME AND ADDRESS NUMBER OF SHARES -----------------------------------
OF BENEFICIAL OWNER BENEFICIALLY OWNED PRIOR TO OFFERING AFTER OFFERING
------------------- ------------------ ----------------- --------------
<S> <C> <C> <C>
FIVE PERCENT STOCKHOLDERS:
E. Alan Brumberger(1)........................... 1,260,615 5.5% 4.6%
GP Strategies Corporation(2).................... 6,274,368(3) 26.9 22.6
Randolph W. Lenz(4)............................. 2,269,760 9.8 8.2
Stephen D. Weinroth(1).......................... 3,866,678 16.8 14.1
DIRECTORS AND EXECUTIVE OFFICERS:
Steven C. Amendola(5)........................... 54,690(6) * *
G. Chris Andersen(1)............................ 3,856,678 16.7 14.0
Kenneth R. Baker(5)............................. 75,000(7) * *
William H. Fike(5).............................. 75,000(7) * *
Alexander MacLachlan(5)......................... 75,000(7) * *
Zoltan Merszei(5)............................... 75,000(7) * *
H. David Ramm(5)................................ 75,000(7) * *
James L. Rawlings(1)............................ 1,014,786 4.4 3.7
Stephen S. Tang(5).............................. --(8) -- --
All directors and executive officers as a group
(9 persons)................................... 4,926,154(9) 23.0% 19.0%
</TABLE>

---------------
* Less than 1%

(1) Address is Andersen, Weinroth & Co., 1330 Avenue of the Americas, 36th
Floor, New York, New York 10019. Messrs. Brumberger, Weinroth, Andersen and
Rawlings are principals in Andersen, Weinroth & Co. We have been advised
that none of them has shared voting or investment power with respect to the
shares of common stock beneficially owned by any other principal in that
firm.

(2) Address is 9 West 57th Street, Suite 4170, New York, New York 10019.

(3) Includes 250,000 options exercisable within 60 days.

(4) Address is 5401 North Federal Highway, Ft. Lauderdale, Florida 33308.

(5) Address is 1 Industrial Way West, Eatontown, New Jersey 07724.

(6) Does not include 1,006,643 options not exercisable within 60 days.

(7) Includes 75,000 options exercisable within 60 days.

(8) Does not include 1,012,500 options not exercisable within 60 days.

(9) Includes 625,000 options exercisable within 60 days. Does not include
2,019,143 options not exercisable within 60 days.

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DESCRIPTION OF CAPITAL STOCK

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

As of August 2, 2000, there were 23,815,681 shares of common stock issued
and outstanding. Following the offering, our authorized capital stock will
consist of 40,000,000 shares of common stock, of which 27,515,681 will be issued
and outstanding, and 5,000,000 shares of undesignated preferred stock issuable
in one or more series designated by our board of directors, of which no shares
will be issued and outstanding. At August 3, 2000, there were 40 holders of
record of our common stock.

COMMON STOCK

Voting Rights

The holders of our common stock have one vote per share. Holders of our
common stock are not entitled to vote cumulatively for the election of
directors. Generally, all matters to be voted on by stockholders must be
approved by a majority, or, in the case of election of directors, by a
plurality, of the votes entitled to be cast at a meeting at which a quorum is
present by all shares of common stock present in person or represented by proxy,
voting together as a single class, subject to any voting rights granted to
holders of any then outstanding preferred stock.

Dividends

Holders of common stock will share ratably in any dividends declared by our
board of directors, subject to the preferential rights of any preferred stock
then outstanding. Dividends consisting of shares of common stock may be paid to
holders of shares of common stock.

Other Rights

On liquidation, dissolution or winding up of us, all holders of common
stock are entitled to share ratably in any assets available for distribution to
holders of shares of common stock. No shares of common stock are subject to
redemption or have preemptive rights to purchase additional shares of common
stock.

PREFERRED STOCK

Our certificate of incorporation provides that shares of preferred stock
may be issued from time to time in one or more series. Our board of directors is
authorized to fix the voting rights, if any, designations, powers, preferences,
qualifications, limitations and restrictions applicable to the shares of each
series. Our board of directors may, without stockholder approval, issue
preferred stock with voting and other rights that could adversely affect the
voting power and other rights of the holders of the common stock and could have
anti-takeover effects. We have no present plans to issue any additional shares
of preferred stock. The ability of our board of directors to issue preferred
stock without stockholder approval could have the effect of delaying, deferring
or preventing a change of control of us or the removal of existing management.

