As filed with the Securities and Exchange Commission on May 28, 1996
Registration No. 33- _________
FORM S-3
SECURITIES AND EXCHANGE COMMISSION
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ELECTROSOURCE, INC.
(Exact name of issuer as specified in its charter)
Delaware 8731 742466304
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or Classification Code Number) Code Number)
3800B Drossett Drive Michael G. Semmens,
Austin, Texas 78744-1131 President
(512) 445-6606 Electrosource, Inc.
Address, including zip code, and 3800B Drossett Drive
telephone number, including area code, Austin, Texas 78744-1131
of registrant's principal offices (512) 445-6606
executive offices) (Name, address, including zip
code, and telephone number,
including area code, of
agent for service)
Copy to:
Bret Van Earp
Attorney at Law
100 Congress Avenue, Suite 1800
Austin, Texas 78701
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the
following box. This box is checked.
Calculation of Registration Fee
Proposed Proposed
Title of each class Amount to be maximum maximum Amount of
of securities to be registered offering price aggregate registration
registered per unit* offering price fee
Common Stock,
$.10 par value 806,092 shares $1.16 per share $935,067 $322.43
*Estimated solely for the purpose of determining the registration fee and
based upon the closing price quoted in the NASDAQ system for a share of
Electrosource, Inc. Common Stock on May 24, 1996.
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, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Page 1 of 18 Pages.
An Exhibit Index appears on Page 17.
ELECTROSOURCE, INC.
CROSS REFERENCE SHEET
Information Required by Form S-3 Caption in Prospectus
Item 1. Forepart of the Registration Statement Outside Front Cover Page
and Outside Front Cover Page of of Prospectus
Prospectus
Item 2. Inside Front and Outside Back Cover Inside Front and Outside
Pages of Prospectus Back Cover Pages of Prospectus
Item 3. Summary Information, Risk Factors Summary of Prospectus;
and Ratio of Earnings to Fixed Charges Risk Factors
Item 4. Use of Proceeds Not Applicable
Item 5. Determination of Offering Price Not Applicable
Item 6. Dilution Dilution
Item 7. Selling Security Holders Selling Security Holder
Item 8. Plan of Distribution The Offering
Item 9. Description of Securities to be Not Applicable
Registered
Item 10. Interests of Named Experts and Not Applicable
Counsel
Item 11. Material Changes Recent Developments
Item 12. Incorporation of Certain Inside Front Cover Page of
Information by Reference Prospectus
Item 13. Disclosure of Commission Position Indemnification of Officers
on Indemnification for Securities and Directors
Act Liabilities
SUBJECT TO COMPLETION, DATED MAY 28, 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
ELECTROSOURCE, INC.
806,092 Shares of Common Stock, $.10 par value
The shares offered hereby are outstanding shares of the Common
Stock, $.10 par value per share ("Common Stock"), of Electrosource,
Inc., a Delaware corporation (the "Company"), which are being sold
by the Selling Shareholder named herein. The Company will not
receive any part of the proceeds from the sale of such shares.
The Company has agreed to bear all costs of the preparation,
filing and prosecution of the registration statement of which this
Prospectus is a part. Such expenses are estimated to be
approximately $25,000 for the offering.
The Company has been advised that the sale of the shares may be
made from time to time by or for the account of the Selling
Shareholder in the over-the-counter market through broker-dealers.
These sales will be made at market prices prevailing at the time of
sale. The broker-dealers may act as agents of the Selling
Shareholder or may purchase any of the shares as principal and
thereafter may sell such shares from time to time in the over-the-
counter market at prices prevailing at the time of sale or at
negotiated prices. Neither the security to be offered nor the
selling method to be used may be varied.
Broker-dealers used by the Selling Shareholder may be deemed to be
"underwriters" as defined in the Securities Act of 1933. In
addition, the Selling Shareholder may be deemed to be an underwriter
within the meaning of the Securities Act of 1933 with respect to the
Common Stock offered hereby.
The Common Stock is traded in the over-the-counter market and is
quoted on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") under the symbol "ELSI." On May 24,
1996, the closing price for a share of Common Stock as reported on
NASDAQ was $1.16 per share.
SEE "RISK FACTORS", ON PAGE 4 OF THIS PROSPECTUS, FOR A DISCUSSION
OF CERTAIN IMPORTANT FACTORS INVOLVED IN THIS OFFERING.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May 28, 1996
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and in accordance therewith files reports and other information with
the Securities and Exchange Commission (the "Commission"). Such
reports, together with proxy statements and other information filed
by the Company, can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at certain of its Regional Offices
located at: 7 World Trade Center, New York, New York 10007; and Room
1204, Everett McKinley Dirksen Building, 219 South Dearborn Street,
Chicago, Illinois 60604. Copies of such material can also be
obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission a registration statement
under the Securities Act of 1933, as amended, with respect to the
securities offered hereby (the "Registration Statement"). As
permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits and undertakings
contained in the Registration Statement. Such additional information
can be inspected at the principal office of the Commission, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
the Registration Statement can be obtained from the Commission at
prescribed rates by writing to the Commission at such address.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which are on file with the commission,
are hereby specifically incorporated by reference into this
prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995;
(2) The Company's Quarterly Report on Form 10Q for the three months
ended March 31, 1996.
