<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1999
REGISTRATION NO. 333-77337
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
ILLINOIS SUPERCONDUCTOR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3688459
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
451 KINGSTON COURT, MT. PROSPECT, ILLINOIS 60056, (847) 391-9400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
EDWARD W. LAVES
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ILLINOIS SUPERCONDUCTOR CORPORATION
451 KINGSTON COURT, MT. PROSPECT, ILLINOIS 60056, (847) 391-9400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------------------
WITH COPIES TO:
LAWRENCE D. LEVIN, ESQ.
Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661
(312) 902-5200
---------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ] _____
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]____
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE COMBINED
PROSPECTUS CONTAINED IN THIS REGISTRATION STATEMENT ALSO RELATES TO THE
REGISTRANT'S REGISTRATION STATEMENT ON FORM S-3 (REG. NO. 333-56601), WHICH
REGISTERED 11,592,000 SHARES OF THE REGISTRANT'S COMMON STOCK AND WAS DECLARED
EFFECTIVE BY THE COMMISSION ON AUGUST 13, 1998.
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 SECTION 8(A), MAY
DETERMINE.
================================================================================
<PAGE> 2
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell, and is not soliciting an offer to buy, these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated June 16, 1999
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
18,340,183 SHARES
[ILLINOIS SUPERCONDUCTOR CORPORATION LOGO (TM)]
COMMON STOCK
---------------------------
This prospectus relates to the offer and sale from time to time of up
to 18,340,183 shares of our common stock, including preferred stock purchase
rights, by the selling stockholders specified in this prospectus . We have
issued or will issue the shares upon conversion of senior convertible notes and
exercise of certain warrants held by the selling stockholders. We may issue up
to 1,858,586 of the shares to the selling stockholders as interest on the notes.
We will not receive any proceeds from the sale of the shares, but we will
receive proceeds from the exercise of the warrants.
Our common stock is traded on the Nasdaq National Market under the
symbol "ISCO." On June 14, 1999, the closing price of our common stock as
reported on the Nasdaq National Market was $0.9375 per share. Our principal
executive offices are located at 451 Kingston Court, Mt. Prospect, Illinois
60056 and our telephone number at that address is (847) 391-9400.
AN INVESTMENT IN THE SHARES OFFERED HEREBY ENTAILS A HIGH DEGREE OF
RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR INFORMATION THAT YOU SHOULD
CONSIDER BEFORE PURCHASING THE SHARES OFFERED BY THIS PROSPECTUS.
---------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus if truthful or complete. Any representation to the contrary is a
criminal offense.
---------------------------
The date of this Prospectus is ___________, 1999
<PAGE> 3
RISK FACTORS
An investment in the shares of our common stock entails a high degree
of risk. You should carefully consider the following risks and uncertainties,
and all other information contained or incorporated by reference in this
prospectus, before purchasing the shares of our common stock offered by this
prospectus. Any of the following risks could materially adversely affect our
business, operating results or financial condition and could result in a
complete loss of your investment.
OUR SUPERCONDUCTING TELECOMMUNICATIONS PRODUCTS MAY NEVER ACHIEVE MARKET
ACCEPTANCE.
Our radio frequency filter products, which are based on our
patented and proprietary high-
temperature superconducting technology, have not been sold in very large
quantities and a sufficient market may not develop for such products. Our
products may not continue to meet the demanding product performance and
reliability criteria set by cellular and Personal Communications Services, or
PCS, service providers. Also, our products may not operate reliably on a
long-term basis. Repeated or widespread quality problems could result in
significant warranty expenses and/or the loss of customer confidence. Failure to
successfully develop, manufacture and commercialize products on a timely and
cost-effective basis will have a material adverse effect on our business,
operating results and financial condition.
WE HAVE A LIMITED OPERATING HISTORY, HAVE INCURRED SIGNIFICANT LOSSES SINCE OUR
FOUNDING AND MAY NEVER ACHIEVE PROFITABILITY.
We have only recently begun to generate significant revenues from the
sale of our products and do not expect revenues to increase dramatically until
we ship a significantly larger amount of our products. Accordingly, we have only
a limited operating history upon which an evaluation of our business and
prospects can be based. We must therefore be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stages of product commercialization.
We have incurred substantial net losses in each year since our
inception and expect to continue to incur operating losses through at least the
end of 1999. We must overcome significant manufacturing and marketing hurdles to
sell large quantities of our products. In order to continue to grow revenues, we
may be required to further reduce the prices of our products. In the event of
further price reductions, we may not be able to reduce product costs
sufficiently to achieve acceptable product margins. We may never achieve
profitability or, if profitability is achieved, we may not sustain it.
INSUFFICIENT ADDITIONAL FUNDING MAY PREVENT COMMERCIALIZATION OF OUR PRODUCTS,
AND WE MAY BE UNABLE TO CONTINUE AS A GOING CONCERN.
We will require substantial additional funds during the fourth quarter
of 1999 to finance our product development, manufacturing, marketing and sales
activities. Our outstanding debt instruments contain certain restrictions which
may adversely impair our ability to obtain additional financing. See "Our
significant indebtedness may adversely affect our business and restrict our
ability to obtain additional financing" below. If adequate financing is not
available on acceptable terms when needed, we (1) will be required to
substantially delay, scale-back or eliminate the manufacturing, marketing or
sales of one or more of our products or research and development programs or (2)
may be required to obtain funds through arrangements with collaborative partners
or others that may require us to relinquish rights to certain of our
technologies or potential products that we would not otherwise relinquish. In
particular, if we do not secure adequate financing prior to or during the
2
<PAGE> 4
fourth quarter of 1999, we will have to substantially reduce our operating plans
in order to continue our operations
beyond such date. This would materially adversely affect our business, operating
results and financial condition and impair our ability to compete in the
marketplace.
The report of our independent auditors on our financial statements
which are incorporated by reference into this prospectus contain an explanatory
paragraph that states that we have suffered ongoing operating losses and do not
currently have financing commitments in place to meet expected cash requirements
through 1999. These matters raise substantial doubt about our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NASDAQ HAS NOTIFIED US THAT OUR COMMON STOCK IS SCHEDULED TO BE DELISTED FROM
THE NASDAQ NATIONAL MARKET, WHICH WOULD MAKE IT MORE DIFFICULT FOR STOCKHOLDERS
TO SELL SHARES OF OUR COMMON STOCK .
We currently do not meet the net tangible assets requirement for
continued listing of our common stock for trading on the Nasdaq National Market.
Therefore, Nasdaq has recently notified us that our common stock is scheduled to
be delisted for trading on the Nasdaq National Market. We have requested an oral
hearing to appeal Nasdaq's determination. This will stay the delisting action
pending a final decision by Nasdaq. Our appeal may not be successful and,
therefore, our common stock may be delisted for trading on the Nasdaq National
Market in the near future. Such delisting would have a material adverse effect
on the trading market for our common stock and the liquidity of such market. It
could also materially hinder our ability to obtain additional funding as needed,
especially if we do not list our common stock for trading on another securities
market or exchange soon after such delisting.