INDEMNIFICATION MATTERS

Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director has
breached his or her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation Law
or obtained an improper personal benefit. This provision does not alter a
director's liability under the federal securities laws and does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty. Our by-laws provide that directors and officers shall
be, and in the discretion of our board of directors, non-officer employees may

38
<PAGE> 43

be, indemnified by us to the fullest extent authorized by Delaware law, as it
now exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with service for or on our behalf. Our by-laws
also provide that the right of directors and officers to indemnification shall
be a contract right and shall not be exclusive of any other right now possessed
or hereafter acquired under any by-law, agreement, vote of stockholders or
otherwise. We intend to apply for directors' and officers' insurance against
certain liabilities.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us as described
above, we have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. At present, there is no pending
material litigation or proceeding involving any of our directors, officers,
employees or agents in which indemnification will be required or permitted.

PROVISIONS OF CERTIFICATE OF INCORPORATION AND BY-LAWS WHICH MAY HAVE
ANTI-TAKEOVER EFFECT

A number of provisions of our certificate of incorporation and by-laws
concern matters of corporate governance and the rights of stockholders. These
provisions, as well as the ability of our board of directors to issue shares of
preferred stock and to set the voting rights, preferences and other terms, may
be deemed to have an anti-takeover effect and may discourage takeover attempts
not first approved by our board of directors, including takeovers which
stockholders may deem to be in their best interests. If takeover attempts are
discouraged, temporary fluctuations in the market price of our common stock,
which may result from actual or rumored takeover attempts, may be inhibited.
These provisions, together with the ability of our board of directors to issue
preferred stock without further stockholder action, also could delay or
frustrate the removal of incumbent directors or the assumption of control by
stockholders, even if the removal or assumption would be beneficial to our
stockholders. These provisions also could discourage or make more difficult a
merger, tender offer or proxy contest, even if favorable to the interests of
stockholders, and could depress the market price of our common stock. Our board
of directors believes that these provisions are appropriate to protect the
interests of the company and our stockholders. Our board of directors has no
present plans to adopt any further measures or devices which may be deemed to
have an "anti-takeover effect."

Meetings of Stockholders

Our by-laws provide that a special meeting of stockholders may be called
only by the chief executive officer, the president or our board of directors
unless otherwise required by law. Our by-laws provide that only those purposes
included in the notice of the special meeting may be considered or dealt with at
that special meeting unless otherwise provided by law.

Ability to Adopt Stockholder Rights Plan

Our board of directors may in the future resolve to issue shares of
preferred stock or rights to acquire such shares in order to implement a
stockholder rights plan. A stockholder rights plan typically creates voting or
other impediments to discourage persons seeking to gain control of us by means
of a merger, tender offer, proxy contest or otherwise if our board of directors
determines that such change in control is not in the best interests of us and
our stockholders. Our board of directors has no present intention of adopting a
stockholder rights plan and is not aware of any attempt to effect a change in
control of us.

Amendment of the Certificate of Incorporation

Any amendment to our certificate of incorporation must be approved by a
majority of our board of directors and, if required by law, thereafter approved
by a majority of the outstanding shares entitled to vote with respect to such
amendment.

39
<PAGE> 44

Amendment of By-laws

Our by-laws provide that our by-laws may be amended or repealed by our
board of directors or by the stockholders. Such action by the stockholders
requires the affirmative vote of at least a majority of the shares present in
person or represented by proxy at any regular or special meeting of the
stockholders. Such action by the board of directors requires the affirmative
vote of a majority of the directors at any regular or special meeting of the
directors. The board of directors may not amend or repeal the provision dealing
with amendment of the by-laws or amend or repeal any provision that requires the
approval of stockholders to be amended or repealed. Any amendment or repeal of
the by-laws by the board of directors may be amended or repealed by the
stockholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.

40
<PAGE> 45

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, there will be outstanding 27,515,681
shares of our common stock, or 28,065,681 shares of our common stock if the
underwriters' over-allotment option is exercised in full, including 759,368
shares of common stock issuable upon the automatic conversion of the Series A
preferred stock, at the completion of this offering. Of such shares, 3,700,000
shares of common stock sold in this offering, or 4,255,000 shares if the
underwriters' over-allotment option is exercised in full, will be freely
transferable without restriction if purchased by persons other than our
affiliates.

We have agreed to file a registration statement covering resales of the
759,368 shares of common stock issuable upon the automatic conversion at the
completion of this offering of our outstanding Series A preferred stock and
152,207 shares of common stock held by three stockholders, and to use our best
efforts to have that registration statement declared effective within 90 days of
the date of this prospectus. Sales of shares of common stock by the selling
stockholders may have an adverse effect on the market price of our common stock.

