As filed with the Securities and Exchange Commission on March 31, 2000
Registration No. 333---------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
EARTHSHELL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 77-0322379
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
9020 Junction Drive
Annapolis Junction, Maryland 20701
(301) 957-1300
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(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
Simon K. Hodson
Chief Executive Officer
EARTHSHELL CORPORATION
9020 Junction Drive
Annapolis Junction, Maryland 20701
(301) 957-1300
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
With copies to:
Robert K. Montgomery, Esq.
Casey M. Nault, Esq.
Gibson, Dunn & Crutcher LLP
2029 Century Park East
Los Angeles, California 90067
(310) 552-8500
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, 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
============================ ========================= =========================
Title Proposed Maximum Amount of
of Securities Aggregate Registration
to be Registered Offering Price(1) Fee
- ---------------------------- ------------------------- -------------------------
- ---------------------------- ------------------------- -------------------------
Common Stock,
$.01 par value $23,593,750 $6,229
============================ ========================= =========================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933.
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
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The information in this prospectus is not complete and may be changed without
notice. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 31, 2000
PRELIMINARY PROSPECTUS
5,000,000 Shares
EARTHSHELL CORPORATION
Common Stock
This is a public offering of shares of common stock of EarthShell
Corporation. We may offer for sale and sell shares in varying amounts and at
prices and on terms to be determined at the time of sale. We will receive all of
the proceeds from our sale of our common stock.
Our common stock is listed on the NASDAQ National Market under the
symbol "ERTH." On March 28, 2000, the closing price of one share of our common
stock was $4.53.
Our principal executive offices are located at 9020 Junction Drive,
Annapolis Junction, Maryland 20701. Our telephone number is (301) 957-1300.
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INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS MARCH 31, 2000
<PAGE>
RISK FACTORS
BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE OF
VARIOUS RISKS ASSOCIATED WITH SUCH AN INVESTMENT, INCLUDING THOSE DESCRIBED
BELOW. YOU SHOULD CONSIDER CAREFULLY THESE RISK FACTORS TOGETHER WITH ALL OF THE
OTHER INFORMATION INCLUDED IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED
BY REFERENCE BEFORE YOU DECIDE TO PURCHASE OUR COMMON STOCK.
EARTHSHELL(R) IS A REGISTERED TRADEMARK OF EARTHSHELL
CORPORATION. ALIITE(R)IS A REGISTERED TRADEMARK OF E. KHASHOGGI INDUSTRIES, LLC.
BIG MAC(R)IS A REGISTERED TRADEMARK OF THE MCDONALD'S CORPORATION.
BECAUSE WE ARE A DEVELOPMENT STAGE COMPANY SUBJECT TO THE INHERENT RISKS OF
ESTABLISHING A NEW BUSINESS, WE CANNOT ASSURE YOU THAT OUR OPERATIONS WILL
ULTIMATELY BE SUCCESSFUL AND GENERATE A PROFIT IN THE FUTURE.
To date, we have primarily focused on developing products.
Because we are a development stage company with no commercial operating history,
we are subject to the inherent risks of establishing a new business enterprise.
Although we have built our first plant to produce Big Mac(R) sandwich containers
for sale to Perseco, the primary packaging purchaser for the McDonald's
Corporation, under a supply agreement between our licensee, Sweetheart Cup
Company, Inc. ("Sweetheart"), and Perseco, it has not yet achieved full-scale
commercial operations. In addition, although we have developed a number of
prototype products, including bowls, plates, cups and other hinged-lid
containers in addition to the Big Mac(R) container, these products remain
subject to further development and customer-specific modification. Among other
things, we must:
o fully develop these prototype and additional products;
o develop commercially viable manufacturing processes and capacity;
o attract, retain and motivate qualified personnel;
o achieve market acceptance of our products;
o respond to competitive developments; and
o develop systems to manage our growth effectively.
