ELECTRONICALLY TRANSMITTED TO THE SECURITIES AND EXCHANGE COMMISSION ON
JUNE 12, 2003
REGISTRATION NO. 333-105582
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MILLENNIUM CELL INC.
DELAWARE 8743 22-3726792
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
1 INDUSTRIAL WAY WEST
EATONTOWN, NEW JERSEY 07724
(732) 542-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEPHEN S. TANG
PRESIDENT, CHIEF EXECUTIVE OFFICER AND ACTING CHIEF FINANCIAL OFFICER
MILLENNIUM CELL INC.
1 INDUSTRIAL WAY WEST
EATONTOWN, NEW JERSEY 07724
(732) 542-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
THOMAS MORE GRIFFIN, ESQ.
GIBBONS, DEL DEO, DOLAN, GRIFFINGER & VECCHIONE, P.C.
ONE PENNSYLVANIA PLAZA
NEW YORK, NEW YORK 10119
(212) 649-4700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this registration statement.
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 from an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
Title of Each Class Amount Proposed Maximum Proposed Maximum Amount of
of Securities to be to be Offering Price Aggregate Offering Registration
Registered Registered Per Share Price Fee
- ----------------------------------------------------------------------------------------------------------------------
Common Stock, 3,854,000(1) $1.74(2) $6,705,960 $543(3)
par value $0.001
per share
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- ----------------------------
(1) Shares issuable upon conversion of $3 million aggregate principal amount of
unsecured convertible debentures, including shares issuable in lieu of interest
payments on unsecured convertible debentures of the Company.
(2) Calculated in accordance with Rule 457(c) based on the average of the high
and low sales prices of the common stock as reported on the Nasdaq National
Market on May 20, 2003, solely for the purpose of calculating the amount of the
registration fee. Under Rule 416 under the Securities Act, the number of shares
of common stock registered includes an indeterminate number of shares of common
stock that may be issued in connection with stock splits, stock dividends or
similar transactions.
(3) In accordance with Rule 457(p), payment of the registration fee due with
respect to this Registration Statement shall be made by offsetting the amount
due hereunder against the $1,628 registration fee we paid in connection with the
filing of our Registration Statement on Form S-3 No. 333-99753, filed on
September 18, 2002, which registration statement was withdrawn prior to
effectiveness on October 1, 2002. On November 7, 2002, in connection with filing
Registration Statement No. 333-101061, $687 was offset against such amount. On
February 11, 2003, in connection with filing Registration Statement No.
333-103104, $117 was offset against said amount. As of the date of filing this
Registration Statement, $824 remains and a portion of which is used to offset
the fee due hereunder.
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 COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED JUNE 12, 2003
PROSPECTUS
[MILLENNIUM CELL LOGO]
3,854,000 SHARES OF COMMON STOCK
The selling stockholder listed under the section entitled "Selling
Stockholder," or its pledgees or assignees, is offering for sale up to 3,854,000
shares of our common stock for resale to the public. The selling stockholder
will be selling shares of common stock that it can acquire upon conversion of up
to $3 million principal amount of unsecured convertible debentures, including
the issuance of shares in lieu of interest payments on unsecured convertible
debentures of the Company.
We will not receive any proceeds from the resale of shares of common
stock by the selling stockholder. We are paying the expenses of this offering.
Our common stock is traded on the NASDAQ NATIONAL MARKET where it
trades under the Symbol: MCEL. On June 10, 2003, the last reported sale price of
our common stock on the NASDAQ NATIONAL MARKET was $1.65 per share.
THIS INVESTMENT INVOLVES RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------------------------------
The information in this prospectus is not complete and may change.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The date of this Prospectus is June , 2003
You should rely only on the information incorporated by reference or
contained in this prospectus or a prospectus supplement or amendment. We have
not authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus or a prospectus supplement or amendment. Our
business, financial condition, results of operations and prospects may have
changed since that date.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary..................................................... 1
Risk Factors........................................................... 5
Use of Proceeds........................................................ 15
Selling Stockholder.................................................... 15
Plan of Distribution................................................... 16
Legal Matters.......................................................... 18
Experts................................................................ 18
Where You Can Find Additional Information.............................. 18
FORWARD-LOOKING STATEMENTS
Some of the statements under "Risk Factors" elsewhere in this
prospectus and elsewhere in filings by the Company with the Securities and
Exchange Commission contain forward-looking statements (within the meaning of
the Private Securities Litigation Reform Act of 1995) that are subject to risks
and uncertainties. Statements that are not statements of historical fact may be
deemed to be forward-looking information. When we use words such as "plan,"
"believe," "expect," "anticipate," "intend" or similar expressions, we are
making forward-looking statements. You should not rely on forward-looking
statements because they are subject to a number of assumptions concerning future
events, and are subject to a number of uncertainties and other factors, many of
which are outside of our control, that could cause actual results to differ
materially from those indicated. Please note that we disclaim any intention or
obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise. These factors include,
but are not limited to, the following: (i) the cost and timing of development
and market acceptance of, and the availability of components and raw materials
required by, a hydrogen fuel storage and delivery system, (ii) competition from
current, improving and alternate power technologies, (iii) our ability to access
the proceeds of our secured debenture financing program, (iv) our ability to
protect our intellectual property, (v) our ability to budgeted revenue and
expense amounts, (vi) our ability to generate revenues from the sale or license
of, or provision of services related to, our technology, (vii) our ability to
form strategic alliances or partnerships to help promote our technology and
achieve market acceptance, (viii) our ability to generate design, engineering,
or management services revenue opportunities in the hydrogen generation or fuel
cell markets, and (ix) other factors detailed from time to time in our filings
with the Securities and Exchange Commission.
PROSPECTUS SUMMARY
This summary highlights important features of this offering and the
information included or incorporated by reference in this prospectus. This
summary does not contain all of the information that you should consider before
investing in our common stock. You should read the entire prospectus carefully,
especially the risks of investing in our common stock discussed under "Risk
Factors".
THE COMPANY
We were formed as a Delaware limited liability company in 1998,
organized and began operations on January 1, 1999 and converted into a Delaware
corporation on April 25, 2000. We are an emerging technology company engaged in
the business of developing innovative fuel systems for the safe storage,
transportation and generation of hydrogen for use as an energy source.
We have developed and applied for patents for a proprietary process
called Hydrogen on Demand(TM) that safely generates hydrogen from
environmentally friendly raw materials. Our technology can be used to generate
hydrogen for use by fuel cells in the production of electricity, generate
hydrogen for use by modified internal combustion engines, and provide hydrogen
for other industrial purposes. In the proprietary process, the energy potential
of hydrogen is carried in the chemical bonds of sodium borohydride, which in the
presence of a catalyst releases hydrogen. The primary input components of the
reaction are water and sodium borohydride, a derivative of borax, which is found
in substantial natural reserves globally.
Our principal executive offices are located at 1 Industrial Way West,
Eatontown, New Jersey 07724 and our telephone number at that location is (732)
542-4000. Our internet address is www.millenniumcell.com. The information
contained in or connected to our website is not incorporated by reference in
this prospectus.