The remaining 27,154,106 shares of common stock will be "restricted
securities" under Rule 144. These shares may be sold in the future without
registration under the Securities Act to the extent permitted by Rule 144,
pursuant to another exemption from registration under the Securities Act or
under an effective registration statement. As currently in effect, Rule 144
provides that any person, or persons whose shares are aggregated, holding
restricted securities, who has beneficially owned the shares for at least one
year, is entitled to sell within any three-month period the number of shares
that does not exceed the greater of 1% of the then outstanding shares of the
common stock (approximately 275,157 shares after the offering and giving effect
to the conversion of the Series A preferred stock) and the reported average
weekly trading volume of the then outstanding shares of common stock during the
four calendar weeks immediately preceding the date on which the notice of sale
is filed with the Securities and Exchange Commission. Sales under Rule 144 also
are subject to certain provisions relating to the manner and notice of sale and
the availability of current public information about us. A person, or persons
whose shares are aggregated, who is not deemed one of our affiliates at any time
during the 90 days immediately preceding a sale and who has beneficially owned
the shares for at least two years, would be entitled to sell such shares under
Rule 144(k) without regard to the volume limitation and the other conditions
mentioned above.

We cannot predict the effect that any future sales of shares of common
stock, or the availability of such shares for sale, will have on the market
price of the common stock from time to time. We believe that sales of
substantial numbers of shares of common stock, or the perception that such sales
could occur, would adversely affect prevailing market prices of the common stock
and our ability to raise capital in the future through the sale of additional
securities.

In addition to the outstanding shares of common stock, and the shares
issuable upon the conversion of the outstanding Series A preferred stock upon
the completion of this offering, we have reserved a total of 3,473,071 shares of
common stock for issuance upon exercise of outstanding options. Shares of common
stock issuable in the future could hinder future financings.

LOCK-UP AGREEMENTS AND REGISTRATION RIGHTS

In connection with this offering, our existing officers, directors and
substantially all of our stockholders, except for those persons who will receive
common stock upon the automatic conversion upon completion of this offering of
the Series A preferred stock and the stockholders holding 152,207 shares of
common stock that we have agreed to register for resale within 90 days after
this offering, have agreed with the underwriters that, subject to limited
exceptions, they will not sell or dispose of any of their shares for 180 days
after the date of this prospectus. Morgan Keegan & Company, Inc. may, in its
sole discretion and at any time without notice, release all or any portion of
the shares subject to such restrictions. We have agreed to use our best efforts
to register for resale commencing 90 days from the date of this prospectus the
shares of common stock issuable upon conversion at the completion of this
offering of the outstanding Series A preferred stock and 152,207 shares of
common stock held by three stockholders.

We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, except we
may issue, and grant options to purchase, shares of common stock under our stock
option plan.

41
<PAGE> 46

UNDERWRITING

Under an underwriting agreement, Morgan Keegan & Company, Inc. and The
Robinson-Humphrey Company, LLC are acting as representatives of the underwriters
named below. Under the underwriting agreement, each of the underwriters has
severally agreed to purchase from us the respective number of shares of common
stock set forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Morgan Keegan & Company, Inc. ..............................
The Robinson-Humphrey Company, LLC .........................

---------
Total............................................. 3,700,000
=========
</TABLE>

The underwriting agreement provides that the underwriters' obligations to
purchase shares are subject to conditions contained in the underwriting
agreement, and that if any of the shares are purchased by any underwriter under
the underwriting agreement, then all of the shares that such underwriter has
agreed to purchase under the underwriting agreement must be purchased.

The underwriters have advised us that they propose to offer the shares
directly to the public at the public offering price set forth on the cover page
of this prospectus and to dealers at the public offering price less a selling
concession not in excess of per share. The underwriters may allow, and the
dealers may re-allow, a concession not in excess of per share to brokers
and dealers. After the offering, the underwriters may change the offering price
and other selling terms.

We have granted to the underwriters an option to purchase up to an
additional 555,000 shares, exercisable solely to cover over-allotments, if any,
at the public offering price less the underwriting discounts and commissions
shown on the cover page of this prospectus. The underwriters may exercise this
option at any time until 30 days after the date of the underwriting agreement.
To the extent that the underwriters exercise this option, each underwriter will
be committed, subject to conditions, to purchase the additional shares, and the
company will be obligated under the over-allotment option to sell the shares to
the underwriter.

The following table shows the per share and total public offering price,
the underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no exercise
or full exercise by the underwriters of their over-allotment option.

<TABLE>
<CAPTION>
PER WITHOUT WITH
SHARE OPTION OPTION
-------- -------- --------
<S> <C> <C> <C>
Public offering price..............................
Underwriting discount..............................
Proceeds before expenses...........................
</TABLE>

We estimate our expenses relating to the offering to be $1.0 million. We
will pay to the underwriters underwriting discounts and commissions in an amount
equal to the public offering price per share of common stock less the amount the
underwriters pay to us for each share of common stock.

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute payments that
the underwriters may be required to make with respect to these liabilities.

42
<PAGE> 47

For a period ending 180 days from the date of this prospectus, we and our
executive officers and directors and certain of our stockholders have agreed
that, without the prior written consent of Morgan Keegan & Company, Inc., we
will not:

- offer, pledge, sell, contract to sell or sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or

- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock, whether any such transaction described above is to be settled by
delivery of common stock or other securities, in cash or otherwise.

