<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1997
REGISTRATION NO. 333-25805
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERIGON INCORPORATED
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
CALIFORNIA 95-4318554
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
404 EAST HUNTINGTON DRIVE
MONROVIA, CALIFORNIA 91016
(818) 932-1200
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
--------------------------
LON E. BELL, PH.D., CHIEF EXECUTIVE OFFICER
AMERIGON INCORPORATED
404 EAST HUNTINGTON DRIVE
MONROVIA, CALIFORNIA 91016
(818) 932-1200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES OF COMMUNICATIONS TO:
D. STEPHEN ANTION, ESQ.
O'MELVENY & MYERS LLP
400 SOUTH HOPE STREET
LOS ANGELES, CALIFORNIA 90071-2899
(213) 669-6000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement, subject to
market conditions and certain contractual restrictions on transfer.
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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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NUMBER OF PROPOSED PROPOSED
SECURITIES OF MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF EACH CLASS TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SECURITY OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Class A Warrants(1)................ 1,620,000 -- -- --
Class A Common Stock, no par value
per share(2)..................... 1,620,000 $5.00 $8,100,000 $2,454.55
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</TABLE>
(1) Pursuant to Rule 457(g), no separate registration fee is being paid to
register these securities.
(2) Issuable upon exercise of the Class A Warrants being registered hereby.
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.
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<PAGE>
PROSPECTUS
AMERIGON INCORPORATED
1,620,000 CLASS A WARRANTS
AND 1,620,000 SHARES OF
CLASS A COMMON STOCK
---------------------
This Prospectus relates to 1,620,000 Class A Warrants (the "Selling
Securityholder Warrants") of Amerigon Incorporated, a California corporation
(the "Company"), held by 46 holders (the "Selling Securityholders") and the
1,620,000 shares of the Company's Class A Common Stock, no par value per share
("Class A Common Stock"), issuable upon the exercise of the Selling
Securityholder Warrants. The Selling Securityholder Warrants and the Class A
Common Stock issuable upon exercise of the Selling Securityholder Warrants are
sometimes collectively referred to herein as the "Selling Securityholder
Securities." The Selling Securityholder Warrants were issued to the Selling
Securityholders upon conversion of the convertible subordinated debentures of
the Company that they received in a private placement completed by the Company
in October 1996 (the "Bridge Financing"). See "Selling Securityholders" and
"Plan of Distribution." Each Selling Securityholder Warrant entitles the holder
to purchase at any time until February 12, 2002 one share of the Company's Class
A Common Stock at an exercise price of $5.00, subject to adjustment, and subject
to reduction at the discretion of the Company. At any time after February 11,
1998, the Company may, upon 30 days' written notice, redeem each Selling
Securityholder Warrant in exchange for $0.05 per Selling Securityholder Warrant,
provided that before any such redemption, (i) the average closing bid price of
the Class A Common Stock as reported by the Nasdaq SmallCap Market or (ii) the
average last reported sale price as reported by the primary exchange on which
the Class A Common Stock is traded, if the Class A Common Stock is traded on a
national securities exchange, or by Nasdaq, if the Class A Common Stock is
traded on the Nasdaq National Market System, shall have, for 30 consecutive
business days ending on a date within 15 days of the date of the notice of
redemption, averaged in excess of $8.75 (subject to adjustment in the event of
stock splits or other similar events).
Except as otherwise set forth in a Prospectus Supplement, the Selling
Securityholder Securities covered by this Prospectus may be sold from time to
time in the over-the-counter market to purchasers in certain states or U.S.
territories in transactions at prevailing market prices effected through
registered broker-dealers receiving customary commissions in connection with
such sales. See "Plan of Distribution."
The Selling Securityholders, and intermediaries through whom such securities
are sold, may be deemed underwriters within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered,
and any profits realized or commissions received may be deemed underwriting
compensation. The Company has agreed to indemnify the Selling Securityholders
against certain liabilities, including liabilities under the Securities Act.
The Company will not receive the proceeds from any sale of the Selling
Securityholder Securities by the Selling Securityholders. In the event that all
of the Selling Securityholder Warrants are exercised, the Company will receive
aggregate gross proceeds of $8,100,000. The Company is obligated to pay D.H.
Blair Investment Banking Corp. a commission equal to five percent of the gross
proceeds from any exercise of the Selling Securityholder Warrants. The net
proceeds, if any, received from any exercises of the Selling Securityholder
Warrants will be used for general corporate purposes. See "Use of Proceeds,"
"Selling Securityholders" and "Plan of Distribution."
On February 12, 1997, a registration statement under the Securities Act with
respect to an underwritten public offering by the Company (the "Offering") of
19,550 Units (including 2,550 Units subject to the Underwriter's over-allotment
option, which was exercised in full), each Unit consisting of 280 shares of
Class A Common Stock and 280 Class A Warrants, was declared effective by the
Securities and Exchange Commission (the "Commission"). The Company received
approximately $17,700,000 in net proceeds from the Offering after payment of
underwriting discounts and commissions and expenses of the Offering.
The Class A Common Stock and the Class A Warrants are traded on the Nasdaq
SmallCap Market under the symbols "ARGNA" and "ARGNW", respectively. The closing
sale price of the Class A Common Stock and the Class A Warrants on May 5, 1997,
as reported by Nasdaq, was $3.656 per share and $.781 per warrant, respectively.
--------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING ON PAGE 5 AND
"DILUTION" BEGINNING ON PAGE 18.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES 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 , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in
such Registration Statement and the exhibits thereto. For further information
with respect to the Company and the selling Securityholder Securities, reference
is hereby made to the Registration Statement and the exhibits thereto, which may
be inspected without charge at the public reference facilities maintained at the
principal office of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington D.C. 20549 and at the Commission's regional offices at 7 World Trade
Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained upon written request from the public reference section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Electronic registration statements made through the Electronic Data Gathering,
Analysis and Retrieval System are publicly available through the Commission's
Web site (http://www.sec.gov). Statements contained in the Prospectus as to the
contents of any contract or other document referred to herein are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed (or incorporated by reference) as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. Such reports
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at the addresses shown
above. Copies of such material can be obtained from the Public Reference Section
of the Commission at the address shown above at prescribed rates or through the
Commission's Web site. Reports and other information concerning the Company may
also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Class A Common Stock and the Class A Warrants are listed on the Nasdaq
SmallCap Market under the symbols "ARGNA" and "ARGNW", respectively. Certain
information, reports and proxy statements of the Company are also available for
inspection at the offices of the Nasdaq National Market Reports Section, 1735 K
Street, Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, as noted below, are incorporated by reference into this Prospectus:
(a) Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as
amended; (b) Current Report on Form 8-K dated January 30, 1997; (c) Current
Report on Form 8-K dated April 28, 1997; (d) the description of the Class A
Common Stock (including the description of the Common Stock generally) contained
in the Company's Registration Statement on Form 8-A filed with the Commission on
or about May 21, 1993 (File No. 000-21810); and (e) the description of the Class
A Warrants contained in the Company's Registration Statement on Form 8-A, as
amended, filed with the Commission on or about February 4, 1997 (File No.
000-21810).
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
of the Selling Securityholder Securities, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing such documents.
Any statement contained herein or in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part of this Prospectus, except as so modified or superseded. The Company hereby
undertakes to provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus has been delivered, upon the written or
oral request of such person, a copy of any or all of the documents referred to
in "Incorporation of Certain Information by Reference" which have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents. Requests for such copies should be directed to Amerigon Incorporated,
404 East Huntington Drive, Monrovia, California 91016-3600, Attention: Corporate
Secretary, (818) 932-1200.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED HEREIN. INVESTORS SHOULD ALSO
CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS."
THE COMPANY
GENERAL
Amerigon Incorporated (the "Company") is a development stage company
incorporated in California in 1991 to develop, manufacture and market
proprietary high technology automotive components and systems for sale to
automobile and other original equipment manufacturers. The Company's business
strategy is to apply aerospace and defense industry technology to products for
the automotive market. The Company has focused on technologies that it believes
can be readily adapted to automotive needs for advanced vehicle electronics and
for electric vehicle systems. The Company seeks to avoid direct competition with
established automotive suppliers of commodity products by identifying market
opportunities where the need for rapid technological change gives an edge to new
market entrants with proprietary products. To date, the Company has principally
focused on developing proprietary positions in the following technologies: (i)
thermoelectric heated and cooled seats; (ii) radar for maneuvering and safety;
(iii) voice interactive navigation and entertainment; and (iv) electric vehicle
components and production systems.
The Company has substantially completed development of the first generation
of its Interactive Voice System ("IVS-TM- ") audio-navigation product. The
IVS-TM- provides spoken-word navigation directions to driver and passengers
using an in-vehicle compact audio disc system. To date, the IVS-TM- product has
not been commercially successful and likely would require substantial further
development before it could be expected to achieve significant sales. The
Company is presently seeking strategic or financial partners to help further
develop and market the IVS-TM- product line or, failing that, to sell the
IVS-TM- product line and the Company's interests in related technology. The
Company recently entered into a letter of intent that contemplates the possible
formation of a joint venture to pursue further development and marketing of the
IVS-TM- product. See "Recent Developments" below. If the Company is unable to
consummate the proposed joint venture (or any similar transaction) or to sell
the IVS-TM- product line in the near future, the Company plans to discontinue
sales and further development of the IVS-TM- and related technology.
