ELECTRO ENERGY AND IN-Q-TEL ANNOUNCE STRATEGIC RELATIONSHIP AND DEVELOPMENT AGREEMENT FOR BIPOLAR LITHIUM BATTERY TECHNOLOGY

August 16, 2004
Danbury, CT

Electro Energy, Inc. (OTC Bulletin Board: EEEI – News), a leading provider of advanced battery technologies and associated systems, and In-Q-Tel, a private not-for-profit venture group funded by the Central Intelligence Agency, today announced the establishment of a strategic relationship, including a technology development agreement.

The strategic relationship began in March 2004, prior to the company going public. This included In-Q-Tel funding of technology development for the application of Electro Energy’s bipolar design to lithium battery chemistry and other advanced battery-power solutions to serve the national security community, as well as the issuance of securities.

“In-Q-Tel invested in Electro Energy because their unique battery technology promises better performance to both public and private sector users across a wide variety of applications,” said Gilman Louie, CEO of In-Q-Tel.

Martin Klein, CEO of Electro Energy, said, “Our partnership with In-Q-Tel funds the extension of our patented bipolar cell design to lithium battery chemistry, an important addition to the company’s capabilities. We are very pleased with the confidence that In-Q-Tel has shown in our company, and we felt our shareholders would be glad to know about this relationship. We believe the resulting product will be superior to existing products for both government and commercial power applications.”

Electro Energy’s bipolar cell design provides superior performance in energy capacity, size and weight vs. current commercially available battery products. The design of Electro Energy’s products is significantly simpler and less costly than conventional cylindrical and prismatic technologies. Among its advantages is the ability to discharge efficiently at exceptionally high rates, compact packaging and lower manufacturing costs. These factors can be critical in applications such as military communications, military aircraft, and space and medical applications, as well as power-consuming commercial applications such as hybrid electric cars, electric bicycles and scooters, cordless power tools, load regulation and stationary energy storage.

About Electro Energy Inc.
Electro Energy (http://www.electroenergyinc.com) founded in 1992, is an engineering, technology, and manufacturing organization, dedicated to meeting customer needs with advanced battery technologies and associated systems. Electro Energy technology provides superior battery performance in energy capacity, high voltage, size and weight vs. competitors. Electro Energy products are used in a variety of spacecraft and aircraft. Electro Energy has also targeted the power tool and hybrid vehicle markets.

In addition to lithium battery chemistry, Electro Energy focuses on the development and ultimate commercialization of a bipolar nickel-metal hydride (BP Ni-MH) rechargeable battery, for which seven U.S. patents and four foreign patents have been issued and for which three additional patent applications are in process. Since its founding, Electro Energy has developed and owns both the patented design of BP Ni-MH batteries and the patented production process for their manufacture. Electro Energy has produced and delivered prototype BP Ni-MH batteries for the U.S. Army (field radios and silent watch applications), NASA (satellites), Partnership for a New Generation Vehicle (hybrid vehicles), NAVAIR and U.S. Air Force (F-18 and F-16 Aircraft), National Institute of Health (NIH) (heart assist pumps), and the Department of Energy (DOE) (distributed energy and power quality), that have demonstrated performance advantages over existing technologies.

Electro Energy’s Colorado Springs facility, Electro Energy Mobile Products Inc., acquired in 2003 from privately held Eagle Picher Technologies, is a supplier of Super NiCd’s for U.S. Government satellite systems, and vented nickel-cadmium batteries for legacy military aircraft such as the B-52, B-1 and Cobra Helicopters and industrial products. The Colorado Springs operation is also developing thermal batteries and lithium batteries and will participate in the manufacture of BP Ni-MH products.

Certain statements in this news release may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the safe harbor created by those rules. All statements, other than statements of fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of the companies, are forward- looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Technical complications that may arise could prevent the prompt implementation of any strategically significant plan(s) outlined above. The companies caution that these forward-looking statements are further qualified by other factors including, but not limited to, those set forth in Electro Energy’s Form 8-K and MCG Diversified, Inc.’s Form 10-QSB for the period ended March 31, 2004, filed with the U.S. Securities and Exchange Commission (available at http://www.sec.gov). Electro Energy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Pursuant to a June 1, 2004 agreement, Consulting For Strategic Growth I, Ltd. (“CFSG”) provides Electro Energy with consulting, business advisory, investor relations, public relations and corporate development services, for which CFSG receives a fixed monthly fee for the duration of the agreement. Independent of CFSG’s receipt of cash compensation from Electro Energy, CFSG may choose to purchase the common stock of Electro Energy and thereafter sell those shares at any time it deems appropriate to do so.