THE OFFERING
The 3,854,000 shares of our common stock being offered by the selling
stockholder consists of shares issuable upon conversion of up to $3 million
principal amount of unsecured convertible debentures issued immediately
following effectiveness of this registration statement upon exchange of secured
convertible debentures as described below, including issuances in lieu of
interest payments on unsecured convertible debentures of the Company. In
accordance with the terms of the registration rights agreement with the selling
stockholder, we determined the number of shares of common stock to be offered
for resale by doubling the approximate number of shares that could be issued
upon conversion of $3 million principal amount of unsecured convertible
debentures based on the closing price of our common stock on May 20, 2003,
discounted at 10%. The number of shares that we may actually issue may be more
or less than the 3,854,000 shares being offered by the selling stockholder
through this prospectus because the conversion of the unsecured convertible
debentures may, at the option of the Company, be based on a formula that is
dependent upon the market price of our common stock. If the market price of our
common stock falls, we may be required to issue more shares of common stock upon
1
conversion of unsecured convertible debentures. We determined the number of
shares covered by this Prospectus in order to adequately cover a reasonable
increase in the number required.
The shares offered by the selling stockholder under this prospectus do
not include shares which it may acquire from us in the future as a result of
adjustments to the exercise price of the warrants or conversion price of the
debentures due to sales by the Company of stock or stock equivalents at a price
per share that is below the then applicable exercise or conversion price.
Pursuant to a contractual obligation with the selling stockholder, if the
exercise or conversion price is adjusted due to subsequent sales of stock or
stock equivalents, the Company may be required to file a separate registration
statement relating to any such shares.
The selling stockholder pursuant to this prospectus may sell the shares
of common stock offered for resale in a secondary offering.
THE PRIVATE PLACEMENT
This Prospectus contains brief summaries of certain provisions of the
securities purchase agreement, the registration rights agreement, the unsecured
convertible debentures, the secured convertible debentures, including the
exchange debenture attached as an exhibit thereto, the warrants and the
continuing letter of credit agreement. Such summaries do not purport to be
complete. For a full and complete statement of the terms and provisions of such
instruments or agreements, reference is made to such securities purchase
agreement, registration rights agreement, the unsecured convertible debentures,
the secured convertible debentures, including the exchange debenture attached as
an exhibit thereto, the warrants, and the continuing letter of credit agreement,
each of which is filed as an exhibit to this registration statement or other
filings made by the Company with the Securities and Exchange Commission. The
descriptions of all such agreements or instruments are qualified in their
entirety by such reference.
On October 31, 2002, Millennium Cell Inc. (the "Company") entered into
a private placement financing transaction with two "accredited investors"
pursuant to the terms of a securities purchase agreement among the Company and
the purchasers. The private placement was exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) of such Act. The
placement consisted of the sale of 588,790 shares of common stock and warrants
(with an exercise price of $2.32) to purchase 147,198 shares of common stock of
the Company for gross proceeds of $1.0 million. Pursuant to the terms of the
purchase agreement, one of the investors agreed to acquire $12 million of
secured and unsecured debentures, convertible into common stock of the Company,
subject to certain terms and conditions, and warrants. Convertible unsecured
debentures with a principal amount of $3.5 million and warrants to acquire
242,678 shares (with an exercise price of $3.00 per share) were issued on
December 26, 2002 following effectiveness of Registration Statement No.
333-101061 relating to the underlying shares of common stock. Interest accrues
at a rate of 4% per annum with payments due quarterly. The unsecured debentures
due date of June 30, 2003 has been extended to September 30, 2003, subject to an
additional three thirty-day extensions at the mutual consent of the Company and
the investor.
On January 23, 2003, the Company's stockholders approved the issuance
of $8.5 million of secured convertible debentures and warrants to acquire
589,376 shares at a special meeting of
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stockholders and the secured convertible debentures were issued on January 30,
2003. Interest accrues at money market rates with payments due quarterly. The
secured convertible debentures are secured by a standby letter of credit issued
by Wachovia Bank, National Association, with an aggregate face amount equal to
the outstanding principal of the secured convertible debentures and are due in
January 2006. The Company pledged to the bank as collateral the proceeds from
the sale of the secured convertible debentures. Therefore, the Company does not
have the ability to use the proceeds from the sale of the secured convertible
debentures until the bank pledges are released upon exchange to unsecured
convertible debentures.
The Company is obligated in the future to register the resale of shares
issuable on conversion of the $8.5 million principal amount of secured
convertible debentures following exchange of such secured convertible debentures
for unsecured convertible debentures. Each time the principal amount of
outstanding unsecured convertible debentures is less than $1.0 million, a
portion of the $8.5 million of secured convertible debentures will automatically
convert into unsecured convertible debentures in increments of $3.0 million,
$3.0 million and $2.5 million upon effectiveness of the registration statement
relating to the underlying shares of common stock issuable upon conversion of
such unsecured convertible debentures.
The selling stockholder currently holds less than $1 million of
unsecured convertible debentures and $8.5 million of secured convertible
debentures. Upon effectiveness of this registration statement, $3 million of
outstanding secured convertible debentures will be exchanged for unsecured
convertible debentures and the letter of credit bank will release to the Company
$3 million of cash pledged as collateral to secure the $3 million principal
amount of secured convertible debentures being exchanged. Upon such exchange,
the selling shareholder will hold $5.5 million principal amount of secured
convertible debentures (which will be secured by the letter of credit) and less
than $4 million principal amount of unsecured convertible debentures (which
includes $3 million principal amount of unsecured convertible debentures issued
upon exchange of secured convertible debentures). The shares offered for resale
hereby are issuable to the selling stockholder upon conversion of $3 million
principal amount of unsecured convertible debentures issued upon exchange of
secured convertible debentures, including issuances of common stock in lieu of
interest payments on unsecured convertible debentures of the Company.
Shares offered for resale hereby are issuable to the selling
stockholder upon conversion of unsecured convertible debentures under three
different scenarios:
o At the option of the holder, at any time and from time to time at
$4.25 per share.
o At the option of the Company, if (1) the average closing prices of the
Company's common stock during any consecutive 30 trading days is equal
to or greater than $5.10 per share and (2) the closing price for each
of 15 trading days during such 30 trading day period which need not be
consecutive is equal to or greater than $5.10.
o The Company may also convert $300,000 (or up to $2.5 million with
investor consent) of unsecured debentures each 10 trading days at an
adjusted conversion price equal to the lesser of (i) $4.25 and (ii)
the volume weighted average of closing prices for the 10 prior trading
days discounted from 4% to 12%. The discount to the adjusted
conversion price
3
depends on the cumulative amount of debentures converted as of the
respective dates of conversion.
In addition, the Company has the option to issue freely tradable shares
of common stock in lieu of interest payments on the unconverted and then
outstanding principal amount of unsecured debentures. The number of shares of
common stock issued in lieu of any interest payment will be equal to the amount
of the interest payment divided by the average 5 day volume weighted average
price of the stock for the 5 trading days immediately preceding the interest
payment date.
