<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from ____________ to ____________
Commission file number 1-10446
LITHIUM TECHNOLOGY CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3411148
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5115 Campus Drive, Plymouth Meeting, PA 19462
(Address of Principal Executive Offices)
(610) 940-6090
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of October 31, 1996:
16,800,455 shares of Common Stock
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE> 2
LITHIUM TECHNOLOGY CORPORATION AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
<TABLE>
<CAPTION>
Page
PART 1 - FINANCIAL INFORMATION
<S> <C>
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations - Nine Months Ended September
30, 1996 and 1995, and Period From July 21, 1989 (Date
of Inception) to September 30, 1996 4
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) - 5
Nine Months Ended September 30, 1996
Consolidated Statements of Cash Flows - Nine Months ended September 30, 1996 6
and 1995 and Period from July 21, 1989 (Date of Inception) to
September 30, 1996
Notes to Consolidated Financial Statements - September 30, 1996 7-14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 15-20
RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 21-22
</TABLE>
Page 2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
LITHIUM TECHNOLOGY CORPORATION AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
Cash and equivalents $ 581,000 $ 217,000
Prepaid expenses and other current assets 8,000 54,000
------------ ------------
Total Current Assets 589,000 271,000
------------ ------------
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION OF
$304,000 at September 30, 1996 and $177,000 at December 31, 1995 669,000 653,000
------------ ------------
OTHER ASSETS:
Restricted cash 65,000 47,000
Debt issue costs, less accumulated amortization of $100,000 in 1995 -- 174,000
Security deposits 20,000 20,000
------------ ------------
85,000 241,000
------------ ------------
$ 1,343,000 $ 1,165,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
12% convertible promissory notes $ -- $ 1,284,000
Accounts payable 1,412,000 891,000
Due to related parties -- 327,000
Accrued salaries 124,000 155,000
------------ ------------
Total Current Liabilities 1,536,000 2,657,000
7% CONVERTIBLE PROMISSORY NOTES, DUE DECEMBER 1999 -- 300,000
------------ ------------
Total Liabilities 1,536,000 2,957,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Undesignated preferred stock:
Authorized - 75,849 shares, issued and outstanding - None -- --
Series B convertible preferred stock, par value $.01 per share:
Authorized - 14,151 shares; issued and outstanding - None at September 30, 1996 and -- --
6,942 shares at December 31, 1995
Series C convertible preferred stock, par value $.01 per share: -- --
Authorized - 10,000 shares; issued and outstanding - None at September 30, 1996 and
10,000 shares at December 31, 1995 Common stock par value $.01 per share:
Authorized - 50,000,000 shares
Issued and outstanding - 16,077,084 shares at September 30, 1996 and 7,542,795 shares at
December 31, 1995 161,000 75,000
Additional paid-in capital 16,047,000 11,471,000
Accumulated deficit (6,865,000) (6,865,000)
Deficit accumulated during development stage (9,536,000) (6,473,000)
------------ ------------
Total Stockholders' Equity (Deficiency) (193,000) (1,792,000)
------------ ------------
$ 1,343,000 $ 1,165,000
============ ============
</TABLE>
See notes to consolidated financial statements
Page 3
<PAGE> 4
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Period from
September 30, September 30, July 21, 1989
--------------------------------- ---------------------------- (Date of Inception)
1996 1995 1996 1995 September 30, 1996
--------------- ------------- ------------- ------------- ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
COSTS AND EXPENSES:
Engineering, research
and development $ 325,000 $ 288,000 $ 899,000 $ 852,000 $ 3,533,000
General and administrative 765,000 389,000 2,143,000 1,015,000 5.886,000
Interest expense, net of
interest income (13,000) 20,000 21,000 56,000 117,000
--------------- ------------- ------------- ------------- ------------
1,077,000 697,000 3,063,000 1,923,000 9,536,000
--------------- ------------- ------------- ------------- ------------
NET LOSS $ (1,077,000) $ (697,000) $ (3,063,000) $ (1,923,000) $ (9,536,000)
=============== ============= ============= ============= ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 15,919,000 6,948,000 13,212,000 6,790,000
=============== ============= ============= =============
NET LOSS PER SHARE $ (.07) $ (.10) $ (.23) $ (.28)
=============== ============= ============= =============
</TABLE>
See notes to consolidated financial statements
Page 4
<PAGE> 5
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY) - (UNAUDITED)
<TABLE>
<CAPTION>
Series B Series C
Convertible Preferred Stock Convertible Preferred Stock Common Stock
--------------------------- --------------------------- ----------------------
Shares Amount Shares Amount Shares Amount
------------ ------------ ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1995 6,942 $ -- 10,000 $ -- 7,543,000 $ 75,000
NINE MONTHS ENDED
SEPTEMBER 30, 1996:
Issuance of Common Stock:
Upon conversion of convertible
preferred stock (6,942) -- (10,000) -- 454,000 4,000
Upon conversion of 7% convertible
promissory notes and accrued
interest thereon 152,000 2,000
Upon conversion of 12% convertible
promissory notes and accrued
interest thereon 7,004,000 70,000
For cash from Consortium,
net of placement costs of $212,000 632,000 7,000