(3) All other reports filed by the Company pursuant to Section 13(a)
or Section 15(d) of the Exchange Act since December 31, 1995,
including the following:
(i) Form 8-K Current Report dated January 12, 1996;
(ii) Form 10-C Report by Issuer of Securities Quoted on NASDAQ
Interdealer Quotation System dated January 23, 1996; and
(iii) Form 10-C Report by Issuer of Securities Quoted on NASDAQ
Interdealer Quotation System dated February 29, 1996;
(4) The description of the Company's Common Stock set forth
under the captions "Description of Electrosource, Inc. Common Stock"
and "Purposes and Effects of Certain Provisions of the
Electrosource, Inc. Certificate and the Electrosource, Inc. Bylaws"
in the Information Statement filed as Exhibit 28.1 to the Company's
Registration Statement on Form 10 filed October 19, 1987 (as amended
by Form 8 Amendments filed January 8, 1988 and January 13, 1988),
which description of the Company's Common Stock was incorporated by
reference into the Registration Statement on Form 10 in response to
Item 11, "Description of Registrant's Securities to be Registered."
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to December 31,
1995, and prior to the termination of the offering shall be deemed
to be incorporated by reference into this prospectus.
The Company will provide without charge to each person, including
any beneficial owner, to whom this prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the
information that has been incorporated by reference in this
prospectus (not including exhibits to the information that is
incorporated by reference unless such exhibits are specifically
incorporated by reference into the information that this prospectus
incorporates). Requests should be directed to Electrosource, Inc.,
Corporate Secretary, 3800B Drossett Drive, Austin, Texas 78744-1131,
telephone (512) 445-6606.
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by, and should
be read in conjunction with, the more detailed information and
financial statements contained elsewhere in this prospectus and in
the documents incorporated by reference herein.
The Company
Electrosource, Inc. (the "Company") is engaged in the development
and commercial application of technologies related to lead-acid,
rechargeable storage batteries and ancillary products. The Company's
principal activity is the development, manufacture and sale of a new
lead-acid battery concept called Horizon. See "The Company," below.
The principal executive offices of the Company are located at
3800B Drossett Drive, Austin, Texas 78744-1131, and its telephone
number is (512) 445-6606.
Recent Developments
Proposed Reverse Stock Split
The Company proposes to amend its Certificate of Incorporation to
effect a ten-for-one reverse stock split.
See "Recent Developments," below.
The Offering
The shares offered hereby are 806,092 outstanding shares of the
Company's Common Stock, $.10 par value per share, which are being
sold by Mitsui Engineering & Shipbuilding Co., Ltd. ("Mitsui" or the
"Selling Shareholder"). The Company will not receive any part of the
proceeds from the sale of such shares.
The sale of the shares may be made from time to time by or for the
account of the Selling Shareholder in the over-the-counter market
through broker-dealers. These sales will be made at market prices
prevailing at the time of sale. The broker-dealers may act as agents
of the Selling Shareholder or may purchase any of the shares as
principal and thereafter may sell such shares from time to time in
the over-the-counter market at prices prevailing at the time of sale
or at negotiated prices. Neither the security to be offered nor the
selling method to be used may be varied.
The Company has agreed to bear all costs of preparing, filing and
processing the registration statement of which this prospectus is a
part. Such expenses are estimated to be approximately $25,000 for the
offering.
RISK FACTORS
An investment in the Common Stock offered hereby involves a high
degree of risk. The following factors should be considered in
evaluating an investment in the Company.
Financial Constraints. As of May 14, 1996, in the absence of any
additional financing and without the generation of any significant
revenue (other than interest on cash investments), management
anticipates that the CompanyOs cash will be substantially depleted
by June 30, 1996. There can be no assurance that additional
financing can be obtained on terms satisfactory to the Company, if
at all. The full depletion of the Company's cash would likely lead
to the Company's ceasing all operations and activities and,
ultimately, to its dissolution and liquidation.
Contingencies Related to Business Plan and Commercialization of
Product. In June 1994 the Company made the decision to become the North
American manufacturer of the Horizon battery, while continuing its
previous plans with respect to licensing of third party
manufacturers overseas. The shift from research and development to
manufacturing has required, and will continue to require,
significant additional outlays for capital equipment as well as
greatly increased managerial and production staffing, which will in
turn require significant amounts of new capital. There can be no
assurance that the Company will be able to raise this capital on
terms satisfactory to the Company, or at all. Development of the
Horizon Battery and manufacturing processes continue, and there can
be no assurance that the battery will be successfully
commercialized.
