| As filed with the Securities and Exchange Commission on [_____________] | Registration No. 333- |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the registration statement becomes effective.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. |_|
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, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please 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 registration statement pursuant to General Instruction 1.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. |_|
If this Form is a post effective amendment to a registration statement filed pursuant to General Instruction 1.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. |_|
| Title Of Each Class of Securities To Be Registered | Amount To Be Registered | Proposed Maximum Offering Price Per Share | Proposed Maximum Aggregate Offering Price | Amount Of Registration Fee |
| Common Stock | 3,473,684 (1) | $ 2.14 (2) | $ 7,433,684 | $ 795.40 |
| Common Stock | 1,745,454 (3) | $ 2.14 (2) | $ 3,735,272 | $ 399.67 |
| Common Stock | 750,000 (4) | $ 2.14 (2) | $ 1,605,000 | $ 171.74 |
| (1) | The number of shares of common stock registered hereunder is based upon the maximum number of shares of common stock of the Registrant issuable upon conversion of the notes and the exercise of the warrants acquired in connection with the exercise of the additional investment rights. |
| (2) | Pursuant to rule 457(c), registration fee calculations are estimated based on the $2.14 Nasdaq Official Closing Price on June 22, 2006, which is within 5 business days prior to the initial filing of this registration statement, using the fee rate of $107.00 per million dollars of the aggregate offering market price at that date. |
| (3) | Pursuant to Rule 416 of the Securities Act of 1933, as amended, such shares shall include (i) an indeterminate number of shares of common stock that may become issuable as a result of stock splits, stock dividends, recapitalizations and similar events, and (ii) an additional number of shares of common stock representing the Registrant’s good faith estimate of the maximum number of additional shares that may become issuable pursuant to contractual agreement with the selling shareholders, which consists of payment of interest on senior secured convertible promissory notes or upon conversion of the convertible notes together with such indeterminate number of shares as may be issuable pursuant to anti-dilution or make-whole provisions contained therein. |
| (4) | Common Stock to be registered on behalf of Lithium Nickel Asset Holding I, Inc. in connection with shares it acquired from the Company in April, 2006. |
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, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
This prospectus relates to the public offering, which is not being underwritten, of 5,969,138 shares of common stock, 750,000 of which are outstanding, 2,894,737 of which may be issued upon conversion of outstanding senior secured convertible notes due 2010, held by our selling shareholders, the original aggregate principal amount of which is $11.0 million (the “Convertible Notes”), 578,947 of which may be issued as the result of the exercise of warrants held by certain of our selling shareholders, and 1,745,454 of which may be issued as payment of principal and interest on the Convertible Notes, and other related potential issuances.
The selling shareholders may offer for resale through this prospectus the shares of common stock at various times at market prices prevailing at the time of sale or at privately negotiated prices. The selling shareholders may resell the common stock to or through underwriters, broker-dealers, or agents, who may receive compensation in the form of discounts, concessions, or commissions. We will not receive any of the proceeds from the resale of the common stock offered through this prospectus. We will bear all costs, expenses, and fees in connection with the registration of the shares. The selling shareholders will bear all commissions and discounts, if any, attributable to the sales of the shares.
The selling shareholders identified in this prospectus, or their pledgees, donees, permitted transferees or other successors-in-interest, may offer the shares from time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices.
We do not know when or in what amount a selling shareholder may offer shares for sale, including whether a selling shareholder will sell any or all of the shares offered by this prospectus.
Shares of our common stock are quoted on the Nasdaq Capital Market under the symbol “EEEI.” The last official closing price on January 18, 2007 was $1.51 per share
Neither the United States Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is January 22, 2007
| Page | ||||
| Summary | 1 | |||
| Recent Developments | 2 | |||
| Risk Factors | 3 | |||
| Forward-Looking Statements | 12 | |||
| Use Of Proceeds | 12 | |||
| Selling Shareholders | 13 | |||
| Plan Of Distribution | 15 | |||
| Legal Matters | 17 | |||
| Experts | 17 | |||
| Information Incorporated By Reference | 17 | |||
| Indemnification | 18 | |||
| About This Prospectus | 18 | |||
| Where You Can Find More Information | 18 | |||
You should rely only on the information contained or incorporated by reference in this prospectus and in any accompanying prospectus supplement. We have not authorized anyone to provide you with different information.
The shares of common stock are not being offered in any jurisdiction where the offer is not permitted.
You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of the prospectus or any prospectus supplement.
This prospectus is part of a registration statement that we filed with the SEC, utilizing a “shelf” registration process or continuous offering process. Under this shelf registration process, the selling shareholders may, from time to time, sell the securities described in this prospectus in one or more offerings. This prospectus provides you with a general description of the securities that may be offered by the selling shareholders. Each time a selling shareholder sells securities, the selling shareholder is required to provide you with this prospectus and, in certain cases, a prospectus supplement containing specific information about the selling shareholder and the terms of the securities being offered. That prospectus supplement may include additional risk factors or other special considerations applicable to those securities. Any prospectus supplement may also add, update, or change information in this prospectus. If there is any inconsistency between the information in this prospectus and any prospectus supplement, you should rely on the information in that prospectus supplement. You should read both this prospectus and any prospectus supplement together with additional information described under “Where You Can Find More Information.”
As used in this prospectus, the terms the “Company”, “we,” “our,” and “us” may, depending on the context, refer to Electro Energy Inc., including its subsidiaries.
The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this prospectus or incorporated by reference in this prospectus and may not contain all the information that is important to you.
Our Company
Electro Energy Inc. is a Florida corporation, which was originally formed on December 29, 1993 under the name MCG Diversified, Inc. (“MCG”). Effective June 9, 2004, pursuant to an Agreement of Merger and Plan of Reorganization, dated May 7, 2004 (the “Merger Agreement”), among Electro Energy, Inc. (“EEI”), a privately held Delaware corporation, MCG and EEI Acquisition Corp. (“Merger Sub”), a Delaware corporation and wholly owned subsidiary of MCG, the Merger Sub merged with and into EEI, with EEI remaining as the surviving corporation (the “Merger”). On September 29, 2004, EEI changed its name to EEI Technologies, Inc.
EEI Technologies, Inc. (“EEI”) has been primarily engaged in the research and development of battery technologies since 1992. Historically, EEI has performed research and development services under fixed price contracts primarily with the U.S. military and government agencies. The business strategy has until recently been to seek government funding to support the development of our battery concepts with the intent to use the technology developed as a springboard into commercial applications and manufacturing. The development work has focused on basic materials technology and prototype development of specialty bipolar nickel-metal hydride batteries and bipolar lithium-ion batteries using a unique, patented flat wafer cell design, in addition to low maintenance nickel-cadmium batteries. The cells can be made in any shape and are therefore applicable to a wide variety of military and commercial applications. Wafer cells are stacked one on top of another to create multi-cell batteries with the required energy capacity and voltage for a given application. EEI has supplied prototype batteries to various commercial and government customers for use in military communications, satellites, aircraft auxiliary power, standby power, and medical applications.
Management is currently researching commercial market opportunities while pursuing additional development activities. Management is targeting the automotive industry, where battery technology is needed to support the rapidly growing hybrid electric vehicle market, the plug-in electric vehicle market, and manufacturers upgrading to more powerful 42 volt starting batteries from the 12 volt systems used today. The electric bicycle and scooter market is growing, particularly in Asia where governments are encouraging a switch to electric power to reduce pollution. Management believes that high performance electric scooters have a market in the U.S. also and is searching for a partner in this market. The cordless power tool market is rapidly growing and management believes EEI batteries provide better energy capacity and a better environmental profile for these applications as well.
EEI is also engaged in the manufacture of specialty battery products. In October 2003, EEI acquired the power systems operations of EaglePicher Technologies, LLC (“EaglePicher”) in Colorado Springs, Colorado. EaglePicher is a diversified company engaged in the manufacture of specialty batteries, chemicals and electronic materials. The Colorado Springs operation had been established by EaglePicher in 1976 and has been primarily engaged in the manufacture of specialty nickel-cadmium (“Ni-Cd”) batteries for satellites and aircraft applications. As a result of an internal restructuring of priorities, EaglePicher management decided to divest its Colorado Springs battery operation to EEI in 2003. For EEI, the acquisition provided an established product line, capacity for manufacturing, personnel with complementary skills broadening the chemistry portfolio and manufacturing opportunities, and one of the few facilities certified to manufacture products for manned spaceflight. The specialty battery products that the Company produces at this facility include components for battery power systems used in satellites and aircraft in connection with a five year supply agreement with EaglePicher, as well as to fulfill custom orders from government agencies.