For cash 38,000
In payment of deferred compensation
and accounts payable 254,000 3,000
Issuance of Warrants in
settlement of litigation
Net Loss
------------ ------------ ------------ ----------- ----------- ----------
BALANCES AT
SEPTEMBER 30, 1996 -- $ -- -- $ -- $16,077,000 $ 161,000
============ ============ ============ =========== =========== ==========
<CAPTION>
Deficit
Accumulated
Additional During
Paid-In Accumulated Development
Capital Deficit Stage
------------- ------------- ------------
<S> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1995 $ 11,471,000 $ (6,865,000) $ (6,473,000)
NINE MONTHS ENDED
SEPTEMBER 30, 1996:
Issuance of Common Stock:
Upon conversion of convertible
preferred stock (4,000)
Upon conversion of 7% convertible
promissory notes and accrued
interest thereon 318,000
Upon conversion of 12% convertible
promissory notes and accrued
interest thereon 1,830,000
For cash from Consortium,
net of placement costs of $212,000 2,181,000
For cash 19,000
In payment of deferred compensation
and accounts payable 164,000
Issuance of Warrants in
settlement of litigation 68,000
Net Loss (3,063,000)
------------- ------------- ------------
BALANCES AT
SEPTEMBER 30, 1996 $ 16,047,000 $ (6,865,000) $ (9,536,000)
============= ============= ============
</TABLE>
See notes to consolidated financial statements
Page 5
<PAGE> 6
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Period from
September 30, July 21, 1989
-------------------------------- (Date of Inception) to
1996 1995 September 30, 1996
------------ ------------ -----------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,063,000) $ (1,923,000) $(10,165,000)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation 127,000 126,000 304,000
Amortization of debt issue costs 225,000 105,000 470,000
Other -- 14,000 25,000
Loss from discontinued operations -- -- 629,000
Fair value of warrants and option granted for services rendered -- -- 38,000
Common stock of the Company issued to certain
employees for services provided to Industries -- -- 106,000
Expenses paid by shareholder on behalf of Company -- -- 79,000
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 46,000 22,000 (8,000)
Security deposits -- -- (20,000)
Accounts payable and accrued expenses 659,000 154,000 1,992,000
Due to related parties (209,000) 63,000 --
------------ ------------ ------------
Net cash provided by (used in) operating activities (2,215,000) (1,439,000) (6,550,000)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (143,000) (7,000) (723,000)
Restricted cash (18,000) 185,000 (65,000)
Net advances from (to) discontinued operations -- -- 94,000
------------ ------------ ------------
Net cash provided by (used in) investing activities (161,000) 178,000 (694,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net advances repayable only out of proceeds of public offering -- -- 471,000
Proceeds received upon issuance of common stock 2,207,000 -- 3,239,000
Proceeds received from issuance of preferred stock -- -- 100,000
Proceeds received upon exercise of warrants, net of costs 68,000 342,000 540,000
Net advances by former principal stockholder -- -- 321,000
Proceeds from sale of convertible debt 516,000 1,185,000 3,624,000
Debt issue costs (51,000) (191,000) (470,000)
------------ ------------ ------------
Net cash provided by financing activities 2,740,000 1,336,000 7,825,000
------------ ------------ ------------
NET CHANGE IN CASH AND EQUIVALENTS 364,000 75,000 581,000
CASH AND EQUIVALENTS, BEGINNING OF YEAR 217,000 106,000 --
------------ ------------ ------------
CASH AND EQUIVALENTS, END OF YEAR $ 581,000 $ 181,000 $ 581,000
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Contribution to capital by former principal stockholder $ -- $ -- $ 3,659,000
============ ============ ============
Related party debt exchanged for convertible debt $ -- $ -- $ 321,000
============ ============ ============
Exchange of indebtedness to former principal
stockholder for common stock $ -- $ -- $ 445,000
============ ============ ============
Issuance of common stock for services and deferred salaries $ 167,000 $ -- $ 255,000
============ ============ ============
Exchange of equipment and accrued rent for common stock $ -- $ -- $ 271,000
============ ============ ============
Subordinated notes and related accrued interest
exchanged for Series A preferred stock $ -- $ -- $ 3,300,000
============ ============ ============
Exchange of convertible debt for convertible preferred stock $ -- $ -- $ 356,000
============ ============ ============
Conversion of convertible debt and accrued interest
into common stock $ 2,220,000 $ 1,050,000 $ 3,435,000
============ ============ ============
Exchange of advances repayable only out of
proceeds of public offering for common stock $ -- $ -- $ 471,000
============ ============ ============
Deferred offering costs on warrants exercised $ -- $ -- $ 88,000
============ ============ ============
Settlement of payable upon issuance of warrants $ 68,000 $ -- $ 68,000
============ ============ ============
</TABLE>
See notes to consolidated financial statements
Page 6
<PAGE> 7
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
applicable to interim periods. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. These financial
statements should be read in conjunction with the Company's audited
financial statements included in the Company's Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission for the year ended
December 31, 1995. Operating results for the three and nine month periods
ended September 30, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996 or any interim period.