The secured convertible debentures are convertible at the option of the
holder, at any time and from time to time at $4.25 per share. Following exchange
of secured convertible debentures for unsecured convertible debentures, the
convertible debentures so exchanged are also convertible at the option of the
Company under the two circumstances set forth above.
In order to exercise the Company's options to convert the debentures,
certain equity conditions must be satisfied including the following:
(i) the number of authorized but unissued and otherwise
unreserved shares of common stock is sufficient for such issuance;
(ii) such shares of common stock are registered for resale
pursuant to an effective registration statement, and the prospectus
thereunder is available for use to sell such shares or all such shares
may be sold without volume restrictions pursuant to Rule 144(k) under
the Securities Act;
(iii) the common stock is listed or quoted (and is not suspended
from trading) on The NASDAQ National Market or SmallCap Market or
other eligible market and such shares of common stock are approved for
listing;
(iv) no event of default nor any event that with the passage of
time and without being cured would constitute an event of default has
occurred and not been cured; and
(v) no public announcement of a pending or proposed change of
control transaction has occurred that has not been consummated.
WARRANTS. We have also registered under separate prospectuses the
resale of up to an aggregate of 1,248,069 shares which can be acquired from us
upon exercise of presently outstanding warrants. These warrants are exercisable
immediately at an exercise price of $2.32 (as to 147,198 shares), $3.00 (as to
242,678 shares) and $3.93 (as to 858,193 shares), which may change in the future
based on certain anti-dilution adjustments.
All warrants may not be exercised and all debentures may not be
converted to the extent that a holder thereof would then beneficially own,
together with its affiliates, more than 9.999% of our common stock then
outstanding subsequent to the applicable conversion or exercise.
RESALES OF COMMON STOCK. The following table summarizes the number of
common shares that have been registered by the Company for potential resale in
conjunction with (i) the sale of shares by the Company to private accredited
investors in June and October 2002, (ii) shares issuable upon exercise of
outstanding warrants and (iii) shares issuable upon conversion of outstanding
unsecured debentures:
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COMMON STOCK
COMMON STOCK ISSUABLE UPON
EFFECTIVE DATE ISSUABLE UPON CONVERSION OF
REGISTRATION OF REGISTRATION SALES OF EXERCISE OF UNSECURED TOTAL COMMON
STATEMENT NUMBER STATEMENT COMMON STOCK WARRANTS DEBENTURES STOCK REGISTERED
- ---------------- --------- ------------ -------- ---------- ----------------
333-92144 10/04/02 1,075,268 268,817 -- 1,344,085
333-101061 12/23/02 588,790 389,876 2,973,847 3,952,513
333-103104 2/25/03 589,376 589,376
Offered Hereby -- -- 3,854,000 3,854,000
--------- ----------- --------- ---------
Total 1,664,058 1,248,069 6,827,847 9,739,974
========= =========== ========= =========
Each time the principal amount of outstanding unsecured debentures is
less than $1.0 million, a portion of the remaining $5.5 million of secured
debentures will automatically exchange into unsecured debentures in increments
of $3.0 million and $2.5 million upon effectiveness of the registration
statement relating to the underlying shares of common stock. The Company is
obligated in the future to register the resale of shares issuable on conversion
of the $5.5 million principal amount of secured debentures following exchange of
such secured debentures for unsecured debentures.
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks and uncertainties described below, the
information in this prospectus and the additional information in our other
reports on file with the Securities and Exchange Commission and the other
documents incorporated by reference in this prospectus before deciding whether
to invest in our common stock. Our business and results of operations could be
seriously harmed by any of the following risks. The trading price of our common
stock could decline due to any of these risks, and you may lose part or all of
your investment.
WE ARE A DEVELOPMENT STAGE COMPANY, WHICH HAS ONLY BEEN IN BUSINESS FOR A
LIMITED TIME.
We completed our initial public offering in August 2000. Due to the
nature of the emerging industries in which we compete, much of our information
rests on the beliefs formed by management and has not necessarily been supported
by independent sources. As a result, there can be no guarantee as to the
adequacy of our business plan. Due to the emerging nature of hydrogen storage
and delivery technology, and fuel cell technology and alternative energy
technology in general, your basis for evaluating us is limited.
WE HAVE INCURRED SUBSTANTIAL LOSSES AND EXPECT LOSSES FOR THE NEXT FEW YEARS.
THERE CAN BE NO ASSURANCE THAT WE CAN ACHIEVE PROFITABILITY, AND EVEN IF WE DO
BECOME PROFITABLE, THAT WE CAN SUSTAIN PROFITABILITY.
We have incurred substantial losses since we were founded and we
anticipate we will continue to incur losses over the next few years. We had an
accumulated deficit of approximately $59,410,242 as of March 31, 2003. We expect
to continue to incur net losses for the next few years as we continue to make
significant investments in commercialization activities. Even if we do achieve
profitability, we may be unable to sustain or increase our profitability in the
future.
5
WE EXPECT OUR FUTURE OPERATING RESULTS TO VARY QUARTER TO QUARTER, AND INCREASE
THE LIKELIHOOD THAT WE MAY FAIL TO MEET THE EXPECTATIONS OF SECURITIES ANALYSTS
AND INVESTORS AT ANY GIVEN TIME.
We expect our revenues and operating results to vary significantly from
quarter to quarter. In addition, the Company will be required to incur interest
expense upon conversion of the unsecured convertible debentures into common
stock at the time of, and to the extent of, such conversion. As a result of each
of the foregoing, quarter-to-quarter comparisons of our revenues, interest
expense and operating results may not be meaningful. In addition, due to our
stage of development, we cannot predict our future revenues or results of
operations accurately. It is possible that in one or more future quarters our
operating results will fall below the expectations of securities analysts and
investors. If this happens, the trading price of our common stock may decline.
WE MAY BE SUBJECT TO LITIGATION RESULTING FROM COMMON STOCK VOLATILITY, WHICH
MAY RESULT IN SUBSTANTIAL COSTS AND A DIVERSION OF OUR MANAGEMENT'S ATTENTION
AND RESOURCES AND COULD HAVE A NEGATIVE EFFECT ON OUR BUSINESS AND RESULTS OF
OPERATIONS.
The stock market has, from time to time, experienced extreme price and
volume fluctuations. Many factors may cause the market price for our common
stock to decline, perhaps substantially, including:
o failure to meet our product development and
commercialization milestones,
o demand for our common stock,
o revenues and operating results failing to meet the
expectations of securities analysts or investors in any
quarter,
o downward revisions in securities analysts' estimates or
changes in general market conditions,
o technological innovations by competitors or in competing
technologies,
o investor perception of our industry or our prospects, or
o general technology or economic trends.
In the past, companies that have experienced volatility in the market
price of their stock have been the subject of securities class action
litigation. As a result, we may be involved in a securities class action
litigation in the future. Such litigation often results in substantial costs and
a diversion of management's attention and resources and could have a negative
effect on our business and results of operations.