At this stage in our development, we cannot assure you that we
will achieve these goals and that our operations will be successful and generate
a profit in the future. As of March 31, 2000, we had not yet reported any
operating revenues.
WE EXPECT TO CONTINUE TO EXPERIENCE OPERATING LOSSES UNTIL WE ARE ABLE TO
COMMERCIALLY PRODUCE AND SELL OUR PRODUCTS IN QUANTITIES NECESSARY TO GENERATE A
PROFIT.
Sweetheart has entered into a supply agreement with Perseco.
We are currently in the midst of a product validation process with Perseco with
respect to the EarthShell Big Mac(R) sandwich container made of the new
composite material ("EarthShell Products") which is typical for all new product
introductions into the McDonald's system. We expect to continue to incur
substantial operating losses until this product validation process is complete
and until we can commercially produce our products in quantities necessary to
generate a profit and our products achieve broad market acceptance and
penetration. We experienced aggregate net losses of approximately $145 million
from our inception on November 1, 1992 through December 31, 1999. The success of
our future operations depends upon our ability and the ability of our licensees
and joint venture partners to commercialize various types of EarthShell
Products. Due to the uncertainties inherent in product development, market
acceptance of newly-developed products and our need to rely on our licensees and
joint venture partners to manufacture, distribute and sell EarthShell Products,
we are unable to predict when our products will be introduced nationally or when
we will receive significant revenues from any EarthShell Product other than the
EarthShell Big Mac(R) sandwich container, which we currently expect to be able
to distribute nationally during the year 2000.
WE MAY NEED TO OBTAIN ADDITIONAL FINANCING IN ORDER TO FUND OUR OPERATIONS UNTIL
EARTHSHELL PRODUCTS ACHIEVE COMMERCIAL VIABILITY AND GENERATE SIGNIFICANT
REVENUES, WHICH COULD POTENTIALLY BE DILUTIVE TO EXISTING STOCKHOLDERS.
Although we believe the proceeds we anticipate receiving from
this offering will provide EarthShell with the capital it needs for the
foreseeable future, we may need to seek additional third party financing in the
future to meet our operating and working capital needs and to fund the further
expansion of our business. We may not be able to obtain that capital or that
capital may not be available on terms satisfactory to us. If additional funds
are raised through the issuance of stock, dilution to existing stockholders may
result. If additional funds are raised through the incurrence of debt, these
debt instruments will likely contain restrictive financial, maintenance and
security covenants, which could restrict our ability to conduct our business as
we would prefer in the absence of those covenants.
WE MAY CONTINUE TO INCUR FINANCIAL LOSSES AS A RESULT OF FUNDING OBLIGATIONS
UNDER OUR AGREEMENTS WITH SOME OF OUR LICENSEES AND JOINT VENTURE PARTNERS, ONE
OF WHICH REQUIRES US TO FUND NEGATIVE CASH FLOWS UNTIL OUR MANUFACTURING
FACILITIES MEET EFFICIENCY CRITERIA SET FORTH IN THAT AGREEMENT.
We have refined our business strategy and are currently using
a joint venture structure in which our joint venture partners will generally
share equally in the cost of manufacturing facilities and will assume equally
the risks of any failure of the manufacturing facilities to meet targeted
efficiencies. The joint venture agreements we entered into with Finland-based
Huhtamaki Van Leer Oyj and with Prairie Packaging, Inc. contain this type of
risk-sharing arrangement. By contrast, our earlier agreement with Sweetheart is
structured so that we license or contribute manufacturing equipment to
Sweetheart and guarantee the performance of the equipment. This was done in an
effort to induce Sweetheart to begin to produce EarthShell Products during their
initial commercial introduction. In addition, under our operating agreement with
Sweetheart, we are obligated to fund negative operating cash flow until the date
upon which the turnkey manufacturing lines first meet specified efficiency
criteria. We are also obligated to fund additional costs incurred if the
equipment does not continue to satisfy these criteria for a two-year period
following that date. Our obligations to guarantee performance of these
manufacturing lines and to fund negative operating cash flows under this
agreement, and the possibility that we might ultimately fail to receive a return
on our investment in the equipment, may cause us to continue to incur losses for
a period of time and significantly impair our profitability.