2. DESCRIPTION OF BUSINESS
Lithium Technology Corporation (sometimes referred to herein as "LTC")
together with its wholly-owned subsidiary Lithion Corporation (sometimes
referred to herein as "Lithion") (LTC and Lithion are collectively referred
to herein as the "Company") is considered to be a development stage company
for financial reporting purposes until significant product sales occur. LTC
was incorporated in 1986 but did not conduct business operations until July
1989 when it exchanged its capital stock for all of the capital stock of
Hope Industries, Inc. ("Industries") and Lithion Corporation. By the end of
1993, Industries was divested and since such time the Company has focused
on commercialization of battery technology and developing strategic
alliance partners of global prominence who the Company believes will assist
in bringing the technology to the manufacturing stage and participate in
the distribution and sale of LTC products on a worldwide basis. The Company
is engaged in the business of developing and seeking to commercialize a
unique, solid-state, lithium-polymer, rechargeable battery. The Company's
patented technology base includes battery composition, construction and
related continuous-flow manufacturing processes. The Company believes that
its battery technology, which is currently in the pre-prototype development
phase, is capable of
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<PAGE> 8
providing two to four times the run time performance of current
rechargeable batteries. The Company's objective is the commercialization of
such technology, inclusive of moving from laboratory-scale product
prototypes and related prototype processes to full scale market
introduction, achieving cost-competitiveness, and constructing
manufacturing lines capable of producing ever-increasing volumes. The
Company's commercialization focus is on the rapidly growing portable
electronics market segment (notebook computers, wireless communications
handsets and multimedia devices). The Company has generated no revenues and
has no commercial operations to date. The Company has been unprofitable
since inception and expects to incur substantial additional operating
losses over the next several years. The Company does not expect to generate
any revenues from operations during the fiscal years ending December 31,
1996 and 1997.
3. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Laboratory equipment $ 847,000 $ 714,000
Furniture and fixtures 86,000 80,000
Leasehold improvements 40,000 36,000
---------- ----------
973,000 830,000
Less: Accumulated depreciation
and amortization 304,000 177,000
---------- ----------
$ 669,000 $ 653,000
========== ==========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
LEASES - The Company leases its principal operating facility from an
unrelated party providing for annual rent of $122,400 through November 1999
and contains an option to renew for an additional 5 years.
EMPLOYMENT AGREEMENT - On May 9, 1996, the Company entered into a one-year
employment agreement with Thomas R. Thomsen pursuant to which Mr. Thomsen
is employed as the Company's Chief Executive Officer at an annual salary of
$185,000. Mr. Thomsen shall also be eligible to receive a target bonus of
up to 40% of his annual salary for such fiscal year of the Company, the
exact amount of such bonus to be determined by the Board of Directors in
accordance with performance thresholds for such fiscal year to be agreed
upon by the Board of Directors and Mr. Thomsen. Mr. Thomsen's employment
agreement also provides for the issuance of a ten (10) year non-qualified
option to purchase 400,000 shares of the Company's Common Stock at an
exercise price of $2.5625 per share. If Mr. Thomsen's employment is
terminated without cause and other than due to disability or death, the
Company will be obligated to (i) continue Mr. Thomsen's salary for an
additional six (6) months or the remainder of the term on the contract,
whichever is longer ("severance period"), (ii) continue for such "severance
period" all of Mr. Thomsen's benefits under the Company's medical
insurance, disability insurance, life insurance and other benefit plans as
are then in effect for executives of the Company, and (iii) accelerate the
vesting of all unexercisable options such that upon termination all then
exercisable and unexercisable options immediately become exercisable on the
date of termination, and all the same shall remain exercisable for a period
of three (3) years commencing on the date of termination.
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<PAGE> 9
On July 24, 1996, the Company entered into a one-year employment agreement
with David J. Cade pursuant to which Mr. Cade is employed as the Company's
President and Chief Operating Officer at an annual salary of $140,000. Mr.
Cade shall also be eligible to receive a target bonus of up to 20% of his
annual salary for such fiscal year of the Company, the exact amount of such
bonus to be determined by the Board of Directors in accordance with
performance thresholds for such fiscal year to be agreed upon by the Board
of Directors and Mr. Cade. Mr. Cade's employment agreement also provides
for the issuance of a ten (10) year incentive option to purchase 133,333
shares of the Company's Common Stock at an exercise price of $1.33 per
share. If Mr. Cade's employment is terminated without cause and other than
due to disability or death, the Company will be obligated to (i) continue
Mr. Cade's salary for an additional six (6) months or the remainder of the
term on the contract, whichever is longer ("severance period"), (ii)
continue for such "severance period" all of Mr. Cade's benefits under the
Company's medical insurance, disability insurance, life insurance and other
benefit plans as are then in effect for executives of the Company, and
(iii) in the case of death or disability, the option shall be exercisable
to the extent then vested for a period of three years.
On July 24, 1996, the Company entered into a one-year employment agreement
with George R. Ferment pursuant to which Dr. Ferment is employed as the
Company's Executive Vice President of Operations and Chief Technical
Officer at an annual salary of $130,000. Dr. Ferment shall also be eligible
to receive a target bonus of up to 20% of his annual salary for such fiscal
year of the Company, the exact amount of such bonus to be determined by the
Board of Directors in accordance with performance thresholds for such
fiscal year to be agreed upon by the Board of Directors and Dr. Ferment.