6
WE MAY NEED FUTURE CAPITAL TO COMPLETE OUR PRODUCT DEVELOPMENT AND
COMMERCIALIZATION PLANS. IF WE ARE ABLE TO RAISE ADDITIONAL CAPITAL, IT MAY
DILUTE YOUR OWNERSHIP OR RESTRICT OUR ABILITY TO RUN OUR BUSINESS.
The Company's working capital requirements continue to be significant.
To date, the Company has been dependent primarily on the net proceeds of its
initial public offering and private placements of its equity securities. Other
than the secured convertible debentures, the Company currently has no committed
sources of, or other arrangements with respect to, additional financing. There
can be no assurance that the Company's existing capital resources will be
sufficient to fund the Company's future operations. If additional working
capital is required, it may dilute your ownership or restrict our ability to run
our business. In addition, conversion of the outstanding secured and unsecured
convertible debentures will cause dilution.
The Company's working capital requirements depend and will continue to
depend on numerous factors, including the timing of revenues, the expense
involved in commercializing its products, realizing cost reductions on its
technology, and the cost involved in protecting the proprietary rights of the
Company.
OUR FUTURE PLANS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO ATTRACT OR
RETAIN KEY PERSONNEL.
We have attracted a highly skilled management team and specialized
workforce, including scientists, engineers, researchers and marketing
professionals. Our future success is dependant in part on attracting and
retaining qualified management and technical personnel. Our inability to hire
qualified personnel on a timely basis, or the departure of key employees, could
materially and adversely affect our development and commercialization plans and
therefore, our business, prospects, results of operations and financial
condition.
WE DO NOT INTEND TO PAY ANY DIVIDENDS.
We have not declared and paid any dividends on our common stock and we
do not intend to declare and pay any dividends on our common stock. Earnings, if
any, will be used to finance and expand our business.
WE ARE SUBJECT TO NUMEROUS CONDITIONS AND RESTRICTIONS RELATING TO OUR ABILITY
TO ACCESS THE PROCEEDS OF THE LETTER OF CREDIT SECURED CONVERTIBLE DEBENTURES.
SUCH PROCEEDS MAY NOT ULTIMATELY BE AVAILABLE TO THE COMPANY.
Upon effectiveness of this registration statement, the secured
convertible debentures will be outstanding in aggregate principal amount of $5.5
million, are secured by a letter of credit equal to the principal amount of the
secured debentures outstanding and are due January 30, 2006. The proceeds of
such secured convertible debentures are pledged by the Company to the letter of
credit bank as security. As a result, the proceeds of the secured convertible
debentures are not available to the Company until such secured convertible
debentures are exchanged for unsecured convertible debentures as described under
"The Private Placement". The exchange of secured convertible debentures for
unsecured convertible debentures is subject to numerous
7
conditions including timely reduction of the then outstanding principal amount
of unsecured convertible debentures to less than $1 million and successful
registration of the resale of the common stock issuable upon conversion of the
unsecured debentures issuable upon exchange of the related secured convertible
debenture. If we are not able to exchange all of the letter of credit secured
convertible debentures to unsecured convertible debentures and gain access to
the proceeds from the letter of credit bank as described in the "Prospectus
Summary - The Private Placement" section of this prospectus, we would need to
raise additional capital to finance our business plan. Even if access to all the
proceeds is available to the Company, we many nonetheless require additional
working capital if our expenses exceed budgeted levels or revenues fall short of
projections.
WE MAY BE REQUIRED TO ISSUE MORE SHARES OF COMMON STOCK UPON ADJUSTMENT OF THE
CONVERSION AND EXERCISE PRICES OF THE SECURITIES. SALES OF SUBSTANTIAL AMOUNTS
OF COMMON STOCK IN THE PUBLIC MARKET COULD REDUCE THE MARKET PRICE OF OUR COMMON
STOCK AND MAKE IT MORE DIFFICULT FOR US AND OUR STOCKHOLDERS TO SELL OUR EQUITY
SECURITIES IN THE FUTURE.
If we sell stock or stock equivalents at a price per share that is
below either the then-applicable conversion price of the debentures or below the
exercise price of the warrants, then the conversion or exercise price, as
applicable, of the debentures and warrants may adjust downward, subject to
certain enumerated exceptions. The number of additional shares of common stock
to which the holders of these securities would be entitled depends on the price
at which we sell our stock. Furthermore, at any time and from time to time after
the effectiveness of any registration statement relating to the resale of shares
for this financing program, and if certain conditions are met, we have the
right, upon 10 trading days' prior notice, to require the conversion of $300,000
(increased to up to $2,500,000 with the investor's consent) of unsecured
convertible debentures into common stock. The conversion prices, at the time and
to the extent of the conversion, will be determined based on a discount ranging
from 4% to 12% on the volume weighted average closing price for the 10 trading
days prior to the conversion. As a result of the foregoing, we may be required
to issue more shares of common stock upon the conversion and exercise of the
securities issued or issuable as part of the private placement transaction.
Sales of substantial amounts of common stock in the public market could
reduce the market price of our common stock and make it more difficult for us
and our stockholders to sell our equity securities in the future.
The number of shares previously registered and registered hereby
relating to unsecured debentures and to be registered in the future relating to
the letter of credit secured convertible debentures when exchanged for unsecured
debentures includes substantially more than the number of shares that the
investor is currently eligible to receive upon the conversion of the convertible
debentures. We are obligated to register for resale more shares than are
currently issuable under all of the unsecured convertible debentures and may be
required in the future to register for resale more shares than are currently
issuable under the warrants, pursuant to contractual obligations with the
selling stockholders and to ensure that a sufficient number of shares is
registered in the event that exercise price or conversion price adjustments are
made. If
8
the price of our common stock decreased substantially and we sold shares at a
price lower than the conversion or exercise prices of the securities issued or
issuable as part of the private placement, the issuance of a greater number of
shares under those securities could have an effect on the control of our
Company. The securities, however, cannot be converted or exercised to the extent
that a selling stockholder would then own, together with its respective
affiliates, more than 9.999% of the shares of common stock then outstanding
subsequent to the applicable conversion or exercise.
Although the sale of these additional shares to the public might
increase the liquidity of our stockholders' investments, the increase in the
number of shares available for public sale could drive the price of our common
stock down, thus reducing the value of your investment and perhaps hindering our
ability to raise additional funds in the future. In addition, to the extent
other restricted shares become freely available for sale, whether through an
effective registration statement or under Rule 144 of the Securities Act, or if,
we issue additional shares that might be or become freely available for sale,
you could expect our stock price to decrease.
FAILURE TO COMPLY WITH A NUMBER OF FINANCIAL COVENANTS COULD RESULT IN AN EVENT
OF DEFAULT UNDER THE UNSECURED CONVERTIBLE DEBENTURES.
At all times when unsecured convertible debentures are outstanding, the
Company covenants that it will not permit its cash balance ratio to outstanding
unsecured indebtedness to be less than 1.25 to 1. A failure to comply with this
covenant will be an event of default and the holder has the right to require the
Company to prepay 125% of the outstanding unsecured convertible debentures and
100% of the outstanding letter of credit secured convertible debentures or, if
letter of credit secured debentures have been exchanged, 125% of the outstanding
unsecured debentures issued on exchange thereof, plus accrued interest.