Private Placement of Notes and Warrants
On March 31, 2006, we entered into a note and warrant purchase agreement with seven institutional accredited investors (the “Investors”) and, on April 5, 2006, we completed the note purchase transaction, pursuant to which we issued and sold to the Investors $11,000,000 in aggregate principal amount of 8.5% senior secured convertible notes due 2010 and related warrants to purchase common stock, the shares of common stock into which such securities may be converted or which may be purchased upon exercise are being registered hereunder. The notes convert into shares of our common stock at any time and from time to time on or before March 31, 2010, initially at a conversion price of $3.80 per share (equivalent to an initial conversion rate of approximately 263 shares of common stock per $1,000 in principal amount of notes), which could potentially be adjusted in accordance with a 24-month reset provision and certain anti-dilution adjustments. At the initial conversion price, the notes would convert into an aggregate of 2,894,737 shares of our common stock, and the warrants would be exercised into an aggregate of 578,947 shares of our common stock, all of which are being registered hereunder.
Accordingly, this prospectus covers, in part, the resale by the selling shareholders of shares of our common stock issued upon conversion of the selling shareholders’ convertible notes and the exercise of the warrants issued to them in connection therewith.
In addition, under the terms of the convertible notes, we are required to register the underlying securities within a definitive time period. As a result of the Securities and Exchange Commission staff comments to certain of our previous filings under the Securities Exchange Act of 1934, the registration of such underlying securities were delayed until the comments were resolved. We have since resolved the comments; however, we were required to pay approximately $440,000 in penalty payments to the note holders.
Acquisition of Manufacturing Assets
On April 5, 2006, we completed our acquisition of certain assets relating to the manufacture of lithium-ion and nickel based rechargeable cells and batteries from Lithium Nickel Asset Holding Company I, Inc., a Delaware corporation (the “Seller”), pursuant to the terms of an Asset Purchase Agreement by and among us, Electro Energy Florida, LLC, f/k/a EEI Acquisition Co., LLC, our wholly-owned subsidiary (“Acquisition Co.”), and the Seller. The total purchase price for the assets consisted of 5,750,000 unregistered shares of our common stock (the “Consideration Shares”) and a six-year warrant (the “Acquisition Warrant”) to purchase up to 2,000,000 shares of our common stock (the “Acquisition Warrant Shares”) at an exercise price of $7.00 per share. Of the total number of shares, 1,000,000 Consideration Shares will be held in escrow pursuant to an escrow agreement entered into at the closing in order to secure the Seller’s indemnification obligations under the Asset Purchase Agreement. A condition of the transaction was our agreement to include 750,000 Consideration Shares in this registration statement. In addition, we agreed to include 400,000 Consideration Shares in any subsequent registration statement in exchange for the forfeiture of 500,000 warrants by the Seller. The purchase price was determined as a result of arm’s length negotiations between the parties.
At the closing, Acquisition Co. and the Seller also entered into lease agreements pursuant to which Acquisition Co. agreed to lease from the Seller certain real property owned by the Seller, located at 12781 N.W. Highway 441, Alachua, Florida (near Gainesville). In connection with the lease agreements, and in addition to rental payments, we issued to the Seller a four-year warrant (the “Lease Warrant”) to purchase 1,000,000 shares of our common stock (the “Lease Warrant Shares”) at an exercise price of $7.00 per share.
In addition, 4,600,000 Consideration Shares, all of the Acquisition Warrant Shares and all of the Lease Warrant Shares are subject to a lock-up agreement restricting the ability of the Seller to transfer the Consideration Shares and warrants for a period of one year, and providing for a partial release for transfer in the second year after the closing.
We intend to use the acquired assets to develop and manufacture battery technologies, products and systems.
Neither the Seller nor any of its affiliates has had any material relationship or association with us.
We amended our previously filed Forms 10-QSB for the second quarter ended June 30, 2006 and the third quarter ended September 30, 2006 to restate our accounting for the April 2006 purchase of certain battery manufacturing related assets located in Alachua County, Florida. The determination was made by our Board of Directors after consultation with our Chief Financial Officer, senior management, financial advisors and independent registered public accounting firm following the receipt of comments from the Securities and Exchange Commission staff.
The effect of the restatement was to increase property and equipment by $9,039,821 with a corresponding increase in stockholders' equity as a result of revaluing the 5,750,000 shares of our common stock issued in connection with the asset purchase. There was no effect on our results of operations or basic and diluted earnings per share for the periods. Cash flows for the periods did not change, except for an increase of $9,039,821 in stock issued in connection with asset purchase in the supplemental disclosures of non-cash activities. The foregoing restatement adjustments did not affect our reported cash and cash equivalents balance during the reported periods.
Recent Changes in Management and Board of Directors
On November 14, 2005, the Board of Directors elected Dr. Robert Hamlen to fill a vacant position as a Director, effective November 14, 2005, and to hold such office until the next annual election of directors and until his successor is duly elected and qualified. There are no family relationships between Dr. Hamlen and any of the other executive officers or directors of the Registrant. During the past two years, the Registrant has not been a party to any transactions, or proposed transactions, that Dr. Hamlen has, or had, a material interest.
The Board of Directors approved the appointment of Michael Reed as the Company’s Chief Executive Officer and President, and on May 30, 2006, Mr. Reed accepted the position, replacing Martin G. Klein. Mr. Klein will remain Chairman of the Company’s Board of Directors. Mr. Reed, age 56, will also remain as the Chief Operating Officer and President of EEI Technologies, Inc., a wholly owned subsidiary of the Company, a position he has held since May 2005. The terms, including compensation, of Mr. Reed’s employment with the Company remain unchanged.
On August 14, 2006, the Board of Directors elected William Wylam as a Director, effective August 14, 2006, who shall hold office until the next annual election of directors and until his successor is duly elected and qualified. Mr. Klein introduced Mr. Wylam as a potential candidate to the Company. The Board also granted to Mr. Wylam options to purchase 25,000 shares of common stock of the Company in accordance with the Company's 2005 Stock Option Plan. There are no family relationships between Mr. Wylam and any of the other executive officers or directors of the Company.
On August 1, 2006, the Company had previously entered into a consulting agreement (the "Consulting Agreement") with Mr. Wylam. The Consulting Agreement provides that Mr. Wylam will consult with the Company on an ongoing basis. Under the terms of the Consulting Agreement, Mr. Wylam will be compensated at the rate of $1,500 per month, plus $1,000 for each full day during which Mr. Wylam has rendered certain additional services, as well as reasonable out-of-pocket expenses. Mr. Wylam has agreed not to engage in or conduct any business which competes with the business conducted by the Company during the term of the Consulting Agreement. The Consulting Agreement will continue until terminated by either party with thirty days advance written notice.
Effective August 8, 2006, Audra J. Mace resigned as Chief Financial Officer and Corporate Secretary of the Company. Mr. Reed, the Company's Chief Executive Officer and President, was appointed interim Chief Financial Officer of the Company by the Board of Directors, effective as of August 8, 2006, while the Company conducted a search for Ms. Mace's successor. Mr. Reed served as interim Chief Financial Officer of the Company on the same terms and conditions of his existing employment agreement and confidentiality and unfair competition agreement with the Company, each dated April 28, 2005, and effective May 2, 2005. Information regarding Mr. Reed's employment agreement and confidentiality and unfair competition agreement is contained in a Form 8-K the Company filed on April 28, 2005 under the heading "Appointment of a Principal Officer" and was updated in a Form 8-K the Company filed on May 31, 2006 under the heading" Departure of Directors or Principal Officers; Election of Directors; Appointment of a Principal Officer."
The Board of Directors of the Company then approved the appointment of Timothy E. Coyne as the Company's Chief Financial Officer on November 21, 2006, replacing the Company's interim Chief Financial Officer, Mr. Reed. Mr. Coyne joined Electro Energy after five years as Chief Financial Officer and Vice President and Corporate Controller of Imagistics International Inc., a former division of Pitney Bowes Inc. where he was responsible for Accounting, Finance, Treasury, Budgeting, Reporting/Control, Audit, Tax and Investor Relations.
Mr. Coyne's employment at the Company is at-will. He receives a monthly salary of $11,538.46 payable in bi-weekly installments, along with customary benefits. He is also eligible for an annual performance bonus of up to 35% of his annual salary. In addition, Mr. Coyne participates in the Company's 2005 Stock Option Plan. Upon his appointment, Mr. Coyne received a grant of 150,000 options to purchase shares of common stock of the Company, vesting over a four year period.
On November 21, 2006, the Board of Directors of the Company elected Lawrence G. Schafran as a Director, effective November 21, 2006, who shall hold office until the next annual election of directors and until his successor is duly elected and qualified. Mr. Klein introduced Mr. Schafran as a potential candidate to the Company. Upon his appointment, Mr. Schafran received a grant of 50,000 options to purchase shares of common stock of the Company, vesting over a four year period. Mr. Schafran currently serves on the Audit Committee of the Company. There are no family relationships between Mr. Schafran and any of the other executive officers or directors of the Company.