Dr. Ferment's employment agreement also provides for the issuance of a ten
(10) year incentive option to purchase 133,333 shares of the Company's
Common Stock at an exercise price of $1.33 per share. If Dr. Ferment's
employment is terminated without cause and other than due to disability or
death, the Company will be obligated to (i) continue Dr. Ferment's salary
for an additional six (6) months or the remainder of the term on the
contract, whichever is longer ("severance period"), (ii) continue for such
"severance period" all of Dr. Ferment's benefits under the Company's
medical insurance, disability insurance, life insurance and other benefit
plans as are then in effect for executives of the Company, and (iii) in the
case of death or disability, the option shall be exercisable to the extent
then vested for a period of three years.
CONSULTING AGREEMENT - On May 9, 1996, the Company entered into a
consulting agreement with Donald C. Taylor, a former director of the
Company, at a monthly compensation of $7,000. Amounts paid through
September 30, 1996 total $35,000. Mr. Taylor will provide advisory
services, shareholder relations and related consulting services to the
Company. The Agreement will be in effect for a period of one (1) year,
subject to automatic renewals of one (1) year unless either party to the
Agreement provides written notice of non-renewal to the other party at
least ninety (90) days prior to the expiration of the initial or any
renewal term of the Agreement. In no event shall the Agreement be
automatically renewed for more than two
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additional one (1) year terms. These terms may be modified as mutually
agreed upon by the parties at any time.
WARRANTS - During May and June 1996, the Company issued two warrants. One
warrant was issued to Group III Capital, Inc. ("Group III") entitling Group
III to purchase up to 1,500,000 shares of the Company's Common Stock at an
exercise price of $1.54 per share. The warrant is exercisable with respect
to the first 320,000 shares as of the date of issuance and with respect to
the balance of 1,180,000 underlying shares on May 1, 1997, provided that
exercisability as to the balance of such 1,180,000 warrant shares is
accelerated upon the closing of certain debt or equity financing
transactions resulting in gross proceeds to the Company of $5,000,000 or
more. The warrant was issued to Group III in consideration of services
rendered and to be rendered by Group III to the Company. Donald C. Taylor,
a former director of the Company, is the President and a director of Group
III. The Company also issued a warrant to Robert Pfeffer in connection with
the settlement of litigation (including the settlement of amounts due
Matthew Stuart & Co. totalling $68,000) between the Company and Mr.
Pfeffer. This warrant entitles Mr. Pfeffer to purchase up to 600,000 shares
of Common Stock at $0.51 per share. This warrant was exercised with respect
to 196,079 shares of Common Stock in October, 1996. The Company has
disputed the issuance of certain other warrants to Matthew Stuart & Co.,
Inc., and Richard Perlman, formerly a vice president of Matthew Stuart and
formerly a director of the Company. The Company has declared such other
warrants and related documents void.
LEGAL PROCEEDINGS - In August 1996 civil actions were commenced against the
Company by Richard Perlman, a former director of the Company, and Christy &
Viener, former legal counsel to the Company, respectively. The two suits
were commenced in United States District Court for the Southern District of
New York. The Company subsequently filed its own lawsuit against Christy &
Viener and Mr. Perlman in United States District Court for the Eastern
District of Pennsylvania. Mr. Perlman's complaint alleges that he is
entitled to monetary damages and specific performance of registration
rights relating to certain warrants of the Company that have not been
registered and to which he claims entitlement. The Company has declared
such warrants and related documents void. Christy & Viener's complaint
alleges non-payment of legal fees incurred in connection with the rendering
of legal services and such unpaid fees are included in accounts payable.
The Company believes these actions to be meritless and intends to
vigorously defend both actions and to assert all available defenses and
counterclaims.
The Company's lawsuit against Christy & Viener, a New York City law firm,
includes claims arising out of Christy & Viener's alleged fraud, legal
malpractice and conflicts of interest flowing from the fraudulent issuance
of the same warrants that form the basis of Perlman's action. The
complaint also asserts claims for alleged violations of Federal securities
laws, the Racketeer Influenced and Corrupt Organizations Act, and
fiduciary duties owed by the law firm and its partners to the Company. The
lawsuit was filed in United States District Court in Philadelphia and
names as defendants: Christy & Viener and William Gray, Steven Berger, and
Franklin Viele, each a partner in the firm. The complaint includes similar
claims against a fifth defendant, Mr.
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Perlman as noted above, formerly a financial advisor to the Company and a
member of its Board of Directors flowing from the fraudulent issuance of
warrants to him.
5. STOCKHOLDERS' EQUITY
MERGER AND REVERSE STOCK SPLIT - Effective February 1996, the Company's
then majority stockholder approved a merger agreement pursuant to which the
Company, a Nevada corporation, merged with a newly formed Delaware
corporation in order to reincorporate the Company as a Delaware corporation
and effectuate a recapitalization, principally a 1 for 30 reverse stock
split which has been reflected in the Company's financial statements as if
it had occurred on December 31, 1995.
WARRANTS - At September 30, 1996, the Company had warrants outstanding to
purchase 2,307,858 shares of Common Stock at exercise prices ranging from
$0.51 per share to $2.56 per share which expire through May 2006.