In addition, during this 180-day period, we have also agreed not to file
any registration statement for the registration of any shares of common stock or
any securities convertible into or exercisable or exchangeable for common stock
without the prior written consent of Morgan, Keegan & Company, Inc., except that
we have agreed to use our best efforts to register for resale commencing 90 days
from the date of this prospectus the shares of common stock issuable upon
conversion of the Series A preferred stock and 152,207 shares of common stock
held by three stockholders.

At our request, the underwriters have reserved up to 10% of the shares in
this offering for sale at the initial public offering price to certain of our
employees, directors and members of their immediate families. These persons must
commit to purchase after the registration statement has become effective but
before the open of business on the following day. The number of shares available
for sale to the general public will be reduced to the extent these individuals
purchase such reserved shares. Any reserved shares not purchased will be offered
by the underwriters to the general public on the same basis as the other shares
offered by this prospectus. To the extent any of our directors acquire reserved
shares, they will be subject to the 180-day lock-up agreement described above.

In connection with this offering, certain underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may create a syndicate short
position by making short sales of our common stock and may purchase shares of
our common stock on the open market to cover syndicate short positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of shares than the underwriters are required to purchase in the offering.
Short sales can be either "covered" or "naked." "Covered" short sales are sales
made in an amount not greater than the underwriters' over-allotment option to
purchase additional shares in the offering. "Naked" short sales are sales in
excess of the over-allotment option. A naked short position is more likely to be
created if the underwriters are concerned that there may be a downward pressure
on the price of the common stock in the open market after pricing that could
adversely affect investors who purchase in the offering. The underwriters may
close out any covered short position by either exercising their over-allotment
or purchasing shares in the open market. In determining the source of shares to
close out the covered short position, the underwriters will consider, among
other things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
over-allotment option. The underwriters would close out any naked short position
by purchasing shares in the open market. The underwriting syndicate may reclaim
selling concessions if the syndicate repurchases previously distributed shares
in syndicate covering transactions, in stabilization transactions or in some
other way or if Morgan Keegan & Company, Inc. receives a report that indicates
clients of such syndicate members have "flipped" the shares. These activities
may have the effect of raising or maintaining the market price of our common
stock or preventing or retarding a decline in the market price of our common
stock. As a result, the price of our common stock may be higher than the price
that might otherwise exist in the open market. The underwriters are not required
to engage in these activities and may end any of these activities at any time.

Neither we nor the underwriters make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the shares. In
43
<PAGE> 48

addition, neither we nor the underwriters make any representation that the
underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
included in this offering in any jurisdiction where action for that purpose is
required. The shares of common stock included in this offering may not be
offered or sold, directly or indirectly, nor may this prospectus or any other
offering material or advertisements in connection with the offer and sales of
any shares of common stock be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with the applicable
rules and regulations of that jurisdiction. Persons who receive this prospectus
are advised to inform themselves about and to observe any restrictions relating
to this offering of our common stock and the distribution of this prospectus.
This prospectus is not an offer to sell or a solicitation of any offer to buy
any shares of common stock included in this offering in any jurisdiction where
that would not be permitted or legal.

Prior to this offering, there has been no established market for our common
stock. The initial public offering price for the shares of common stock offered
by this prospectus will be determined by negotiation between us and the
representative of the underwriters. The factors to be considered in determining
the initial public offering price include the following:

- the history and the prospects for the industry in which we compete,

- our past and present operations,

- our historical results of operations,

- our prospects for future operating results,

- the recent market prices of securities of generally comparable companies,
and

- general conditions of the securities market at the time of this offering.

Application has been made to list our common stock on the Nasdaq National
Market under the symbol "MCEL." In order to meet the requirements for listing
the common stock on the Nasdaq National Market, the underwriters have undertaken
to sell lots of 100 or more shares to a minimum of 2,000 beneficial owners.

44
<PAGE> 49

LEGAL MATTERS

The validity of the shares of common stock we offer will be passed upon for
us by Baker & McKenzie. Various legal matters related to this offering will be
passed upon for the underwriters by Vinson & Elkins L.L.P.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1999 and for the year then ended as set forth in
their report. We have included our financial statements in the prospectus, and
elsewhere in the registration statement, in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act and the rules and regulations
thereunder for the registration of the common stock in this offering. This
prospectus is part of the registration statement. For further information about
us and our common stock, you should refer to the registration statement.
Statements contained in this prospectus as to any contract, agreement or other
document referred to are not necessarily complete. Where the contract or other
document is an exhibit to the registration statement, each statement is
qualified by the provisions of that exhibit.

You can inspect and copy all or any portion of the registration statement
or any reports, statements or other information we file at the public reference
facility maintained by the Securities and Exchange Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information about the
operation of the public reference rooms. Copies of all or any portion of the
registration statement can be obtained from the public reference section of the
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the registration statement is publicly
available through the Securities and Exchange Commission's Internet site located
at www.sec.gov.