An investment in the securities offered hereby involves a high degree of risk. In addition to the other information contained and incorporated by reference in this prospectus (including the risk factors stated therein), you should carefully consider the following risks before purchasing the securities offered hereby. If any of these risks occurs, our business, financial condition and operating results could be materially adversely affected. The following are not the only risks and uncertainties we face. Additional risks and uncertainties of which we are unaware or which we currently believe are immaterial could also adversely affect our business, financial condition or results of operations. In any case, the value of the notes and warrants, and the trading price of our common stock could decline and you could lose all or part of your investment. See also “Forward-Looking Statements.”
We are still in an early stage of development and have a history of operating losses and uncertain future profitability.
We were founded in 1992 and have principally been engaged in research and development activities. We have incurred significant operating losses since inception. We expect to incur larger losses in the future as we continue our product development efforts and seek to expand our production, sales and marketing capabilities. We have not yet developed bipolar nickel-metal hydride batteries for commercial sale that are capable of generating significant commercial revenues. We cannot anticipate when, or if, we will generate significant commercial sales revenues or achieve profitability.
We have historically been dependent on government funding.
To date nearly all of our revenues have been derived from development contracts or subcontracts funded by agencies of the U.S. government. We expect, at least in the near term and possibly longer, to continue to derive a significant amount of our revenues from our government contracts business. As a result, our revenues could be adversely impacted by a decrease in defense spending by the U.S. government.
Eagle PicherTechnologies, LLC (“EaglePicher”), historically our largest customer, filed for bankruptcy protection in April 2005 and our revenues for the year ended December 31, 2005 declined significantly as a result.
Consolidated net revenue included net revenue pursuant to a supply agreement with EaglePicher amounting to $626,254, or 16.2% and $2,958,935, or 44% for the years ended December 31, 2005 and 2004, respectively. We believe the division of EaglePicher that produces batteries is a viable business entity and although no assurance can be given, will continue to operate because of its importance to national defense. EaglePicher's parent company filed its plan of reorganization on January 25, 2006. On August 1, 2006, pursuant to their confirmed plan of reorganization, substantially all the assets of EaglePicher and its U.S. subsidiaries were transferred to the newly formed EaglePicher Corporation (EPC) and its subsidiaries. On September 28, 2006, the Company and EPC's subsidiary EaglePicher Technologies, LLC (EPT) entered into an agreement pursuant to which (i) the Company shall continue to supply certain products to EPT under the terms of an existing supply agreement which expires in September 2008 with annual renewal options thereafter, (ii) EPT forgave $100,000 of the $150,000 balance remaining on the note payable to EPT due on October 1, 2006, (iii) EPT granted the Company the option to terminate the Colorado Springs lease after December 31, 2006 with 90 days notice and (iv) the Company agreed to terminate its right of first refusal on buying the EPT nickel hydrogen battery business.
Our products may not be accepted in the marketplace by original equipment manufacturers or by consumers.
We believe that our future growth and increased profitability are largely dependent upon our success in commercial markets, in which we have yet to begin competing. We believe that while the technologies used in our government and commercial sectors have similarities, the business aspects of operating in such sectors differ significantly. Achieving market acceptance of our bipolar nickel-metal hydride batteries will require substantial marketing efforts and expenditures of significant funds. In addition, to achieve market acceptance, our bipolar nickel-metal hydride batteries must offer significant price and/or performance advantages over other current and potential alternative battery technologies in a broad range of applications. We cannot be certain that our bipolar nickel-metal hydride batteries will achieve or sustain any such advantages. Even if our bipolar nickel-metal hydride batteries provide meaningful price or performance advantages, there can be no assurance that they will achieve or maintain market acceptance in any potential market application. The success of our products will also depend upon the level of market acceptance by original equipment manufacturers (OEMs) and other customers that incorporate our bipolar nickel-metal hydride batteries, over which we have no control. No assurance can be given that we will receive adequate assistance from OEMs to successfully commercialize our products. If our bipolar nickel-metal hydride batteries do not achieve and maintain significant price and/or performance advantages over other technologies and achieve significant and sustained market acceptance, or if customers’ applications which incorporate our products do not achieve lasting market acceptance, our business, results of operations and financial condition could be seriously impacted. We cannot be certain that our marketing efforts will result in significant commercial revenues or allow us to achieve profitability.
There is currently no commercial market for our products and it is uncertain whether such a market will develop.
Because there is currently no commercial market for our bipolar nickel-metal hydride batteries, it is difficult to assess or predict with any assurance the growth rate, if any, or the size of the market for such batteries. We cannot be certain that the commercial market for our bipolar nickel-metal hydride batteries will develop, or that our batteries will achieve market acceptance. If the commercial market for our batteries fails to develop, develops slower than expected or becomes saturated with competitors, or if our products do not achieve significant market acceptance, our business, operating results and financial condition will be seriously impacted.
Battery technologies are rapidly evolving. We may be unable to remain competitive if we are unable to keep pace with evolving technologies.
The battery industry has experienced, and is expected to continue to experience, rapid technological change. There can be no assurance that our products will be able to compete effectively in any of our targeted market segments. Various companies are seeking to enhance traditional battery technologies, such as lead acid and nickel-cadmium, and other companies have recently introduced or are developing rechargeable batteries based on lithium and other emerging and potential technologies. We cannot guarantee that competing technologies that outperform our batteries will not be developed and successfully introduced by other companies.
We will face substantial future capital requirements that we may not be able to satisfy, and which may cause us to delay or curtail our business plan.
Our capital requirements in connection with our development, testing, production, sales and marketing activities will be significant. We are not currently generating sufficient revenues from our operations to fund our activities and execute our business plan. Therefore, we are dependent on the continued receipt of funding from government development contracts to continue the development, production, marketing and sales of our products. We cannot be certain that we will be able to generate sufficient revenues in the future to fund our activities. In the event that the proceeds of the private placement that we completed in April of 2006 prove to be insufficient to execute our business plan (due to a change in our plans or a material inaccuracy in our assumptions or as a result of unanticipated expenses, technical difficulties or other unanticipated problems), we would be required to seek additional financing sooner than currently anticipated. The inability to obtain additional financing, when needed, could have a detrimental effect on us. Further, in the event that we require additional financing, such financing would probably result in the dilution of shareholders’ percentage interests in our company.
Our financial performance will depend almost entirely on the development of a demand for our bipolar nickel-metal hydride batteries, for which there is currently no commercial market.
Our financial performance will depend in large part on the development of a demand for our bipolar nickel-metal hydride batteries. There is currently no commercial market for this technology, and the markets into which we intend to expand are currently served by other types of batteries, which are established and accepted in such markets. If the demand for our bipolar nickel-metal hydride batteries develops slower than we currently anticipate, then this could cause a detrimental effect on our business, operating results and financial condition.
Our patent portfolio and trade secrets do not assure that competitors or others cannot eventually develop technologies similar or superior to our battery technologies.
Our success is dependent on our ability to maintain the proprietary nature of our technology and production processes through a combination of domestic and foreign patent and trade secret protection, non-disclosure agreements and licensing agreements. We cannot be certain that any of the patents issued to Electro Energy Inc. as of the date of this prospectus will provide meaningful protection against a competitor, or that any pending patent application will be granted. In addition, patent applications filed in foreign countries are subject to laws, rules and procedures that differ from those of the United States, and thus there can be no assurance that foreign patent applications related to issued United States patents will issue. In addition, even if these patent applications issue, some foreign countries provide significantly less patent protection than the United States. The status of patents involves complex legal and factual questions and the breadth of claims issued is uncertain. Accordingly, there can be no assurance that our patents, and any patents that may be issued to us in the future, will afford protection against competitors with similar technology. In addition, no assurances can be given that patents currently issued to us or to be issued in the future to us will not be infringed upon, reverse engineered or designed around by others or that others will not obtain patents that we would need to license, reverse engineer or design around. If existing or future patents containing broad claims are upheld by the courts, the holders of such patents could require other companies, which could potentially include us, to obtain intellectual property licenses from them or else to reverse engineer or design around those patents. If we are found to be infringing upon third-party patents, there can be no assurance that we would be able to design around or reverse engineer such patents or that any necessary licenses would be available on reasonable terms, if at all.
We could incur substantial costs in defending ourselves and potentially others in litigation or prosecuting infringement claims against third parties. If the outcome of any such litigation were unfavorable to us, our business, financial condition and results of operations could be seriously impacted. To determine the priority of inventions, we may have to participate in interference proceedings in the U.S. Patent and Trademark Office or comparable proceedings in foreign patent offices, which could result in substantial cost to us and may result in an adverse decision as to the priority of our inventions. Similarly, we may have to participate in opposition proceedings in foreign patent offices, which could result in substantial cost to us and may result in an adverse decision as to the patentability or scope of our pending foreign patent applications.
In addition to patent protection, we will rely on the law of unfair competition and trade secrets to protect our proprietary rights. We consider several elements of our production process to be trade secrets. We attempt to protect our trade secrets and other proprietary information through agreements with employees, consultants, subcontractors, customers and suppliers, enforcement of state and federal statutory and common law, and other security measures. However, third parties may independently develop substantially equivalent proprietary information and techniques, or otherwise gain access to our trade secrets or disclose such technology, which could have a detrimental effect on our business, results of operations and financial condition. We cannot be certain that our efforts to vigorously protect our rights will always be successful.