OUR SIGNIFICANT INDEBTEDNESS MAY ADVERSELY AFFECT OUR BUSINESS AND RESTRICT OUR
ABILITY TO OBTAIN ADDITIONAL FINANCING.
As of March 31, 1999, our ratio of total debt to total capitalization
was approximately 103%. Our indebtedness primarily consists of senior
convertible notes held by the selling stockholders. The substantial degree to
which we are leveraged may adversely affect our ability to finance our future
operations, to compete effectively against better capitalized competitors and to
withstand downturns in our business or the economy generally. Although the
outstanding senior convertible notes currently permit, subject to certain
restrictions, us to pay accrued interest on such securities in shares of our
common stock, we may not be permitted to do so in the future. Our business may
not generate sufficient cash flow, or we may not be able to raise sufficient
additional funds, to pay such interest in cash which may cause the outstanding
senior convertible notes to become due and payable immediately. In addition, the
outstanding senior convertible notes contain restrictions that may adversely
affect our ability to obtain additional equity or debt financing. Under the
senior convertible notes, we are not permitted, without the prior approval of
the holders of the senior convertible notes:
o to incur any additional indebtedness, other than pursuant to a
working capital line of credit in an amount not to exceed $1
million or to trade creditors in the ordinary course of
business;
o to create any lien, pledge, or encumbrance, subject to certain
exceptions, on any of our assets;
o for so long as a significant portion of the senior convertible
notes remain outstanding, to engage in certain sale or merger
transactions, or to engage in certain other transactions which
require the approval of our stockholders;
3
<PAGE> 5
o to redeem, purchase or otherwise acquire any of our equity or
debt securities which are junior in rights or preferences to
the senior convertible notes; or
o to pay any dividend, other than in shares of common stock,
with respect to junior securities.
In addition, in the event that we fail to achieve break-even or positive
operating income during the second quarter of 2000, the outstanding senior
convertible notes may become immediately due and payable unless the holders
agree to modify or waive such provision. Furthermore, for so long as the amount
of our common stock issuable upon conversion of the senior convertible notes
represents 5% or more of the total then outstanding shares of our common stock,
the holders of the senior convertible notes have the right to designate two
members for election to our Board of Directors.
OUR COMMON STOCK PRICE MAY DECREASE SIGNIFICANTLY DURING RELATIVELY SHORT
PERIODS OF TIME.
The market price of our common stock, like that of many other
high-technology companies, has fluctuated significantly . Since January 1, 1998,
the closing price of our common stock has ranged from a low of $0.53 per share
to a high of $3.31 per share. We believe the other factors disclosed under the
caption "Risk Factors" could cause the market price of our common stock to
continue to fluctuate significantly in the future.
WE MAY NOT BE ABLE TO COMMERCIALLY MANUFACTURE, MARKET AND SELL OUR PRODUCTS.
For us to be financially successful, we must manufacture our products
in substantial quantities, at acceptable costs and on a timely basis. We have
only produced limited quantities of our products for commercial installations
and for use in development and customer field trial programs. Production of
large quantities of our products at competitive costs present a number of
technological and engineering challenges for us. We may be unable to manufacture
such products in sufficient volume and may incur substantial costs and expenses
in connection with manufacturing larger quantities of our products. We may be
unable to make the transition to large scale commercial production successfully.
We must further develop our marketing and sales force in order to
effectively demonstrate the advantages of our products over more traditional
products and competitive superconductive products. We may also elect to enter
into agreements or relationships with third parties regarding the
commercialization or marketing of our products. If we enter into such agreements
or relationships, we will be substantially dependent upon the efforts of others
in deriving commercial benefits from our products. We may be unable to establish
adequate sales and distribution capabilities, we may be unable to enter into
marketing agreements or relationships with third parties on financially
acceptable terms, and any third parties with whom we enter into such
arrangements may not be successful in marketing our products.
WE MAY NOT BE ABLE TO SUCCESSFULLY COMPETE WITH OTHERS IN THE VERY COMPETITIVE
WIRELESS TELECOMMUNICATIONS EQUIPMENT MARKET.
In cellular and PCS telecommunications applications, we compete with
conventional radio frequency component manufacturers whose products are
currently used by our potential customers. Many of these companies with which we
compete have substantially greater financial resources, larger research and
development staffs and greater manufacturing and marketing capabilities than us.
Other emerging wireless technologies, including "smart antennas" and tower
mounted amplifiers, may also provide protection from radio frequency
interference and offer enhanced range to cellular and PCS service providers at
lower prices and/or superior performance. High performance radio frequency
filters may not become a preferred technology to address the needs of cellular
and PCS service providers. Failure of our products to improve performance
sufficiently, reliably, or at an acceptable
4
<PAGE> 6
price, to achieve commercial acceptance or to otherwise successfully compete
with conventional and new technologies would have a material adverse effect on
our business, operating results and financial condition.
WE MAY NOT BE ABLE TO SUCCESSFULLY COMPETE WITH OTHERS IN THE SUPERCONDUCTIVE
ELECTRONICS MARKET IF IT BECOMES VERY COMPETITIVE.
Although the market for superconductive electronics currently is small
and in the early stages of development, we believe it will become intensely
competitive, especially if products with significant market potential are
successfully developed. In addition, if the superconducting industry develops,
additional competitors with significantly greater resources are likely to enter
the field. In order to compete successfully, we must:
o continue to develop and maintain technologically advanced
products;
o manufacture and market our products in commercial quantities,
either alone or with third parties;
o reduce production costs;
o attract and retain highly qualified personnel; and
o obtain additional patent or other intellectual property rights
protection for our technology and products.
We may be unable to achieve these objectives. Our failure to achieve these
objectives would have a material adverse effect on our business, operating
results and financial condition.
OUR REDUCTION IN PRICES FOR OUR PRODUCTS MAY NOT GENERATE SUSTAINED SALES
GROWTH.
During the fourth quarter of 1998, we implemented a new pricing
strategy pursuant to which we reduced the prices for all of our products.
Although sales of our products increased significantly during the fourth quarter
of 1998, such sales growth was not sustained in the first quarter of 1999 and
may not be sustained over subsequent periods. Similarly, we may be unable to
continue to reduce product costs sufficiently to achieve and maintain acceptable
product margins.
WE MAY NOT BE ABLE TO IMPROVE AND IMPLEMENT OPERATIONAL, FINANCIAL,
MANUFACTURING AND INFORMATIONAL SERVICES TO MANAGE OUR GROWTH.
Our growth to date has caused, and will continue to cause, a
significant strain on our management, operational, financial and other
resources. Our ability to manage our growth effectively will require us to
implement new, and improve our current, operational, financial, manufacturing
and management information systems and better train, manage and motivate our
employees. These demands may require the addition of new management personnel
and the development of additional expertise by management. Any increase in
resources devoted to product development and marketing and sales efforts could
have an adverse effect on our financial performance in the next several fiscal
quarters. If we receive substantial orders, we may have to expand our current
facility, which could cause an additional strain on our management personnel and
development resources. The failure of our management team to effectively manage
growth could have a material adverse effect on our business, operating results
and financial condition.
