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SUPPLEMENT TO LITHIUM TECHNOLOGY CORPORATION
PROSPECTUS DATED OCTOBER 9, 1996
Delete the third and fourth paragraphs on Page 5 and replace the same with the
following:
NEED FOR ADDITIONAL CAPITAL; UNCERTAINTY OF ADDITIONAL FUNDING. The
amount of capital the Company currently has will not be sufficient to finance
all stages necessary to commercialize the Company's rechargeable battery
technology. The Company believes that it has sufficient capital resources to
meet the Company's needs and satisfy the Company's obligations through
approximately the second quarter of 1997 based on the Company's current
strategies and subject to the uncertainties discussed in this Prospectus. The
Company does not currently have sufficient cash to achieve all its development
and production objectives, including the 1998 installation of the pilot
manufacturing line (defined and discussed herein) during the first half of 1998.
In order to finance its business, the Company will need to obtain additional
financing. In order to raise this capital, the Company will be required to sell
additional debt or equity securities. The Company has thus far successfully
raised approximately $8.9 million through the private sale of its securities
including $1.75 million from the sale of Convertible Notes (as defined below) in
October 1996 (the "Convertible Notes Offering").
New capital will be required in order for the Company to proceed with
the Company's business strategy, and such new capital is planned to be sought
from several sources, including the Consortium. There can be no assurance that
the incremental capital needed to attain commercial viability of the Company's
battery technology will be obtained (which the Company currently estimates at
approximately $25 million). There can be no assurance that additional financing
will be available when needed or on terms acceptable to the Company. If
additional funds are raised by issuing equity securities, existing stockholders
will incur further dilution.
The Company has received a commitment letter from Laidlaw & Co. for an
underwritten public offering of between $7 million and $10 million of the
Company's common stock (the "Underwritten Offering"). The commitment letter is
subject to a number of conditions. Pursuant to the Convertible Note Agreements
(defined and discussed herein), executed in connection with the Convertible
Notes Offering, the Company has agreed to use part of the Underwritten Offering
proceeds to repay the Convertible Notes. There can be no assurance that the
Underwritten Offering will be consummated. Moreover, the offering proceeds will
not satisfy the Company's entire cash needs. If the Company is unable to raise
sufficient additional capital, it will be forced to curtail research and
development expenditures which, in turn, will delay, and could prevent, the
completion of the commercialization process. The Company is also currently
discussing future funding alternatives with potential unrelated third-party
investors.
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Delete the last two sentences under the caption "Exercise of Outstanding
Warrants; Additional Dilution" on Page 11 and replace the same with the
following paragraph:
In October 1996, the Company issued $1.75 million principal amount
convertible notes (the "Convertible Notes"). In connection with the issuance of
the Convertible Notes, the Company issued 267,176 shares of the Company's common
stock as compensation to the purchasers of the Convertible Notes, and 66,794
shares plus a warrant to purchase an additional 87,500 shares at an exercise
price of $1.31 to the placement agent. Pursuant to the terms of the Convertible
Note Agreements, additional shares may be required to be issued to the
purchasers of the Convertible Notes in the event of certain post-closing events.
First, the Convertible Notes must be repaid on the earlier to occur of (i)
January 23, 1997 or (ii) the Underwritten Offering described herein. In the
event that the principal amount of the Convertible Notes is not paid when due
the Noteholders may convert the Notes into as much as $3,850,000 worth of the
Company's common stock (to be valued as of the date of specified triggering
events less a discount factor). In the event of default, commencing on the 151st
day after the closing date and until the time of such conversion by the
Noteholders, the Company is required to pay the Noteholders 10% interest on the
outstanding principal balance of the Convertible Notes. The Noteholders'
conversion rights expire upon the earlier of (i) repayment of the Notes or (ii)
November 2, 1998, and such conversion rights are the Noteholders' exclusive
remedy in the event of the Company's failure to repay the principal amount of
the Convertible Notes. The Convertible Notes, if unpaid on November 2, 1998, are
automatically converted into shares of the Company's common stock. The terms of
the Convertible Note Agreements allow the Company two 30-day extensions of the
January 23, 1997 maturity date, provided the Company issues to the Noteholders
$175,000 worth of the Company's common stock (based on the value of the common
stock at the time of the extension less a discount factor), for each such
extension. Second, if the Company does not file a registration statement with
the Securities and Exchange Commission covering the Underwritten Offering
described herein by November 24, 1996, the Company is required to issue to the
Noteholders an additional $43,750 worth of the Company's common stock (based on
the value of the common stock valued as of that date less a discount factor).
The Company must also issue to the Noteholders an additional $8,750 worth of the
Company's common stock each week that such registration statement is not filed
thereafter (based on the value of the common stock at the beginning of each such
week less a discount factor). There can be no assurances that: (a) the
registration statement for the Underwritten Offering will be timely filed; (b)
the Underwritten Offering will be successfully concluded; (c) the Company will
not exercise both extensions on the maturity date of the Convertible Notes; or
(d) the Company will be able to repay the principal amount of the Convertible
Notes by January 23, 1997. Consequently, stockholders may incur a substantial
dilution of their equity interest. The number of shares issuable to the
Noteholders could be substantial and, pursuant to the terms of the Convertible
Notes, could increase substantially if the market value of the Company's common
stock, which is a component of the applicable conversion formulas, decreases
substantially.
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Insert the following paragraph as a new second paragraph under the caption
"Shares Eligible for Future Sales" on Page 12:
The 333,970 shares already issued in connection with the Convertible
Notes Offering and the shares issuable upon conversion of the Convertible Notes
and/or the occurrence of other specified events will be (i) eligible for future
sale pursuant to Regulation S promulgated under the Securities Act of 1933, as
amended, and/or (ii) eligible for future sale upon the exercise, if any, of any
applicable piggy back registration rights.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER 25, 1996
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