The commercial success of our batteries is highly dependent on our ability to manufacture our products at competitive costs.
To be successful, we must manufacture commercial quantities of high quality products at competitive costs. Even if our current research and development activities result in the design of batteries with commercially desirable characteristics, we will have to manufacture, in commercial quantities, products with appropriate performance characteristics, at competitive costs. The cost estimates for competitive comparisons set forth in this Prospectus are based upon our internal estimates and will have to be verified in the scale up to full production.
Our ability to manufacture our products at competitive costs will be dependent on our ability to obtain raw materials from sole or limited source suppliers.
We are dependent on sole or limited source suppliers for certain key raw materials used in our products, particularly nickel-hydroxide and metal-hydride alloys. Currently, we generally purchase sole or limited source raw materials pursuant to purchase orders placed from time to time and have no long-term contracts or other guaranteed supply arrangements with our sole or limited source suppliers. We cannot be certain that our suppliers will be able to meet our requirements relative to specifications and volumes for key raw materials, that we will be able to locate alternative sources of supply or that we will be able to purchase raw materials at an acceptable cost. In addition, the raw materials that we will utilize must be of a very high quality. We at times in the past have experienced delays in product development due to the delivery of non-conforming raw materials from our suppliers.
Our manufacturing facilities are subject to federal, state and local environmental laws and regulations because batteries contain hazardous materials.
Our facilities are subject to a broad range of federal, state and local laws and regulations relating to the environment, including those governing discharges to the air, water and land, the handling and disposal of solid and hazardous substances and waste and the remediation of contamination associated with releases of hazardous substances at our facilities and at off-site disposal locations. Risk of environmental liability is inherent in our business and no assurance can be given that substantial environmental costs will not arise in the future. In particular, we might incur capital and other costs to comply with increasingly stringent environmental laws and enforcement policies.
A battery is composed of chemicals and other materials which may be hazardous to human health.
Battery technologies vary in relative safety as a result of their differing chemical compositions. Most battery technologies incorporate a liquid electrolyte which, if leaked, may be dangerous. In addition, in the event of a short circuit or other physical damage to the battery, the liquid electrolyte may be free to flow to the reaction site and produce a continuous chemical reaction. This reaction may create heat or gas which, if not properly released, may explode and harm nearby individuals. Our bipolar nickel-metal hydride battery appears to minimize these risks because there is no free electrolyte in the cells. Nevertheless, we have not fully completed safety testing and do not know whether the advantages inherent in our technology will make the battery as safe as or safer than other battery technologies. In addition, each new battery design requires new safety testing. We cannot guarantee that safety problems will not develop with respect to our battery technology that would prevent, delay or impair commercial introduction.
We incorporate safety policies in our research and development activities and will do so in our production processes, although no assurance can be given that an accident in our facilities will not occur. Any accident, whether caused by the use of a battery or in our operations, could result in significant delays or claims for damages resulting from injuries, which would seriously impact our business, operating results and financial condition.
We could face material financial exposure in a future product liability action.
We may be held liable if any product we develop in the future, or any product which is made with the use of any of our technologies, causes injury or is found otherwise defective during product testing, manufacturing, marketing or sale. We do not currently maintain product liability insurance. Although we intend to obtain product liability insurance, we may not have insurance coverage sufficient in amount and scope against potential liabilities or the claims may be excluded from coverage under the terms of the policy. Furthermore, product liability insurance is becoming increasingly expensive. As a result, we may not be able to obtain sufficient amounts of insurance coverage, obtain additional insurance when needed, or obtain insurance at a reasonable cost, which could prevent or inhibit the commercialization of our products or technologies. If we are sued for any damage or injury caused by our products or technology, our liability could equal a material portion, or even exceed, our total assets. Any claims against us, regardless of their merit or eventual outcome, could have a detrimental effect upon our business, operating results and financial condition.
The departure of or failure to recruit key personnel could have a detrimental effect on us.
Our success will depend to a significant extent upon a limited number of members of senior management and other key employees, particularly our founder, Chairman and Chief Technologist, Martin G. Klein and President and Chief Executive Officer, Michael E. Reed. We will also rely on consultants and advisors to assist us in formulating our research and development strategy. The loss of the services of one or more key managers or other employees could have a materially adverse effect upon our business, operating results or financial condition. In addition, we believe that our future success will depend in large part upon our ability to attract and retain additional highly skilled technical, management, sales and marketing personnel. There can be no assurance we will be successful in attracting and retaining such personnel, and the failure to do so would have a detrimental effect on our business, operating results and financial condition.
We have broad discretion over the use of a significant portion of the net proceeds of our recently completed private placement. If we do not wisely allocate the proceeds, our business plan will be hampered.
We have broad discretion to allocate a significant portion of the net proceeds of our recently-completed private placement. Our management will determine, with our Board of Directors, but without the need for stockholder approval, how to allocate a significant portion of these proceeds. If we do not wisely allocate the proceeds, our ability to carry out our business plan will be hampered. The timing and amount of our actual expenditures are subject to change and will be based on many factors, including:
| • | the rate of progress of our research and development programs; |
| • | the results of our battery testing; |
| • | the time and expense necessary to achieve domestic and foreign customer acceptance and any necessary regulatory approvals; |
| • | competitive technological, market and other developments; |
| • | our ability to attract and retain quality employees; and |
| • | our ability to implement our sales, marketing, clinical research, product development, manufacturing, and investor/public relations plans. |
Our officers and directors as a group have significant voting power and may take actions that may not be in the best interest of shareholders or noteholders.
Martin G. Klein, our Chairman and Chief Technologist, and other officers and directors and certain persons who might be deemed to be related persons of Mr. Klein and other officers and directors together beneficially own approximately 32% of the outstanding shares of our common stock. Upon consummation of the proposed acquisition and this offering (giving effect to the full conversion of the notes and exercise of the warrants), such persons will continue to beneficially own a significant percentage of the outstanding shares of our common stock. As a result of such continuing significant ownership, Mr. Klein and such other persons may be able to effectively control the outcome of certain matters requiring a shareholder vote, including offers to acquire the company and election of directors.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could prevent us from producing reliable financial reports or identifying fraud. In addition, shareholders could lose confidence in our financial reporting, which could have an adverse effect on our stock price.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud, and a lack of effective controls could preclude us from accomplishing these critical functions. For fiscal year ending December 31, 2007, we will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. Assigned to accounting issues at present are only our Chief Financial Officer and staff accountants at each of our facilities, which may be deemed to be inadequate. Although we intend to augment our internal controls procedures and expand our accounting staff, there is no guarantee that this effort will be adequate.
During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to maintain the adequacy of our internal accounting controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. Failure to achieve and maintain an effective internal control environment could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have an adverse effect on our stock price.
Issuance of the shares of common stock upon conversion or repayment of the convertible notes and exercise of warrants will dilute the ownership interest of existing shareholders and could adversely affect the market price of our common stock.
We may issue shares of common stock (i) upon conversion of some or all of the convertible notes, (ii) in satisfaction of our principal and interest payment obligations under the convertible notes, in lieu of cash payments, and (iii) upon exercise of the warrants. Any of these issuances will dilute the ownership interests of existing shareholders. Any sales in the public market of this common stock could adversely affect prevailing market prices of the common stock. In addition, the existence of these convertible notes and warrants may encourage short selling by market participants.
We substantially increased our outstanding indebtedness with the issuance of senior convertible notes and we may not be able to pay our debt and other obligations.
In April 2006 we issued notes in the aggregate principal amount of $11 million in a private placement to certain institutional investors. The notes accrue interest at a rate of 8.5% per annum, subject to adjustment, with accrued interest payable quarterly in arrears in cash, and with interest for the first two years pre-paid to such investors on the closing of the transaction. By issuing the notes we increased our indebtedness substantially. In addition, the holders of the notes have imposed certain restrictive covenants, including limits on our future indebtedness and limits on our ability to incur future liens and make certain restricted payments. Upon a change of control (as defined in the notes), the holders of the notes will have certain redemption rights. An event of default would occur under the notes for a number of reasons, including our failure to pay when due any principal, interest or late charges on the notes. Upon the occurrence of an event of default, our obligations under the notes may become due and payable in accordance with the terms thereof, and the investors will have the right to proceed against the security interest granted in the collateral described below. Our obligations under the notes are secured by substantially all of our assets, other than accounts receivable, existing at the closing of the offering (and any replacement collateral)
As a result, the issuance of the notes may or will:
| • | make it more difficult for us to obtain any necessary financing in the future for working capital, capital expenditures or other purposes; |
| • | make it more difficult for us to be acquired; |
| • | require us to dedicate a substantial portion of our cash flow from operations and other capital resources to debt service; |
| • | limit our flexibility in planning for, or reacting to, changes in our business; |
| • | make us more vulnerable in the event of a downturn in our business or industry conditions; and |
| • | place us at a competitive disadvantage to any of our competitors that have less debt. |
If we are unable to satisfy our payment obligations under the notes or otherwise are obliged to repay the notes prior to the due date, we could default on such notes, in which case our available cash could be depleted, perhaps seriously, and our ability to fund operations could be materially harmed. In addition, if we are not able to satisfy our obligations under the notes, the noteholders could exercise their rights as secured creditors, which may include taking control of the collateral and selling it to satisfy our obligations, which would have an adverse effect on our business and stock price.