Furthermore, an event of default would result if the closing price of the
Company's common stock is less than $0.75 for 20 consecutive trading days or
less than $0.50 for 10 consecutive trading days. Upon the occurrence of this
event of default, the holder has the right to require the Company to prepay 100%
of the outstanding unsecured and letter of credit secured convertible debentures
or, if letter of credit secured debentures have been exchanged, the unsecured
debentures issued on exchange thereof, plus accrued interest. The unsecured
convertible debentures, the letter of credit secured debentures and, if the
letter of credit debentures are exchanged, the unsecured debentures issued on
exchange thereof, as well as the continuing letter of credit agreement executed
by the Company in connection with issuing the letter of credit, all contain
additional events of default. Under the unsecured convertible debentures, the
letter of credit secured debentures, and, if the letter of credit debentures are
exchanged, the unsecured debentures issued on exchange thereof, if any other
event of default occurs, the holder has the right to require the Company to
prepay 130% of the outstanding principal amount of the unsecured and letter of
credit secured debentures or, if letter of credit secured debentures have been
exchanged, the unsecured debentures issued on exchange thereof, plus accrued
interest. The occurrence of an event of default would have a material adverse
effect on the Company.
9
IF WE ARE UNABLE TO CONTINUE TO COMPLETE PROTOTYPE DEVELOPMENT AND ENGINEERING
OF COMMERCIALLY VIABLE HYDROGEN GENERATION SYSTEMS, WE WILL NOT BE ABLE TO BUILD
OUR BUSINESS AS ANTICIPATED.
We have produced and are currently demonstrating a number of test and
evaluation systems and are continuing our efforts to decrease the costs of our
systems' components and subsystems, improve their overall reliability and
efficiency and ensure their safety. In addition, while we are conducting tests
to predict the overall life of our systems, we have not yet tested our system's
longevity for the useful life required for commercialization.
FAILURE TO MEET MILESTONES AND PERFORMANCE GOALS WITH POTENTIAL CUSTOMERS COULD
DELAY OR IMPEDE COMMERCIALIZATION OF OUR TECHNOLOGY. POTENTIAL PURCHASERS OF OUR
SYSTEMS MAY DECLINE TO PURCHASE THEM OR CHOOSE TO PURCHASE ALTERNATE
TECHNOLOGIES.
We have established product development and commercialization
milestones and a timeline for achieving development goals related to our
technology, design improvements and fuel cost reduction goals. Delays and missed
milestones may have a material impact on our commercialization schedule. If we
experience delays in meeting our development goals or our systems experience
technical defects or if we are unable to meet cost or performance goals,
including system efficiency, or hydrogen output useful life and reliability, our
commercialization schedule could be delayed. In such event, potential purchasers
of our commercial systems may choose alternative technologies and any delays
could allow potential competitors to gain market advantages.
OUR HYDROGEN GENERATION SYSTEMS MAY ONLY BE COMMERCIALLY VIABLE AS A COMPONENT
OF OTHER COMPANIES' PRODUCTS, AND THESE COMPANIES MAY CHOOSE NOT TO INCLUDE OUR
SYSTEMS IN THEIR PRODUCTS.
To be commercially viable, our hydrogen generation systems must be
integrated into products manufactured by original equipment manufacturers, which
are known as OEMs. We can offer no guarantee that OEMs will manufacture
appropriate products or, if they do manufacture such products, that they will
choose to use our sodium borohydride hydrogen generation systems. Any
integration, design, manufacturing or marketing problems encountered by OEMs
could adversely affect the market for our hydrogen generation systems and our
financial results.
ANY PERCEIVED PROBLEM WHILE CONDUCTING DEMONSTRATIONS OF OUR TECHNOLOGY COULD
HURT OUR REPUTATION AND THE REPUTATION OF OUR PRODUCTS, WHICH WOULD IMPEDE THE
DEVELOPMENT OF OUR BUSINESS.
We are currently field-testing our sodium borohydride technology and we
plan to conduct additional field tests in the future. Although to date we have
not experienced significant problems in our field-testing, these field tests may
encounter problems and delays for a number of reasons, including the failure of
our technology, the failure of the technology of others, the
10
failure to combine these technologies properly and the failure to maintain and
service the test prototypes properly. Many of these potential problems and
delays are beyond our control. In addition, field test programs, by their
nature, involve delays and modifications. Any problem or perceived problem with
our field tests could hurt our reputation and the reputation of our products.
A MASS MARKET FOR OUR PRODUCTS MAY NEVER DEVELOP OR MAY TAKE LONGER TO DEVELOP
THAN WE ANTICIPATE.
A mass market may never develop for sodium borohydride hydrogen
generation systems, or may develop more slowly than we anticipate. Fuel cells
and internal combustion engines operating on hydrogen generation systems
represent an emerging market, and we do not know whether end-users will want to
use them. The development of a mass market for these systems may be affected by
many factors, some of which are beyond our control, including:
o the acceptance in mass markets of hydrogen as an alternative
fuel source,
o the cost competitiveness of our hydrogen generation systems,
o acceptance of fuel cells as a reliable cost competitive
energy source,
o the emergence of newer, more competitive technologies and
products,
o the future cost of sodium borohydride,
o regulatory requirements,
o consumer perceptions of the safety of our products, and
o consumer reluctance to try a new product.
If a mass market fails to develop or develops more slowly than we
anticipate, we may be unable to recover the losses we will have incurred in the
development of our products and we may never achieve profitability.
SINCE ZERO EMISSION VEHICLE REQUIREMENTS CAN BE MET WITHOUT USING FUEL CELLS,
TRANSPORTATION INDUSTRY MANUFACTURERS MAY USE OTHER TECHNOLOGIES TO MEET
REGULATORY REQUIREMENTS.
It is possible to meet the zero emission vehicle requirements imposed
by California and certain northeastern states by using technologies other than
our sodium borohydride hydrogen generation systems. In addition, some major
transportation industry manufacturers are seeking to develop their own
proprietary fuel cell systems with different hydrogen sources. We can offer no
assurance that transportation industry manufacturers will use our sodium
borohydride hydrogen generation technology in their vehicles to meet regulatory
requirements. Their failure to do so could have a negative effect on our
business and financial results.
11
CHANGES IN ENVIRONMENTAL POLICIES COULD RESULT IN TRANSPORTATION INDUSTRY
MANUFACTURERS ABANDONING THEIR INTEREST IN FUEL CELL POWERED VEHICLES. THIS MAY
SUBSTANTIALLY LESSEN THE MARKET FOR OUR PRODUCTS AND HARM THE DEVELOPMENT OF OUR
BUSINESS.