THOUGH WE ARE PRODUCING A LIMITED AMOUNT OF OUR PRODUCTS ON AN INTEGRATED
PRODUCTION LINE ON A COMMERCIAL SCALE, WE ARE NOT YET SURE THAT THEY CAN BE
PRODUCED AT A COMPETITIVE COST. OUR FAILURE TO DO SO WOULD ADVERSELY AFFECT OUR
ABILITY TO COMPETE WITH CONVENTIONAL DISPOSABLE FOODSERVICE PACKAGERS.
Our success depends, in substantial part, on our ability to
produce EarthShell Products at a competitive cost. While we have been successful
at producing the EarthShell Big Mac(R) sandwich container on commercial scale
equipment, production volumes to date have been low relative to our purchase
order commitment. Until production volumes approach design capacity levels,
actual costs and profitability will not be certain. Further, all our other
products are currently in various stages of development and we have not yet
produced them on a fully integrated production line or on a commercial scale. We
have not, therefore, proven the actual cost of manufacturing EarthShell
Products, and we cannot assure you that we will be able to manufacture them at a
competitive cost. As licensees and joint ventures begin to commercially produce
EarthShell Products, they may encounter difficulties that cause costs of
production to exceed what we currently anticipate. Our failure to manufacture
EarthShell Products at commercially competitive costs would make it difficult to
compete with other foodservice disposables manufacturers.
BECAUSE WE ARE NOT YET PRODUCING OUR PRODUCTS ON A COMMERCIAL SCALE, WE DO NOT
KNOW WHETHER WE WILL BE ABLE TO CONSTRUCT SUFFICIENT MANUFACTURING CAPACITY THAT
WILL PERMIT A TIMELY ROLL-OUT AND MARKET ACCEPTANCE OF OUR PRODUCTS.
Because of our inexperience in manufacturing, we cannot assure
you that we will be successful in producing quantities of EarthShell Products
sufficient to permit a timely commercial roll-out of EarthShell Products.
Moreover, it may require greater time and effort than we anticipate to achieve
the production volumes and efficiencies required. We cannot assure you that we
will be successful in building sufficient manufacturing capacity on a timely
basis or that we will have adequate manufacturing equipment available when
necessary to permit a timely roll-out of EarthShell Products. Our failure to
produce sufficient quantities of EarthShell Products or construct adequate
manufacturing equipment that is properly working in an integrated manner when
necessary to permit a timely roll-out of EarthShell Products could adversely
affect market acceptance of EarthShell Products.
CONSUMERS MAY NOT PERCEIVE EARTHSHELL PRODUCTS AS BEING BETTER FOR THE
ENVIRONMENT THAN CONVENTIONAL DISPOSABLE FOODSERVICE CONTAINERS, WHICH WOULD
ADVERSELY AFFECT MARKET ACCEPTANCE OF OUR PRODUCTS.
Our success depends substantially on our ability to design,
develop and manufacture foodservice disposables that are not as harmful to the
environment as conventional disposable foodservice containers made from paper,
plastic and polystyrene. EarthShell has used a life cycle inventory methodology
in its environmental assessment of EarthShell Products and in the development of
associated environmental claims and we have received support for the EarthShell
concept from a number of environmental groups. Although we believe that
EarthShell Products offer a number of environmental advantages over conventional
packaging products, our products may also possess characteristics that consumers
or some environmental groups could perceive as negative for the environment. In
particular, EarthShell Products may result in more solid waste by weight and, in
a dry environment, by volume, and manufacturing and distributing them may
release greater amounts of some pollutants, and lesser amounts of other
pollutants, than occurs with conventional packaging. Whether, on balance,
EarthShell Products are better for the environment than conventional packaging
products is a somewhat subjective judgment and we believe that we have addressed
the major concerns of environmental groups with respect to the EarthShell Big
Mac(R) sandwich container and have goals in place to:
o reduce the weight of the container;
o use reclaimed starch from sources not currently being
reclaimed for commercial uses; and
o continue our efforts to reduce the environmental impact
of the EarthShell Big Mac(R) sandwich container.