The Company's other products are in various stages of development. The
Company is presently working with three of the world's largest automotive
original equipment manufacturers on pre-production development programs for
heated and cooled seats. In addition, the Company has sold multiple prototypes
of its heated and cooled seats and radar for maneuvering and safety to potential
customers for evaluation and demonstration. In February 1996, the Company
entered into a memorandum of understanding (which has since expired) with a
strategic partner to enter into a proposed joint venture in India to develop,
market and/or manufacture electric vehicles. The terms of the joint venture
called for the Company to contribute cash in the approximate amount of
$2,200,000 as well as the design and certain tooling for production of the
electric vehicles to the joint venture in exchange for a minority equity stake.
The proposed joint venture called for the Company to produce approximately 60
electric mini-cars in ready-to-assemble kits for assembly in India. The proposed
Indian co-venturer would have been expected to build the manufacturing
capability for full-scale production. In anticipation of the formation of the
Indian joint venture, the Company began prototype development work on a mini-car
called the "REVA," designed principally for the Indian market. The Company has
produced five fully-functional REVA prototypes. The Company has decided not to
make any financial contribution to the joint venture entity and to seek a
different joint venture arrangement involving the same and/or possibly one or
more other strategic partners. The five completed REVA prototypes, together with
additional prototypes that the Company may complete pursuant to existing grants,
may be contributed to an alternative joint venture. However, no
3
<PAGE>
assurance can be given that the Company will identify any alternative strategic
partners or ultimately consummate any joint venture transaction.
The address and main telephone number of the Company's executive offices are
404 East Huntington Drive, Monrovia, California 91016 and (818) 932-1200,
respectively.
RECENT DEVELOPMENTS
The Company has determined to focus its resources primarily on developing
its heated and cooled seat and radar for maneuvering and safety technologies.
The Company has adopted this strategy primarily because the Company believes
that the markets for these products have greater near-term potential than the
markets for its other products, and because these technologies afford the
Company its best opportunities to exploit competitive advantages over rival
companies. The Company also would expect continued necessary development and
marketing of the Company's voice interactive navigation technologies and
electric vehicle systems to entail very high costs, to the point that they would
likely exceed the Company's financial resources. Even if the Company were able
to overcome this financial challenge, management also believes that the Company
might not be able to develop and successfully market the next generation of
IVS-TM- , and might not be able to successfully develop and profitably
manufacture electric vehicles or their components, without commercial or
technical assistance from one or more strategic partners.
The Company recently entered into a letter of intent with Yazaki
Corporation, a Japanese company ("Yazaki"), and Technology Strategies and
Alliances, a California corporation ("TSA"), pursuant to which the parties
propose, subject to satisfactory completion of due diligence, completion of
definitive documents and other conditions specified in the letter of intent, to
form a joint venture to develop and market the IVS-TM- product in the automotive
aftermarket. The basic terms of the joint venture call for the Company to
provide to the joint venture company substantially all assets relating to the
IVS-TM- product, with the Company retaining an equity interest in such company.
The Company would also be paid $2,000,000 in cash within one year of the
parties' execution of the definitive joint venture agreement. The Company may be
obligated to pay a portion of the consideration received in the joint venture
transaction to third parties pursuant to existing license agreements. The
transaction would also involve payments to the Company of up to $1,000,000 to
support the Company's cost structure in the IVS-TM- area. The letter of intent
further contemplates that Yazaki would contribute capital agreed by the parties
to be necessary to fund the joint venture company's business strategy in
exchange for, among other things, a majority equity interest in such company and
the exclusive rights to manufacture, market and sell to automotive and other
industries' OEMs all products developed by the joint venture company. Shares in
the joint venture company would also be reserved for key officers, working
directors and employees of the joint venture company through a stock option
plan. No assurance can be given that Yazaki will provide any support funding,
that the parties will agree on a definitive joint venture agreement or enter
into such agreement, or that the proposed joint venture transaction will
ultimately be consummated.
The Company has recently experienced significant cash shortfalls because its
expenses have greatly exceeded its revenues. On March 7, 1997, the Company
completed a public offering (the "Offering") of 19,550 units, each unit
consisting of 280 shares of Class A Common Stock and 280 Class A Warrants. The
proceeds from such Offering, net of underwriting fees and other fees and
expenses, totalled approximately $17,700,000 and were used by the Company to
repay approximately $4,110,000 in indebtedness, with the balance to be used to
fund future operations.
4
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RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE IN NATURE AND INVOLVE A
HIGH DEGREE OF RISK. PRIOR TO MAKING AN INVESTMENT DECISION, PROSPECTIVE
INVESTORS IN THE COMPANY'S SECURITIES SHOULD GIVE CAREFUL CONSIDERATION TO,
AMONG OTHER THINGS, THE RISK FACTORS SET FORTH BELOW. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. REFERENCE IS MADE IN
PARTICULAR TO THE DESCRIPTION OF THE COMPANY'S PLANS AND OBJECTIVES FOR FUTURE
OPERATIONS, ASSUMPTIONS UNDERLYING SUCH PLANS AND OBJECTIVES AND OTHER
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS. SUCH STATEMENTS MAY BE
IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY," "WILL,"
"EXPECT," "BELIEVE," "ESTIMATE," "ANTICIPATE," "INTEND," "CONTINUE," OR SIMILAR
TERMS, VARIATIONS OF SUCH TERMS OR THE NEGATIVE OF SUCH TERMS. SUCH STATEMENTS
ARE BASED ON MANAGEMENT'S CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF
FACTORS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS. THE COMPANY EXPRESSLY
DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR
REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY
CHANGE IN THE COMPANY'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN
EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED.
FACTORS WHICH COULD CAUSE SUCH RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED
IN THE FORWARD-LOOKING STATEMENTS INCLUDE THOSE SET FORTH BELOW.
DEVELOPMENT STAGE COMPANY
The Company's proposed future operations are subject to numerous risks
associated with establishing new businesses, including, but not limited to,
availability of capital, unforeseeable expenses, delays and complications, as
well as specific risks of the industry in which the Company competes. There can
be no assurance that the Company will be able to market any product on a
commercial scale, achieve profitable operations or remain in business. To date,
the Company's first developed product, the IVS-TM-, has not been commercially
successful. The Company was formed in April 1991 and most of its products are
still in the development stage. In addition, several of the Company's products
are aimed at the electric vehicle market, which is still in its infancy and may
never achieve commercial prominence. The likelihood of the success of the
Company must be considered in light of the problems, expenses, difficulties,
complications and delays frequently encountered in connection with establishing
a new business, including, without limitation, uncertainty as to market
acceptance of the Company's products, marketing problems and expenses,
competition and changes in business strategy. There can be no assurance that the
Company will be successful in its proposed business activities.
Moreover, except for the IVS-TM-, the Company's other products are in
various stages of prototype development and will require the expenditure of
significant funds for further development and testing in order to commence
commercial sales. The IVS-TM- likely will require further development, at
significant cost, in order to have a reasonable prospect for commercial
viability. The Company recently entered into a letter of intent that
contemplates the possible formation of a joint venture to pursue further
development of the IVS-TM- product. See "Recent Developments." No assurance can
be given that the Company will obtain the funds necessary to pay for such
further development of its products (through arrangements with strategic
partners or otherwise) or that, if such funds are obtained, the Company will be
successful in resolving all technical problems relating to its products or in
developing the technology used in its prototypes into commercially viable
products. The Company does not expect to generate any significant revenues from
the sale of seat or radar products for at least 9 to 18 months, and no assurance
can be given that such sales will ever materialize. Further, there can be no
assurance that any of the Company's products, if successfully developed, will be
capable of being produced in commercial quantities at reasonable costs or will
be successfully marketed and distributed. See "--Limited Marketing Capabilities;
Uncertainty of Market Acceptance."
5
<PAGE>
SUBSTANTIAL OPERATING LOSSES SINCE INCEPTION
The Company has incurred substantial operating losses since its inception.
At December 31, 1996 and 1995, the Company had accumulated deficits since
inception of $23,184,000 and $13,187,000, respectively. The Company's
accumulated deficits are attributable to the costs of developmental and other
start-up activities, including the industrial design, development and marketing
of the Company's products and a significant loss incurred on a major electric
vehicle development contract. See "--Electric Vehicle Cost Overruns and
Significant Contract Losses." The Company has continued to incur losses due to
continuing expenses without significant revenues or profit margins on the sale
of products, and expects to incur significant losses for the foreseeable future.