Possible Loss of Trading Liquidity. The Company's Common Stock is
traded on the Over-the-Counter Market and is reported on NASDAQ. In order to
maintain listing by NASDAQ, the Company must maintain a minimum $1 million
of stockholders' equity. The Company is currently in compliance with
this requirement. At current levels of operations, this requirement
cannot be maintained beyond the second quarter of 1996 without additional
equity finance, conversion of existing debt or other transactions that
increase shareholder equity. Management is currently engaged in
discussions for such transactions; however, there is no assurance that
they will be completed. If the minimum required balance is not maintained,
the NASDAQ may choose to delist the Common Stock of the Company from
trading which would restrict the liquidity of the Common Stock.
Ordinarily, before delisting, NASDAQ would provide the Company notice
and an opportunity to present and carry out a plan for compliance. Delisting
by NASDAQ would be an Event of Default under the terms of the April 1995
Debentures and could trigger a requirement to repay the Debentures
immediately. April 1995 Debentures with a principal balance of $250,000
were outstanding at March 31, 1996.
Termination of Technology License. The Company holds the rights to
develop and use certain coextrusion technology necessary to the
manufacture of its principal products under an exclusive license
from Blanyer-Mathews Associates, Inc. ("Blanyer-Mathews"). This
license is subject to termination by Blanyer-Mathews in the event
that the Company enters bankruptcy proceedings or defaults in its
obligation to pay royalties. Loss of the rights to the coextrusion
technology would have a severe adverse impact upon the Company's
continued viability.
Loss of Trade Secret Protection. The Company has elected to
protect certain aspects of its technology under state trade secret
laws, rather than under federal patent laws. Trade secret protection
requires that the Company preserve the confidentiality of the
technology subject to trade secret status. In the event that such
confidentiality cannot be maintained, or if third parties can
successfully "reverse-engineer" the affected technology, trade
secret status may be lost. Loss of trade secret protection would
allow third parties to utilize the technology without obtaining a
license from the Company.
Competition. The lead-acid battery industry is highly competitive
and includes a number of firms, many with greater financial,
technological, manufacturing, marketing and other resources and
longer operating histories than the Company. There is no assurance
that the Company will be able to compete successfully in this highly
competitive environment due to the Company's limited financial
resources and lack of established products.
Dependence on Key Personnel. Management of the Company is composed
primarily of Michael Semmens, President, Chief Executive Officer and
Chairman of the Board, William Griffin, Executive Vice President,
Chris Morris, Vice President-Technical Operations, James M. Rosel, Vice
President and General Counsel, and Mary Beth Koenig. The loss of any of
these executive officers could have a material adverse effect on the
Company. The Company does not have employment contracts with Ms. Koenig or
with Messrs. Rosel and Morris, and the employment contracts between Mr.
Semmens and the Company and Mr. Griffin and the Company do not impose any
material penalty in the event of resignation.
Dilution. The market price of $1.16 per share of Common Stock as
of May 24, 1996, was substantially greater than the Company's actual
net negative tangible book value of ($.01) per outstanding share of
Common Stock at March 31, 1996. Purchasers of Common Stock at the
recent market price will suffer an immediate dilution of $1.17 per
share, or 100%, measured by the difference between the market price
and the Company's net negative tangible book value per share. See
"Dilution."
Certain Antitakeover Effects. Certain provisions contained in the
Delaware General Corporation Law and in the Company's Restated
Certificate of Incorporation and bylaws may make it difficult for
any third party to effect or attempt an acquisition of the Company
without the approval of the Company's Board of Directors. The
Restated Certificate of Incorporation also divides the Company's
Board of Directors into three classes serving staggered terms. This
provision may hinder or delay any attempt to gain control of the
Company by replacing the Board of Directors. Such potential
antitakeover effects may depress the market value of the Common
Stock. In addition, certain provisions of the Company's Restated
Certificate of Incorporation and bylaws require the affirmative vote
of 90% of the Company's outstanding Common Stock.
Absence of Dividends. The Company has never declared or paid any
dividends on its outstanding Common Stock, and it is unlikely that
it will do so in the foreseeable future.
THE COMPANY
Electrosource, Inc. (the "Company") is engaged in the development
and commercial application of technologies related to lead-acid,
rechargeable storage batteries and ancillary products. The Company's
principal activity is the development, manufacture and sale of a new
lead-acid battery concept called Horizon. The Horizon battery
utilizes plate grids made from a patented coextruded wire. The
plates are oriented in a horizontal plane rather than the vertical
plane, as is the practice in conventional batteries. Current
activities are concentrated upon development of Horizon concept
batteries for use in electric vehicles. The Company is also
developing new processes for the energy-active material for use in
both Horizon and conventional batteries.
