The Dow Chemical Company (“Dow”) has elected to purchase $1.25 million of Millennium Cell’s Series B-1 Convertible Preferred Stock under an option which became exercisable upon the achievement of the first milestone under the joint development agreement earlier this month.
Dow also committed to continue its human resource commitment towards achievement of the second milestone. Dow has expressed its intent to maintain an investment in Millennium Cell and may periodically liquidate some or all of the shares it acquired at the inception of the joint development program.
H. David Ramm, Millennium Cell’s CEO commented, “We are very encouraged by the performance of our respective technical and business teams this past year and look forward to Dow’s increasing involvement as we work with our licensees to develop hydrogen batteries for portable device markets. Dow’s capabilities will be instrumental as we work to significantly increase our performance advantage over traditional batteries.”
“Dow continues to focus on alternative energy technologies with a special emphasis on applications that can lead to early adoption in commercial applications. The use of hydrogen fuel cells is a promising area that requires improved technology for fuel handling and storage to support commercial applications. Millennium Cell has demonstrated steady progress in this area as evidenced by the achievement of the first of the four milestones in our collaboration agreement. Because of this progress, Dow is pleased to continue its collaboration with Millennium Cell, and we look forward to working toward the achievement of the next milestone,” said James H. Plonka, Dow Vice President, Corporate Venture Capital.
In February 2005, Millennium Cell and Dow entered into a three-year, milestone-driven joint development program to collaborate on the development and commercialization of portable fuel cell systems for use in consumer electronics and military applications. These hydrogen batteries are based on Millennium Cell’s patented Hydrogen on Demand technology and proton exchange membrane fuel cells to convert hydrogen and oxygen to electricity.
The milestones under the program include securing a development funding contract from the military and the subsequent development, manufacture and delivery of a prototype to meet the specifications of that contract. Since the program’s inception, Dow has been providing a combination of business and technical resources to aid in the achievement of these milestones. As each milestone is achieved, Dow’s resource commitment increases, as detailed in the definitive agreements signed by both companies.
Upon achievement of each of the milestones, Dow is entitled to certain equity grants from Millennium Cell and, provided Dow has made all prior minimum investments, will have the right to purchase additional equity in Millennium Cell through cash investments up to a total of $5 million over the four milestones.
At a closing held yesterday, Dow purchased 71,429 shares of Series B-1 Preferred Stock for $1.25 million, and received detachable warrants to purchase 178,571 shares of the Company’s common stock with an exercise price of $2.10 per share. Separately, Millennium Cell issued 138,150 shares of Series A2-1 Preferred Stock that were earned by Dow through human resource and intellectual property contributions toward achievement of the first milestone. The number of Series A Preferred shares issued was determined by subtracting the number of Series B-1 Preferred shares and related warrants purchased from 4% of the Company’s fully diluted shares outstanding.
Millennium Cell has filed with the Securities and Exchange Commission a Current Report on Form 8-K that sets forth additional information with respect to Dow’s purchase of Series B Convertible Preferred Stock and related warrants as well as the grant of Series A Preferred Stock in consideration for the first milestone achievement.
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