To date, the interest in fuel cell technology in the transportation
industry has been driven in large part by environmental laws and regulations
mainly in California and, to a lesser extent, certain northeastern states. There
can be no guarantee that these laws and regulations will not change. Changes in
these laws and regulations could result in transportation industry manufacturers
abandoning their interest in fuel cell powered vehicles. In addition, if current
laws and regulations in the United States and Europe are not kept in force or if
further environmental laws and regulations are not adopted in these
jurisdictions as well as in other jurisdictions, demand for vehicular fuel cells
may be limited.
Although the development of alternative energy sources, and in
particular fuel cells, has been identified as a significant priority by many
governments, we cannot assure you that governments will not change their
priorities or that any such change would not negatively affect our business or
the development of our products.
WE WILL CONTINUE TO FACE INTENSE COMPETITION FROM ENERGY TECHNOLOGY COMPANIES
AND MAY BE UNABLE TO COMPETE SUCCESSFULLY.
Our products face and will continue to face significant competition.
New developments in technology may negatively affect the development or sale of
some or all of our products or make our products uncompetitive or obsolete. A
large number of corporations, national laboratories and universities in the
United States, Canada, Europe and Japan are pursuing alternative hydrogen
storage and delivery technologies. These entities, many of which have
substantially greater resources than we do, are currently engaged in the
development of products and technologies that are similar to, or may be
competitive with, certain of our products and technologies.
As more potential competitors understand the potential of fuel cells to
replace existing power sources and the necessity of hydrogen to power those fuel
cells, there will be increased competition in the hydrogen delivery and storage
product segment. This competition will come from current storage technologies,
from improvements to current storage technologies and from new alternative
storage technologies. We will compete in each of our target markets based on
that market's desired product characteristics, such as safety, cost, size,
environmental impact, ease of use and a variety of other attributes. Depending
on the specific desired attributes of each market and application, our
technology may or may not be able to compete successfully.
OUR FAILURE TO OBTAIN OR MAINTAIN THE RIGHT TO USE CERTAIN INTELLECTUAL PROPERTY
MAY NEGATIVELY AFFECT OUR BUSINESS.
Our future success and competitive position depends in part upon our
ability to obtain or maintain certain proprietary intellectual property to be
used in our principal products. This may
12
be achieved in part by prosecuting claims against others who we believe are
infringing on our rights and by defending claims of intellectual property
infringement by our competitors. While we are not currently engaged in any
material intellectual property litigation, we could become subject to lawsuits
in which it is alleged that we have infringed the intellectual property rights
of others or we could commence lawsuits against others who we believe are
infringing upon our rights. Our involvement in intellectual property litigation
could result in significant expense to us, adversely affecting the development
of sales of the challenged product or intellectual property and diverting the
efforts of our technical and management personnel, whether or not such
litigation is resolved in our favor. In the event of an adverse outcome as a
defendant in any such litigation, we may, among other things, be required to:
o pay substantial damages,
o cease the development, manufacture, use, sale or importation
of products that infringe upon other patented intellectual
property,
o expend significant resources to develop or acquire
non-infringing intellectual property,
o discontinue processes incorporating infringing technology,
or
o obtain licenses to the infringing intellectual property.
An adverse outcome as plaintiff, in addition to the costs involved,
may, among other things, result in the loss of the patent in a suit by a holding
of invalidity or unenforceability, significantly increase competition as a
result of the holding, and require the payment of penalties resulting from
counterclaims by the defendant.
We cannot assure you that we would be successful in such development or
acquisition or that such licenses would be available upon reasonable terms. Any
such development, acquisition or license could require the expenditure of
substantial time and other resources and could have a negative effect on our
business and financial results.
WE MAY NOT BE ABLE TO PROTECT THE RIGHTS TO OUR INTELLECTUAL PROPERTY.
Failure to protect our existing intellectual property rights may result
in the loss of our exclusivity or the right to use our technologies. If we do
not adequately ensure our freedom to use certain technology, we may have to pay
others for rights to use their intellectual property, pay damages for
infringement or misappropriation and/or be enjoined from using such intellectual
property. We rely on patent, trade secret, trademark and copyright law to
protect our intellectual property. The patents that we have obtained will expire
as early as 2015 and the most recently filed applications, if issued, will not
expire until 2021. Some of our intellectual property is not covered by any
patent or patent application. As we further develop our system and related
intellectual property, we expect to seek additional patent protection. Our
patent position is subject to complex factual and legal issues that may give
rise to uncertainty as to the validity, scope and enforceability of a particular
patent. Accordingly, we cannot assure you that:
13
o any of the patents owned by us or other patents that other
parties license to us in the future will not be invalidated,
circumvented, challenged, rendered unenforceable or licensed
to others, or
o any of our pending or future patent applications will be
issued with the breadth of claim coverage sought by us, if
issued at all, or
o any patents owned by or licensed to us, although valid, will
not be dominated by a patent or patents to others having
broader claims.
In addition, effective patent, trademark, copyright and trade secret
protection may be unavailable, limited or not applied for in certain foreign
countries.
We also seek to protect our proprietary intellectual property,
including intellectual property that may not be patented or patentable, in part
by confidentiality agreements. We cannot assure you that these agreements will
not be breached, that we will have adequate remedies for any breach or that such
persons will not assert rights to intellectual property arising out of these
relationships.
The members of our scientific advisory board are employed by entities
other than us, some of which may compete with us. We have not entered into
non-competition agreements with any of our scientific advisors. If any of them
were to consult with or become employed by any of our competitors, our business
could be negatively affected.
SODIUM BOROHYDRIDE IS CURRENTLY A SPECIALTY CHEMICAL, PRODUCED IN LIMITED
QUANTITIES AND SOLD AT HIGH MARGINS. AS A RESULT, THE ENERGY PRODUCED BY OUR
SYSTEMS MAY COST MORE THAN ENERGY PROVIDED THROUGH CONVENTIONAL AND ALTERNATIVE
SYSTEMS. ACCORDINGLY, OUR SYSTEMS MAY BE LESS ATTRACTIVE TO POTENTIAL USERS.
Our systems' ability to produce energy depends on the availability and
pricing of sodium borohydride. Sodium borohydride is currently a specialty
chemical that has limited commercial use and is not manufactured in vast
quantities. There are a limited number of manufacturers of sodium borohydride
located in the United States and Europe and there can be no assurance that the
high cost of this specialty chemical will be reduced.
We believe that we can compete in the portable power and micro power
markets at the current price of sodium borohydride, but it will be necessary to
scale-up production of the chemical to be cost competitive in the transportation
markets. If market acceptance of our technology increases in the transportation,
portable power and battery markets, we believe that this increase in demand for
sodium borohydride will result in the need for additional global manufacturing
capacity. There can be no assurance that we will be able to successfully engage
other companies to increase the production of sodium borohydride to meet the
required demand.
If the price of sodium borohydride is such that the energy produced by
our systems costs more than the energy provided through conventional and other
alternative systems, our systems may be less attractive to potential users.
14
IF LOWER COST PROCESSES FOR THE MANUFACTURE OF SODIUM BOROHYDRIDE ARE NOT
DEVELOPED AND DEMONSTRATED, OUR COMMERCIALIZATION PLANS IN THE TRANSPORTATION
INDUSTRY MAY BE HINDERED.