SERIES B CONVERTIBLE PREFERRED STOCK - During the six months ending June
1996, 6,942 shares of Series B Convertible Preferred Stock were converted
into 370,240 shares of Common Stock.
SERIES C CONVERTIBLE PREFERRED STOCK - During June 1996, 10,000 shares of
Series C Convertible Preferred Stock were converted into 83,334 shares of
Common Stock.
7% CONVERTIBLE PROMISSORY NOTES - During January 1996, $300,000 of such
promissory notes and related accrued interest of $20,000 were converted
into 152,038 shares of Common Stock.
REPRICING OF DIRECTORS STOCK OPTIONS - In August 1995, the Board of
Directors adopted the Directors Stock Option Plan (the "Directors Plan")
and on February 8, 1996, Majestic Hopes, LLC, as the majority stockholder,
ratified the adoption of the Directors Plan. As of February 8, 1996,
options previously granted to directors who were not officers or employees
of the Company were cancelled and new options were reissued under the
Directors Plan, with the identical number of options granted, but with the
exercise price of such options at the fair market value of the Common Stock
as of the effective date, pursuant to the terms and conditions of the
Directors Plan.
ISSUANCE OF COMMON STOCK - On July 23, 1996, the Company issued 198,354
restricted shares of its Common Stock to certain employees in full payment
of $99,000 of deferred salary and bonus accrued in prior periods. Vesting
occurred on October 9, 1996, the time such shares became eligible to be
resold pursuant to an effective Registration Statement. During August,
1996, the Company issued 55,876 restricted shares of its Common Stock in
payment of certain accounts payable totalling $68,000.
STOCK INCENTIVE PLAN - Options under the 1994 Stock Incentive Plan are
summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Options outstanding, January 1, 1996
($0.501 to $2.56 per share) 1,166,645
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C>
Options granted 756,666
Options cancelled (15,824)
----------
Options outstanding, September 30, 1996 1,907,487
==========
Options available for grant, September 30, 1996 759,180
==========
</TABLE>
As of September 30, 1996, options with respect to 908,461 shares of Common
Stock were fully vested.
DIRECTORS STOCK OPTION PLAN - As of September 30, 1996, there were
outstanding options under the Directors Plan with respect to 106,672 shares
of Common Stock, which have exercise prices ranging from $0.90 per share to
$2.56 per share and options with respect to 23,332 shares of Common Stock
are fully vested as of July 1, 1996.
TECHNOLOGY DEVELOPMENT AGREEMENT AND 12% CONVERTIBLE NOTES - On March 29,
1996, the Company entered into a Technology Development Agreement and Stock
Purchase Agreement (the "Agreement") with a Japanese Consortium consisting
of two multi-billion dollar companies (the "Consortium"), based on the
Company's proprietary lithium-polymer rechargeable battery technology. The
parties anticipate that this is the first step in a broader strategic
alliance for the research and development, production, promotion and
distribution of lithium-polymer batteries worldwide. The Company is
continuing to seek a third investor to join the Consortium. There can be no
assurance that a third party will in fact join the Consortium or do so on
terms favorable and acceptable to the Company. Under the Agreement, the
Consortium provided funds and will provide technical resources to assist
the Company in completing the development of its high energy battery to
meet specific performance requirements for portable electronics
applications. The principal objective is to take the patented technology to
the manufacturing scale-up stage. The Agreement gives the Consortium
exclusive option rights to license the Company's technology for
manufacturing in the Far East and Oceania, and co-exclusive rights along
with the Company for manufacturing in Europe and the Americas, where the
parties' strategy includes establishing joint ventures for manufacturing
operations. The Agreement also gives the Consortium an exclusive option for
worldwide distribution and sales of the Company's products. For these
considerations and 631,637 shares of the Company's Common Stock
(representing a 4% equity position in the Company as of the closing), the
Consortium paid $2,400,000. In addition, $1,800,000 of 12% convertible
promissory notes and related accrued interest of $100,000 were converted
into 7,003,446 shares of the Company's Common Stock in connection with the
Agreement.
6. SUBSEQUENT EVENTS
CONVERTIBLE NOTES - On October 25, 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
Page 12
<PAGE> 13
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. 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 piggyback registration rights.
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<PAGE> 14
COMMITMENT FOR UNDERWRITTEN PUBLIC OFFERING - On October 7, 1996, the
Company received a commitment letter from Laidlaw & Co. for an underwritten
public offering of $7,000,000 to $10,000,000 of the Company's Common Stock
(the "Underwritten Offering"). According to the terms of the Convertible
Note Agreements, the principal amount of the Convertible Notes will be
repaid out of the proceeds of the public offering. The commitment letter is
subject to a number of conditions which the Company may be unable to
achieve and there can be no assurances that the Underwritten Offering will
be consummated.
WARRANTS - On October 7, 1996, the Company issued 196,079 shares of its
Common Stock pursuant to the exercise of a warrant issued to Robert Pfeffer
in connection with a Settlement Agreement. Pursuant to such Settlement
Agreement, the Company was required to offset $100,000 against the warrant
exercise price of $100,000 (See Note 4).
STOCK OPTIONS - On October 30, 1996, the Company issued 193,322 shares of
its Common Stock for $96,854 pursuant to the exercise of a stock option by
a former employee.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this
report.