45
<PAGE> 50

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheet as of December 31, 1999 and March 31, 2000
(unaudited)............................................... F-3
Statement of Operations for the period from January 1, 1999
(inception) to December 31, 1999, the period from January
1, 1999 (inception) to March 31, 1999 (unaudited), the
three months ended March 31, 2000 (unaudited) and
cumulative amounts from inception (unaudited)............. F-4
Statement of Stockholders' Equity for the period from
January 1, 1999 (inception) to December 31, 1999 and the
three months ended March 31, 2000 (unaudited)............. F-5
Statement of Cash Flows for the period from January 1, 1999
(inception) to December 31, 1999, the period from January
1, 1999 (inception) to March 31, 1999 (unaudited), the
three months ended March 31, 2000 (unaudited) and
cumulative amounts from inception (unaudited)............. F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 51

REPORT OF INDEPENDENT AUDITORS

The Managing Members
Millennium Cell LLC

We have audited the accompanying balance sheet of Millennium Cell LLC (a
development stage company) as of December 31, 1999, and the related statements
of operations, stockholders' equity and cash flows for the period from January
1, 1999 (inception) to December 31, 1999. 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 audit.

We conducted our audit 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 audit provides 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 LLC at
December 31, 1999 and the results of its operations and its cash flows for the
period from January 1, 1999 (inception) to December 31, 1999, in conformity with
accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming
Millennium Cell LLC will continue as a going concern. As more fully described in
Note 2, the Company is a development stage company, and accordingly, has
generated no revenue and incurred operating losses since inception and these
conditions raise substantial doubt about the Company's ability to continue as
going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.

New York, New York /s/ ERNST & YOUNG LLP
May 5, 2000

F-2
<PAGE> 52

MILLENNIUM CELL LLC
(A DEVELOPMENT STAGE ENTERPRISE)

BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 42,165 $ 56,174
Prepaid expenses.......................................... 10,815
---------- -----------
Total current assets........................................ 42,165 66,989
Property and equipment, net................................. 386,587 459,758
Intangible assets, net...................................... 254,500 257,147
Other assets................................................ 63,225 63,725
---------- -----------
$ 746,477 $ 847,619
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 41,700 $ 21,645
Accrued expenses.......................................... 12,432 41,262
Due to affiliate.......................................... 30,000 44,108
Note payable to affiliate................................. 250,000 250,000
---------- -----------
Total current liabilities................................... 334,132 357,015

Refundable grant obligation................................. 193,622 193,622

Commitments and contingencies

Stockholders' equity:
Common stock, $.001 par value; authorized 40,000,000
shares and 23,679,714 shares issued and outstanding.... 23,680 23,680
Additional paid-in capital................................ 1,226,320 1,726,320
Deficit accumulated during development stage.............. (1,031,277) (1,453,018)
---------- -----------
Total stockholders' equity.................................. 218,723 296,982
---------- -----------
$ 746,477 $ 847,619
========== ===========
</TABLE>

See accompanying notes.
F-3
<PAGE> 53

MILLENNIUM CELL LLC
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENT OF OPERATIONS

See accompanying notes.
F-4
<PAGE> 54

MILLENNIUM CELL LLC
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- ------- ---------- ----------- -------------
<S> <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
Net loss......................... (421,741) (421,741)
---------- ------- ---------- ----------- -----------
Balance at March 31, 2000........ 23,679,714 $23,680 $1,726,320 $(1,453,018) $ 296,982
========== ======= ========== =========== ===========
</TABLE>

See accompanying notes.
F-5
<PAGE> 55

MILLENNIUM CELL LLC
(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM CUMULATIVE
JANUARY 1, 1999 JANUARY 1, 1999 THREE MONTHS AMOUNTS
(INCEPTION) TO (INCEPTION) TO ENDED FROM
DECEMBER 31, 1999 MARCH 31, 1999 MARCH 31, 2000 INCEPTION
----------------- --------------- --------------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................. $(1,031,277) $ (161,778) $ (421,741) $(1,453,018)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation....................... 43,504 -- 20,688 64,192
Amortization....................... 13,503 3,250 4,351 17,854
Changes in operating assets and
liabilities:
Prepaid expenses................ -- (10,815) (10,815)
Other assets.................... (63,225) -- (500) (63,725)
Accounts payable................ 41,700 7,839 (20,055) 21,645
Accrued expenses................ 12,432 -- 28,830 41,262
Due to affiliate................ 30,000 30,000 14,108 44,108
----------- ---------- ---------- -----------
Net cash used in operating
activities......................... (953,363) (120,689) (385,134) (1,338,497)
INVESTING ACTIVITIES
Purchase of property and equipment... (330,091) -- (93,859) (423,950)
Patent registration costs............ (118,003) (25,880) (6,998) (125,001)
----------- ---------- ---------- -----------
Net cash used in investing
activities......................... (448,094) (25,880) (100,857) (548,951)
FINANCING ACTIVITIES
Proceeds from sale of stock.......... 1,250,000 925,000 500,000 1,750,000
Proceeds from grant.................. 193,622 193,622
----------- ---------- ---------- -----------
Net cash provided by financing
activities......................... 1,443,622 925,000 500,000 1,943,622
----------- ---------- ---------- -----------
Net increase in cash and cash
equivalents........................ 42,165 778,431 14,009 56,174
Cash and cash equivalents, at
inception.......................... -- -- 42,165 --
----------- ---------- ---------- -----------
Cash and cash equivalents, end of
period............................. $ 42,165 $ 778,431 $ 56,174 $ 56,174
=========== ========== ========== ===========
</TABLE>