5
<PAGE> 7
WE MAY NOT BE ABLE TO ADEQUATELY RESPOND TO RAPIDLY CHANGING TECHNOLOGIES THAT
MAY RENDER OUR PRODUCTS NONCOMPETITIVE OR OBSOLETE.
Our success will depend in large part upon our ability to keep pace
with rapidly advancing superconducting technology, high performance radio
frequency filter design and efficient, low cost cryogenic technologies. The
Federal Communications Commission, or FCC, has adopted rules that provide
preferential licensing treatment for parties that develop communications
services and technologies. Therefore, our development efforts may be rendered
obsolete by the adoption of alternative solutions to current wireless operator
problems or by technological advances made by others. In addition, other
materials or processes, including other superconducting materials or fabrication
processes, may prove more advantageous for the commercialization of high
performance wireless products than the materials and processes selected by us.
ADVERSE CHANGES IN THE WIRELESS TELECOMMUNICATIONS MARKET WOULD ADVERSELY AFFECT
OUR BUSINESS.
We have selected the wireless telecommunications market, in particular
the cellular and PCS markets, as the first principal target market for our
superconductor-based products. The devotion of substantial resources to the
wireless telecommunications market makes us vulnerable to adverse changes in
this market. Adverse developments in the wireless telecommunications market,
which could come from a variety of sources, including future competition, new
technologies or regulatory decisions, could affect the competitive position of
wireless systems. In addition, the wireless telecommunications market is
currently experiencing an increasing rate of consolidation among the largest
wireless operators, which may cause a significant disruption and/or delay in the
sales of our products. Any adverse developments in the wireless
telecommunications market during the foreseeable future would have a material
adverse effect on our business, operating results and financial condition.
WE MAY ENCOUNTER DIFFICULTIES IF WE PURSUE OTHER MARKET OPPORTUNITIES.
Because high-temperature superconducting product development is a new
and emerging field, there may in the future be new opportunities that are more
attractive than those we have initially identified for our targeted markets. As
a result, we may elect in the future to commit our resources to such other
potentially more attractive market opportunities. Such election may require us
to limit or abandon our current focus on developing, manufacturing, marketing
and selling high-temperature superconducting products for cellular, PCS and
other telecommunications markets. The risks associated with other markets may be
different from the risks associated with the cellular, PCS and other wireless
telecommunications markets, and we may be unable to successfully address such
risks.
BECAUSE ONLY A FEW CUSTOMERS ACCOUNT FOR A SUBSTANTIAL PORTION OF OUR REVENUE,
THE LOSS OF ONE OR MORE OF OUR SIGNIFICANT CUSTOMERS AND OUR FAILURE TO ATTRACT
NEW CUSTOMERS WOULD ADVERSELY AFFECT OUR BUSINESS.
To date, our marketing and sales efforts have focused on major cellular
service providers in retrofit applications and, to a lesser extent, on PCS
operators and cellular and PCS original equipment manufacturers. During 1998,
sales to three of our customers accounted for over 88% of our total revenues for
1998. We expect that if our products achieve market acceptance, a limited number
of wireless service providers and original equipment manufacturers will account
for a substantial portion of our revenue during any period. The loss of one or
more of our significant customers and our failure to attract new customers would
have a material adverse effect on our business, operating results and financial
condition.
OUR INABILITY TO SHORTEN OUR CUSTOMERS' LENGTHY SALES CYCLES COULD ADVERSELY
AFFECT OUR BUSINESS.
Sales of many of our products depend in significant part upon the
decision of prospective customers and current customers to adopt and expand
their use of our products. Wireless service
6
<PAGE> 8
providers and our other customers are significantly larger than, and are able to
exert a high degree of influence over, us. We must generally undergo lengthy
approval and purchase processes with these customers, which can take up to a
year or more. Customers' orders and the length of their approval and purchase
processes are affected by a variety of factors, including:
o the complexity of the product involved and new product
introductions;
o the continued consolidation among our customers or potential
customers;
o regulatory issues affecting customers;
o end user demand for wireless services;
o customer budgeting cycles;
o inventory levels;
o customer integration requirements;
o competitive conditions; and
o general economic conditions.
Our inability to shorten customers' approval and purchase processes could have a
material adverse effect on our business, operating results and financial
condition.
BECAUSE A LIMITED NUMBER OF SOURCES SUPPLY PARTS THAT WE NEED, THE PARTS MAY
NOT BE AVAILABLE WHEN WE NEED THEM OR WE MAY UNNECESSARILY OVERSTOCK THE PARTS
IN ANTICIPATION OF ORDERS THAT DO NOT OCCUR.
Certain parts and components used in our products, including
substrates, vacuum components, and cryogenic refrigerators, are only available
from a limited number of sources and involve long lead times. Our reliance on
these limited source suppliers exposes us to certain risks and uncertainties,
including the possibility of a shortage or discontinuation of certain key
components and reduced control over delivery schedules, manufacturing
capabilities, quality and costs. Business disruption, production shortfalls or
financial difficulties of a limited source supplier could increase product costs
or reduce or eliminate the availability of such parts or components. In such
events, our inability to develop alternative sources of supply quickly and on a
cost-effective basis could materially impair our ability to manufacture and
deliver our products on a timely basis. This could result in the cancellation of
customer orders and have a material adverse effect on our business, operating
results and financial condition.
We have no guaranteed supply arrangements with our limited source
suppliers, do not maintain an extensive inventory of parts or components, and
customarily purchase parts and components pursuant to purchase orders placed
from time to time in the ordinary course of business. In the event of increases
in demand for our products, we may be required to stock certain long lead time
parts to satisfy customer requirements and in anticipation of future orders. The
failure of anticipated orders to materialize as forecasted could limit resources
available for other important purposes or accelerate our requirement for
additional funds. In addition, such excess inventory could become obsolete,
which could materially adversely affect our business, operating results and
financial condition.
7
<PAGE> 9
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS AND PATENTS
AGAINST INFRINGEMENT.
Our success will depend in part on our ability to obtain patent
protection for our products and processes, to preserve our trade secrets and to
operate without infringing upon the patent or other proprietary rights of others
and without breaching or otherwise losing rights in the technology licenses upon
which any of our products are based. We believe that, since the discovery of
high-temperature superconducting materials in 1986, a large number of patent
applications have been filed worldwide and many patents have been granted in the
U.S. relating to high-temperature superconducting materials, including yttrium
barium copper oxide, which is the principal high-temperature superconducting
material in our present and currently proposed products, radio frequency
technologies and other products and technologies that we are pursuing. The
claims in those patents often appear to overlap and there are interference
proceedings pending in the U.S. Patent and Trademark Office, not currently
involving us, regarding rights to inventions claimed in some of the
high-temperature superconducting materials patent applications. We believe there
is a significant risk that current and potential competitors and other
third-parties have filed or will file patent applications for, or have obtained
or will obtain, patents or other proprietary rights relating to materials,
products or processes used or proposed to be used by us. In any such case, to
avoid infringement, we would have to either license such technologies or design
around any such patents. We may be unable to obtain licenses to such
technologies or, if obtainable, such licenses may not be available on terms
acceptable to us or we may be unable to successfully design around these
third-party patents.