The continued development of the Horizon battery, as well as the
continued viability of the Company as a going concern, are
contingent upon the Company's ability to raise substantial amounts
of new capital. As of May 14, the Company did not have firm
commitments for any such financing, and there can be no assurance
that the necessary financing will be obtained. The offering
described in this prospectus will not result in any proceeds to the
Company. See "Risk Factors."
The principal executive offices of the Company are located at
3800B Drossett Drive, Austin, Texas 78744-1131, and its telephone
number is (512) 445-6606.
RECENT DEVELOPMENTS
Purpose of the Reverse Stock Split
The Company has filed definitive proxy materials proposing to its
shareholders an amendment to the Company's Restated Certificate of
Incorporation that would effect a one-for-ten reverse stock split.
Pursuant to this amendment, if adopted at the Annual Meeting of
Shareholders to be held in June 1996, each ten shares of Common
Stock currently outstanding would be reclassified as one share of
new Common Stock. The par value per share of the Common Stock would
increase from $0.10 per share to $1.00 per share as a result of the
reverse stock split.
THE OFFERING
The shares to be offered pursuant to this prospectus are
outstanding shares of the Company's Common Stock, par value $.10 per
share, acquired by the Selling Shareholder upon conversion of
certain convertible promissory notes (see "Selling Security Holder",
below).
The shares of Common Stock offered hereby may be sold from time to
time by the Selling Shareholder. Such sales must be made in the over-
the-counter market through broker-dealers at the then prevailing
market price. Neither the security to be offered nor the selling
method may be varied.
The Selling Shareholder has agreed to limit its sales of Common
Stock hereunder to a maximum of 20,000 shares in any one day.
There is no underwriter or coordinating broker acting in
connection with this offering. The Selling Shareholder may be deemed
an "underwriter" within the meaning of the Securities Act of 1933
(the "Securities Act") with respect to the shares of Common Stock
offered hereunder. The Company and the Selling Shareholder have
agreed to indemnify one another against certain liabilities,
including liabilities under the Securities Act.
In effecting sales, brokers or dealers engaged by the Selling
Shareholder may arrange for other brokers or dealers to participate.
Brokers or dealers will receive commissions or discounts from
Selling Shareholder in amounts to be negotiated immediately prior to
the sale. Such brokers or dealers and any other participating
brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales.
The Company has agreed to bear all costs of preparing, filing and
processing the registration statement of which this prospectus is a
part. Such expenses are estimated to be approximately $25,000 for
the offering.
SELLING SECURITY HOLDER
The shares of Common Stock covered by this Prospectus are being
offered by Mitsui Engineering & Shipbuilding Co., Ltd.("Mitsui"),
a large Japanese industrial corporation. Mitsui will receive the 806,092
shares offered hereunder upon conversion of Convertible Notes (discussed
below); these shares represent Mitsui's entire ownership of the Common
Stock. The number of shares is subject to an adjustment for the actual
amount of interest due at the date of conversion. Following the offering,
and assuming the sale of all shares offered hereby, Mitsui will own no
shares of Common Stock.
Distribution Agreement
The Company entered into a Distributorship Agreement with Mitsui
on July 7, 1994. This agreement granted to Mitsui the exclusive
right to distribute Horizon Batteries and related products in Japan,
with nonexclusive distribution rights in all other areas in which
the Company had not or did not subsequently grant exclusive rights
to a third party. Mitsui paid $1,000,000 in license fees at the time
of the signing of the Distributorship Agreement and agreed to pay an
additional $1,000,000 in two installments in August 1994 and August
1995. Payment of these amounts was subsequently postponed by
amendments to the agreement.
The Distributorship Agreement also granted Mitsui the option,
exercisable for a period of five years following the execution of
the agreement, to obtain a license to manufacture Horizon products
in Japan and elsewhere. Mitsui agreed to pay a license fee of
$3,000,000 to the Company in the event that it exercised this
option.
Note Purchase Agreement
On October 26, 1994, the Company and Mitsui entered into a Note
Purchase Agreement pursuant to which Mitsui purchased at face value
a 5% Convertible Promissory Note (the "Convertible Note" and,
together with the Interest Notes described below, the "Convertible
Notes") in the principal amount of $3,800,000. The note had a stated
maturity of ten years, subject to certain prepayment rights of the
Company discussed below and the right of Mitsui to accelerate
maturity in the event of a payment default or event of bankruptcy on
the part of the Company. Interest was payable semiannually in the
form of additional notes ("Interest Notes") having a principal
amount equal to the interest accrued and payable and otherwise
having terms identical to those of the Convertible Note. As of the
date of this Prospectus, the Company had issued two Interest Notes
having an aggregate principal amount of $263,150. The Convertible
Notes were convertible into shares of Common Stock at a conversion
price of $3.80 per share, subject to customary adjustments in the
event of stock splits, reorganizations, and similar events.