The convertible notes are secured by substantially all of our assets.
The investors in our private placement of the convertible notes received a security interest in and a lien on substantially all of our assets, other than accounts receivable, existing at the closing of the offering (and any replacement collateral). As a result of this security interest and lien, if we fail to meet our payment or other obligations under the convertible notes, the investors would be entitled to foreclose on and liquidate substantially all of our assets. Under those circumstances, we may not have sufficient funds to service our day-to-day operational needs. Any foreclosure by the investors in the private placement would have a material adverse effect on our financial condition.
The convertible notes provide that upon the occurrence of various events of default and change of control transactions, the holders would be entitled to require us to redeem the convertible notes for cash, which could leave us with little or no working capital for operations or capital expenditures.
The convertible notes allow the holders thereof to require redemption of the convertible notes upon the occurrence of various events of default, in the case of certain types of bankruptcy or insolvency events of default involving us, or specified change of control transactions. In such a situation, we may be required to redeem all or part of the convertible notes, including any accrued interest and penalties. Some of the events of default include matters over which we may have little or no control. If an event of default or a change of control occurs, we may be unable to pay the full redemption price in cash. Even if we were able to pay the redemption price in cash, any such redemption could leave us with little or no working capital for our business. We have established an escrow fund for payment of certain our obligations under the convertible notes consisting of approximately $2,970,000, pursuant to the terms of an escrow agreement, to pay at least the first four scheduled interest payments on the notes on the applicable interest payment dates in an amount representing the cash interest payment, as well as an amount equal to the exercise of a certain noteholders’ repurchase right, assuming it is exercised in full.
The active public market for our common stock has only developed relatively recently and could fail to sustain itself. Our stockholders may not be able to resell their shares at or above the price at which they purchased their shares, or at all.
The market price of our common stock may fluctuate significantly in response to factors, some of which are beyond our control, such as product liability claims or other litigation; the announcement of new products or product enhancements by us or our competitors; quarterly variations in our competitors’ results of operations; changes in earnings estimates or recommendations by securities analysts; developments in our industry; and general market conditions and other factors, including factors unrelated to our own operating performance.
The stock market in general has recently experienced extreme price and volume fluctuations. In particular, market prices of securities of companies such as ours have experienced fluctuations that often have been unrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline in the value of our common stock. Price volatility might be worse if the trading volume of our common stock is low.
Additional risks may exist because we became public through a reverse merger transaction. Securities analysts of major brokerage firms may not provide coverage of our stock since there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any follow-on offerings on our behalf in the future.
Our common stock trades on the NASDAQ Capital Market. In the future, our common stock may be removed from listing on the NASDAQ Capital Market and may not qualify for listing on any stock exchange, in which case it may be difficult to find a market in our common stock.
Our securities trade on The NASDAQ Capital Market. NASDAQ has several requirements for companies to meet for continued listing, including but not limited to minimum stockholders’ equity. If we fail to demonstrate compliance with all requirements for continued listing on The NASDAQ Capital Market, our common stock could be delisted from The NASDAQ Capital Market. There can be no assurance that we will satisfy the requirements for continued listing on The NASDAQ Capital Market.
If our common stock is no longer traded on The NASDAQ Capital Market, it may be more difficult for you to sell shares that you own, and the price of our common stock may be negatively affected. As a result, there is a risk that holders of our common stock may not be able to obtain accurate price quotes or be able to correctly assess the market price of our common stock. Increases in volatility could also make it more difficult to pledge shares of our common stock as collateral, if holders sought to do so, because a lender might be unable to accurately value our common stock.
If our Common Stock were de-listed from The NASDAQ Capital Market, trading of our common stock, if any, could be conducted in the over-the-counter market in the so-called “pink sheets” or, if available, the National Association of Securities Dealer’s “Electronic Bulletin Board.” In addition, delisting from NASDAQ may subject our common stock to so-called “penny stock” rules. These rules impose additional sales practice and market making requirements on broker-dealers who sell and/or make a market in such securities. Consequently, broker-dealers may be less willing or able to sell and/or make a market in our common stock. Additionally, an investor would find it more difficult to dispose of, or to obtain accurate quotations for the price of, our common stock. As a result of a delisting, it may become more difficult for us to raise funds through the sale of our securities.
A significant number of our shares are eligible for sale. Their sale could depress the market price of our stock.
Sales of a significant number of shares of our common stock in the public market could harm the market price of our common stock. As additional shares of our common stock become available for resale in the public market pursuant to the registration of the sale of the shares underlying the securities issued in the private placement, and otherwise, the supply of our common stock will increase, which could decrease its price. Some or all of the shares of common stock issuable upon the conversion of the Notes and upon the exercise of the warrants pursuant to the private placement may be offered from time to time in the open market pursuant to Rule 144, and these sales may have a depressive effect on the market for the shares of common stock. In general, a person who has held restricted shares for a period of one year may, upon filing with the SEC a notification on Form 144, sell into the market common stock in an amount equal to the greater of 1% of the outstanding shares or the average weekly number of shares sold in the last four weeks prior to such sale. Such sales may be repeated once each three months, and any of the restricted shares may be sold by a non-affiliate after they have been held two years. Holders of “restricted” securities have agreed not to sell, transfer or otherwise dispose of their shares of common stock for a period of time after the closing of the private placement.
We do not anticipate paying dividends in the foreseeable future. The lack of dividends may have a negative effect on the stock price.
We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings to support operations and to finance expansion and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future.
We are subject to critical accounting policies. We may interpret or implement required policies incorrectly.
We follow U.S. generally accepted accounting principles in preparing our financial statements and SEC filings. As part of this work, we must make many estimates and judgments about future events. These affect the value of the assets and liabilities, contingent assets and liabilities, and revenue and expenses that we report in our financial statements. We believe these estimates and judgments are reasonable, and we make them in accordance with our accounting policies based on information available at the time. However, actual results could differ from our estimates, and this could require us to record adjustments to expenses or revenues that could be material to our financial position and results of operations in future periods.
Our share price has been volatile in the past and may decline in the future.
Our common stock has experienced significant market price and volume fluctuations in the past and may experience significant market price and volume fluctuations in the future in response to factors such as the following, some of which are beyond our control:
| • | quarterly variations in our operating results; |
| • | operating results that vary from the expectations of securities analysts and investors; |
| • | changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors; |
| • | announcements of technological innovations or new products by us or our competitors; |
| • | announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; |
| • | announcements by third parties of significant claims or proceedings against us; |
| • | additions or departures of key personnel; |
| • | changes in the status of our intellectual property rights; |
| • | future sales of our Common Stock; and |
| • | �� | stock market price and volume fluctuations. |
Stock markets often experience extreme price and volume fluctuations. Market fluctuations, as well as general political and economic conditions, such as a recession or interest rate or currency rate fluctuations or political events or hostilities in or surrounding the United States, could adversely affect the market price of our common stock.
In the past, securities class action litigation has often been brought against companies following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management’s attention and resources both of which could have a material adverse effect on our business and results of operations.
Future Sales of our Common Stock in the public market could lower our stock price and conversion of our warrants or notes and any additional capital raised by us may dilute your ownership in us.
We may sell additional shares of common stock in subsequent offerings. In addition, holders of warrants to purchase our common stock will, most likely, exercise their warrants to purchase shares of our common stock after this registration statement is declared effective. We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock. Sales of substantial amounts of our common stock, including shares issued in connection with the exercise of the warrants, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock.
Shares eligible for public sale in the future could decrease the price of our Common Stock and reduce our future ability to raise capital.
Sales of substantial amounts of our common stock in the public market could decrease the prevailing market price of our common stock, which would have an adverse affect on our ability to raise equity capital in the future.
We have never declared or paid any cash dividends on our Series A Preferred or Common Stock. We currently intend to retain future earnings, if any, to finance operations and expand our business and, therefore, do not expect to pay any dividends in the foreseeable future.
We believe it is important to communicate our expectations to investors. However, there may be events in the future that we are not able to predict accurately or that we do not fully control that could cause actual results to differ materially from those expressed or implied. This prospectus and the documents incorporated by reference in this prospectus may contain forward looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain factors, risks and uncertainties that may cause actual results, events and performances to differ materially from those referred to in such statements. These statements address operating performance, events or developments that we expect or anticipate will occur in the future, such as projections about our future results of operations or our financial condition, research, development and commercialization of our product candidates, anticipated trends in our business, manufacture of sufficient and acceptable quantities of our proposed products and our strategies to grow the company. The forward looking statements are based on information available to us on the date hereof, and we assume no obligation to update any such forward looking statements.