The patent applications filed by us or by our licensors may not result
in issued patents or the scope and breadth of any claims allowed in any patents
issued to us or our licensors may not exclude competitors or provide competitive
advantages to us. In addition, patents issued to us, or our licensors, may not
be held valid if subsequently challenged or others may claim rights in the
patents and other proprietary technologies owned or licensed by us. Others may
have developed or may in the future develop similar products or technologies
without violating any of our proprietary rights. Furthermore, our loss of any
license to technology that we now have or acquire in the future may have a
material adverse effect on our business, operating results and financial
condition. Participation in litigation or patent office proceedings in the U.S.
or other countries may be necessary to enforce patents issued or licensed to us,
to defend against infringement claims made by others or to determine the
ownership, scope or validity of the proprietary rights of us and others. Such
litigation could result in substantial cost to us and diversion of our efforts.
An adverse outcome in any such proceedings could subject us to significant
liabilities to third parties, require us to seek licenses from third parties
and/or require us to cease using certain technologies. This could have a
material adverse effect on our business, operating results and financial
condition.
OUR FAILURE TO COMPLY WITH FCC OR EXPORT REGULATIONS COULD ADVERSELY AFFECT OUR
BUSINESS.
The operation of base stations is subject to FCC licensing and the
radio equipment into which our products would be incorporated is subject to FCC
approval. Base stations and the equipment marketed for use therein must meet
specified technical standards. Our ability to sell our wireless
telecommunications products is dependent on the ability of wireless base station
equipment manufacturers and wireless base station operators to obtain and retain
the necessary FCC approvals and licenses. In order for them to be acceptable to
base station equipment manufacturers and to base station operators, the
characteristics, quality and reliability of our base station products must meet
FCC technical standards. Any failure to meet such standards or delays by base
station equipment manufacturers and wireless base station operators in obtaining
the necessary approvals or licenses could have a material adverse effect on our
business, operating results and financial condition. In addition,
high-temperature superconducting radio frequency filters are on the U.S.
Department of Commerce's export regulation list. Therefore, exportation of such
filters to certain countries may be restricted or subject to export licenses.
8
<PAGE> 10
OUR FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS AND OUR USE OF HAZARDOUS
MATERIALS COULD ADVERSELY AFFECT OUR BUSINESS.
We use certain hazardous materials in our research, development and
manufacturing operations. As a result, we are subject to stringent federal,
state and local regulations governing the storage, use and disposal of such
materials. It is possible that current or future laws and regulations could
require us to make substantial expenditures for preventive or remedial action,
reduction of chemical exposure, or waste treatment or disposal. Our operations,
business or assets could be materially and adversely affected by the
interpretation and enforcement of current or future environmental laws and
regulations. In addition, there is the risk of accidental contamination or
injury from hazardous materials. In the event of an accident, we could be held
liable for any damages that result. Furthermore, the use and disposal of
hazardous materials involves the risk that we could incur substantial
expenditures for such preventive or remedial actions. The liability in the event
of an accident or the costs of such actions could exceed our resources or
otherwise have a material adverse effect on our business, results of operations
and financial condition.
OUR INABILITY TO HIRE AND RETAIN EXPERIENCED KEY PERSONNEL COULD ADVERSELY
AFFECT OUR BUSINESS.
Our success will depend in large part upon our ability to attract and
retain highly qualified management, administrative, manufacturing, marketing,
sales and research and development personnel that are experienced in the
wireless telecommunications and/or superconductive electronics industries. The
specialized nature of our business and the intense competition for qualified
high-technology and advanced science personnel in northern Illinois make it
difficult to locate and hire qualified personnel. The loss of services of any of
our executive officers or other key personnel, or our failure to attract and
retain other executive officers or key personnel, could have a material adverse
effect on our business, operating results and financial condition.
OUR SINGLE FACILITY MAKES US SUSCEPTIBLE TO BUSINESS INTERRUPTIONS.
Our primary operations, including engineering, manufacturing, research,
distribution and general administration, are housed in a single facility in Mt.
Prospect, Illinois. Any material disruption in our operations, whether due to
fire, flooding, natural disaster, power loss or otherwise, would have a material
adverse effect on our business, operating results and financial condition.
FUTURE SALES OF A LARGE NUMBER OF SHARES OF OUR COMMON STOCK BY THE SELLING
STOCKHOLDERS COULD CAUSE OUR STOCK PRICE TO DECLINE AND ADVERSELY AFFECT OUR
ABILITY TO RAISE NEW FUNDS IN EQUITY OFFERINGS.
As of May 31, 1999, excluding shares which may be issued as interest,
an aggregate of at least 16,337,778 shares of our common stock registered for
public resale pursuant to this prospectus were issuable upon conversion of
outstanding senior convertible notes and exercise of outstanding warrants held
by the selling stockholders. This equalled approximately 128% of our common
stock outstanding as of that date. The sale of a substantial number of shares of
our common stock by the selling stockholders upon the conversion of a
substantial portion of the senior convertible notes and/or the exercise of a
substantial portion of the warrants, or the perception that such sales could
occur, could adversely affect the prevailing market price of our common stock.
In addition, any such sale or such perception could make it more difficult for
us to raise capital through future sales of equity securities at a time and
price that we deem appropriate.
OUR STOCKHOLDER RIGHTS PLAN AND PROVISIONS IN OUR CERTIFICATE OF INCORPORATION
AND BY-LAWS COULD DISCOURAGE TENDER OFFERS OR TAKEOVER ATTEMPTS.
We have certain provisions which may be deemed to have a potential
"anti-takeover" effect in that such provisions may delay, defer or prevent a
change of control of us. For example, we have a
9
<PAGE> 11
stockholders rights plan that, by substantial dilution to a person or group that
attempts to acquire us on terms not approved by our Board of Directors, may
interfere with certain acquisitions, including acquisitions that may offer a
premium over market price to some or all of our stockholders. In addition, our
certificate of incorporation and by-laws contain provisions that include:
o a requirement that stockholder action may be taken only at
stockholders' meetings;
o the authority of our Board of Directors to issue series of our
preferred stock with such voting rights and other powers as
our Board of Directors may determine;
o notice requirements in our by-laws relating to nominations to
our Board of Directors and to the raising of business matters
at stockholders' meetings; and
o the classification of our Board of Directors into three
classes, each serving for staggered three-year terms.
In addition, the outstanding senior convertible notes held by the selling
stockholders contain provisions which allow the selling stockholders to
significantly influence most matters which would require stockholder approval,
including many change of control transactions. The interests of the holders of
senior convertible notes could conflict with the interests of our stockholders.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Because we want to provide you with more meaningful and useful
information, this prospectus contains, and incorporates by reference, certain
forward-looking statements, as such term is defined in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
that reflect our current expectations regarding our future results of
operations, performance and achievements. We intend for such forward-looking
statements to be covered by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. We have tried, wherever possible, to identify
these forward-looking statements by using words such as "anticipates,"
"believes," "estimates," "expects," "plans," "intends" and similar expressions.