If lower cost processes for the manufacture of sodium borohydride are
not developed, it may negatively affect our ability to compete in all the
potential markets we intend to pursue, particularly the transportation markets.
This may have an adverse effect on our growth of operations and our financial
results.
WE ARE DEPENDENT ON COMPANIES OR GOVERNMENTAL AGENCIES TO DEVELOP THE
INFRASTRUCTURE REQUIRED TO USE OUR TECHNOLOGIES IN CERTAIN APPLICATIONS OR
MARKETS.
Our supply chain plan is focused primarily on the global joint
development and licensing of a proprietary process for the manufacture and
regeneration of sodium borohydride with large, industrial partners including
borate producers, industrial hydrogen providers, chemical providers, and major
energy producers (including oil, gas, and electricity companies). Our success in
this area is dependent on our ability to enter into partnerships or other
cooperative arrangements with these companies. In addition, in the
transportation markets, it will be necessary to make changes to the current fuel
delivery infrastructure in order for our products to be used by consumers on a
mass scale. There can be no assurance that we will be able to rely on companies
and/or government agencies to make the infrastructure changes needed for our
technology to be used on a mass scale in all potential markets.
ANY ACCIDENTS INVOLVING OUR PRODUCTS OR THE RAW MATERIALS USED IN OUR PRODUCTS
COULD IMPAIR THEIR MARKET ACCEPTANCE.
Sodium borohydride fuel solutions have a high pH, and may be corrosive
and harmful to human skin. In powder form, it can be fatal if swallowed and may
cause skin burns in contact with moist skin. The long-term health effects of the
fuel have not been evaluated. If spilled in the ground or water it could
adversely impact plant, marine, or animal life. Furthermore, if sodium
borohydride comes into contact with water, it could generate flammable hydrogen
gas. In solid form, sodium borohydride is also combustible and could produce
hazardous and/or flammable decomposition products in a fire.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the
selling stockholder.
SELLING STOCKHOLDER
The following table sets forth information regarding the beneficial
ownership of shares of common stock by the selling stockholder as of June 9,
2003, and the number of shares of common stock covered by this Prospectus.
Beneficial ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to securities. The
following table includes certain shares of common stock issuable upon exercise
of certain warrants and upon conversion of certain convertible debentures.
However, the selling
15
stockholder is prohibited from acquiring shares of common stock under the
debentures and the warrants (as applicable) to the extent that such acquisition
would result in the selling stockholder, together with any of its respective
affiliates, beneficially owning in excess of 9.999% of our common stock
outstanding after such acquisition. The selling stockholder has not held any
position or office and has not had any other material relationship with us or
any of our affiliates within the past three years.
The percentage of ownership for the selling stockholder disclosed in
this table is based on 30,693,320 shares of common stock outstanding as of June
9, 2003, plus any common stock equivalents exercisable within 60 days and held
by that holder. Both the number of shares listed as beneficially owned after the
offering by the selling stockholder in the table and selling stockholder's
percentage of share ownership after the offering are based on the assumption
that all of the shares acquired by the selling stockholder and being offered
hereunder are sold pursuant to this offering, and that no other shares of common
stock are acquired or disposed of by the selling stockholder prior to the
termination of this offering. Because the selling stockholder may sell all, some
or none of its 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
stockholder will own upon completion of this offering.
Information with respect to the shares of our common stock beneficially
owned by the selling stockholder follows:
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO AFTER
RESALE OF SHARES RESALE OF SHARES
Number of
Number of Shares Being
Name of Selling Stockholder Shares Percent Offered Number of Shares Percent
Pine Ridge Financial, Inc. 3,406,580(1) 9.9%(1) 3,854,000(2) 2,960,407(3) 8.9%(3)
(1) Based on information provided by the selling stockholder and based on
30,693,320 shares of common stock outstanding plus common stock equivalents
exercisable within 60 days and held by the holder. Based on: (i) 371,916 shares
of common stock held directly, (ii) an aggregate of 1,129,667 shares of common
stock which may be acquired upon exercise of currently outstanding warrants to
acquire such number of shares, and (iii) an aggregate of 2,164,706 shares which
the selling stockholder has the right to acquire upon conversion of
approximately $700,000 of currently outstanding unsecured convertible debentures
and $8.5 million of currently outstanding secured convertible debentures at the
conversion price of $4.25 per share ($3 million of which will be exchanged for
unsecured convertible debentures upon effectiveness of the registration
statement of which this prospectus forms a part and the resale of shares
acquired upon conversion thereof are offered hereby). No shares are included in
the table relating to conversions of unsecured debentures at the election of the
Company at prices of less than $4.25, since conversions at the election of the
Company must be initiated by the Company and, as such, are not within the
control of the selling stockholder and therefore not deemed beneficially owned
by the selling stockholder. The selling stockholder cannot exercise its warrants
nor may it convert its debentures, to the extent that it would then own,
together with its affiliates, more than 9.999% of the shares of our common stock
then outstanding. Without giving effect to such existing 9.999% limitation, the
selling stockholder has the right to acquire 3,666,289 shares or 10.8%.
(2) The Company is contractually obligated to register all the shares offered
hereby.
(3) Includes: (i) 371,916 shares of common stock held directly, (ii) an
aggregate of 1,129,667 shares of common stock which may be acquired upon
exercise of currently outstanding warrants to acquire such number of shares,
and (iii) an aggregate of 1,458,824 shares which the selling stockholder has
the right to acquire upon conversion of approximately $700,000 of currently
outstanding unsecured convertible debentures and $5.5 million of currently
outstanding secured convertible debentures (after giving effect to the exchange
of $3 million of secured debentures for unsecured debentures upon effectiveness
of the registration statement of which this prospectus forms a part and assuming
the resale by the selling stockholder of all shares acquired upon conversion
thereof) at the conversion price of $4.25 per share. No shares are included in
the table relating to conversions of unsecured debentures at the election of the
Company at prices of less than $4.25, since conversions at the election of the
Company must be initiated by the Company and, as such, are not within the
control of the selling stockholder and therefore not deemed beneficially owned
by the selling stockholder. The selling stockholder cannot exercise its warrants
nor may it convert its debentures, to the extent that it would then own,
together with its affiliates, more than 9.999% of the shares of our common stock
then outstanding.
PLAN OF DISTRIBUTION
The selling stockholder and any pledgees, assignees and
successors-in-interest 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 stockholder may use any one or more of the
following methods when selling shares:
16
o ordinary brokerage transactions and transactions in which
the broker-dealer solicits purchasers;
o 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;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling stockholders to
sell a specified number of such shares at a stipulated price
per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholder may also sell shares under Rule 144 under the
Securities Act of 1933, as amended, if available, rather than under this
prospectus.
Broker-dealers engaged by the selling stockholder may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholder (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholder does not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholder may from time to time pledge or grant a
security interest in some or all of the common stock, convertible debentures or
warrants owned by it and, if it defaults in the performance of its secured
obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time under this prospectus, or under an amendment to
this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act amending the list of selling stockholder to include the pledgee,
transferee or other successors in interest as selling stockholders under this
prospectus.