NEED FOR ADDITIONAL FINANCING
The Company has experienced negative cash flow from operations since its
inception and has expended, and expects to continue to expend, substantial funds
to continue its development efforts. The Company has not generated and does not
expect to generate in the near future sufficient revenues from the sales of its
principal products to cover its operating expenses. The Company will require
additional financing through bank borrowings, debt or equity financing or
otherwise to finance its planned operations. Unless the Company were to obtain
one or more additional significant development contracts or grants (which cannot
be assured), the Company will not be able to obtain bank financing to fund its
operations. If additional funds are not obtained when needed, the Company will
be required to significantly curtail its activities, dispose of one or more of
its technologies and/or cease operations and liquidate. If and when the Company
is able to commence commercial production of its heated and cooled seat or radar
products, the Company will incur significant expenses for tooling product parts
and to set up manufacturing and/or assembly processes. In part as a result of
the Company's anticipated capital requirements, management is currently seeking
to enter into collaborative or other arrangements with financial or strategic
corporate partners to develop the IVS-TM- product and its electric vehicle
technologies or, failing that, to sell the Company's proprietary interests in
and any other assets relating to such technologies. See "--Possible Disposition
or Abandonment of Electric Vehicle and IVS-TM- Product Businesses." No assurance
can be given that such alternate funding sources can be obtained or will provide
sufficient, or any, financing for the Company. Moreover, the licensing
agreements for the Company's current and potential future rights to licensed
technology generally require the payment of minimum royalties. For the fiscal
year ended December 31, 1996, the Company paid a total of approximately $201,000
in royalties. In the event the Company is unable to pay such royalties or
otherwise breaches such licensing agreements, the Company would lose its rights
to the technology, which would have a material adverse effect on the Company's
business.
POSSIBLE DISPOSITION OR ABANDONMENT OF ELECTRIC VEHICLE AND IVS-TM- PRODUCT
BUSINESSES
To date, the Company has focused on and invested substantial capital in four
product technologies: (i) thermoelectric heated and cooled seats; (ii) radar for
maneuvering and safety; (iii) voice interactive navigation and entertainment;
and (iv) electric vehicle components and production systems. The Company has
recently determined to focus its resources primarily on developing its heated
and cooled seat and radar technologies. The Company recently entered into a
letter of intent that contemplates the possible formation of a joint venture to
pursue further development of the IVS-TM- product. However, no assurance can be
given that such joint venture will ever be consummated. The Company is also
presently seeking strategic and financial partners to help support continued
development and marketing of the Company's electric vehicle systems. No
assurance can be given that the Company will be able to attract any such
strategic or financial partners or that, if such partners were to be obtained,
the Company's electric vehicle products could be successfully developed. If the
Company is unable to consummate a relationship with one or more strategic or
financial partners for the development, marketing and/or manufacture of the
IVS-TM- and electric vehicle products in the near term, the Company will attempt
to sell its proprietary interests
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and other assets in and related to these products or abandon their development.
No assurance can be given that the Company would be able to effect such a sale
on terms favorable to the Company or at all. Moreover, there can be no assurance
that the Company's change in business strategy will prove successful or even
beneficial to the Company.
ELECTRIC VEHICLE COST OVERRUNS AND SIGNIFICANT CONTRACT LOSSES
For fiscal 1996, the Company reported cost overruns on its approximately
$9,600,000 electric vehicle contract (the "Samsung contract") with Samsung Heavy
Industries Co., Ltd., Kihung R&D Center, that caused the costs of such contract
to exceed revenues from the contract by approximately $2,150,000 for 1996 and
resulted in the Company recording charges to operations for the ultimate
estimated loss at completion of the contract of approximately $1,900,000. The
Company may continue to experience cost overruns on this contract due to
continuing delays in the completion of this contract, as well as other factors.
Furthermore, the customer under the contract is entitled to withhold 10% of the
contract price payable to the Company for a period of time following the final
shipment and to offset such amount against any claims it may have against the
Company, including any warranty claims. Any such withholding and/or offset could
result in additional losses under this contract. The Company will also be
obliged to fulfill warranty obligations on electric vehicles delivered under the
contract for a period of one year, which may result in additional expense to the
Company.
UNCERTAIN MARKET DEMAND FOR IVS-TM-; FURTHER REFINEMENT NEEDED; POSSIBLE
DISPOSITION
Development of the first generation IVS-TM- audio navigation product was
completed and commercial sales commenced in December 1995. To date, sales of the
product have been weak due to lower than anticipated consumer acceptance of the
product and overall market demand. In 1995, the Company had pre-production
orders for approximately 2,000 units. As of December 31, 1996, only
approximately 2,700 units had been produced and sold. Of such units,
approximately 270 are subject to one customer's right to return units for a
refund of approximately $77,000. No assurance can be given that such units will
not be returned. Moreover, the Company believes that the current IVS-TM- product
is not commercially viable and will require further development, at significant
cost, in order to have a reasonable prospect for commercial viability,
particularly with respect to sales to automobile manufacturers. Based upon the
results to date, the strategy of attempting to sell the IVS-TM- product in the
aftermarket is questionable. The Company recently entered into a letter of
intent that contemplates the possible formation of a joint venture to pursue
further development of the IVS-TM- product. However, no assurance can be given
that such joint venture will ever be consummated. See "Recent Developments".
LACK OF EXCLUSIVE LICENSES ON IVS-TM- AND HEATED AND COOLED SEATS; POTENTIAL
LOSS OF EXCLUSIVITY OF LICENSE ON RADAR FOR MANEUVERING AND SAFETY
The Company has entered into an agreement with the licensor of the IVS-TM-
product that resolved prior differences of interpretation of the license
agreement covering the IVS-TM- technology. The new agreement provides, among
other things, that such licensor can produce, market and/or license others to
make and sell products incorporating certain improvements made by the Company to
the IVS-TM- technology that could compete directly with the Company's IVS-TM-
product. The licensor may introduce a competitive product as early as 1997. Such
competition could have an adverse effect on the value of the Company's IVS-TM-
product and on any future versions of such product. The Company also lacks an
exclusive license for its heated and cooled seat technology. Consequently, such
technology may be licensed to other entities, which may introduce seat products
competitive with those of the Company. Such competitive products may be superior
to the Company's seat products, and such competition may have a material adverse
effect on sales of the Company's seat products and on the business and financial
condition of the Company.
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The Company's exclusive license from the Regents of the University of
California for the Company's radar technology requires the Company to achieve
sales of products to at least one original equipment manufacturer by the end of
1998. Failure to achieve such sales for a particular application will result in
the loss of exclusivity of the license for that application, in which event the
licensor will have the right to grant other entities a non-exclusive license for
that application on terms no more favorable than those enjoyed by the Company.
LIMITED PROTECTION OF PATENTS AND PROPRIETARY RIGHTS; POTENTIAL DISPUTE WITH
LICENSOR OF SEAT TECHNOLOGY
The Company believes that patents and proprietary rights have been and will
continue to be important in enabling the Company to compete. There can be no
assurance that any patents will be granted or that the Company's or its
licensors' patents and proprietary rights will not be challenged or circumvented
or will provide the Company with any meaningful competitive advantages or that
any pending patent applications will issue. Furthermore, there can be no
assurance that others will not independently develop similar products or will
not design around any patents that have been or may be issued to the Company or
its licensors. Failure to obtain patents in certain foreign countries may
materially adversely affect the Company's ability to compete effectively in
certain international markets. The Company is aware that an unrelated party
filed a patent application in Japan on March 30, 1992 with respect to certain
improvements to the CCS technology developed by the Company.
The Company has a different understanding regarding technology improvements
made by the Company than that of the licensor of certain technology used in the
Company's heated and cooled seats. Such licensor has informed the Company that
he believes that he is entitled to a license to use any improvements to such
technology that the Company might develop. If such licensor were deemed to have
such rights to use such improvements, such licensor may develop and sell seat
products competitive with those of the Company, which competition may have a
material adverse effect on sales of the Company's seats and its business and
financial condition generally.
The Company also relies on trade secrets that it seeks to protect, in part,
through confidentiality and non-disclosure agreements with employees, customers
and other parties. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any such breach or
that the Company's trade secrets will not otherwise become known to or
independently developed by competitors. To the extent that consultants, key
employees or other third parties apply technological information independently
developed by them or by others to the Company's proposed projects, disputes may
arise as to the proprietary rights to such information which may not be resolved
in favor of the Company. The Company may be involved from time to time in
litigation to determine the enforceability, scope and validity of proprietary
rights. Any such litigation could result in substantial cost to the Company and
diversion of effort by the Company's management and technical personnel.
Additionally, with respect to licensed technology, there can be no assurance
that the licensor of the technology will have the resources, financial or
otherwise, or desire to defend against any challenges to the rights of such
licensor to its patents.