These statements reflect our current beliefs and are based on information
currently available to us. Accordingly, these statements are subject to certain
risks, uncertainties and contingencies, including the factors set forth under
the caption "Risk Factors", which could cause our actual results, performance or
achievements for 1999 and beyond to differ materially from those expressed in,
or implied by, any of these statements. You should not place undue reliance on
any forward-looking statements. Except as otherwise required by federal
securities laws, we undertake no obligation to release publicly the results of
any revisions to any such forward- looking statements that may be made to
reflect events or circumstances after the date of this prospectus or to reflect
the occurrence of unanticipated events.
RECENT DEVELOPMENT
At our annual meeting of stockholders held on June 9, 1999, our
stockholders approved an amendment to our certificate of incorporation to
increase our authorized shares of common stock from 30 million shares to 60
million shares.
10
<PAGE> 12
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of two registration statements we have filed
with the SEC. This prospectus does not contain all of the information contained
in the registration statements or the exhibits to the registration statements.
For further information about us, please see the complete registration
statements. Summaries of agreements or other documents in this prospectus are
not necessarily complete. Please refer to the exhibits to the registration
statements for complete copies of these documents.
We are subject to the information requirements of the Securities
Exchange Act of 1934 and file reports, proxy statements and other information
with the SEC. You may read and copy such reports, proxy statements and other
information, including the registration statements and all of their exhibits, at
the following SEC public reference rooms:
450 Fifth Street, N.W. Seven World Trade Center Citicorp Center
Judiciary Plaza Suite 1300 500 West Madison Street
Room 1024 New York, NY 10048 Suite 1400
Washington, D.C. 20549 Chicago, IL 60661
You may obtain information on the operation of the SEC public reference
room in Washington, D.C. by calling the SEC at 1-800-SEC-0330. Our SEC filings,
including the registration statements of which this prospectus forms a part, are
also available from the SEC's Web site at http://www.sec.gov, which contains
reports, proxy and information statements and other information regarding
issuers that file electronically. You may also inspect and copy our SEC filings,
including the complete registration statements of which this prospectus forms a
part, at the offices of The Nasdaq Stock Market located at 1735 K Street, N.W.,
Washington, D.C. 20006-1500.
The SEC allows us to "incorporate by reference" into this prospectus
certain information that we file with it. This means that we can disclose
important information to you by referring you to another document that we filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this prospectus, except for any information superseded by information
in this prospectus. The information incorporated by reference is an important
part of this prospectus, and information that we file later with the SEC will
automatically update and supersede the information contained, or other
information earlier incorporated by reference, in this prospectus.
We incorporate by reference the following documents that we previously
filed with the SEC pursuant to the Securities Exchange Act:
1. The Annual Report on Form 10-K for our fiscal year ended December
31, 1998, as amended by Amendment No. 1 on Form 10-K/A filed on June 16, 1999;
2. The Quarterly Report on Form 10-Q for our fiscal quarter ended March
31, 1999;
3. The Current Reports on Form 8-K and Form 8-K/A dated March 31, 1999
and the Current Report on Form 8-K dated April 28, 1999;
4. The description of our common stock contained in our registration
statement on Form 8-A filed August 23, 1993 pursuant to Section 12 of the
Securities Exchange Act and all related amendments and reports we file for the
purpose of updating such description; and
11
<PAGE> 13
5. The description of the preferred stock purchase rights contained in
our registration statement on Form 8-A filed February 12, 1996 pursuant to
Section 12 of the Securities Exchange Act and all related amendments and reports
we file for the purpose of updating such description.
This prospectus will also incorporate by reference any of our future SEC filings
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act until all
of the selling stockholders sell all of the shares or the offering is otherwise
terminated. The documents incorporated by reference may be obtained through the
SEC and are also available from us without charge. You may obtain documents
incorporated by reference in this prospectus by telephoning us at (847) 391-9400
or writing us at the following address:
Corporate Secretary
Illinois Superconductor Corporation
451 Kingston Court
Mt. Prospect, Illinois 60056
Our Web site is located at http://www.ilsc.com. Information contained
in our Web site is not a part of this prospectus.
USE OF PROCEEDS
The selling stockholders will receive all of the net proceeds from the
sale of their shares of our common stock. Accordingly, we will not receive any
proceeds from the sale of the shares by the selling stockholders. If and when
the selling stockholders exercise their warrants, we will receive any proceeds
from the sale of the up to 5,460,000 shares to be issued to the selling
stockholders. If the warrants are exercised in full and paid for in cash, we
will receive $12,423,000. We intend to use such proceeds for working capital and
other general corporate purposes, including funding of our product development
programs, expansion of our sales and marketing efforts, and acquisition of
manufacturing equipment.
12
<PAGE> 14
SELLING STOCKHOLDERS
The following tables list certain information, as of May 31, 1999,
regarding the beneficial ownership of our outstanding common stock by each of
the selling stockholders, both before the offering of the shares and as adjusted
to reflect the sale of the shares. The 18,340,183 shares of our common stock
registered for public resale pursuant to this prospectus and listed under the
column "Number of Shares Being Offered" include (1) 143,814 shares held by the
selling stockholders, (2) up to 10,877,783 shares which we may issue to the
selling stockholders upon conversion of $13.45 million aggregate face principal
amount of our senior convertible notes, (3) up to 1,858,586 shares which we may
issue to the selling stockholders as interest on the notes and (4) up to
5,460,000 shares which we may issue to the selling stockholders upon exercise of
warrants.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING
---------------------------------------------------------------------------------
SHARES ISSUABLE SHARES ISSUABLE SHARES ISSUABLE
SHARES UPON CONVERSION AS INTEREST ON UPON EXERCISE
NAME OF SELLING STOCKHOLDER DIRECTLY HELD OF NOT THE NOTES(1) OF WARRANTS TOTAL
- ---------------------------- ------------- --------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Alexander Finance, LP -- 657,503 -- -- 657,503
-- 1,388,368
Elliott Associates, L.P. 125,357 1,263,011 -- -- 1,388,357
Westgate International, L.P. 125,457 1,262,900 --
State Farm Mutual Automobile 520,000 1,818,053
Insurance Company 225,000 1,044,446 28,607 130,000 351,999
Spring Point Partners, L.P. -- 216,667 5,332 10,000 27,077
Spring Point Offshore Fund -- 16,667 410
</TABLE>
<TABLE>
<CAPTION>
SHARES EXCLUDED FROM BENEFICIAL
OWNERSHIP PRIOR TO OFFERING(2)
---------------------------------------------------------------------------
SHARES ISSUABLE SHARES ISSUABLE SHARES ISSUABLE
UPON CONVERSION AS INTEREST ON UPON EXERCISE
NAME OF SELLING STOCKHOLDER OF NOTE THE NOTES(1) OF WARRANTS TOTAL
- ---------------------------- ------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Alexander Finance, LP 3,688,177 119,852 2,133,333 5,941,362
Elliott Associates, L.P. 1,364,151 71,911 1,350,725 2,786,787
Westgate International, L.P. 1,364,261 71,911 1,350,724 2,786,896
State Farm Mutual Automobile
Insurance Company -- -- -- --
Spring Point Partners, L.P. -- -- -- --
Spring Point Offshore Fund -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL SHARES
ISSUABLE AS INTEREST BENEFICIAL OWNERSHIP AFTER OFFERING(5)
ON THE NOTES IF HELD NUMBER OF SHARES --------------------------------------
NAME OF SELLING STOCKHOLDER TO MATURITY(3) BEING OFFERED(4) NUMBER OF SHARES PERCENT
- ------------------------------- ---------------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Alexander Finance, L.P. 624,696 7,223,561 -- --
Elliott Associates, L.P. 389,163 4,493,427 70,891(6) *
Westgate International, L.P. 389,163 4,493,525 70,891(6) *
State Farm Mutual Automobile
Insurance Company 144,331 1,737,384 225,000 *
Spring Point Partners, L.P. 12,266 364,265 -- --
Spring Point Offshore Fund 944 28,021 -- --
</TABLE>
- ------------------
* Less than 1%.