The Company had the option to prepay the Convertible Notes in
whole or part at any time following October 26, 1999 so long as the
market price of the Common Stock exceeded the conversion price by at
least twenty percent during the thirty trading days prior to notice
of prepayment.
Mitsui had the right under the Note Purchase Agreement to tender
Convertible Notes or shares of Common Stock acquired upon conversion
of Convertible Notes in payment of up to $4,000,000 in license fees
(but not sales-based royalties) due under the Distributorship
Agreement or any subsequent manufacturing license agreement between
the Company and Mitsui. The tender price of notes would be, at
Mitsui's option, either the principal amount (plus accrued interest)
of the Convertible Notes tendered or the average market price of the
Common Stock into which the tendered notes were convertible over the
thirty trading days prior to the tender. The tender price of any
Common Stock tendered would be the average market price of the
Common Stock over the thirty trading days prior to the tender. In
the event that Mitsui elected to tender Convertible Notes or Common
Stock at a price determined in reference to the market price of the
Common Stock in payment of license fees other than the $1,000,000
payable in two installments under the Distributorship Agreement in
August 1994 and August 1995, the Company had the right to prepay at
face value all or any portion of the Convertible Notes not tendered
so long as the market price of the Common Stock exceeded the
conversion price by at least twenty percent during the thirty
trading days prior to notice of prepayment.
The Note Purchase Agreement granted Mitsui the right to require
the Company to register the shares issuable upon conversion of the
Convertible Notes on one occasion, and the right to participate on a
"piggy-back" basis in other registrations of securities effected by
the Company.
Termination Agreement
Mitsui notified the Company of its intention to terminate the
Distributorship Agreement in December 1995, and on March 6, 1996,
the Company and Mitsui entered into a Termination Agreement to
settle all outstanding matters between the two companies. The
Termination Agreement terminated the Distributorship Agreement
effective as of January 4, 1996. Mitsui agreed to tender $1,000,000
in principal amount of Convertible Notes in payment of license fees
due under the Distributorship Agreement subject to the payment to
Mitsui of $100,000 in cash by the Company in respect of Japanese
withholding taxes. In March 1996, the company paid Mitsui the
$100,000 and issued a new Note for $2,800,000 plus interest in
replacement of the $3,800,000 Note which was canceled and returned
to the Company.
Mitsui agreed to pay, and subsequently did pay, the Company
approximately $19,000 for outstanding invoices on battery sales and
approximately $62,000 for canceled prototype battery orders. The
Company agreed to refund the payments for prototypes to the extent
that other buyers for these batteries could be found.
The Company granted Mitsui an option, exercisable on or prior to
March 6, 1998, to enter into a new license for manufacture or
distribution of Company products in Japan, and agreed to credit the
$2,000,000 in aggregate license fees paid under the Distributorship
Agreement against any license fees payable under the new license.
This option is subject to the terms of any license arrangements that
the Company may enter into with any third party in respect of
distribution or manufacturing in Japan prior to the time of Mitsui's
exercise.
Mitsui granted the Company the option to repurchase all
Convertible Notes at any time prior to October 1, 1996, at a price
equal to the greater of $1.50 times the number of shares of Common
Stock into which the Convertible Notes are then convertible or the
average per share closing market price of the Common Stock over the
five trading days prior to notice of exercise times the number of
shares of Common Stock into which the Convertible Notes are then
convertible. This option cannot be exercised if Mitsui has entered
into a binding agreement to sell the Convertible Notes or the shares
of Common Stock into which they are convertible or has engaged an
underwriter to effect their sale.
The Company agreed to register the shares of Common Stock issuable
upon conversion of the Convertible Notes upon MitsuiOs request and
to keep such registration effective for a period of nine months. The
shares offered hereby are being registered pursuant to such a
request, and Mitsui has agreed to convert all outstanding
Convertible Notes into Common Stock upon the effectiveness of the
registration statement of which this Prospectus is a part. Mitsui
has agreed to limit its sales of Common Stock pursuant to this
Prospectus to 20,000 shares or less in any one day. The registration
provisions of the Termination Agreement do not affect the
registration rights granted under the Note Purchase Agreement.
The Company agreed in the Termination Agreement to assist Mitsui
in finding a buyer or buyers for the Common Stock issuable upon
conversion of the Convertible Notes upon Mitsui's request.
USE OF PROCEEDS
The Company will realize no proceeds from the offering. The
Company will bear all costs of preparing, filing and processing the
registration statement of which this prospectus is a part.