DEPENDENCE ON ACCEPTANCE BY AUTOMOBILE MANUFACTURERS AND CONSUMERS; MARKET
COMPETITION
The Company's ability to successfully market its seats and radar products
will in large part be dependent upon the willingness of automobile manufacturers
to incur the substantial expense involved in the purchase and installation of
the Company's products and systems, and, ultimately, upon the acceptance of the
Company's products by consumers. The Company's potential customers may be
reluctant to modify their existing automobile models, where necessary, to
incorporate the Company's products. In addition, automobile manufacturers may be
reluctant to purchase key components from a small, development-stage company
with limited financial and other resources. The Company's ability to
successfully market its seats and radar products will also be dependent in part
upon its ability to persuade automobile manufacturers
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that the Company's products are sufficiently unique that they cannot be obtained
elsewhere. See "Competition; Possible Obsolescence of Technology" and "Lack of
Exclusive Licenses on IVS-TM- and Heated And Cooled Seats; Potential Loss of
Exclusivity of License on Radar for Maneuvering and Safety." There can be no
assurance that the Company will be successful in this effort. Furthermore, in
the event that the Company is successful in obtaining favorable responses from
automobile manufacturers, the Company may need to license its technology to
potential competitors to ensure adequate additional sources of supply in light
of automobile manufacturers' reluctance to purchase products from a sole source
supplier (particularly where the continued viability of such supplier is in
doubt, as may be the case with the Company). Acceptance of the Company's
components and systems for electric vehicles is dependent upon market acceptance
of electric vehicles, as to which there can be no assurance.
LACK OF CAPITAL TO FUND PROPOSED ELECTRIC VEHICLE JOINT VENTURE; STRATEGY
UNTESTED; INCREASED LOSSES RESULTING FROM WRITE-OFF OF CAPITALIZED EXPENSES IN
1996 FOURTH QUARTER
In February 1996, the Company entered into a memorandum of understanding
(which has since expired) with a strategic partner to enter into a proposed
joint venture in India to develop, market and/or manufacture electric vehicles.
The terms of the joint venture called for the Company to contribute cash in the
approximate amount of $2,200,000 as well as the design and certain tooling for
production of the electric vehicles to the joint venture in exchange for a
minority equity stake. The proposed joint venture called for the Company to
produce approximately 60 electric mini-cars in ready-to-assemble kits for
assembly in India. The proposed Indian co-venturer would have been expected to
build the manufacturing capability for full-scale production. In anticipation of
the formation of the Indian joint venture, the Company has begun prototype
development work on a mini-car called the "REVA," designed principally for the
Indian market. The Company has produced five fully-functional REVA prototypes.
The Company has decided not to make any financial contribution to the joint
venture entity and to seek a different joint venture arrangement involving the
same and/or possibly one or more other strategic partners. The five completed
REVA prototypes, together with additional prototypes that the Company may
complete pursuant to existing grants, may be contributed to an alternative joint
venture. However, no assurance can be given that the Company will identify any
strategic partners or ultimately consummate any joint venture transaction.
Event if the Company were to identify willing and able joint venture
partners and desire to consummate a joint venture transaction in India or in
other countries, there can be no assurance that the government of such countries
would grant the necessary permits, authority and approvals for any such joint
venture or similar enterprise or for the development, manufacture and sale of
electric vehicles, that consumer interest would be sufficient or economic
factors affecting consumer demand would be favorable to make such ventures
financially feasible, or that competition would not exist or develop that would
materially adversely affect the financial feasibility of such ventures. In
addition, many of the Company's competitors in the electric vehicle market have
substantially greater financial and other resources than those of the Company.
See "--Dependence on Acceptance by Automobile Manufacturers and Consumers;
Market Competition" and "--Competition; Possible Obsolescence of Technology."
Prior to December of 1996, the Company treated certain costs totaling
approximately $700,000 incurred in connection with prototype development in
anticipation of the formation of the Indian joint venture as capitalized
expenses. Because the Company will not go forward with the joint venture, the
Company treated such costs as current period expenses in December, 1996. Such
expenses increased losses during the fourth quarter of 1996 by approximately
$700,000.
LIMITED MANUFACTURING EXPERIENCE
To date, the Company has been engaged in only limited manufacturing,
principally of the IVS-TM- in small quantities, and there can be no assurance
that the Company's efforts to establish its manufacturing
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operations for any of its products (including electric vehicles) will not exceed
estimated costs or take longer than expected or that other unanticipated
problems will not arise which will materially adversely affect the Company's
operations, financial condition and/or business prospects. The Company has
already experienced significant delays and cost overruns in connection with its
electric vehicle contracts. See "--Electric Vehicle Cost Overruns and
Significant Contract Losses." Automobile manufacturers demand on-time delivery
of quality products, and some have required the payment of substantial financial
penalties for failure to deliver components to their plants on a timely basis.
Such penalties, as well as costs to avoid them, such as working overtime and
overnight air freighting parts that normally are shipped by other less expensive
means of transportation, could have a material adverse effect on the Company's
business and financial condition. Moreover, the inability to meet demand for the
Company's products on a timely basis would materially adversely affect the
Company's reputation and prospects. The Company currently is seeking to identify
and hire a vice president of operations with manufacturing experience. However,
no assurance can be given that the Company will be successful in identifying,
hiring or retaining such an individual on terms affordable to the Company (or on
any terms).
RESTATEMENT OF 1996 1ST QUARTER AND 2ND QUARTER FINANCIAL RESULTS
On October 24, 1996, the Company filed two Forms 10-Q/A amending the
Company's quarterly reports on Form 10-Q for the periods ended March 31, 1996
and June 30, 1996, respectively, to adjust revenues and expenses associated with
development contracts. In the six months ended June 30, 1996, these adjustments
resulted in a decrease in revenues from development contracts of $1,500,000 and
a decrease in expenses related to direct development contract costs of $570,000,
which caused an increased operating loss and net loss of $930,000. Net loss per
share for such period increased by $.23. The decrease in revenues from
development contracts for the six months ended June 30, 1996 consisted of
approximately $800,000 related to errors in the calculation of the revenue
recognized under the Company's major electrical vehicle development contract.
The correction of these errors also resulted in an increase in direct
development contract costs of approximately $130,000 for the six months ended
June 30, 1996. The remaining decrease in development contract revenue of
approximately $700,000 related to the reversal of $700,000 in revenue and an
equal amount of associated contract costs recognized prior to the finalization
of the Company's proposed joint venture in India and related contracts
therefrom. The $700,000 in costs were recorded as deferred contract costs. See
"--Lack of Capital to Fund Proposed Electric Vehicle Joint Venture; Strategy
Untested; Increased Losses Resulting from Write-off of Capitalized Expenses in
1996 Fourth Quarter."
DEPENDENCE ON AND STRAINED RELATIONS WITH VENDORS AND SUPPLIERS
The Company is dependent on various vendors and suppliers for the components
of its products. Although the Company believes that there are a number of
alternative sources for most of these components, certain components are only
available from a limited number of suppliers. Due to the Company's recent cash
shortfalls, the Company was unable to pay, and did not pay, most of its vendors
and suppliers on a timely basis. Even though the Company has since paid such
vendors and suppliers using a portion of the proceeds from the Offering, the
Company believes that its relations with many of such vendors and suppliers are
strained. There can be no assurance that any of such vendors and suppliers will
not limit or cease doing business with the Company or impose more onerous or
restrictive payment and credit terms. The loss of any significant supplier, in
the absence of a timely and satisfactory alternative arrangement, or an
inability to obtain essential components on reasonable terms or at all, could
materially adversely affect the Company's business and operations. The Company's
business and operations could also be materially adversely affected by delays in
deliveries from suppliers.
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LEGAL PROCEEDINGS
HBI Financial Inc. ("HBI"), and DDJ Capital Management, LLC ("DDJ"), each
major shareholders of the Company, have threatened various claims against the
Company and its directors and officers arising out of the December 1995 private
placement by the Company of 750,000 shares of Class A Common Stock. In general,
they allege that the Company provided misleading projections and failed to
disclose certain information in connection with such private placement. The
Company believes these allegations to be without merit. While, to the Company's
knowledge, HBI and DDJ have commenced no legal action against the Company in
connection with such claims, no assurance can be given that they will not do so
in the future. If they were to commence such legal action, the Company would be
forced to defend such action and/or settle with them, the costs of which defense
and/or any resulting liability or settlement could have a material adverse
effect on the Company's financial condition. John W. Clark, a director of the
Company, is a general partner of an affiliate of HBI.
On November 14, 1996, Gibbins Pattern & Plastic, Inc. ("Gibbins"), a
supplier to the Company, filed suit against the Company in Michigan state court
in the circuit court for the County of Wayne, Michigan for breach of contract,
open account/account stated, and unjust enrichment/quantum meruit. Gibbins
alleges that the Company has failed to pay for delivered products. The Company
has withheld certain payments because Gibbins has failed to provide the Company
with assurance of true performance. Gibbins has claimed a total of $231,548 in
damages. The Company has removed the lawsuit to the federal district court for
the Eastern District of Michigan and asserted certain counterclaims against
Gibbins, which Gibbins has denied. The Company intends to defend the matter
vigorously and believes that the lawsuit will not have a material adverse effect
on the Company.
The Company is subject to other litigation in the ordinary course of its
business, none of which is expected to have a material adverse effect on the
Company.
LIMITED MARKETING CAPABILITIES; UNCERTAINTY OF MARKET ACCEPTANCE
Because of the sophisticated nature and early stage of development of its
products, the Company will be required to educate potential customers and
successfully demonstrate that the merits of the Company's products justify the
costs associated with such products. In certain cases, the Company will likely
encounter resistance from customers reluctant to make the modifications
necessary to incorporate the Company's products into their products or
production processes. In some instances, the Company may be required to rely on
its distributors or other strategic partners to market its products. The success
of any such relationship will depend in part on the other party's own
competitive, marketing and strategic considerations, including the relative
advantages of alternative products being developed and/or marketed by any such
party. There can be no assurance that the Company will be able to market its
products properly so as to generate meaningful product sales.