GENERAL
The Company is a development stage company engaged in the business of
developing and seeking to commercialize a unique, solid-state,
lithium-polymer, rechargeable battery. The Company has generated no
revenues and has no commercial operations to date. The Company has been
unprofitable since inception and expects to incur substantial additional
operating losses over the next several years. The Company does not expect
to generate any revenues from operations during the fiscal year ending
December 31, 1996 and 1997. The Company believes that its battery
technology, which is currently in the pre-prototype development phase, is
capable of providing two to four times the performance of current
rechargeable batteries. The Company's objective is the commercialization of
such technology, inclusive of moving from laboratory-scale product
prototypes and related prototype processes to full scale market
introduction, achieving cost-competitiveness. The Company's
commercialization focus is on the rapidly growing portable electronics
market segment (notebook computers, wireless communications handsets and
multimedia devices).
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
The Company has financed its operations from December 10, 1993 with
convertible debt and private placements of common and preferred stock and
has raised approximately $8.9 million, including, most recently, the $1.75
million sale of Convertible Notes on October 25, 1996 described herein.
Also, the Company has received a commitment letter from Laidlaw & Co. for
an underwritten public offering of between $7 million to $10 million of the
Company's Common Stock. There can be no assurances that the Underwritten
Offering will be successfully concluded.
AS OF SEPTEMBER 30, 1996
At September 30, 1996, the Company had cash of $581,000, prepaid and other
current assets of $8,000, fixed assets of $669,000 and other assets of
$85,000. The Company's total liabilities were $1,536,000, consisting of
accounts payable and accrued expenses. The $300,000 plus accrued interest
of $20,000 due to holders of the 7% convertible promissory notes was
converted into 152,038 shares of Common Stock during January 1996. In
addition, the Company converted $1,800,000 of debt plus accrued interest of
$100,000 into 7,003,446 shares of Common Stock on March 29, 1996. The
Company had a net working capital deficit of $947,000 on September 30,
1996.
The Company's working capital declined by approximately $867,000 from June
30, 1996 to September 30, 1996. The Company's cash and equivalents declined
by approximately $728,000 from June 30, 1996 to September 30, 1996. This
decline in working capital and cash is attributable primarily to the
Company's expenditure of cash obtained from equity investments in order to
pay operating expenses, which have increased during the quarter and nine
months ended September 30, 1996 as compared to
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<PAGE> 16
corresponding 1995 periods and as compared to the quarter ended June 30,
1996 primarily for the reasons discussed below in "Results of Operations".
The Company's stockholder's deficiency was $(193,000) at September 30,
1996, after giving effect to an accumulated deficit of $(16,401,000) which
consisted of $(9,536,000) accumulated deficit during the development stage
from July 21, 1989 through September 30, 1996 and $(6,865,000) accumulated
deficit from prior periods. The Company expects to incur substantial
operating losses as it continues its commercialization efforts.
While the Company's operating plan seeks to minimize the Company's capital
requirements, commercialization of the Company's battery technology will
require substantial amounts of additional capital. 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
in October 1996. There can be no assurances that the incremental capital
needed for attaining commercial viability of the company's battery
technology will be obtained (which the Company currently estimates at
approximately $25 million). The Company has received a commitment letter
for an Underwritten Offering of between $7 million and $10 million of the
Company's Common Stock. There can be no assurances that the Underwritten
Offering will be consummated. Of the proceeds of the Underwritten Offering,
pursuant to the terms of the Convertible Note Agreements, $1.75 million
will be used to repay the Convertible Notes which were issued in October
1996. The proceeds from this comtemplated offering will not satisfy the
Company's entire cash needs. Accordingly, 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 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 Report. 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 during the first half of 1998. In order to raise
sufficient capital for its future growth, the Company will be required to
sell additional debt or equity securities. See "Plan of Operation for the
Company."
On March 29, 1996, the Company entered into the Technology Development
Agreement and Stock Purchase Agreement with the Japanese consortium
consisting of Mitsubishi Materials Corporation and Mitsui & Co., Ltd. (the
"Consortium") discussed in further detail elsewhere in this Report, based
on the Company's proprietary lithium-polymer rechargeable battery
technology, which Agreements, among other things, required that the
$1,800,000 due to the holders of the 12% convertible promissory notes, and
accrued interest thereon, be converted into 7,003,446 shares of Common
Stock, on such date and as permitted under the Notes. All liens and
security interests held by the Noteholders were simultaneously released and
discharged.
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<PAGE> 17
Under the Technology Development Agreement, the Consortium will provide
funds and technical resources to assist the Company in completing the
development of its high energy battery to meet specific performance
requirements for portable electronics applications. The principal objective
is to take the patented technology to the manufacturing scale-up stage. The
Agreement gives the Consortium exclusive option rights to license the
Company's technology for manufacturing in the Far East and Oceania, and
co-exclusive rights along with the Company for manufacturing in Europe and
the Americas, where the parties' strategy includes establishing joint
ventures for manufacturing operations. The Agreement also gives the
Consortium an exclusive option for worldwide distribution and sales of the
Company's products. For these considerations, and 631,637 shares of the
Company's Common Stock (representing a 4% equity position in the Company as
of the closing) the Consortium paid $2.4 million, prior to payment of
placement costs of approximately $212,000, which net proceeds were invested
in treasury bills.