DILUTION
At March 31, 1996, the Company had a net negative tangible book
value of ($.01) per share of Common Stock outstanding. "Net tangible
book value per share" represents the amount of total tangible assets
of the Company, reduced by the amount of total liabilities of the
Company, divided by the number of shares of Common Stock
outstanding. Purchasers of Common Stock for cash at the assumed
offering price of $1.16 per share (based on the market price of a
share of Common Stock as quoted by NASDAQ on May 24, 1996) will
therefore incur an immediate dilution of $1.17 per share from the
assumed offering price measured by the difference between the
assumed offering price and the Company's net tangible book value per
share.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Restated Certificate of Incorporation provides that
a director of the Company will not be personally liable to the
Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except that such provisions will not
eliminate or limit the liability of a director (i) for a breach of
the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) with
respect to unlawful payments of dividends or unlawful stock
purchases or redemptions for which the director is liable under
Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derives an
improper personal benefit.
The Company's Bylaws provide that, to the extent permitted by law,
the Company will indemnify each of its directors, and authorize the
purchase of insurance with respect thereto. The Bylaws also provide
that the Company may indemnify its officers, employees or agents who
are made or threatened to be made defendants or respondents to any
threatened, pending or completed action, suit or proceeding due to
such person's service to the Company or to certain other entities at
the request of the Company, so long as such person acted in good
faith and in a manner he reasonably believed to be not opposed to
the best interests of the Company. Such indemnification may be made
only upon a determination that such indemnification is proper in the
circumstances because the person to be indemnified has met the
applicable standard of conduct to permit indemnification under the
law.
In addition to indemnification provided pursuant to the Company's
Restated Certificate of Incorporation and Bylaws, the Company has
entered into a Director Indemnification Agreement with each director
of the Company providing for, among other things, (i)
indemnification by the Company of each director to the full extent
authorized or permitted by Delaware statutes; (ii) maintenance by
the Company of director and officer insurance coverage for the
benefit of each director of up to $2,000,000, subject to
availability at premiums not substantially disproportionate to the
amount of coverage; (iii) indemnification by the Company of each
director in connection with settlements under certain circumstances;
(iv) procedures relating to independent review of determinations
regarding director indemnification (including special provisions in
case of a change in control of the Company); and (v) the advancement
of expenses to directors in connection with matters for which the
director is entitled to indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, or
otherwise, the Company 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 Company of expenses
incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding)
is asserted against the Company by such director, officer or
controlling person in connection with the securities being
registered, the Company 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.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon
for the Company by Bret Van Earp, Attorney at Law, 100 Congress
Avenue, Suite 1800, Austin, Texas 78701.
EXPERTS
The financial statements of the Company appearing in the Company's
Annual Report (Form 10-K) for the year ended December 31, 1995, have
been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon (which contains an explanatory paragraph with
respect to substantial doubt about the Company's ability to continue
as a going concern) included therein and incorporated herein by
reference. Such financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
No dealer, salesman or other
person has been authorized to
give any information or to make
any representation not contained
in this prospectus in connection
with the offer contained herein,
and, if given or made, such
information or representation
must not be relied upon as having
been authorized by the Company.
This prospectus does not
constitute an offer to sell, or a
solicitation of an offer to buy,
any securities in any
jurisdiction to any person to
whom it is not lawful to make any
such offer or solicitation in
such jurisdiction. Neither the
delivery of this prospectus nor ELECTROSOURCE, INC.
any sale made hereunder shall,
under any circumstances, create
an implication that there has
been no change in the affairs of
the Company since the date hereof
or that the information herein is
correct as of any time subsequent
to its date.
_________________________________
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 2 806,092 Shares of
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE 2 Common Stock
SUMMARY OF PROSPECTUS 3
RISK FACTORS 4
THE COMPANY 6
RECENT DEVELOPMENTS 6
THE OFFERING 6
SELLING SECURITY HOLDER 7
DILUTION 8
INDEMNIFICATION OF OFFICERS AND
DIRECTORS 9
LEGAL MATTERS 9
EXPERTS 9 May 24, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following sets forth the estimated expenses expected to be
incurred in connection with the issuance and distribution of the
securities registered hereby:
SEC Registration Fee $4,000.00
Printing Costs 0.00
Legal Fees and Expenses 7,500.00
Accounting Fees and Expenses 7,500.00
Blue Sky Fees and Expenses $6,000.00
Total $25,000.00*
*The Company will bear all costs of the offering.
Item 15. Indemnification of Directors and Officers
See "Indemnification of Officers and Directors" in the
Prospectus, which is hereby incorporated by reference.
Item 16. Exhibits
The following exhibits are filed with or incorporated by
reference into this registration statement:
4.1 Restated Certificate of Incorporation of Electrosource, Inc.
(filed as Exhibit 3.1 to Electrosource, Inc., Registration
Statement on Form 10 filed October 19, 1987, as amended by
Form 8 Amendments filed January 8, 1988 and January 13, 1988
(hereinafter referred to as "Form 10") and incorporated
herein by reference).