TIME LAG FROM PROTOTYPE TO COMMERCIAL SALES
The sales cycle in the automotive components industry is lengthy and can be
as long as six years or more for products that must be designed into a vehicle,
since some companies take that long to design and develop a car. Even when
selling parts that are neither safety-critical nor highly integrated into the
vehicle, there are still many stages that an automotive supply company must go
through before achieving commercial sales. The sales cycle is lengthy because an
automobile manufacturer must develop a high degree of assurance that the
products it buys will meet customer needs, interface as easily as possible with
the other parts of a vehicle and with the automobile manufacturer's production
and assembly process, and have minimal warranty, safety and service problems. In
the case of electric vehicles, another factor affecting the pace of
commercialization is the pace of development of the electric vehicle industry
itself. Since that industry has been and probably will continue to be slow to
develop, electric vehicle products can
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generally be expected to require even longer times for commercialization than
products intended for use in conventional gasoline-powered vehicles.
SPECIAL FACTORS APPLICABLE TO THE AUTOMOTIVE INDUSTRY IN GENERAL
The automobile industry is cyclical and dependent on consumer spending. The
Company's future sales may be subject to the same cyclical variations as the
automotive industry in general. There have been recent reports of declines in
sales of automobiles on a worldwide basis, and there can be no assurance that
continued or increased declines in automobile production would not have a
material adverse effect on the Company's business or prospects. Additionally,
automotive customers typically reserve the right to unilaterally cancel
contracts completely or to require unilateral price reductions. Although they
generally reimburse companies for actual out-of-pocket costs incurred with
respect to the particular contract up to the point of cancellation, these
reimbursements typically do not cover costs associated with acquiring general
purpose assets such as facilities and capital equipment, and may be subject to
negotiation and substantial delays in receipts by the Company. Any unilateral
cancellation of, or price reduction with respect to, any contract that the
Company may obtain could reduce or eliminate any financial benefits anticipated
from such contract and could have a material adverse effect on the Company's
financial condition and results of operations.
COMPETITION; POSSIBLE OBSOLESCENCE OF TECHNOLOGY
The automotive component and electric vehicle industries are subject to
intense competition. Most of the Company's competitors are substantially larger
in size, have substantially greater financial, marketing and other resources
than the Company, and have more extensive experience and records of successful
operations than the Company. Competition extends to attracting and retaining
qualified technical and marketing personnel. There can be no assurance that the
Company will successfully differentiate its products from those of its
competitors, that the marketplace will consider the Company's current or
proposed products to be superior or even comparable to those of its competitors,
or that the Company can succeed in establishing relationships with automobile
manufacturers. Furthermore, no assurance can be given that competitive pressures
faced by the Company will not adversely affect its financial performance. Due to
the rapid pace of technological change, the Company's products may even be
rendered obsolete by future developments in the industry. The Company's
competitive position would be adversely affected it if were unable to anticipate
such future developments and obtain access to the new technology.
DEPENDENCE ON KEY PERSONNEL; NEED TO RETAIN TECHNICAL PERSONNEL
The Company's success will depend to a large extent upon the continued
contributions of Lon E. Bell, Ph.D., Chief Executive Officer and Chairman of the
Board of Directors and the founder of the Company. The Company has obtained
key-person life insurance coverage in the amount of $2,000,000 on the life of
Dr. Bell. Dr. Bell is not bound by an employment agreement with the Company. The
loss of the services of Dr. Bell or any of the Company's executive personnel
could materially adversely affect the Company. Effective on March 14, 1997, R.
John Hamman, Jr., the Company's Vice President of Finance and Chief Financial
Officer, resigned from the Company for personal reasons unrelated to his former
responsibilities with the Company. The Company has commenced a search for a
qualified individual to succeed Mr. Hamman as the Company's Chief Financial
Officer. There can be no assurance, however, that the Company will be successful
in identifying, hiring or retaining such a successor on terms acceptable to the
Company or on any terms. The success of the Company will also depend, in part,
upon its ability to retain qualified engineering and other technical and
marketing personnel. There is significant competition for technologically
qualified personnel in the geographic area of the Company's business, and the
Company may not be successful in recruiting or retaining sufficient qualified
personnel.
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RELIANCE ON MAJOR CONTRACTORS; RISKS OF INTERNATIONAL OPERATIONS
The Company has in the past engaged certain outside contractors to perform
product assembly and other production functions for the Company, and the Company
anticipates that it may desire to engage contractors for such purposes in the
future. The Company believes that there are a number of outside contractors that
provide services of the kind that have been used by the Company in the past and
that the Company may desire to use in the future. However, no assurance can be
given that any such contractors would agree to work for the Company on terms
acceptable to the Company or at all. The Company's inability to engage outside
contractors on acceptable terms or at all would impair the Company's ability to
complete any development and/or manufacturing contracts for which outside
contractors' services may be needed. Moreover, the Company's reliance upon third
party contractors for certain production functions will reduce the Company's
control over the manufacture of its products and will make the Company dependent
in part upon such third parties to deliver its products in a timely manner, with
satisfactory quality controls and on a competitive basis.
Furthermore, the Company may engage contractors located in foreign
countries. Accordingly, the Company will be subject to all of the risks inherent
in international operations, including work stoppages, transportation delays and
interruptions, political instability, foreign currency fluctuations, economic
disruptions, the imposition of tariffs and import and export controls, changes
in governmental policies and other factors which could have an adverse effect on
the Company's business. See also "--Risk of Foreign Sales."
POTENTIAL CHARGES TO INCOME
In connection with the Company's initial public offering completed in 1993,
3,000,000 shares of the Company's Class A Common Stock (the "Escrow Shares")
were placed (and currently remain) in an escrow account, and are subject to
release to the beneficial owners of such shares in the event the Company attains
certain pre-tax income goals. In the event any Escrow Shares are released to
persons who are current or former officers or other employees of the Company,
compensation expense will be recorded for financial reporting purposes.
Accordingly, in the event of the release of the Escrow Shares from escrow, the
Company will recognize during the periods in which the earnings thresholds are
met or are probable of being met one or more substantial non-cash charges which
would have the effect of substantially increasing the Company's loss or reducing
or eliminating earnings, if any, at such time. Although the amount of
compensation expense recognized by the Company will not affect the Company's
total shareholders' equity or reduce its working capital, it may have a
depressive effect on the market price of the Company's securities. The Company
will incur a non-recurring charge to operations in the first quarter of 1997
relating to the repayment of the promissory notes (the "Bridge Notes") sold in
the Bridge Financing and associated costs of their issuance in the aggregate
amount of approximately $397,000.
POTENTIAL PRODUCT LIABILITY
The Company's business will expose it to potential product liability risks
which are inherent in the manufacturing, marketing and sale of automotive
components. In particular, there may be substantial warranty and liability risks
associated with critical safety components of the Company's products. If
available, product liability insurance generally is expensive. While the Company
presently has $5,000,000 of product liability coverage with respect to the
IVS-TM- product and its electric vehicle prototypes, there can be no assurance
that it will be able to obtain or maintain such insurance on acceptable terms
with respect to other products the Company may develop, or that any insurance
obtained will provide adequate protection against any potential liabilities. In
the event of a successful claim against the Company, a lack or insufficiency of
insurance coverage could have a material adverse effect on the Company's
business and operations.
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GOVERNMENT AUDITS OF GRANTS
The Company's grants are subject to periodic audit by the granting
government authorities for the purpose of confirming, among other things,
progress in development and that grant moneys are being used and accounted for
as required by the granting authority. If, as a result of any such audit, a
granting authority were to disallow expenses submitted for reimbursement, such
authority could seek recovery of such funds from the Company. The Company is not
aware of any pending or threatened audits with respect to the Company's grants
and does not have any reason to believe that any grant moneys have been applied
in a manner inconsistent with grant requirements or that any grant audits are
otherwise warranted or likely. However, no assurance can be given that any such
audits will not be commenced in the future or that, if commenced, any such
audits would not result in an obligation of the Company to reimburse funds to
the granting authority.
NO DIVIDENDS
The Company has not paid any cash dividends on its Common Stock since its
inception and, by reason of its present financial status and its contemplated
financial requirements, does not anticipate paying any cash dividends in the
foreseeable future. It is anticipated that earnings, if any, which may be
generated from operations will be used to finance the operations of the Company.