The selling stockholder 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.
The selling stockholder and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or
17
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act. The
selling stockholder has have informed the Company that it does not have any
agreement or understanding, directly or indirectly, with any person to
distribute the common stock.
The Company has agreed to indemnify the selling stockholder against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus
will be passed upon for us by Gibbons, Del Deo, Dolan, Griffinger & Vecchione,
P.C., Newark, New Jersey.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 2002, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act and the rules and regulations thereunder for the registration
of the resale of shares of common stock. This prospectus is part of the
registration statement. As allowed by the SEC rules, this prospectus does not
contain all the information you can find in the registration statement or the
exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information in this prospectus and information we
file later with the SEC will automatically update and supersede this
information. This prospectus incorporates by reference the documents set forth
below that we have previously filed with the SEC. These documents contain
important information about us, our business and our finances.
The documents that we are incorporating by reference are:
o Our Annual Report on Form 10-K for the year ended December
31, 2002;
o Our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2003;
o Our Current Reports on Form 8-K filed with the SEC on
January 27 and April 29, 2003;
18
o The description of our common stock that is contained in our
Registration Statement on Form S-1 filed with the SEC on
January 9, 2001.
Any document which we file pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus but before the end
of any offering of securities made under this prospectus will also be considered
to be incorporated by reference.
If you request, either orally or in writing, we will provide you with a
copy of any or all documents which are incorporated by reference. We will
provide such documents to you free of charge, but will not include any exhibits,
unless those exhibits are incorporated by reference into the document. You
should address requests for documents to Stephen S. Tang, President, Chief
Executive Officer and Acting Chief Financial Officer, Millennium Cell Inc., 1
Industrial Way West, Eatontown, New Jersey 07724.
You can inspect and copy all or any portion of the registration
statement or any reports, statements or other information we file at the public
reference facility maintained by the Securities and Exchange Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549. You may call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information
about the operation of the public reference rooms. Copies of all or any portion
of the registration statement can be obtained from the public reference section
of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, the registration statement is
publicly available through the Securities and Exchange Commission's Internet
site located at www.sec.gov.
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[MILLENNIUM CELL LOGO]
COMMON STOCK
PROSPECTUS
JUNE , 2003
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses payable
by the registrant in connection with the sale of the common stock being
registered.
SEC registration fee $543
Legal fees and expenses $10,000
Accounting fees and expenses $10,000
Printing expenses $500
Miscellaneous $957
Total $22,000
The selling stockholder described in the prospectus included herewith
will not pay any of the expenses of this offering.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
In accordance with Section 145 of the Delaware General Corporation Law,
Article 11 of our certificate of incorporation provides that no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (1) for any breach of the director's duty of loyalty to the Company or
its stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) in respect of unlawful
dividend payments or stock redemptions or repurchases or (4) for any transaction
from which the director derived an improper personal benefit.
Article V of our by-laws provides for indemnification by the Company of
its officers and certain non-officer employees under certain circumstances
against expenses, including attorneys fees, judgments, fines and amounts paid in
settlement, reasonably incurred in connection with the defense or settlement of
any threatened, pending or completed legal proceeding in which any such person
is involved by reason of the fact that such person is or was an officer or
employee of the registrant if such person acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to criminal actions or proceedings, if such person
had no reasonable cause to believe his or her conduct was unlawful.
II-1
ITEM 16. EXHIBITS
The exhibits filed as part of this registration statement are as
follows:
EXHIBIT NO. DESCRIPTION
4.10.2 Unsecured Convertible Debenture No. 2.(2)
4.10.3 Letter Amendment to Unsecured Convertible Debenture and
Secured Convertible Debenture dated April 22, 2003.(5)
4.11 Form of Exchange Convertible Debenture.(3)
4.12 Secured Convertible Debenture in aggregate principal
amount of $8.5 million.(2)
5.1 Opinion of Gibbons, Del Deo, Dolan, Griffinger &
Vecchione, P.C.(5)
10.16 Securities Purchase Agreement dated as of October 31,
2002 among the Company and the purchasers named
therein.(3)
10.17 Registration Rights Agreement dated as of October 31,
2002 among the Company and the purchasers named
therein.(3)
10.21 Continuing Letter of Credit Agreement dated January 30,
2003 between the Company and Wachovia Bank, National
Association.(4)
10.22 Security Agreement Dated January 30, 2003 between the
Company and Wachovia Bank, National Association.(4)
10.23 Letter of Credit securing $8.5 million Secured
Convertible Debentures.(4)
II-2
23.1 Consent of Gibbons, Del Deo, Dolan, Griffinger &
Vecchione, P.C. (included in its opinion filed as
Exhibit 5.1 hereto).(5)
23.2 Consent of Ernst & Young, L.L.P.(1)
24.1 Powers of Attorney.(5)
(1) Filed herewith.
(2) Previously filed with Annual Report on Form 10-K for the year ended
December 31, 2002 under the same Exhibit Number.
(3) Previously filed with Registration Statement No. 333-101061 under the same
Exhibit Number.
(4) Previously filed with Registration Statement No. 333-103104 under the same
Exhibit Number.
(5) Previously filed with Registration Statement No. 333-105582 on May 27, 2003
under the same Exhibit Number.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which 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;
(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 thereof) 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 the 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 Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
II-3
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) That, insofar as indemnification for liabilities arising under the
Securities 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
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Eatontown,
State of New Jersey, on June 12, 2003.
MILLENNIUM CELL INC.
By: /s/ Stephen S. Tang
--------------------------------
Name: Stephen S. Tang
Title: Chief Executive Officer, Acting
Chief Financial Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
Chief Executive Officer, Acting Chief Financial June 12, 2003
/s/ Stephen S. Tang Officer, President and Director
- --------------------------- (Principal Executive Officer and Acting
Stephen S. Tang Principal Financial Officer)
/s/ John Giolli Controller (Principal Accounting Officer) June 12, 2003
- --------------------------- Director
John Giolli
/s/ G. Chris Andersen* Director June 12, 2003
- ---------------------------
G. Chris Andersen
/s/ Kenneth R. Baker* Director June 12, 2003
- ---------------------------
Kenneth R. Baker
/s/ Alexander MacLachlan* Director June 12, 2003
- ---------------------------
Alexander MacLachlan
/s/ Zoltan Merszei* Director June 12, 2003
- ---------------------------
Zoltan Merszei
/s/ H. David Ramm* Director June 12, 2003
- ---------------------------
H. David Ramm*
/s/ James L. Rawlings* Director June 12, 2003
- ---------------------------
James L. Rawlings
Director June __, 2003
- ---------------------------
Richard L. Sandor
Director June __, 2003
- ---------------------------
John R. Wallace
*By: /s/ Stephen S. Tang Stephen S. Tang as Attorney-in-Fact pursuant to
- --------------------------- Powers of Attorney filed as Exhibit 24.1.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
23.2 Consent of Ernst & Young, L.L.P.(1)
(1) Filed herewith.