Our disclosure and analysis in this prospectus contain some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance.
Any or all of our forward-looking statements in this prospectus may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this prospectus will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially.
We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. You are advised, however, to consult any additional disclosures we make in our reports to the SEC on Forms 10-K, 10-Q, 8-K, and amendments thereto. Also note that we provide a cautionary discussion of risks and uncertainties under “Risk Factors” on page 3 of this prospectus. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed here could also adversely affect us. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.
We will not receive any proceeds from the resale of the common stock offered through this prospectus. We will, however, receive proceeds from the exercise of the warrants issued to the selling shareholders if and when they are exercised. We anticipate that the net proceeds from such exercise will be used for working capital and general corporate purposes.
The selling shareholders will pay any expenses customarily borne by selling shareholders (including underwriting discounts, commissions and fees and expenses of counsel to the extent not required to be paid by us). We will bear all other costs, fees and expenses incurred in effecting the registration of the shares covered by this prospectus, including, but not limited to, all registration and filing fees, listing fees and expenses of our counsel and our accountants.
Shares Being Registered
This prospectus relates to the public offering, which is not being underwritten, of 5,969,138 shares of common stock, 750,000 of which are outstanding, 2,894,737 of which may be issued upon conversion of outstanding senior secured convertible notes due 2010, 578,947 of which may be issued as the result of the exercise of warrants held by selling shareholders, and 1,745,454 of which may be issued as payment of principal and interest on the convertible notes, and other related potential issuances.
We issued the convertible notes and warrants to purchase 3,473,684 shares of common stock to certain independent institutional investors (the “Private Placement Investors”), in a private placement transaction that closed on April 5, 2006. On the same date, we acquired all of the personal property (the “Assets”) of Lithium Nickel Asset Holding I, Inc. a Delaware corporation (“LNAH”). In consideration of the transfer of the Assets, we issued an aggregate of 5,750,000 shares of common stock to LNAH, 750,000 of which are being registered hereunder.
The private placement transaction and the issuance of the shares and warrants in connection with the acquisition of the Assets were exempt from the registration requirements of the Securities Act of 1933, as amended.
Private Placement Investors and LNAH
The shares of common stock being offered by this prospectus by the Private Placement Investors are issuable upon conversion of the convertible notes, as principal and interest payments on the convertible notes and upon exercise of the warrants. The shares of common stock being offered by this prospectus by LNAH are currently shares of common stock outstanding owned by LNAH. We are registering the shares of common stock in order to permit the Private Placement Investors and LNAH to offer the shares for resale from time to time.
The table below lists the Private Placement Investors and LNAH and other information regarding the beneficial ownership of the shares of common stock by each Private Placement Investor and by LNAH. The column titled “Shares Beneficially Owned Before Offering” lists the number of shares of common stock beneficially owned by each Private Placement Investor and by LNAH, including the shares of common stock beneficially owned assuming conversion of all the convertible notes into shares of common stock with respect to the Private Placement Investors. The number of shares of common stock set forth in this column and held by a Private Placement Investor is based on the initial conversion price of the convertible notes of $3.80 per share. However, the conversion price of the convertible notes is subject to adjustment from time to time.
The column titled “Shares Offered Hereby” lists the shares of common stock being offered pursuant to this prospectus by each Private Placement Investor assuming conversion of the convertible notes, and exercise of warrants, into shares of common stock and by LNAH. Because the conversion price used for paying principal and interest on the convertible notes in shares of common stock and the conversion price otherwise used for converting the convertible notes into shares of common stock may be adjusted, the number of shares of common stock set forth in this column consists of each Private Placement Investor’s pro rata portion of the shares of our common stock outstanding prior to the sale of the convertible notes based on each Private Placement Investor’s percentage of the aggregate principal amount of the convertible notes and warrants purchased in the April 5, 2006 private placement transaction.
This prospectus generally covers the resale by the Private Placement Investors of the sum of (i) the number of shares of common stock issuable as principal and interest payments on the convertible notes, (ii) the number of shares of common stock issuable upon conversion of the convertible notes and (iii) the number of shares of common stock issuable upon exercise of the warrants, and by LNAH of its shares to be registered hereunder. Because the conversion price of the convertible notes may be adjusted and the exercise price of the warrants may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered by this prospectus with respect to the Private Placement Investors.
Selling Shareholders
We have agreed with each selling shareholder to file a registration statement to register for resale the shares of common stock set forth below. Except as noted in the footnotes below, none of the selling shareholders has held any position or office with us or any of our predecessors or affiliates within the last three years or has had a material relationship with us or any of our predecessors or affiliates within the past three years other than as a result of the ownership of our shares or other securities. Shares may also be sold by donees, pledgees, and other transferees or successors in interest of the selling shareholders.
The term “selling shareholders” includes the shareholders listed below and their respective transferees, assignees, pledgees, donees or other successors. The following table sets forth information, as of January 22, 2007, with respect to each selling shareholder. The information below is based on information provided by or on behalf of the selling shareholders.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. The percentage of ownership for the selling security holders disclosed in this table is based on 22,583,107 shares of common stock outstanding as of January 18, 2007. Both the number of shares listed as being offered by the selling security holders in the table and the holders’ respective percentages of share ownership after the offering are based on the assumptions that all of the shares being offered are sold pursuant to this offering, and that no other shares of common stock are acquired or disposed of by the selling security holders prior to the termination of this offering. Because the selling security holders may sell all, some, or none of their shares or may acquire or dispose of other shares of common stock, we cannot estimate the aggregate number of shares that will be sold in this offering or the number or percentage of shares of common stock that the selling security holders will own upon completion of this offering.
| Shares Beneficially Owned Before Offering (1) | Shares Offered Hereby (2) | Warrant Shares Offered Hereby (3)(4) | Shares Beneficially Owned After Offering | Shares Issuable As Interest | ||||
|---|---|---|---|---|---|---|---|---|
| Name | Number | Percentage | Number | Percentage | Number | Percentage | ||
| Context Advantage Fund, L.P. (5) | 0 | 0% | 144,737 | 28,947 | 173,684 | 1% | 87,273 | 5% |
| Context Offshore Advantage Fund, Ltd. (6) | 0 | 0% | 546,053 | 109,211 | 655,264 | 3% | 329,256 | 19% |
| Context Opportunistic Master Fund, L.P. (7) | 0 | 0% | 98,684 | 19,737 | 118,421 | 1% | 59,504 | 3% |
| Basso Fund Ltd. (8) | 0 | 0% | 78,947 | 15,789 | 94,736 | 0% | 47,603 | 3% |
| Basso Private Opportunities Holding Fund Ltd. (9) | 0 | 0% | 36,184 | 7,237 | 43,421 | 0% | 21,818 | 1% |
| Basso Multi-Strategy Holding Fund Ltd. (10) | 0 | 0% | 213,816 | 42,763 | 256,579 | 1% | 128,926 | 7% |
| Cranshire Capital, LP (11) | 0 | 0% | 263,158 | 52,632 | 315,790 | 1% | 158,678 | 9% |
| Smithfield Fiduciary LLC (12) | 0 | 0% | 526,316 | 105,263 | 631,579 | 3% | 317,355 | 18% |
| Millennium Partners, L.P. (13) | 0 | 0% | 526,316 | 105,263 | 631,579 | 3% | 317,355 | 18% |
| Quattro Fund Ltd. (14) | 0 | 0% | 236,842 | 47,368 | 284,210 | 1% | 142,810 | 8% |
| Quattro Multi-Strategy Master Fund Ltd. (15) | 0 | 0% | 26,316 | 5,263 | 31,579 | 0% | 15,868 | 1% |
| Treeline Investment Partners, LP (16) | 7,500 | 0% | 197,368 | 39,474 | 244,342 | 1% | 119,008 | 7% |
| Lithium Nickel Asset Holding I, Inc. (17) | 6,750,000 | 29% | 750,000 | 0 | 6,750,000 | 29% | 0 | 0% |
| Total | 6,757,500 | 29% | 3,644,737 | 578,947 | 10,231,184 | 44% | 1,745,454 | 100% |
| * | Less than 1 percent. |
| (1) | The number of shares beneficially owned is determined in accordance with Rule 13d-3 of the Exchange Act, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rule, beneficial ownership includes any shares as to which an individual has sole or shared voting power or investment power and also any shares which an individual has the right to acquire within 60 days of the date of this prospectus through the exercise of any stock option or other right. Unless otherwise indicated, each selling security holder has sole voting and investment power with respect to its shares of common stock. The inclusion of any shares in this table does not constitute an admission of beneficial ownership for the selling security holders. |
| (2) | Assumes the full conversion of the holder’s note at a conversion price of $3.80 in accordance with the terms of the note. Pursuant to Rule 416 of the Securities Act, (assuming for purposes of such calculation, that such notes were converted on the day immediately preceding the filing of the registration statement for which this prospectus is a part, this registration statement also shall cover any additional shares of common stock that become issuable in connection with the shares registered for sale hereby by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of our outstanding shares of common stock. The shares listed in this column include shares underlying the notes acquired in April 2006. |
| (3) | Assumes the full exercise of the holder’s warrant at an exercise price of $3.80 in accordance with the terms of the warrant. Pursuant to Rule 416 of the Securities Act, (assuming for purposes of such calculation, that such warrants were exercised on the day immediately preceding the filing of the registration statement of which this prospectus is a part, this registration statement also shall cover any additional shares of common stock that become issuable in connection with the shares registered for sale hereby by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the receipt of consideration that results in an increase in the number of our outstanding shares of common stock. The shares listed in this column include shares underlying the warrants acquired in April 2006. |