FLUCTUATIONS IN QUARTERLY RESULTS; SIGNIFICANT DECLINE IN REVENUES EXPECTED;
POSSIBLE VOLATILITY OF STOCK PRICE
Factors such as announcements by the Company of quarterly variations in its
financial results, or unexpected losses, could cause the market price of the
Class A Common Stock of the Company to fluctuate significantly. The results of
operations in previous quarters have been partially dependent on large grants,
orders and development contracts, which may not recur in the future. In
addition, the Company's quarterly operating results may fluctuate significantly
in the future due to a number of other factors, including timing of product
introductions by the Company and its competitors, availability and pricing of
components from third parties, timing of orders, foreign currency exchange
rates, technological changes and economic conditions generally. Development
contract revenues are expected to decline significantly in the next fiscal
quarter because the activity on the Company's major electric vehicle development
contract diminished during the fourth quarter of 1996 and substantially
concluded at the end of the year with no replacement contract presently
scheduled to follow. In recent years, the stock markets in general, and the
share prices of technology companies in particular, have experienced extreme
fluctuations. These broad market and industry fluctuations may adversely affect
the market price of the Class A Common Stock. In addition, failure to meet or
exceed analysts' expectations of financial performance may result in immediate
and significant price and volume fluctuations in the Class A Common Stock.
POTENTIAL CONFLICTS OF INTEREST
Affiliates of Lon E. Bell, Ph.D., Chief Executive Officer, Chairman of the
Board of Directors, founder and a principal shareholder of the Company, and/or
Michael R. Peevey, a director of the Company, are parties to certain business
contracts and arrangements with the Company. These contracts and arrangements
include the Company's lease of a manufacturing and office facility located in
Alameda, California from CALSTART, a non-profit research and development
consortium co-founded by Dr. Bell and for which Dr. Bell serves as a director
and member of the executive committee and for which Mr. Peevey serves as
Chairman of the Board of Directors, several management contracts pursuant to
which the Company manages certain electric vehicle grant programs obtained by
CALSTART and an engineering design services contract pursuant to which the
Company periodically engages Adaptrans, an entity owned by Dr. David Bell, Dr.
Bell's son, to provide assistance with the Company's development of its electric
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vehicle Energy Management System. These relationships and transactions, coupled
with Dr. Bell's ownership of a significant percentage of the Company's Class A
Common Stock and his membership on the Board of Directors, could give rise to
conflicts of interest. The Company believes that such affiliate transactions are
on terms no less favorable to the Company than those that could have been
obtained from unaffiliated third parties.
John W. Clark, a director of the Company, is a general partner of an
affiliate of HBI. HBI and DDJ, each major shareholders of the Company, have
threatened various claims against the Company and its directors and officers
arising out of the December 1995 private placement by the Company of 750,000
shares of Class A Common Stock. See "--Legal Proceedings." While to the
Company's knowledge neither HBI nor DDJ has commenced any legal action against
the Company, no assurance can be given that any such legal action will not be
commenced in the future. The relationship of Mr. Clark with HBI, coupled with
the fact that he is a member of the Company's Board of Directors, could give
rise to conflicts of interest.
SIGNIFICANT INFLUENCE OF PRINCIPAL SHAREHOLDER
The Company's principal shareholder, Dr. Bell, beneficially owns
approximately 28% of the outstanding shares of Class A Common Stock of the
Company and, therefore, will have the power to influence significantly the
management and policies of the Company.
ANTI-TAKEOVER EFFECTS OF UNISSUED PREFERRED STOCK
The Company's Board of Directors has the authority to issue up to 5,000,000
shares of Preferred Stock and to determine the price, rights, preferences and
privileges of those shares without any further vote of action by the
shareholders. The rights of the holders of Class A Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any shares of
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. However, the Company has no present plans to issue shares
of Preferred Stock.
RISK OF FOREIGN SALES
A substantial percentage of the Company's revenues to date have been from
sales to foreign countries. Accordingly, the Company's business is subject to
many of the risks of international operations, including governmental controls,
tariff restrictions, foreign currency fluctuations and currency control
regulations. However, substantially all sales to foreign countries have been
denominated in U.S. dollars. As such, the Company's historical net exposure to
foreign currency fluctuations has not been material. No assurance can be given
that future contracts will be denominated in U.S. dollars, however.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
At any time after February 11, 1998, the Selling Securityholder Warrants may
be redeemed by the Company at a redemption price of $.05 per Warrant upon not
less than 30 days' prior written notice if the closing bid price of the Class A
Common Stock shall have averaged in excess of $8.75 per share for 30 consecutive
trading days ending within 15 days of the notice. Redemption of the Selling
Securityholder Warrants could force the holders (i) to exercise the Selling
Securityholder Warrants and pay the exercise price therefor at a time when it
may be disadvantageous for the holders to do so, (ii) to sell the Selling
Securityholder Warrants at the then current market price when they might
otherwise wish to hold the Selling Securityholder Warrants, or (iii) to accept
the nominal redemption price which, at the time the Selling Securityholder
Warrants are called for redemption, is likely to be substantially less than the
market value of the Selling Securityholder Warrants.
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OUTSTANDING OPTIONS AND WARRANTS
As of May 5, 1997, the Company had outstanding (i) 5,474,000 Class A
Warrants to purchase shares of Class A Common Stock (other than the Selling
Securityholder Warrants); (ii) an option granted to the underwriter in the
Offering to purchase an aggregate of 952,000 shares of Class A Common Stock,
assuming exercise of the Class A Warrants subject to such option; (iii) 530,000
shares of Class A Common Stock reserved for issuance upon exercise of options
under the Company's 1993 Stock Option Plan; (iv) options granted to six of the
Company's directors to purchase an aggregate of 220,000 shares of Class A Common
Stock, which options are subject to shareholder approval; and (v) warrants to
purchase 264,757 shares of Class A Common Stock (excluding warrants to purchase
additional shares of Class A Common Stock issuable in the event certain
anti-dilution provisions are deemed effective). Holders of such warrants and
options are likely to exercise them when, in all likelihood, the Company could
obtain additional capital on terms more favorable than those provided by such
warrants and options. Further, while these warrants and options are outstanding,
the Company's ability to obtain additional financing on favorable terms may be
adversely affected.
16
<PAGE>
USE OF PROCEEDS
The Company will not receive the proceeds from any sale of the Selling
Securityholder Securities. The proceeds to be received by the Company from the
exercise of the Selling Securityholder Warrants (assuming all of such warrants
are exercised), net of the commission to be paid to D.H. Blair Investment
Banking Corp. (equal to five percent of the gross amount of such proceeds), will
be $7,695,000. The Company intends to use such net proceeds for general
corporate purposes. Pending such use of the net proceeds, they will be invested
in short-term, interest-bearing securities or money market funds.
17
<PAGE>
DILUTION
The following discussion assumes that all of the Selling Securityholder
Warrants are exercised.
As of December 31, 1996, and giving retroactive effect to the completion of
the Offering and the application of the net proceeds therefrom and to the
$397,000 charge to operations to be incurred in the first quarter of 1997 in
connection with the repayment of the Bridge Notes, the Company had a net
tangible book value of approximately $14,710,000, or approximately $1.54 per
share of Class A Common Stock. Net tangible book value per share represents the
amount of the Company's total tangible assets, less liabilities, divided by the
number of shares of Class A Common Stock outstanding (excluding the Escrow
Shares). Giving retroactive effect to the assumed exercise of all of the Selling
Securityholder Warrants and the receipt of the net proceeds therefrom, the pro
forma net tangible book value at December 31, 1996 would have been $2.01 per
share, representing an immediate increase in net tangible book value of $.47 per
share to the present shareholders and an immediate dilution of $2.99 per share
to new investors from the exercise price of the Selling Securityholder Warrants
(the "Warrant Exercise Price"). Dilution per share represents the difference
between the Warrant Exercise Price and the pro forma net tangible book value
after the issuance of all shares of Class A Common Stock issuable upon exercise
of the Selling Securityholder Warrants (collectively, such issuances being
referred to as the "Stock Issuance").
The following table illustrates the per share dilution to be incurred by
public investors from the Warrant Exercise Price:
<TABLE>
<S> <C> <C>
Warrant Exercise Price per share of Class A Common Stock....................... $ 5.00
Net tangible book value before completion of the Stock Issuance.............. 1.54
Increase attributable to new investors....................................... 0.47
---
Pro forma net tangible book value after the Stock Issuance..................... 2.01
---------
Dilution of net tangible book value to new investors........................... $ 2.99
---------
</TABLE>
The following table sets forth the difference between the present
shareholders and the investors in the Stock Issuance with respect to the number
of shares of Class A Common Stock purchased from the Company, the total
consideration paid and the average price per share:
<TABLE>
<CAPTION>
AVERAGE
PERCENT OF PERCENT OF PRICE PER
NUMBER TOTAL AMOUNT TOTAL SHARE
--------------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current Shareholders............................... 9,542,500(1) 85% $ 40,182,000 83% $ 4.21
Investors in the Stock Issuance.................... 1,620,000 15% 8,100,000 17% 5.00
--------------- --- ------------- --- -----
11,162,500(1) 100% $ 48,282,000 100%
--------------- --- ------------- ---
--------------- --- ------------- ---
</TABLE>
- ------------------------
(1) Excludes the Escrow Shares. See "Risk Factors--Potential Charges to Income"
herein.
18
<PAGE>
SELLING SECURITYHOLDERS
An aggregate of up to 1,620,000 Class A Warrants and 1,620,000 shares of
Class A Common Stock issuable upon exercise of such Class A Warrants may be
offered for resale by the Selling Securityholders.