4.2 Amendment to Restated Certificate of Incorporation of
Electrosource, Inc. (filed as Exhibit 3.1 to Electrosource,
Inc. Quarterly Report on Form 10-Q filed August 14, 1995 and
incorporated herein by reference).
4.3 Bylaws of Electrosource, Inc. (filed as Exhibit 3.2 to
Electrosource, Inc., Registration Statement on Form 10 filed
October 19, 1987, as amended by Form 8 Amendments filed
January 8, 1988 and January 13, 1988 (hereinafter referred
to as "Form 10") and incorporated herein by reference).
4.4 Amendment to Bylaws of Electrosource, Inc., pursuant to a
Certificate of Secretary dated May 25, 1990 (filed as
Exhibit 3.3 to Electrosource, Inc., Annual Report on Form 10-
K for the period ended December 31, 1991, and incorporated
herein by reference).
4.5 Amendment to Bylaws of Electrosource, Inc (filed as Exhibit
3.3 to Electrosource, Inc., Annual Report on Form 10-K for
the period ended December 31, 1993, and incorporated herein
by reference).
4.6 Amendment to Bylaws of Electrosource, Inc (filed as Exhibit
3.6 to Electrosource, Inc., Annual Report on Form 10-K for
the period ended December 31, 1994, and incorporated herein
by reference).
4.7 Note Purchase Agreement between Mitsui Engineering and
Shipbuilding Co., Ltd. and Electrosource, Inc., dated
October 26, 1994 (filed as an Exhibit to the Company's
October 26, 1994, Form 8-K and incorporated herein by
reference).
4.8 Convertible Promissory Note in favor of Mitsui Engineering
and Shipbuilding Co., Ltd. was dated October 26, 1994 (filed
as an Exhibit to the Company's October 26, 1994, Form 8-K
and incorporated herein by reference).
4.9 Termination Agreement between Electrosource, Inc., and
Mitsui Engineering & Shipbuilding Co., Ltd., dated March 6,
1996 (filed as Exhibit 10.36 to the Company's Form 10-K for
the period ended December 31, 1995, and incorporated herein
by reference).
5.1 Opinion of Bret Van Earp.
24.1 Consent of Ernst & Young LLP.
24.2 Consent of Bret Van Earp
25 Power of Attorney
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(a) 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 (to the extent that the information require
to be included in a post-effective amendment is contained in
periodic reports filed with or furnished to the Securities and
Exchange Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement);
(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, reflect a fundamental change in the information
set forth in the registration statement (to the extent that the
information required to be included in a post-effective amendment
is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this registration
statement); and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(b) That, for purposes of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) 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.
The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the registrantOs annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 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.
With respect to the undertaking required by paragraph (h) of
Item 512 of Regulation S-K, see "Indemnification of Officers and
Directors" in the Prospectus, which is incorporated herein by
reference.
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 Austin, State of Texas, on May 28,
1996.
ELECTROSOURCE, INC.
By: /s/ Michael G. Semmens
Michael G. Semmens,
President
By: /s/ James M. Rosel
James M. Rosel
Vice President and General Counsel
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael G. Semmens and
James M. Rosel, and each of them, his true and lawful attorney-in-
fact and agent, with full power of substitution, and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign this Registration Statement of
Electrosource, Inc. and any and all amendments (including post-
effective amendments) to this Registration Statement, and to file
the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, and each of them, or any
substitute may lawfully do or cause to be done by virtue thereof.
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 date indicated.
Signature Title Date
/s/ Michael G. Semmens President, Chief May 28, 1996
Michael G. Semmens Executive Officer
and Chairman of the Board
(Principal Executive Officer)
/s/ Charles L. Mathews Director May 28, 1996
Charles L. Mathews
/s/ Dr. Norman Hackerman Director May 28, 1996
Dr. Norman Hackerman
/s/ Richared S. Williamson Director May 28, 1996
Richard S. Williamson
/s/ John Malone Director May 28, 1996
John Malone
/s/ Thomas S. Wilson Director May 28, 1996
Thomas S. Wilson
/s/ Nathan Morton Director May 28, 1996
Nathan Morton
/s/ William R. Graham Director May 28, 1996
William R. Graham
/s/ Mary Beth Koenig Treasurer and May 28, 1996
Mary Beth Koenig Controller
(Principal Accounting Officer)
EXHIBIT INDEX
Exhibit Number Sequentially
Numbered Page
4.1 Restated Certificate of Incorporation of Electrosource,
Inc. (filed as Exhibit 3.1 to Electrosource, Inc.,
Registration Statement on Form 10 filed October 19,
1987, as amended by Form 8 Amendments filed January 8,
1988 and January 13, 1988 (hereinafter referred to
as "Form 10") and incorporated herein by reference).