| (4) | The warrants have an exercise price of $3.80 per share. These warrants may be exercised at any time before April 5, 2010. |
| (5) | Michael S. Rosen and William D. Fertig have voting and investment control over the securities held by Context Advantage Fund, L.P. |
| (6) | Michael S. Rosen and William D. Fertig have voting and investment control over the securities held by Context Offshore Advantage Fund, Ltd. |
| (7) | Michael S. Rosen and William D. Fertig have voting and investment control over the securities held by Context Opportunist Master Fund, L.P. |
| (8) | Basso Capital Management, L.P. (“Basso”) is the investment manager to Basso Fund Ltd. Howard I. Fischer is a managing member of Basso GP, LLC, the General Partner of Basso, and as such, has voting and investment control over the securities held by Basso Fund Ltd. |
| (9) | Basso Capital Management, L.P. (“Basso”) is the investment manager to Basso Private Opportunities Holding Fund Ltd. Howard I. Fischer is a managing member of Basso GP, LLC, the General Partner of Basso, and as such, has voting and investment control over the securities held by Basso Private Opportunities Holding Fund Ltd. |
| (10) | Basso Capital Management, L.P. (“Basso”) is the investment manager to Basso Multi-Strategy Holding Fund Ltd. Howard I. Fischer is a managing member of Basso GP, LLC, the General Partner of Basso, and as such, has voting and investment control over the securities held by Basso Multi-Strategy Holding Fund Ltd. |
| (11) | Mitchell P. Kopin, President of Downsview Capital, Inc., the General Partner of Cranshire Capital, LP has sole voting and dispositive powers over the securities held by Cranshire Capital, LP. |
| (12) | Highbridge Capital Management, LLC is the trading manager of Smithfield Fiduciary LLC and has voting control and investment discretion over securities held by Smithfield Fiducuiary LLC. Glenn Dubin and Henry Swieca control Highbridge Capital Management, LLC., which in turn, has voting and investment control over the securities held by Smithfield Fiduciary LLC. Each of Highbridge Capital Management, LLC, Glenn Dubin and Henry Swieca disclaim beneficial ownership of the securities held by Smithfield Fiduciary LLC. |
| (13) | Millennium Management, L.L.C., a Delaware limited liability company, is the managing partner of Millennium Partners, L.P., a Cayman Islands exempted limited partnership, and consequently may be deemed to have voting control and investment discretion over securities owned by Millennium Partners, L.P. Israel A. Englander is the managing member of Millennium Management, L.L.C. As a result, Mr. Englander may be deemed to be the beneficial owner of any shares deemed to be beneficially owned by Millennium Management, L.L.C. The foregoing should not be construed in and of itself as an admission by either of Millennium Management, L.L.C. or Mr. Englander as to beneficial ownership of the shares of the Company’s common stock owned by Millennium Partners, L.P. Address: c/o Millennium Management, L.L.C., 666 Fifth Avenue, 8th Floor, New York, NY 10103, Telephone: (212) 841-4100, Facsimile: (212) 841-4141 |
| (14) | Andrew Kaplan, Brian Swain and Louis Napoli have shared voting and investment control over the securities held by Quattro Fund Ltd. |
| (15) | Andrew Kaplan, Brian Swain and Louis Napoli have shared has voting and investment control over the securities held by Quattro Multi-Strategy Master Fund Ltd. |
| (16) | Sean Deson has voting and investment control over the securities held by Treeline Investment Partners, LP. |
| (17) | Leo Guthart has voting and investment control over securities held by Lithium Nickel Asset Holding I, Inc. |
We are registering the shares of common stock issuable upon conversion of the convertible notes and upon exercise of the warrants issued in connection with the private placement completed on April 5, 2006, as well as certain shares issuable in connection therewith. We are also registering shares of common stock currently outstanding and owned by Lithium Nickel Asset Holding I, Inc. We will not receive any of the proceeds from the sale by the selling shareholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock. We will not be paying any underwriting discounts or commissions in this offering.
The selling shareholders may, from time to time, sell any or all of their shares of common stock on any stock exchange, market, or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling shareholders may use any one or more of the following methods when selling shares:
| • | on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale; |
| • | in the over-the-counter market; |
| • | in transactions otherwise than on these exchanges or systems or in the over-the-counter market; |
| • | through the writing of options, whether such options are listed on an options exchange or otherwise; |
| • | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| • | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| • | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| • | an exchange distribution in accordance with the rules of the applicable exchange; |
| • | privately negotiated transactions; |
| • | short sales; |
| • | sales pursuant to Rule 144; |
| • | broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share; |
| • | a combination of any such methods of sale; and |
| • | any other method permitted pursuant to applicable law. |
The selling shareholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended, if available, rather than under this prospectus.
The selling shareholders may also engage in short sales against the box, puts and calls, and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades.
Broker-dealers engaged by the selling shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling shareholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Any profits on the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act of 1933, as amended. Discounts, concessions, commissions, and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling shareholder. The selling shareholders may agree to indemnify any agent, dealer, or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act of 1933, as amended.
In connection with the sale of our common stock or interests therein, the selling shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling shareholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The selling shareholders may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending the list of selling shareholders to include the pledgee, transferee, or other successors in interest as selling shareholders under this prospectus.
The selling shareholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees, or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending the list of selling shareholders to include the pledgee, transferee, or other successors in interest as selling shareholders under this prospectus.
The selling shareholders and any broker-dealers or agents that are involved in selling the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933, as amended.
We are required to pay all fees and expenses incident to the registration of the shares of common stock. We have agreed to indemnify the selling shareholders against certain losses, claims, damages, and liabilities, including liabilities under the Securities Act of 1933, as amended.
The selling shareholders have advised us that they have not entered into any agreements, understandings, or arrangements with any underwriters or broker-dealers regarding the sale of their shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling shareholder. If we are notified by any selling shareholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus. If the selling shareholders use this prospectus for any sale of the shares of common stock, they will be subject to the prospectus delivery requirements of the Securities Act of 1933, as amended.
The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934, as amended, may apply to sales of our common stock and activities of the selling shareholders.
The validity of the securities offered by this prospectus will be passed upon for us by Lev & Berlin, P.C., Norwalk, Connecticut.
Our consolidated financial statements as of December 31, 2005 and 2004 and the years then ended, incorporated by reference in this prospectus have been audited by Marcum & Kliegman LLP, an independent registered public accounting firm, as stated in their report appearing herein, and have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The SEC permits us to “incorporate by reference” the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and information that we file with the SEC after the date of this prospectus will automatically update and supersede this information. However, any information contained herein shall modify or supersede information contained in documents we filed with the SEC before the date of this prospectus.
We incorporate by reference the documents listed below and any future filings made with the SEC under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until the offering is completed:
| 1) | Our Annual Report on Form 10-KSB as of and for the fiscal years ended December 31, 2005 and December 31, 2004, filed on April 3, 2006. |
| 2) | Our Quarterly Reports on Form 10-QSB for the quarters ended: |
| a) | Form 10-QSB/A for quarter ended September 30, 2006, filed on January 19, 2007 |
| b) | Form 10-QSB/A for quarter ended June 30, 2006, filed on January 19, 2007 |
| c) | September 30, 2006, filed on November 20, 2006; |
| d) | June 30, 2006, filed on August 21, 2006; |
| e) | March 31, 2006, filed on May 15, 2006; |
| f) | September 30, 2005, filed on November 9, 2005; |
| 3) | Our Current Reports on Form 8-K, filed with the SEC on January 17, 2007, November 28, 2006, August 18, 2006, August 14, 2006, August 9, 2006 July 11, 2006 May 31, 2006, April 6, 2006 and November 15, 2005,. |
| 4) | The description of our common stock contained in a registration statement filed on Form SB-2 on August 19, 2005 under the Securities Exchange Act of 1934, and declared effective on August 26, 2005, including any amendment or report filed for the purpose of updating such description. |
Our Certificate of Incorporation allows us to indemnify our officers and directors to the maximum extent allowed under Delaware law. This includes indemnification for liabilities which could arise under the Securities Act. Insofar as we are permitted to indemnify our officers and directors, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
No person has been authorized to give any information or to make any representations other than those contained in this prospectus in connection with the offering made hereby, and if given or made, such information or representations must not be relied upon as having been authorized by Electro Energy Inc., any selling shareholder, or by any other person. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any implication that information herein is correct as of any time subsequent to the date hereof. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any security other than the securities covered by this prospectus, nor does it constitute an offer to or solicitation of any person in any jurisdiction in which such offer or solicitation may not lawfully be made.