The following table sets forth certain information with respect to the
ownership and sale of Class A Warrants by each Selling Securityholder for whom
the Company is registering the Selling Securityholder Securities for resale to
the public. The Company will not receive any of the proceeds from the sale of
any securities by the Selling Securityholders. To the Company's knowledge, there
are no material relationships between any of the Selling Securityholders and the
Company, nor have any such material relationships existed within the past three
years.
<TABLE>
<CAPTION>
BENEFICIAL MAXIMUM NUMBER OF NUMBER OF CLASS A
OWNERSHIP OF CLASS CLASS A WARRANTS WARRANTS NOT
A WARRANTS PRIOR TO TO BE SOLD IN BEING SOLD IN
SELLING SECURITYHOLDERS THIS OFFERING THIS OFFERING THIS OFFERING
- ------------------------------------------------------- ------------------- ----------------- -----------------
<S> <C> <C> <C>
Wolfson Descendants' 1983 Trust........................ 300,600 270,000 30,600
Carmine Agnello........................................ 108,000 108,000 0
Masada I Limited Partnership........................... 67,500 67,500 0
My 7 Children, Inc..................................... 67,500 67,500 0
Donald G. Drapkin...................................... 60,750 60,750 0
Magid Abraham.......................................... 54,000 54,000 0
Samuel J. Holtzman..................................... 86,200 54,000 32,200
Leonard Keller and Julie Keller........................ 85,800 54,000 31,800
James Nigro............................................ 89,000 54,000 35,000
Vicki Tyler............................................ 54,000 54,000 0
Laurence Fink.......................................... 40,500 40,500 0
Robert and Ellen Kapito................................ 40,500 40,500 0
Tina Giragossian....................................... 33,750 33,750 0
Chana Sasha Foundation................................. 27,000 27,000 0
Arthur Inden and Sheila Inden.......................... 27,000 27,000 0
Joseph Lee............................................. 42,600 27,000 15,600
George Y. Motonaga..................................... 27,000 27,000 0
Nano-Cap Hyper Growth Partnership L.P.................. 35,000 27,000 8,000
Richard Nelson and Elaine Nelson....................... 84,400 27,000 57,400
Alan J. Rubin.......................................... 38,200 27,000 11,200
Jacob Safier........................................... 43,080 27,000 16,080
Wayne Saker............................................ 48,000 27,000 21,000
Mark Scheinfeld and Novy Scheinfeld.................... 29,000 27,000 2,000
Louise Schrier......................................... 27,000 27,000 0
George Spiegel, M.D.................................... 66,800 27,000 39,800
Ervin Tausky........................................... 61,800 27,000 34,800
Donald J. Vernine...................................... 28,400 27,000 1,400
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL MAXIMUM NUMBER OF NUMBER OF CLASS A
OWNERSHIP OF CLASS CLASS A WARRANTS WARRANTS NOT
A WARRANTS PRIOR TO TO BE SOLD IN BEING SOLD IN
SELLING SECURITYHOLDERS THIS OFFERING THIS OFFERING THIS OFFERING
- ------------------------------------------------------- ------------------- ----------------- -----------------
<S> <C> <C> <C>
Aaron Wolfson.......................................... 38,200 27,000 11,200
Abraham Wolfson........................................ 27,360 27,000 360
Harold Greenberg....................................... 23,050 20,250 2,800
Helene Jabara and Theodore R. Jabara Jr................ 20,250 20,250 0
Thomas E. Woodruff..................................... 20,250 20,250 0
David Fohrman.......................................... 24,700 13,500 11,200
Morton E. Goulder...................................... 13,500 13,500 0
Lawrence Helfant....................................... 13,500 13,500 0
Julian Herskowitz, M.D................................. 13,500 13,500 0
Dmitry Khasak.......................................... 13,500 13,500 0
Warren Miller and Jana Miller.......................... 13,500 13,500 0
Denis J. Rinello....................................... 25,000 13,500 11,500
Richard J. Stephenson.................................. 20,500 13,500 7,000
Michael Szikman and Francoise Szikman.................. 16,300 13,500 2,800
Kevin Waltzer and Lisa Waltzer......................... 73,500 13,500 60,000
Martin Wolmark and Riuka Wolmark....................... 13,500 13,500 0
Arnold D. Flam, DDS, Harvey Glicker, DDS
Profit Sharing Trust.................................. 6,750 6,750 0
Bruce A. Herman........................................ 8,150 6,750 1,400
Phillip J. Picchietti.................................. 6,750 6,750 0
</TABLE>
The following table sets forth certain information with respect to the
Selling Securityholders' ownership of the Company's Class A Common Stock and the
sale of the shares of Class A Common Stock issuable upon exercise of the Class A
Warrants.
<TABLE>
<CAPTION>
NUMBER OF
BENEFICIAL MAXIMUM NUMBER OF BENEFICIALLY-OWNED
OWNERSHIP OF SHARES SHARES OF CLASS A SHARES OF CLASS A
OF CLASS A COMMON COMMON STOCK TO COMMON STOCK
STOCK PRIOR TO THIS BE SOLD IN THIS NOT BEING SOLD
SELLING SECURITYHOLDERS OFFERING(1) OFFERING(2) IN THIS OFFERING
- ----------------------------------------------------- ------------------- ----------------- ------------------
<S> <C> <C> <C>
Wolfson Descendants' 1983 Trust...................... 123,700 270,000 123,700
Carmine Agnello...................................... 0 108,000 0
Masada I Limited Partnership......................... 2,500 67,500 2,500
My 7 Children, Inc................................... 0 67,500 0
Donald G. Drapkin.................................... 0 60,750 0
Magid Abraham........................................ 0 54,000 0
Samuel J. Holtzman................................... 74,400 54,000 74,400
Leonard Keller and Julie Keller...................... 92,000 54,000 92,000
James Nigro.......................................... 38,500 54,000 38,500
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
BENEFICIAL MAXIMUM NUMBER OF BENEFICIALLY-OWNED
OWNERSHIP OF SHARES SHARES OF CLASS A SHARES OF CLASS A
OF CLASS A COMMON COMMON STOCK TO COMMON STOCK
STOCK PRIOR TO THIS BE SOLD IN THIS NOT BEING SOLD
SELLING SECURITYHOLDERS OFFERING(1) OFFERING(2) IN THIS OFFERING
- ----------------------------------------------------- ------------------- ----------------- ------------------
<S> <C> <C> <C>
Vicki Tyler.......................................... 0 54,000 0
Laurence Fink........................................ 0 40,500 0
Robert and Ellen Kapito.............................. 0 40,500 0
Tina Giragossian..................................... 0 33,750 0
Chana Sasha Foundation............................... 0 27,000 0
Arthur Inden and Sheila Inden........................ 15,000 27,000 15,000
Joseph Lee........................................... 29,200 27,000 29,200
George Y. Motonaga................................... 5,000 27,000 5,000
Nano-Cap Hyper Growth Partnership L.P................ 17,000 27,000 17,000
Richard Nelson and Elaine Nelson..................... 62,400 27,000 62,400
Alan J. Rubin........................................ 22,400 27,000 22,400
Jacob Safier......................................... 39,734 27,000 39,734
Wayne Saker.......................................... 21,150 27,000 21,150
Mark Scheinfeld and Novy Scheinfeld.................. 2,000 27,000 2,000
Louise Schrier....................................... 20,000 27,000 20,000
George Spiegel, M.D.................................. 43,600 27,000 43,600
Ervin Tausky......................................... 53,100 27,000 53,100
Donald J. Vernine.................................... 6,800 27,000 6,800
Aaron Wolfson........................................ 25,200 27,000 25,200
Abraham Wolfson...................................... 360 27,000 360
Harold Greenberg..................................... 15,500 20,250 15,500
Helene Jabara and Theodore R. Jabara Jr.............. 0 20,250 0
Thomas E. Woodruff................................... 0 20,250 0
David Fohrman........................................ 12,400 13,500 12,400
Morton E. Goulder.................................... 12,550 13,500 12,550
Lawrence Helfant..................................... 0 13,500 0
Julian Herskowitz, M.D............................... 0 13,500 0
Dmitry Khasak........................................ 5,000 13,500 5,000
Warren Miller and Jana Miller........................ 0 13,500 0
Denis J. Rinello..................................... 11,500 13,500 11,500
Richard J. Stephenson................................ 30,400 13,500 30,400
Michael Szikman and Francoise Szikman................ 10,600 13,500 10,600
Kevin Waltzer and Lisa Waltzer....................... 79,000 13,500 79,000
Martin Wolmark and Riuka Wolmark..................... 0 13,500 0
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
BENEFICIAL MAXIMUM NUMBER OF BENEFICIALLY-OWNED
OWNERSHIP OF SHARES SHARES OF CLASS A SHARES OF CLASS A
OF CLASS A COMMON COMMON STOCK TO COMMON STOCK
STOCK PRIOR TO THIS BE SOLD IN THIS NOT BEING SOLD
SELLING SECURITYHOLDERS OFFERING(1) OFFERING(2) IN THIS OFFERING
- ----------------------------------------------------- ------------------- ----------------- ------------------
<S> <C> <C> <C>
Arnold D. Flam, DDS, Harvey Glicker, DDS
Profit Sharing Trust................................ 0 6,750 0
Bruce A. Herman...................................... 9,600 6,750 9,600
Phillip J. Picchietti................................ 0 6,750 0
</TABLE>
- ------------------------
(1) Includes shares of Class A Common Stock issuable upon exercise of Class A
Warrants, other than Selling Securityholder Warrants, held by each Selling
Securityholder. Shares underlying Selling Securityholder Warrants are not
included in the Selling Securityholders' beneficial ownership of shares of
Class A Common Stock because the Selling Securityholder Warrants are not
exercisable within 60 days of the date hereof. See "Plan of Distribution."