13
<PAGE> 15
(1) At our option, these shares of our common stock are issuable as interest on
the notes within 60 days after May 31, 1999 because we may pay interest on
the notes in cash or shares of our common stock.
(2) Pursuant to the terms of the notes and warrants, the selling stockholder
cannot convert its notes or exercise its warrants to the extent such
conversion and/or exercise would cause the number of shares of our common
stock beneficially owned by the selling stockholder and its affiliates,
other than shares deemed beneficially owned through ownership of
unconverted notes and unexercised warrants, to exceed a certain percentage
of the then issued and outstanding shares of our common stock following
such conversion and/or exercise. Accordingly, the selling stockholder,
except for State Farm Mutual Automobile Insurance Company, disclaims
beneficial ownership of the shares listed under this column. However,
absent such restriction, the selling stockholder would beneficially own the
shares listed under this column prior to the offering. For Alexander
Finance, LP, the percentage limitation is 4.9%. For Elliott Associates,
L.P., Westgate International, L.P., State Farm Mutual Automobile Insurance
Company, Spring Point Partners, L.P. and Spring Point Offshore Fund, the
percentage limitation is 9.9%.
(3) Assumes the interest is fully paid in shares of our common stock. At our
option, we may pay interest on the notes in cash or shares of our common
stock.
(4) Represents the number of shares that may be sold by each selling
stockholder pursuant to this prospectus. Pursuant to Rule 416 under the
Securities Act of 1933, the registration statements of which this
prospectus is a part also cover any additional shares of our common stock
which become issuable in connection with the such shares because of any
stock dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration which results in an increase
in the number of outstanding shares of our common stock.
(5) Assumes each selling stockholder sells all of its shares offered pursuant
to this prospectus to unaffiliated third parties. Each selling stockholder
may sell all, part or none of its shares.
(6) Includes 17,391 shares issuable upon conversion of warrants held by the
selling stockholder. These shares are registered for public resale pursuant
to another prospectus.
Mark Brodsky, an employee of a company under common management with
Elliott Associates, L.P. and Westgate International, L.P., served as a director
on our Board of Directors from June 1998 to March 1999. Howard Hoffmann has
served as a director on our Board of Directors since July 1998. Messrs. Brodsky
and Hoffmann were designated as nominees for election to our Board of Directors
by the selling stockholders pursuant to the terms of a securities purchase
agreement, as amended, between the selling stockholders and us.
According to a Schedule 13D filed by Elliott Associates, L.P., Westgate
International, L.P. and Martley International, Inc. with the SEC on April 8,
1999, as amended on April 12, 1999:
o Paul E. Singer and Braxton Associates, L.P., which is
controlled by Mr. Singer, are the general partners of Elliott
Associates, L.P.;
o Martley International, Inc., is the investment manager for
Westgate International, L.P. and shares power with Westgate
International, L.P. to vote or direct the vote of, and to
dispose or direct the disposition of, the shares of our common
stock owned by Westgate International, L.P. Martley
International, Inc. expressly disclaims equitable ownership
of, and pecuniary interest in, any of our common stock; and
o Hambledon, Inc. is the sole general partner of Westgate
International, L.P.
14
<PAGE> 16
PLAN OF DISTRIBUTION
Pursuant to registration rights agreements dated as of May 15, 1998 and
March 31, 1999, by and between us and the selling stockholders, we agreed to
register for public resale shares of our common stock which may in the future be
issued to the selling stockholders, or their pledgees, donees, transferees or
other successors in interest, upon the conversion of the notes, as accrued
interest on the notes and/or upon exercise of the warrants. The registration
statements of which this prospectus is a part, including our registration
statement on Form S-3 (Reg. No. 333-56601) declared effective by the SEC on
August 13, 1998, have been filed with the SEC pursuant to the registration
rights agreements. We have agreed to use our best efforts to keep each
registration statement effective for a period of four years commencing on the
effective date of the applicable registration statement, or a shorter period if
all of such shares registered under the applicable registration statement have
been sold or may be sold without volume restrictions pursuant to Rule 144 under
the Securities Act prior to the expiration of the four-year period. The
aggregate proceeds to the selling stockholders from the sale of shares offered
pursuant to this prospectus will be the prices at which such securities are
sold, less any commissions. The selling stockholders may choose to not sell any
or all of the shares of our common stock offered pursuant to this prospectus.
The notes provide that if any one of several enumerated events occurs,
including:
o the registration statements of which this prospectus is a part
cease to be effective prior to expiration of the
above-mentioned effectiveness period;
o failure of the shares to be registered or qualified for sale
pursuant to the securities laws of applicable states;
o suspension of trading of our common stock on the Nasdaq
National Market for more than three consecutive trading days
or delisting of our common stock from the Nasdaq National
Market, unless such delisting is due to our failure to satisfy
the net tangible assets or minimum bid price maintenance
requirements of the Nasdaq National Market or unless our
common stock is listed on another national market or exchange
within three trading days; and
o suspension of a selling stockholder's rights to convert its
notes,
then the conversion price of the notes will be decreased by 2.5% for each
monthly anniversary of such event until the earlier to occur of the second month
anniversary of the event and the curing of such event. After the second month
anniversary, each selling stockholder, at its option, may instead receive 2.5%
of the outstanding principal of its notes for each month thereafter until the
applicable event is cured. If the event is not cured by the third month
anniversary, each selling stockholder has the option to require us to redeem its
notes.