4.2 Amendment to Restated Certificate of Incorporation
of Electrosource, Inc. (filed as Exhibit 3.1 to
Electrosource, Inc. Quarterly Report on Form 10-Q
filed August 14, 1995, and incorporated herein by
reference).
4.3 Bylaws of Electrosource, Inc. (filed as Exhibit 3.2
to Electrosource, Inc., Registration Statement on
Form 10 filed October 19, 1987, as amended by Form 8
Amendments filed January 8, 1988 and January 13, 1988
(hereinafter referred to as "Form 10") and
incorporated herein by reference).
4.4 Amendment to Bylaws of Electrosource, Inc. (filed as
Exhibit 3.3 to Electrosource, Inc., Annual Report on
Form 10-K for the period ended December 31, 1993, and
incorporated herein by reference).
4.5 Amendment to Bylaws of Electrosource, Inc (filed as
Exhibit 3.6 to Electrosource, Inc., Annual Report on
Form 10-K for the period ended December 31, 1994,
and incorporated herein by reference).
4.6 Amendment to Bylaws of Electrosource, Inc., pursuant
to a Certificate of Secretary dated May 25, 1990
(filed as Exhibit 3.3 to Electrosource, Inc., Annual
Report on Form 10-K for the period ended December 31,
1991, and incorporated herein by reference).
4.7 Note Purchase Agreement between Mitsui Engineering
and Shipbuilding Co., Ltd. and Electrosource, Inc.,
dated October 26, 1994 (filed as an Exhibit to the
Company's October 26, 1994, Form 8-K and incorporated
herein by reference).
4.8 Convertible Promissory Note in favor of Mitsui
Engineering and Shipbuilding Co., Ltd. was dated
October 26, 1994 (filed as an Exhibit to the Company's
October 26, 1994, Form 8-K and incorporated herein
by reference).
4.9 Termination Agreement between Electrosource, Inc.,
and Mitsui Engineering & Shipbuilding Co., Ltd.,
dated March 6, 1996 (filed as Exhibit 10.36 to the
Company's Form 10-K for the period ended December 31,
1995, and incorporated herein by reference).
5.1 Opinion of Bret Van Earp.
24.1 Consent of Ernst & Young LLP.
24.2 Consent of Bret Van Earp (included in opinion
filed as Exhibit 5.1)
25 Power of Attorney (see page II-4 of the Registration
Statement)
May 24, 1996
Electrosource, Inc.
3800B Drossett Drive
Austin TX 78744
Re: Registration of Common Stock
Gentlemen:
Reference is made to the registration statement on Form S-3
(the "Registration Statement") filed with the Securities and
Exchange Commission by Electrosource, Inc. (the "Company") under
the Securities Act of 1933 relating to the distribution of
806,092 shares of the Common Stock, $.10 par value, ("Common
Stock"), of the Company certain selling shareholders.
The opinions expressed herein are limited in all respects to
the substantive law of the State of Texas, the federal law of the
United States, and, to the extent applicable, the Delaware
General Corporation Law. We assume no responsibility as to the
application to or effect on the opinions expressed herein of the
laws of any other jurisdiction.
We have been furnished with and examined originals or
copies, certified or otherwise identified to our satisfaction, of
all such records of the Company, agreements and other
instruments, certificates of officers or representatives of the
company, certificates of public officials, and other documents as
we have deemed necessary or desirable as a basis for the opinions
hereinafter expressed. As to questions of act material to such
opinion, we have relied upon certificates of officers of the
Company where relevant facts were not independently verified or
established.
Based upon the foregoing, and subject in all respects to the
qualifications and limitations set forth herein, we are of the
opinion that the Common Stock to be distributed pursuant to the
Registration Statement is validly issued, fully paid, and non-
assessable.
The opinions expressed herein are rendered as of the date of
this opinion letter, and we expressly disclaim any obligation to
advise you of any changes or new developments occurring after the
date hereof that would or might affect any matters or opinions
set forth herein, and no opinion is implied or may be inferred
beyond the matters expressly stated.
I consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name in the "Legal
Matters" section of the prospectus included therein.
Very truly yours,
/s/
Bret Van Earp
EXHIBIT 24.1
Consent of Ernst & Young, LLP
Independent Auditors
We consent to the reference to our firm under the
caption "Experts" in the Registration Statement (Form S-3
No. 33-_____) and related Prospectus of Electrosource, Inc.
for the registration of 806,092 shares of its common stock
and to the incorporation by reference therein of our report
dated March 8, 1996, except for Note O, as to which the
date is March 18, 1996, with respect to the financial
statements and schedule of Electrosource, Inc. included in
its Annual Report (Form 10-K) for the year ended December
31, 1995, filed with the Securities and Exchange
Commission.
/s/
Ernst & Young LLP
Austin, Texas
May 22, 1996