(2) In each case, assumes that the Selling Securityholders exercise all Selling
Securityholder Warrants beneficially owned by them and then dispose of the
shares of Class A Common Stock underlying such Selling Securityholder
Warrants.
22
<PAGE>
PLAN OF DISTRIBUTION
Subject to certain contractual restrictions as described below, the Selling
Securityholders may sell the Selling Securityholder Securities from time to time
in the over-the-counter market to purchasers in certain states or U.S.
territories, in transactions at prevailing market prices effected through
registered broker-dealers receiving only customary commissions in connection
with such sales. If sales of the Selling Securityholder Securities are to be
made otherwise than as described in the sentence above, a supplement to this
Prospectus will be filed to reflect changes in the description of the plan of
distribution as appropriate.
Each Selling Securityholder has agreed (i) not to sell, transfer or
otherwise dispose publicly of the Selling Securityholder Warrants except after
the time periods and in the percentage amounts set forth below, on a cumulative
basis, and (ii) not to exercise the Selling Securityholder Warrants until after
February 12, 1998. Purchasers of the Selling Securityholder Warrants will not be
subject to such restrictions.
<TABLE>
<CAPTION>
PERCENTAGE
ELIGIBLE FOR
LOCK-UP PERIOD RESALE
- ------------------------------------------------------------------------------------------------------ -------------
<S> <C>
Prior to May 19, 1997................................................................................. 0%
Between May 20, 1997 and July 18, 1997................................................................ 25%
Between July 19, 1997 and September 16, 1997.......................................................... 50%
Between September 17, 1997 and November 15, 1997...................................................... 75%
After November 15, 1997............................................................................... 100%
</TABLE>
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Selling Securityholder Warrants may not
simultaneously engage in market making activities with respect to any securities
of the Company during the applicable "cooling-off" period (at least one, and
possibly five, business days) prior to the commencement of such distribution.
Accordingly, in the event the Underwriter of the Company's initial public
offering or D.H. Blair & Co. Inc. ("Blair") is engaged in a distribution of the
Selling Securityholder Warrants, neither of such firms will be able to make a
market in the Company's securities during the applicable restrictive period.
However, neither the Underwriter nor Blair has agreed to nor are either of them
obliged to act as broker-dealer in the sale of the Selling Securityholder
Warrants and the Selling Securityholders may be required, and in the event Blair
is a market maker, will likely be required, to sell such securities through
another broker-dealer. In addition, each Selling Securityholder desiring to sell
Warrants will be subject to the applicable provisions of the Exchange Act and
the Securities Act and the rules and regulations thereunder, including, without
limitation, Regulation M under the Exchange Act, which provisions may limit the
timing of the purchases and sales of the Company's securities by such Selling
Securityholders.
The Selling Securityholders and broker-dealers, if any, acting in connection
with such sale might be deemed to be underwriters within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of the securities might be deemed to be underwriting discounts and
commissions under the Securities Act.
LEGAL MATTERS
The validity of the Class A Warrants and the shares of Class A Common Stock
underlying such Class A Warrants registered hereby will be passed upon for the
Company by O'Melveny & Myers LLP.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K, as amended, for the year ended December 31, 1996,
have been so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company............................................................... 3
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 17
Dilution.................................................................. 18
Selling Securityholders................................................... 19
Plan of Distribution...................................................... 23
Legal Matters............................................................. 23
Experts................................................................... 23
</TABLE>
AMERIGON
INCORPORATED
1,620,000 CLASS A
WARRANTS AND
1,620,000 SHARES OF
CLASS A COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the registration and sale of the Selling
Securityholder Securities are as follows:
<TABLE>
<S> <C>
SEC registration fee............................................ $2,454.55
NASDAQ fee...................................................... 7,500
Printing and engraving.......................................... 10,000
Accounting fees and expenses.................................... 5,000
Legal fees and expenses......................................... 20,000
Blue Sky filing fees and expenses............................... 35,000
Miscellaneous expenses.......................................... 15,045.45
---------
Total......................................................... $ 95,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Restated Articles of Incorporation and Bylaws of the Company, each as
amended to date, require the Company to indemnify its officers and directors to
the fullest extent permitted by Section 317 of the California General
Corporation Law and applicable law. Section 317 of the California General
Corporation Law makes provision for the indemnification of officers, directors
and other corporate agents in terms sufficiently broad to indemnify such
persons, under certain circumstances, for liabilities (including reimbursement
of expenses incurred) arising under the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
4.1 Form of Warrant Agreement among the Company, the Underwriter and U.S. Stock Transfer Corporation as
Warrant Agent(1)
4.2 Form of Warrant Certificate for Class A Warrant(1)
4.3 Form of Specimen Certificate of Company's Class A Common Stock(2)
4.4 Escrow Agreement among the Company, U.S. Stock Transfer Corporation and the shareholders named
therein(2)
5.1 Opinion of O'Melveny & Myers LLP regarding legality of securities being registered
23.1 Consent of Price Waterhouse LLP
23.2 Consent of O'Melveny & Myers LLP (contained in Exhibit 5.1)
24.1 Power of Attorney (contained on signature page hereof)
</TABLE>
- ------------------------
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-2, File No. 333-17401, and incorporated by reference.
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form SB-2, File No. 3-61702-LA, and incorporated by reference.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales ar being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose 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
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.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 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.
(5) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(6) That, for the purpose of determining any liability under the
Securities Act of 1933, each 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Monrovia, State of California, on May
7, 1997.
AMERIGON INCORPORATED
By: /s/ LON E. BELL
-----------------------------------------
Lon E. Bell, Ph.D.
CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chief Executive Officer
and Chairman of the
/s/ LON E. BELL Board (Principal
- ------------------------------ Executive Officer and May 7, 1997
Lon E. Bell, Ph.D. Acting Principal
Financial and Accounting
Officer)
Vice President of
* Corporate Development
- ------------------------------ and Planning, Secretary May 7, 1997
Joshua M. Newman and Director
*
- ------------------------------ Director May 7, 1997
Roy A. Anderson
*
- ------------------------------ Director May 7, 1997
Roger E. Batzel
*
- ------------------------------ Director May 7, 1997
John W. Clark
*
- ------------------------------ Director May 7, 1997
A. Stephens Hutchcraft, Jr.
*
- ------------------------------ Director May 7, 1997
Michael R. Peevey
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
- ------------------------------ Director , 1997
Norman R. Prouty, Jr.
- ------------------------------ Director , 1997
Richard A. Weisbart
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ LON E. BELL
--------------------------------------
Lon E. Bell, Ph.D.
ATTORNEY-IN FACT
</TABLE>
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF O'MELVENY & MYERS LLP]
May 7, 1997
020,727-004
Amerigon Incorporated
404 East Huntington Drive
Monrovia, California 91016-3600
Gentlemen:
At your request, we have examined the Registration Statement (File No.
333-25805) on Form S-3 (the "Registration Statement") filed by Amerigon
Incorporated, a California corporation (the "Company"), with the Securities and
Exchange Commission in connection with the registration under the Securities Act
of 1933, as amended, of 1,620,000 Class A Warrants (the "Warrants") of the
Company to be sold by certain shareholders of the Company (the "Selling
Securityholders") and the 1,620,000 shares of the Company's Class A Common Stock
("Class A Common Stock") issuable upon exercise of the Warrants. We have also
examined the (i) form of Subscription Agreement by and between the Company and
each of the Selling Securityholders and (ii) form of Warrant Agreement (the
"Warrant Agreement") by and among the Company, D.H. Blair Investment Banking
Corp., and U.S. Stock Transfer Corporation, as Warrant Agent.
We are familiar with the proceedings heretofore taken by the Company in
connection with the authorization, issuance and sale of the Warrants.
It is our opinion that:
1. The Warrants constitute legally valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms,
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors' rights
generally (including, without limitation, fraudulent conveyance laws) and by
general principles of equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or injunctive relief, regardless of
whether considered in a proceeding in equity or at law.
2. Upon payment of the exercise price for the shares of Class A Common
Stock to be issued upon exercise of the Warrants and the issuance and
delivery thereof in accordance with the Warrants and the Warrant Agreement,
and the countersigning of the certificate or certificates representing such
shares by a duly authorized signatory of the registrar for the Company's
Class A Common Stock, such shares will be validly issued, fully paid and
non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
March 14, 1997 appearing on page F-2 of Amerigon Incorporated's Annual Report on
Form 10-K for the year ended December 31, 1996. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Costa Mesa, California
May 6, 1997