The selling stockholders, or their pledgees, donees, transferees or
other successors in interest, may, from time to time, sell all or a portion of
the shares of our common stock at fixed prices that may be changed, at market
prices prevailing at the time of sale, at prices related to such market prices
or at negotiated prices. The selling stockholders may offer their shares of our
common stock at various times in one or more of the following transactions:
o on any national securities exchange or market on which our
common stock may be listed at the time of sale, including the
Nasdaq National Market;
o in the over-the counter market;
15
<PAGE> 17
o through block trades in which the broker or dealer so engaged
will attempt to sell the shares as agent, but may position and
resell a portion of the block as principal to facilitate the
transaction;
o through purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to
this prospectus;
o in ordinary brokerage transactions and transactions in which
the broker solicits purchasers;
o through options, swaps or derivatives;
o in privately negotiated transactions;
o in transactions to cover short sales; and
o through a combination of any such methods of sale.
The selling stockholders may also sell their shares of our common stock in
accordance with Rule 144 under the Securities Act, rather than pursuant to this
prospectus.
The selling stockholders may sell their shares of our common stock
directly to purchasers or may use brokers, dealers, underwriters or agents to
sell such shares. In effecting sales, brokers and dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions, discounts or concessions from a selling
stockholder or, if any such broker-dealer acts as agent for the purchaser of
such shares, from a purchaser in amounts to be negotiated. Such compensation
may, but is not expected to, exceed that which is customary for the types of
transactions involved. Broker-dealers may agree with a selling stockholder to
sell a specified number of such shares at a stipulated price per share, and, to
the extent such broker-dealer is unable to do so acting as agent for a selling
stockholder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to the selling stockholders. Broker-dealers
who acquire shares as principal may thereafter resell such shares from time to
time in transactions, which may involve block transactions and sales to and
through other broker-dealers, including transactions of the nature described
above, in the over-the-counter market or otherwise at prices and on terms then
prevailing at the time of sale, at prices then related to the then-current
market price or in negotiated transactions. In connection with such resales,
broker-dealers may pay to or receive from the purchasers of such shares
commissions as described above.
The selling stockholders and any broker-dealers or agents that
participate with the selling stockholders in sales of their shares of our common
stock may be deemed to be "underwriters" within the meaning of the Securities
Act in connection with such sales. In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of such shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
From time to time the selling stockholders may engage in short sales,
short sales against the box, puts and calls and other hedging transactions in
our securities, and may sell and deliver their shares of our common stock in
connection with such transactions or in settlement of securities loans.
These transactions may be entered into with broker-dealers or other financial
institutions. In addition, from time to time a selling stockholder may pledge
its shares pursuant to the margin provisions of its customer agreements with its
broker-dealer. Upon delivery of such shares or a default by a selling
16
<PAGE> 18
stockholder, the broker-dealer or financial institution may offer and sell such
pledged shares from time to time.
We are required to pay all fees and expenses incident to the
registration of the shares of our common stock, including fees and
disbursements, not to exceed an aggregate of $5,000, of counsel to the selling
stockholders. We have agreed to indemnify the selling stockholders against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act. We have advised the selling stockholders that during such time
as they may be engaged in a distribution of the shares of our common stock, they
are required to comply with the anti-manipulative provisions of Regulation M
under the Securities Exchange Act.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares
offered by the selling stockholders will be passed upon for us by William M.
Kochlefl, Esq., our Vice President, General Counsel and Secretary.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements and schedule included in our Annual Report on Form 10-K, as amended
on Form 10-K/A, for our fiscal year ended December 31, 1998, as set forth in
their report, which is incorporated by reference in this prospectus. Our
financial statements and schedule are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
17
<PAGE> 19
================================================================================
If it is against the law in any state to make an offer to sell the shares, or
to solicit an offer from someone to buy the shares, then this prospectus does
not apply to any person in that state, and no offer or solicitation is made by
this prospectus to any such person. You should rely only on the information
provided or incorporated by reference in this prospectus or any supplement.
Neither we nor any of the selling stockholders have authorized anyone to provide
you with different information. You should not assume that the information in
this prospectus or any supplement is accurate as of any date other than the date
on the front of such documents.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors.............................................. 2
Cautionary Note Regarding Forward-Looking
Statements.............................................. 10
Recent Development........................................ 10
Where You Can Find More Information....................... 11
Use of Proceeds........................................... 12
Selling Stockholders...................................... 13
Plan of Distribution...................................... 15
Legal Matters............................................. 17
Experts................................................... 17
</TABLE>
================================================================================
[ILLINOIS SUPECONDUCTOR CORPORATION LOGO (TM)]
18,340,183 Shares
Common Stock
--------------------
PROSPECTUS
--------------------
_________________ , 1999
================================================================================
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by us in
connection with the issuance and distribution of our common stock pursuant to
the prospectus contained in this registration statement. We will pay all of
these expenses. All amounts are estimates except the SEC registration fee and
the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
APPROXIMATE
AMOUNT
-----------
<S> <C>
Securities and Exchange Commission registration fee.............. $1,269
Nasdaq National Market listing fee............................... 17,500
Accountants' fees and expenses................................... 5,000
Legal fees and expenses.......................................... 15,000
Miscellaneous expenses........................................... 1,231
-------
Total.......................................................... $40,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 9 of our Certificate of Incorporation provides that we shall
indemnify our directors to the full extent permitted by the General Corporation
Law of the State of Delaware and may indemnify our officers and employees to
such extent, except that we shall not be obligated to indemnify any such person
(1) with respect to proceedings, claims or actions initiated or brought
voluntarily by any such person and not by way of defense, or (2) for any amounts
paid in settlement of an action indemnified against by us without our prior
written consent. We have entered into indemnity agreements with each of our
directors and officers. These agreements may require us, among other things, to
indemnify such directors and officers against certain liabilities that may arise
by reason of their status or service as directors or officers, as the case may
be, to advance expenses to them as they are incurred, provided that they
undertake to repay the amount advanced if it is ultimately determined by a court
that they are not entitled to indemnification and to obtain directors' and
officers' liability Insurance if available on reasonable terms.
In addition, Article 8 of our Certificate-of-Incorporation-provides
that a director of ours shall not be personally liable to us or our stockholders
for monetary damages for breach of his or her fiduciary duty as a director,
except for liability (1) forCany breach of the director's duty of loyalty to us
or our stockholders, (2) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (3) for willful or
negligent conduct in paying dividends or repurchasing stock out of other than
lawfully available funds or (iv) for any transaction from which the director
derives an improper personal benefit.
Reference is made to Section 145 of the General Corporation Law of the
State of Delaware which provides for indemnification of directors and officers
in certain circumstances.
The Company has obtained a directors' and officers' liability insurance
policy which entitles the Company to be reimbursed for certain indemnity
payments it is required or permitted to make to its directors and officers.
II-1
<PAGE> 21
Under a registration rights agreement, we have agreed to indemnify the
selling stockholders, and the selling stockholders have agreed to indemnify us
and our directors, our officers, and certain control persons against, certain
liabilities and expenses incurred in connection with the registration statement,
including with respect to their respective obligations under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
3.1 Certificate of Incorporation of the Company, as amended, incorporated
by reference to Exhibit 3.1 3.1 to the Company's Registration Statement
on Form S-3/A filed with the SEC on August 13, 1998 (Reg. No.