If you request a copy of any or all of the documents incorporated by reference by written or oral request, then we will send to you the copies you requested at no charge. However, we will not send exhibits to such documents, unless such exhibits are specifically incorporated by reference in such documents. You should direct requests for such copies to Electro Energy Inc., 30 Shelter Rock Road, Danbury CT 06810, Attention: Timothy E. Coyne, (203) 797-2699.
In addition, we file reports, proxy statements, and other information with the SEC under the Securities Exchange Act of 1934. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may also obtain copies of this information by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Further information on the operation of the SEC’s Public Reference Room in Washington, D.C. can be obtained by calling the SEC at 1-800-SEC-0330.
Our common stock is quoted on the Nasdaq Capital Market. Reports, proxy statements, and other information concerning Electro Energy Inc. can be inspected at the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. The SEC maintains a Web site that contains all information filed electronically by us. The address of the SEC’s Web site ishttp://www.sec.gov.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A STATEMENT THAT DIFFERS FROM WHAT IS IN THIS PROSPECTUS. IF ANY PERSON DOES MAKE A STATEMENT THAT DIFFERS FROM WHAT IS IN THIS PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS IS NOT AN OFFER TO SELL, NOR IS IT SEEKING AN OFFER TO BUY, THESE SECURITIES IN ANY STATE IN WHICH THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE INFORMATION MAY CHANGE AFTER THAT DATE.
| PART II | INFORMATION NOT REQUIRED IN PROSPECTUS |
| ITEM 14. | OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. |
The following table sets forth the expenses of the issuance and distribution of the securities offered hereby, all of which will be paid by Electro Energy Inc.
| Registration fee | $ | 1,462.62 | |
| Printing fees | 100.00 | ||
| Legal fees | 10,000.00 | ||
| Accountant fees | 10,000.00 | ||
| Miscellaneous | - | ||
| Total | $ | 21,562.62 | |
All expenses are estimated except for the Registration fee.
| ITEM 15. | INDEMNIFICATION OF DIRECTORS AND OFFICERS. |
The Florida Business Corporation Act (the “Corporation Act”) permits the indemnification of directors, employees, officers and agents of Florida corporations. Our Articles of Incorporation, as amended (the “Articles”), and Bylaws provide that the Company shall indemnify its directors and officers to the fullest extent permitted by the Corporation Act.
The provisions of the Corporation Act that authorize indemnification do not eliminate the duty of care of a director, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Florida law. In addition, each director will continue to be subject to liability for (a) violations of criminal laws, unless the director had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful, (b) deriving an improper personal benefit from a transaction, (c) voting for or assenting to an unlawful distribution and (d) willful misconduct or conscious disregard for the best interests of the Company in a proceeding by or in the right of a shareholder. The statute does not affect a director’s responsibilities under any other law, such as the Federal securities laws.
Accordingly, pursuant to the forgoing, we are required to indemnify the officers and directors of the Company for any claim arising against such persons in their official capacities if such person acted in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
| ITEM 16. | EXHIBITS. |
(a) The exhibits filed as part of this registration statement are as follows:
| Exhibit No. | Description | |
| 4.1 | Form of 8.5% Senior Secured Convertible Note (incorporated by reference to Exhibit 4.2 filed with Electro Energy Inc.'s Form 8-K filed with the SEC on April 5, 2006). | |
| 4.2 | Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.3 filed with Electro Energy Inc.'s Form 8-K filed with the SEC on April 5, 2006). | |
| 4.3 | Registration Rights Agreement dated as of March 31, 2006, by and among Electro Energy, Inc., and the persons and entities listed on Exhibit A attached thereto (incorporated by reference to Exhibit 4.4 filed with Electro Energy Inc.'s Form 8-K filed with the SEC on April 5, 2006). | |
| 4.4 | Security Agreement, dated as of March 31, 2006, among Electro Energy Inc. and its Subsidiaries in favor of Context Capital Management, LLC, as collateral agent for the ratable benefit of the investors under the Note and Warrant Purchase Agreement (incorporated by reference to Exhibit 4.5 filed with Electro Energy Inc.'s Form 8-K filed with the SEC on April 5, 2006). | |
| 4.5 | Guaranty Agreement, dated as of March 31, 2006, among the Subsidiaries of Electro Energy Inc. in favor of Context Capital Management, LLC, as collateral agent for the ratable benefit of the investors under the Note and Warrant Purchase Agreement (incorporated by reference to Exhibit 4.6 filed with Electro Energy Inc.'s Form 8-K filed with the SEC on April 5, 2006) | |
| 4.6 | Escrow Deposit Agreement, dated as of March 30, 2006, among Electro Energy Inc., each of the purchasers of the notes listed on Schedule I attached thereto, and Signature Bank, as escrow agent (incorporated by reference to Exhibit 4.7 filed with Electro Energy Inc.'s Form 8-K filed with the SEC on April 5, 2006) | |
| 4.7 | Asset Purchase Agreement, dated as of March 31, 2006, among Electro Energy Inc., EEI Acquisition Co., LLC and Lithium Nickel Asset Holding Company I, Inc. (incorporated by reference to Exhibit 2.1 filed with Electro Energy Inc.'s Form 8-K filed with the SEC on April 5, 2006) | |
| 4.8 | Registration Rights Agreement dated as of April 5, 2006, by and among Electro Energy Inc., EEI Acquisition Co., LLC and Lithium Nickel Asset Holding Company I, Inc. (incorporated by reference to Exhibit 2.1 filed with Electro Energy Inc.'s Form 8-K filed with the SEC on April 5, 2006) | |
| 5.1 | Opinion of Lev & Berlin, P.C. regarding the legality of the securities being registered. | |
| 10.1 | Note and Warrant Purchase Agreement, dated as of March 31, 2006, between Electro Energy Inc. and each of the purchasers whose name appears on the signature pages thereto (incorporated by reference to Exhibit 4.1 filed with Electro Energy Inc.'s Form 8-K filed with the SEC on April 5, 2006). | |
| 23.1 | Consent of Independent Registered Public Accounting Firm Marcum & Kliegman LLP. | |
| 23.3 | Consent of Lev & Berlin, P.C. (included in its opinion filed as Exhibit 5.1 hereto). | |
| 24.1 | Power of Attorney (included on signature page to this registration statement). |
| ITEM 17. | UNDERTAKINGS. |
The undersigned registrant hereby undertakes:
(1) To file, during any period in which any offers or sales are being made, a post-effective amendment to this registration statement:
| (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended; |
| (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any other material change to such information in the registration statement. |
(2) That for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities being offered therein and the offering of such securities at the time may be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
| (i) If the registrant is relying on Rule 430B: |
| (A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and |
| (B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or |
| (ii) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
(5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) 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 Act and is, therefore, unenforceable.
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Danbury, State of Connecticut, on January 22, 2007.
| ELECTRO ENERGY INC. (Registrant) | ||
| Date: January 22, 2007 | By: | /s/ Michael E. Reed |
| Michael E. Reed, President & CEO | ||
Pursuant to the requirements of the Securities Exchange Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael E. Reed, as true and lawful attorney-in-fact and agent with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities to sign the Registration Statement filed herewith and any or all amendments to said Registration Statement (including post-effective amendments and Registration Statements filed pursuant to Rule 462 and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, the Securities and Exchange Commission granting unto said attorney-in-fact and agent the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any of them, or his or her substitute, may lawfully do or cause to be done by virtue hereof.
| Date: January 22, 2007 | By: | /s/ Michael E. Reed |
| Michael E. Reed, President and CEO | ||
| Date: January 22, 2007 | By: | /s/ Timothy E. Coyne |
| Timothy E. Coyne, Chief Financial Officer | ||
| Date: January 22, 2007 | By: | /s/ Martin G. Klein |
| Martin G. Klein, Chairman | ||
| Date: January 22, 2007 | By: | /s/ Warren Bagatelle |
| Warren Bagatelle, Director | ||
| Date: January 22, 2007 | By: | /s/ Joseph Engelberger |
| Joseph Engelberger, Director | ||
| Date: January 22, 2007 | By: | /s/ Farhad Assari |
| Farhad Assari, Director | ||
| Date: January 22, 2007 | By: | /s/ Robert Hamlen |
| Robert Hamlen, Director | ||
| Date: January 22, 2007 | By: | /s/ William Wylam |
| William Wylam, Director | ||
| Date: January 22, 2007 | By: | /s/ L.G. Schafran |
| L.G. Schafran, Director | ||