NON-CASH TRANSACTIONS

In January 1999, the Company received licenses and equipment from GP
Strategies ("GPS") in exchange for a note payable to GPS for $250,000.

See accompanying notes.
F-6
<PAGE> 56

MILLENNIUM CELL LLC
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND DESCRIPTION OF BUSINESS

Millennium Cell LLC (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) as a limited liability company with an initial cash
capital contribution of $1.25 million of which GPS contributed $50,000. In
general, the members are not personally liable for any liabilities of the
Company, and the common unit holders share in the profits and losses of the
Company on a pro rata basis. (See also Note 2)

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 to be allocated to the assets
acquired is limited to the $250,000 note payable.

The License covers the use of the Invention to make, use and sell licensed
products within the licensed territory in perpetuity. The Agreement includes a
royalty (see Note 9) based on annual sales of the Company relating to products
manufactured or produced using the Invention.

NOTE 2 -- BASIS OF PRESENTATION

The Company has incurred an operating loss and negative cash flows since
inception and expects to incur additional operating losses and negative cash
flows in the future as it continues to develop technology. The Company's
financial statements have been presented on the basis that it is a going
concern, which contemplates continuity of operations, realization of assets and
the satisfaction of liabilities in the normal course of business. The Company's
continued existence, however, is dependent on its ability to obtain additional
financing in the next fiscal year and successful commercial development of a
marketable product. These circumstances raise substantial doubt about the
Company's ability to continue as a going concern. Management plans to obtain
additional financing in the next fiscal year through private and public equity
offerings to continue operations, including the ongoing development of
technology. The Company has obtained preferred equity financing totalling
approximately $2.2 million in May 2000. Additionally, the Company plans to raise
additional financing through an initial public offering in the third quarter of
2000.

There can be no assurance that the Company will achieve its operating plan
or that it will be able to obtain financing to provide the liquidity necessary
for the Company to continue its operations. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

The unaudited interim financial statements reflect all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods presented.

F-7
<PAGE> 57
MILLENNIUM CELL LLC
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company is authorized to issue 10,000 units. Each unit holder is
entitled to one vote for each unit held, and to receive dividends if and when
declared by the Managing Members.

On April 25, 2000, the Company converted from a limited liability company
to a C corporation with one class of common stock and one class of preferred
stock. All of the outstanding equity interests of the limited liability company
were converted on a one for one basis into shares of common stock of the new
corporation. As of April 25, 2000 a 2,492.6 for one stock split of the
outstanding common stock was also completed. All membership unit amounts in the
accompanying financial statements have been restated to reflect the
aforementioned conversion.

In connection with this conversion, the Company would then be subject to
state and federal income taxes and will account for income taxes under SFAS 109,
"Accounting for Income Taxes". Net deferred tax assets would be fully reserved
with a valuation allowance due to the uncertainty regarding the realization of
such deferred tax assets.

NOTE 3 -- 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..................................... 5 years
Furniture and fixtures...................................... 5 years
Leasehold improvements...................................... 5 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.

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.

Patents

Certain costs associated with obtaining and licensing patents are
capitalized as incurred and are amortized on a straight-line basis over their
estimated useful lives up to 17 years. Amortization of such costs begins once
the patent has been issued. Costs associated with patents are capitalized as
incurred and

F-8
<PAGE> 58
MILLENNIUM CELL LLC
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

amortized over the remaining life. The Company evaluates the recoverability of
its patent costs at each balance sheet date based on estimated undiscounted
future cash flows.

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."

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 organized as a limited liability company, which is treated
as a partnership for federal income tax purposes. Accordingly, no provision for
federal income tax and no provision for state income tax in states recognizing
the limited liability company (i.e., partnership) tax status is required. (Also
see Note 2)

Due to Affiliate

Amounts due to affiliates are primarily comprised of amounts to be
reimbursed to GPS.

Use of Accounting Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles 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.