Additionally, we prefer to use, whenever possible, recycled
or reclaimed raw materials that meet our processing and product performance
criteria. For example, we are currently seeking commercial sources of recycled,
FDA-compliant, post consumer waste ("PCW") fiber. Should FDA-compliant PCW fiber
not be available, we will use the next most suitable, environmental fiber source
and adjust any relevant environmental claims accordingly. We cannot assure you
that environmental groups, regulators, customers or consumers will agree that
EarthShell Products have an environmental advantage over conventional packaging.
Nor can we assure you that all future EarthShell Products, some of which may
require unique material formulations and coatings, will have, or that the market
will recognize them as having, a reduced environmental impact. If EarthShell
Products do not have, or are not recognized by others as having, a reduced
environmental impact, this could adversely affect market acceptance of these
products.
WE HAVE NOT YET FULLY EVALUATED ALL OF THE EARTHSHELL PRODUCTS AND IT IS
POSSIBLE THAT SOME OF THE PRODUCTS MAY NOT PERFORM AS WELL AS CONVENTIONAL
PACKAGING PRODUCTS, WHICH WOULD ADVERSELY AFFECT MARKET ACCEPTANCE OF THESE
PRODUCTS.
Although we believe that we can engineer EarthShell Products
to meet many of the critical performance requirements for specific applications,
individual products may not perform as well as conventional foodservice
disposables; for example, some consumers may prefer clear cups and clear lids on
take-home containers, which are not available with our foam technology. We are
still developing many of our EarthShell Products and we have not yet evaluated
the performance of all of them. If we fail to develop EarthShell Products that
perform comparably with conventional foodservice disposables, this could cause
consumers to prefer our competitors' products.
WE ARE EXPOSED TO RISKS OF DELAY THAT COULD DELAY THE INTRODUCTION OR MARKET
ACCEPTANCE OF ONE OR MORE OF OUR PRODUCTS AND OBLIGATE US FINANCIALLY UNDER ONE
OF OUR OPERATING AGREEMENTS.
There are substantial risks of delay, some of which are beyond
our control, associated with:
o developing our products and related manufacturing processes;
o market acceptance of and demand for our products; and
o developing sufficient production capacity to produce our
products.
For example, we have experienced significant delays in the
initial commercial production of the EarthShell Big Mac(R) sandwich container
for McDonald's. These delays resulted from, among other things, difficulties in
integrating manufacturing equipment and persistent, but typical, problems
debugging our manufacturing lines at Sweetheart's Owings Mills, Maryland
facility. The manufacturing process includes various stages of operation, such
as mixing, forming, trimming, sanding, coating, printing and stacking, all of
which are integrated and computer controlled along an assembly line. We believe
we will be successful in the debugging process going forward as we ramp up
production lines to produce at higher levels, but we cannot assure you that this
process will not result in further delays.
Future delays will obligate us financially under our operating
agreement with Sweetheart. In addition, we cannot assure you that we or our
licensees or joint venture partners will not experience similar or other
problems in start-up or ongoing operations. Delays in the introduction or market
acceptance of one or more EarthShell Products would delay our ability to realize
any revenues from sales of those products.
IF MCDONALD'S OR ANY OTHER OF OUR ANTICIPATED INITIAL PURCHASERS OF OUR PRODUCTS
DO NOT PURCHASE SIGNIFICANT QUANTITIES OF OUR PRODUCTS, IT COULD DELAY THE
INTRODUCTION AND MARKET ACCEPTANCE OF OUR PRODUCTS.