On October 25, 1996, the Company issued $1.75 million principal amount
convertible notes (the "Convertible Notes"). (See Note 6 "Subsequent Events
- Convertible Notes")
RESULTS OF OPERATIONS
Nine Months ended September 30, 1996 and 1995.
The Company has had no revenues for the nine month periods ended September
30, 1996 and 1995.
Engineering, research and development expenses were $899,000 for the nine
months ended September 30, 1996 compared to $852,000 in 1995. The increase
resulted from increased contract research activities.
General and administrative expenses were $2,143,000 for the nine months
ended September 30, 1996 compared to $1,015,000 in 1995. The increase of
$1,128,000 was due to increased legal costs of $984,000 associated with the
termination of certain investment banking services, the defense and
settlement of litigation and preparation of a Registration Statement
related thereto, increased amortization of debt issue costs of $118,000
relating to the 1995 sale of 12% Convertible Promissory Notes and increased
patent and accounting costs offset to a minor extent by discontinuance of a
director's consulting agreement and decreased employment costs.
Interest expense decreased to $21,000 (net of interest income of $39,000)
for the nine months ended September 30, 1996 compared to $56,000 (net of
interest income of $10,000) in 1995. The increase in interest expense for
the comparable periods is primarily attributable to the Company's 12%
convertible term notes.
Three Months ended September 30, 1996 and 1995.
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<PAGE> 18
The Company has had no revenues for the three month periods ended September
30, 1996 and 1995.
Engineering, research and development expenses were $325,000 for the three
months ended September 30, 1996 compared to $288,000 in 1995. The increase
resulted from increased contract research activities.
General and administrative expenses were $765,000 for the three months
ended September 30, 1996 compared to $389,000 in 1995. The increase of
$376,000 was due to increased legal costs of $363,000 primarily associated
with the defense and settlement of litigation and preparation of a
Registration Statement related thereto, increased employment costs and
financial consulting costs offset by reduced amortization of debt issue
costs.
Interest expense decreased to $(13,000) (net of interest income of $13,000)
for the three months ended September 30, 1996 compared to $20,000 (net of
interest income of $3,000) in 1995. The increase in interest expense for
the comparable periods is primarily attributable to the Company's 12%
convertible term notes.
PLAN OF OPERATION FOR THE COMPANY
The Company's strategy is to commercialize its solid-state,
lithium-polymer, rechargeable battery with primary focus on high
performance portable electronic products (notebook computers, wireless
communications handsets and multimedia devices). These market segments are
large, growing rapidly, and demand high performance batteries with a thin,
flat form factor and long run times. There can be no assurance, however,
that the Company will be able to achieve the technological breakthroughs
that will be necessary in order to ultimately achieve commercialization
and/or obtain financings or generate revenues in order to sustain the
Company's on-going research and development phase or to undertake the
design and construction of the Demonstration Pilot Manufacturing line
discussed herein and other manufacturing-related facilities.
During 1994, the Company recruited a new management team and a core
technical staff with commercialization and battery technology expertise. A
modern research facility has been leased and product development is
continuing. At September 30, 1996, the management team and technical staff
consisted of nine full-time employees. The staff has the required expertise
in technology, commercialization, process development, battery engineering,
electrochemistry and strategic alliance development. During 1996 the
Company has entered into an employment agreement with Thomas R. Thomsen
pursuant to which Mr. Thomsen now serves as the Company's Chief Executive
Officer and the Company has also promoted David Cade to the office of
President and Chief Operating Officer and Dr. George Ferment to the office
of Executive Vice President and Chief Technical Officer.
The Company's development and commercialization plan currently has the
following milestones:
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<PAGE> 19
(i) hand-made cell samples tested by potential strategic partners in
1995 (accomplished);
(ii) installation of a Demonstration Manufacturing Facility (DMF)
continuous flow coating and laminating unit in first quarter of 1996
(accomplished);
(iii) upgrade of the DMF in late 1996 and distribution of cell samples
from the DMF to potential Original Equipment Manufacturer (OEM)
customers in early 1997;
(iv) complete manual assembly process on the back end of the DMF in
late 1997, which would enable initial production of battery packs using
cells from the DMF for OEMs in early 1998;
(v) installation of a pilot manufacturing line in early 1998;
(vi) expansion of the pilot manufacturing line in late 1998 by
automating the back-end assembly; and
(vii) construction of a second tier manufacturing capability once
market demand exceeds initial manufacturing capacity.
The Company estimates that completion of phases (i) through (vi) will cost
approximately $25 million. There can be no assurances that the Company will
raise sufficient capital or will meet these development milestones on the
time schedule outlined above.
During March 1996, a benchtop continuous flow coating/laminating line --
referred to previously in this "Plan of Operation" as the Demonstration
Manufacturing Facility ("DMF") -- was installed by the Company. This line
will be used to further define the Company's manufacturing technology, to
sharpen manufacturing cost estimates, and then serve as the initial
production facility for battery cells which will be manually assembled into
battery packs for original equipment manufacturer ("OEM") customers.