NOTE 4 -- PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 1999:

<TABLE>
<S> <C>
Machinery and equipment..................................... $321,211
Furniture and fixtures...................................... 38,878
Leasehold improvements...................................... 70,002
--------
430,091
Accumulated depreciation.................................... (43,504)
--------
Property and equipment, net................................. $386,587
========
</TABLE>

F-9
<PAGE> 59
MILLENNIUM CELL LLC
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5 -- INTANGIBLE ASSETS

Patent and license costs consist of the following at December 31, 1999:

<TABLE>
<S> <C>
Patent and license costs.................................... $268,003
Less accumulated amortization............................... (13,503)
--------
$254,500
========
</TABLE>

NOTE 6 -- 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 at December 31, 1999. 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 7 -- PAYABLE TO AFFILIATE

In connection with the GPS Agreement, the Company entered into a 6% note
payable to GPS, which is payable with interest on September 25, 2001. The
Company plans to repay the note with proceeds of the private placement completed
in the second quarter of 2000.

NOTE 8 -- COMMITMENTS AND CONTINGENCIES

The Company leases office space under an operating lease that expires
September 30, 2004. Future minimum lease payments under the operating lease
relates to the Company's principal office. The lease requires 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 under the operating lease
at December 31, 1999 are as follows:

Rent expense was approximately $23,000 for the year ended December 31,
1999.

In connection with the Agreement, the Company agreed to make the following
royalty payments to GPS, based on eventual sales derived from the Invention: 5%
of the first $10 million of sales, 4% of the second $15 million of sales, 2 1/2%
of the third $25 million of sales and 1% of any sales thereafter. The Company
also agreed with GP Strategies to negotiate in good faith at a future date to
exchange the royalty payments for an equity interest in the Company.

F-10
<PAGE> 60
MILLENNIUM CELL LLC
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9 -- SUBSEQUENT EVENTS (UNAUDITED)

On April 25, 2000, the Company converted from a limited liability company
to a C corporation. The new corporation is authorized to issue a total of
45,000,000 shares of which 40,000,000 will be common stock and 5,000,000 will be
preferred.

In the first quarter of 2000 the members made a capital contribution in the
amount of $500,000 to the Company to fund additional working capital
requirements.

In May 2000, in exchange for approximately $2.2 million, the Company sold
759,368 shares of Series A preferred stock, which will automatically convert
into 759,368 shares of common stock upon completion of the Company's planned
initial public equity offering. As the issuance price is substantially less than
the initial public offering price the Company will incur additional preferred
dividends of approximately $6.2 million from the date of issuance to the initial
public offering. The holders of each share of Series A preferred stock shall
have the right to one vote for each share of common stock.

Also in May 2000 (as amended in August 2000), the Company terminated the
royalty agreements 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 will result in a non cash
charge of approximately $2.8 million.

The Company has issued 3,223,071 of options for shares of common stock to
employees and directors subsequent to March 31, 2000 with exercise prices
ranging from $2.90 per share to the initial public offering price. These
issuances will result in non cash charges of approximately $25.5 million over
the three-year vesting period of the options for the difference between the
exercise prices and the initial public offering price.

F-11
<PAGE> 61

[MILLENNIUM CELL LOGO]

<PAGE> 62

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
, 2000

[MILLENIUM CELL LOGO]

3,700,000 SHARES OF COMMON STOCK

------------------------
PROSPECTUS
------------------------

MORGAN KEEGAN & COMPANY, INC.
THE ROBINSON-HUMPHREY COMPANY

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

We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made after the date of this prospectus shall create an implication that
the information contained in this prospectus or the affairs of Millennium Cell
Inc. have not changed since the date hereof.

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

Until , 2000 (25 days after the date of this prospectus), all
dealers that effect transactions in these shares of common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 63

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated costs and expenses, other than
the underwriting discount, payable by the registrant in connection with the sale
of the common stock being registered.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 13,480
NASD filing fee............................................. 5,506
Nasdaq National Market listing fee.......................... 75,000
Legal fees and expenses..................................... 350,000
Accounting fees and expenses................................ 225,000
Printing and expenses....................................... 300,000
Miscellaneous............................................... 31,014
----------
Total..................................................... $1,000,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

In accordance with Section 145 of the Delaware General Corporation Law,
Article 11 of our certificate of incorporation provides that no director of
Millennium Cell shall be personally liable to Millennium Cell or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the director's duty of loyalty to
Millennium Cell or its stockholders, (2) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (3) in
respect of unlawful dividend payments or stock redemptions or repurchases or (4)
for any transaction from which the director derived an improper personal
benefit.

Article V of our by-laws provides for indemnification by Millennium Cell of
its officers and certain non-officer employees under certain circumstances
against expenses, including attorneys fees, judgments, fines and amounts paid in
settlement, reasonably incurred in connection with the defense or settlement of
any threatened, pending or completed legal proceeding in which any such person
is involved by reason of the fact that such person is or was an officer or
employee of the registrant if such person acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
Millennium Cell, and, with respect to criminal actions or proceedings, if such
person had no reasonable cause to believe his or her conduct was unlawful.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since its formation in December 1998, Millennium Cell has issued the
following securities that were not registered under the Securities Act of 1933,
as amended (the "Securities Act"). Millennium Cell relied on Section 4(2) of the
Securities Act or Regulation D promulgated thereunder relative to sales by an
issuer not involving a public offering.