333-56601) (the "August 1998 S-3").
3.2 Bylaws of the Company, incorporated by reference to Exhibit 3.2 to
Amendment No. 3 to the 3.2 Company's Registration Statement on Form S-1
filed with the SEC on October 23, 1993 (Reg. No. 33-67756) (the "IPO
Registration Statement").
3.3 Certificate of Amendment to the Certificate of Incorporation of the
Company.
4.1 Specimen stock certificate representing Common Stock, incorporated by
reference to Exhibit 4.1 to 4.1 the IPO Registration Statement.
4.2 Form of 2% Senior Convertible Note due May 15, 2002, incorporated by
reference to Exhibit 4.1 4.2 to the August 1998 S-3.
4.3 Form of Warrant dated May 15, 1998, incorporated by reference to
Exhibit 4.3 to the August 1998 4.3 S-3.
4.4 Rights Agreement dated as of February 9, 1996, by and between the
Company and LaSalle National 4.4 Trust, N.A., filed as the Exhibit to
the Company's Registration Statement on Form 8-A, filed February 12,
1996, and incorporated herein by reference.
4.5 Securities Purchase Agreement dated as of May 15, 1998, by and between
the Company and Elliott 4.5 Associates, L.P., Westgate International,
L.P., Alexander Finance, LP, State Farm Mutual Automobile Insurance
Company, Spring Point Partners, L.P. and Spring Point Offshore Fund
incorporated by reference to Exhibit 4.5 to the August 1998 S-3.
4.6 Registration Rights Agreement dated as of May 15, 1998, by and between
the Company and Elliott 4.6 Associates, L.P., Westgate International,
L.P., Alexander Finance, LP, State Farm Mutual Automobile Insurance
Company, Spring Point Partners, L.P. and Spring Point Offshore Fund,
incorporated by reference to Exhibit 4.6 to the August 1998 S-3.
4.7 Form of 6% Senior Convertible Note due May 15, 2002, incorporated by
reference to Exhibit 4.18 4.7 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 (the "1998 10-K").
4.8 Form of Warrant dated May 31, 1999, incorporated by reference to
Exhibit 4.19 to the 1998 10-K.
4.9 Securities Purchase Agreement dated as of March 31, 1999, by and
between the Company and 4.9 Elliott Associates, L.P., Westgate
International, L.P., Alexander Finance, LP and State Farm Mutual
Automobile Insurance Company, incorporated by reference to Exhibit 4.20
to the 1998 Form 10-K.
4.10 Registration Rights Agreement dated as of March 31, 1999, by and
between the Company and Elliott 4.10 Associates, L.P., Westgate
International, L.P., Alexander Finance, LP and State Farm Mutual
Automobile Insurance Company, incorporated by reference to Exhibit 4.21
to the 1998 Form 10-K.
4.11 Amendment to Securities Purchase Agreement dated as of March 31, 1999,
by and between the 4.11 Company and Elliott Associates, L.P., Westgate
International, L.P., Alexander Finance, LP, State Farm Mutual
Automobile Insurance Company, Spring Point Partners, L.P. and Spring
Point Offshore Fund, incorporated by reference to Exhibit 4.22 to the
1998 Form 10-K.
5.0* Opinion of William M. Kochlefl, Esq. as to the legality
of the securities being registered (including consent).
23.1 Consent of Ernst & Young LLP.
23.2* Consent of William M. Kochlefl, Esq. (contained in his opinion filed as
Exhibit 5 hereto).
24.0* Power of Attorney (included on the signature page of the initial filing
of this Registration Statement).
--------
* Previously filed.
II-2
<PAGE> 22
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement
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.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, as amended, each such post-effective
amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Company's annual
report pursuant to Section 13(a) or 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 offer
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the 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.
II-3
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Mt. Prospect, State of Illinois on the 15th day
of June, 1999.
ILLINOIS SUPERCONDUCTOR CORPORATION
By: /s/ EDWARD W. LAVES
----------------------------------
Edward W. Laves,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons on June 15, 1999 in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------- ---------------------------------------------------------
<S> <C>
Chairman of the Board, President and Chief Executive
/s/ EDWARD W. LAVES Officer (Principal Executive Officer)
- -------------------------------------------------
Edward W. Laves
Controller and Treasurer (Principal Financial and
* Accounting Officer)
- -------------------------------------------------
Kenneth E. Wolf
*
- -------------------------------------------------
Howard Hoffmann Director
*
- -------------------------------------------------
Robert D. Mitchum Director
*
- -------------------------------------------------
Terry S. Parker Director
*
- -------------------------------------------------
Tom L. Powers Director
* By: /s/ EDWARD W. LAVES
Edward W. Laves
As attorney-in-fact
</TABLE>
II-4
<PAGE> 24
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ----------------- ------------------------------------------------------------
3.3 Certificate of Amendment to the Certificate of Incorporation
of the Company.
23.1 Consent of Ernst & Young LLP.
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ILLINOIS SUPERCONDUCTOR CORPORATION
ILLINOIS SUPERCONDUCTOR CORPORATION, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify:
I. That, at a meeting held on February 12, 1999 in accordance with Section
141(b) of the General Corporation Law of the State of Delaware, the Board of
Directors of the Corporation adopted a resolution setting forth the proposed
Amendment to Certificate of Incorporation set forth below (the "Amendment"),
declaring its advisability, and submitting it to the stockholders entitled to
vote in respect thereof.
RESOLVED, that the first sentence of Article 4, Section 4.1 of
the Certificate of Incorporation, as amended, of the Corporation is
hereby amended in its entirety to read as follows:
"The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Sixty Million One
Hundred Thousand (60,100,000), of which Sixty Million
(60,000,000) shares are of a class designated "Common Stock"
(referred to in this certificate as "Common"), and One Hundred
Thousand (100,000) shares are of a class designated "Preferred
Stock" (referred to in this certificate as "Preferred")."
II. That, an annual meeting of stockholders was duly called and held on June 9,
1999, upon written notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the holders of a
majority of the outstanding stock entitled to vote thereon, and a majority of
the outstanding stock of each class entitled to vote thereon as a class, voted
in favor of the adoption of the Amendment.
III. That the Amendment has been duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
<PAGE> 2
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to Certificate of Incorporation to be signed by its President and
attested by its Secretary, all on June 9, 1999.
ILLINOIS SUPERCONDUCTOR CORPORATION
By: /s/ EDWARD W. LAVES
---------------------------------
Edward W. Laves, President
Attest:
/s/ WILLIAM M. KOCHLEFL
----------------------------------------
William M. Kochlefl, Secretary
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3 No. 333-77337) and the related
Prospectus of Illinois Superconductor Corporation for the registration of
18,382,683 shares of its common stock and to the incorporation by reference
therein of our report dated February 26, 1999 (except Note 3, as to which the
date is March 31, 1999), with respect to the financial statements and schedule
of Illinois Superconductor Corporation included in its Annual Report (Form 10-K,
as amended on Form 10-K/A) for the year ended December 31, 1998, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------------
Chicago, Illinois
June 15, 1999