Thereafter, based on design data obtained from the DMF, the Company must
successfully construct a pilot manufacturing line reflecting the cost,
quality, reliability, and performance required for the various target
market applications. It is anticipated that the pilot manufacturing line
and associated equipment will cost approximately $7.5 million to construct
in the 1998 time frame. The pilot manufacturing line, according to the
Company's current strategy, will be located within the Company's existing
facility in Plymouth Meeting, Pennsylvania. Construction of the pilot
manufacturing line will require approximately 12 months. Ultimately, the
pilot manufacturing line would be replaced with a larger scale second tier
manufacturing capability housed in the Company's existing facility, which
could be expanded if necessary. The Company intends to finance the overall
estimated $25 million total capital equipment and operating expense
required to bring the Company to the initial commercial production stage at
approximately the end of 1998 (which $25 million includes the
aforementioned estimated $7.5 million cost of the pilot manufacturing
facility) by means of private and/or public equity or debt financings
during the next two years.
There can be no assurance that the Company will be able to meet the
technological objectives and/or satisfy the capital requirements that the
Company believes are
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necessary to convert battery technology into successful commercial
products. There can be no assurance that the Company's products will
generate any revenues, will not encounter technical problems when used,
will be successfully marketed, will be produced at a competitive cost, or
will achieve customer acceptance or, if commercial products are developed
and revenues produced, that the Company will be profitable. The likelihood
of the success of the Company must be weighed against the problems,
expenses, difficulties, complications and delays frequently encountered in
developing and marketing a new product.
During the next twelve months after the date of this Report, the Company
expects to incur expenses of approximately $2,000,000 for the purchase of
equipment based on the Company's current strategies and subject to the
uncertainties discussed in this Report. During the same time frame the
Company expects the number of its employees to increase to approximately 27
individuals.
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 during the first half of 1998. In order to
raise sufficient 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 in October 1996.
Under the terms of the Convertible Note Agreements, the Company may be
required to issue a substantial number of shares of its Common Stock in the
event that the principal amount of the Convertible Notes are not repaid at
maturity and/or other contingencies occur. This capital infusion will
permit the Company to continue its development and commercialization
efforts through approximately the second quarter of 1997 and will be used
to accomplish the commercialization plan milestones through the second
quarter of 1997 based on the Company's current strategies and subject to
the uncertainties discussed in this Report.
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. There can be no assurances that the Underwritten
Offering will be consummated. Of the proceeds of the Underwritten Offering,
$1.75 million will be used to repay the Convertible Notes. These funds and
other capital will be required in order for the Company to proceed with the
Company's business strategy. Accordingly, new capital is planned to be
sought from several sources, including the Consortium. This may result in
further dilution to the Company's existing stockholders. The Company will
seek to expand its strategic alliance with the Consortium and is pursuing
further corporate alliances which would provide capital from license fees
or an additional equity investment. Discussions are continuing with
companies in Japan, Korea, Taiwan, Europe and the United States. However,
there can be no assurances that additional capital will be available to the
Company on a timely basis or on acceptable terms.
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<PAGE> 21
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings.
In August 1996 civil actions were commenced against
the Company by Richard Perlman, a former director of
the Company, and Christy & Viener, former legal
counsel to the Company, respectively. The two suits
were commenced in United States District Court for
the Southern District of New York. The Company
subsequently filed its own lawsuit against Christy &
Viener and Mr. Perlman in United States District
Court for the Eastern District of Pennsylvania. Mr.
Perlman's complaint alleges that he is entitled to
monetary damages and specific performance of
registration rights relating to certain warrants of
the Company that have not been registered and to
which he claims entitlement. The Company has declared
such warrants and related documents void. Christy &
Viener's complaint alleges non-payment of legal fees
incurred in connection with the rendering of legal
services and such unpaid fees are included in
accounts payable. The Company believes these actions
to be meritless and intends to vigorously defend
both actions and to assert all available defenses
and counterclaims.
The Company's lawsuit against Christy & Viener, a New
York City law firm, includes claims arising out of
Christy & Viener's alleged fraud, legal malpractice
and conflicts of interest flowing from the
fraudulent issuance of the same warrants that form
the basis of Perlman's action. The complaint also
asserts claims for alleged violations of Federal
securities laws, the Racketeer Influenced and Corrupt
Organizations Act, and fiduciary duties owed by the
law firm and its partners to the Company. The lawsuit
was filed in United States District Court in
Philadelphia and names as defendants: Christy &
Viener and William Gray, Steven Berger, and Franklin
Viele, each a partner in the firm. The complaint
includes similar claims against a fifth defendant,
Mr. Perlman as noted above, formerly a financial
advisor to the Company and a member of its Board of
Directors flowing from the fraudulent issuance of
warrants to him.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
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<PAGE> 22
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
a) Exhibits
None.
b) Form 8-K
The Company filed one Current Report on Form
8-K during the quarter ended September 30, 1996. Such
report was dated August 16, 1996 with respect to Item
5 of such form.
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<PAGE> 23
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ Thomas R. Thomsen
--------------------------------------------
Chairman and Chief Executive Officer
/s/ William D. Walker
--------------------------------------------
William D. Walker
Treasurer and
Chief Financial Officer
(principal financial officer)
November 13, 1996
Page 23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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