In December 1998, Millennium Cell LLC issued membership interests for an
aggregate purchase price of $1.25 million to nine accredited investors. In April
2000, Millennium Cell LLC was converted into a Delaware corporation and these
membership interests were converted into 23,679,714 shares of common stock
issued to nine shareholders (giving effect to the 2,492.6-for-one stock split
effected in April 2000). 830,298 of these shares of common stock were
subsequently canceled.

In May 2000, Millennium Cell Inc. issued an aggregate of 759,368 shares of
its Series A Convertible Preferred Stock to 14 accredited investors at a
purchase price of $2.90 per share for cash proceeds in the amount of $2.2
million.

In August 2000, Millennium Cell Inc. issued 206,897 shares of common stock
to Steven C. Amendola in consideration of certain intellectual property rights.

II-1
<PAGE> 64

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S> <C>
1.1+ -- Form of Underwriting Agreement
2.1+ -- Certificate of Conversion of Millennium Cell LLC to
Millenium Cell Inc.
3.1+ -- Certificate of Incorporation of Millennium Cell Inc.
3.2+ -- By-Laws of Millennium Cell Inc.
3.3+ -- Certificate of Amendment to Certificate of Incorporation of
Millennium Cell Inc.
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.
4.2+ -- Specimen stock certificate representing the Registrant's
Common Stock
5.1+ -- Opinion of Baker & McKenzie regarding the legality of the
securities being registered
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
10.2+ -- Flex/Office Lease Agreement, dated as of June 9, 1999, by
and between Ten Thirty-Five Associates, Limited Partnership
and Millennium Cell LLC
10.3 -- Amended and Restated Agreement, dated as of August 1, 2000,
by and among Millennium Cell Inc., GP Strategies Corporation
and Steven Amendola
10.4+ -- Assignment, dated as of May 24, 2000, by Steven Amendola in
favor of Millennium Cell Inc.
10.5+ -- Employment Agreement, dated as of May 16, 2000, by and
between Stephen S. Tang and Millennium Cell Inc.
10.6 -- Employment Agreement, dated as of August 2, 2000, by and
between Steven C. Amendola and Millenium Cell Inc.
10.7+ -- Amended and Restated Millennium Cell Inc. 2000 Stock Option
Plan
10.8+ -- Proprietary Rights Agreement, effective as of May 1, 2000,
between DaimlerChrysler Corporation and Millennium Cell Inc.
10.9+ -- Letter Agreement, dated May 24, 2000, between Millennium
Cell Inc. and GP Strategies Corporation
23.1 -- Consent of Ernst & Young L.L.P.
23.2+ -- Consent of Baker & McKenzie (included in Exhibit 5.1)
24.2+ -- Powers of Attorney (included on Page II-4)
27.1+ -- Financial Data Schedule
</TABLE>

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

(b) FINANCIAL STATEMENT SCHEDULES.

Schedules have been omitted because the information required to be included
is not applicable.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

II-2
<PAGE> 65

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act of 1933, shall be deemed to be part
of this registration statement as of the time it was declared effective.

(2) for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 66

SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Eatontown, state of New
Jersey, on August 2, 2000.

MILLENNIUM CELL INC.

By: /s/ STEPHEN S. TANG
--------------------------------------
Name: Stephen S. Tang
Title: Chief Executive Officer and
President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Stephen S. Tang and Steven C. Amendola, or either
of them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments and amendments pursuant to Rule 462 under the Securities Act of 1933)
to this Registration Statement, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ STEPHEN S. TANG Chief Executive Officer, August 2, 2000
--------------------------------------------------- President and Director
Stephen S. Tang (Principal Executive,
Accounting and Financial
Officer)

* Director August 2, 2000
---------------------------------------------------
Steven C. Amendola

* Director August 2, 2000
---------------------------------------------------
G. Chris Andersen

Director
---------------------------------------------------
Kenneth R. Baker

* Director August 2, 2000
---------------------------------------------------
William H. Fike

* Director August 2, 2000
---------------------------------------------------
Alexander MacLachlan

* Director August 2, 2000
---------------------------------------------------
Zoltan Merszei

* Director August 2, 2000
---------------------------------------------------
H. David Ramm

* Director August 2, 2000
---------------------------------------------------
James L. Rawlings

*By: /s/ STEPHEN S. TANG
---------------------------------------------
Stephen S. Tang
Attorney-in-Fact
</TABLE>

II-4
<PAGE> 67

EXHIBIT INDEX

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