We intend McDonald's to be the first foodservice operator to
use EarthShell Products. If McDonald's or any other anticipated initial
purchasers of our products do not ultimately purchase significant quantities of
our products, it could delay the introduction and market acceptance of one or
more of our products and delay our ability to realize any revenues from sales of
those products. Our ongoing product validation process with respect to
EarthShell Products being developed for use in McDonald's restaurants does not
represent a binding development obligation on the part of McDonald's, and
McDonald's is therefore under no obligation to initiate or continue any
development relationship with us.
AN UNEXPECTED UNAVAILABILITY OF RAW MATERIALS USED TO MANUFACTURE OUR PRODUCTS,
INCREASES IN THE PRICE OF THE RAW MATERIALS, OR THE NECESSITY OF FINDING
ALTERNATIVE RAW MATERIALS TO USE IN OUR PRODUCTS COULD DELAY THE INTRODUCTION
AND MARKET ACCEPTANCE OF OUR PRODUCTS.
Although we believe that sufficient quantities of all raw
materials used in EarthShell Products are generally available, if any raw
materials become unavailable it could delay the commercial introduction and
hinder market acceptance of EarthShell Products. In addition, we and our
licensees may become significant consumers of certain key raw materials, such as
starch, and if such consumption is substantial in relation to the available
resources, raw material prices may increase which in turn may increase the cost
of EarthShell Products and impair our profitability. In addition, we may need to
seek alternative sources of raw materials or modify our product formulations if
the cost or availability of the raw materials that we currently use become
prohibitive.
WE CANNOT ASSURE YOU THAT OUR LICENSEES AND JOINT VENTURE PARTNERS WILL DEVOTE
SUFFICIENT RESOURCES TO OUR PRODUCTS OR SUCCESSFULLY MANUFACTURE, DISTRIBUTE OR
MARKET OUR PRODUCTS BECAUSE MANY OF THEM HAVE PRODUCTS THAT WILL COMPETE WITH
OUR PRODUCTS AND OUR LICENSEE MANUFACTURERS ARE NOT OBLIGATED TO ACHIEVE MINIMUM
SALES QUOTAS.
We have no experience in commercially manufacturing,
distributing and marketing foodservice disposables. We will depend on our
licensees and joint venture partners to manufacture and distribute EarthShell
Products. We have entered into agreements with Sweetheart, Finland-based
Huhtamaki Van Leer Oyj and Prairie Packaging, Inc., but these agreements permit
those licensees to manufacture and sell other foodservice disposable packaging
products that are not based on the EarthShell material. We intend to enter into
additional license agreements and joint venture relationships in the future.
Although we have produced EarthShell Products at a low volume level at
Sweetheart's facilities, none of our other licensees has commercially produced
or distributed any EarthShell Products. Our licensee manufacturers are not
obligated to achieve minimum sales quotas. Our licensees and joint venture
partners also manufacture paper or polystyrene packaging which will compete with
EarthShell Products. We cannot assure you that our licensees and joint venture
partners will devote sufficient resources or otherwise be able successfully to
manufacture, distribute or market EarthShell Products. Their failure to do so
would inhibit our ability to distribute our products into the marketplace.
OUR DEPENDENCE ON E. KHASHOGGI INDUSTRIES, LLC ("EKI") FOR THE TECHNOLOGY
NECESSARY TO MANUFACTURE EARTHSHELL PRODUCTS AND FOR CERTAIN TECHNICAL PERSONNEL
MEANS THAT A DISRUPTION IN THE OPERATIONS OR FINANCIAL CONDITION OF EKI EXPOSES
US TO RISKS THAT EKI MAY NOT BE ABLE TO PERFORM SERVICES THAT WE REQUIRE.
We do not own the technology necessary to manufacture
EarthShell Products and we are dependent upon our world-wide, royalty-free,
exclusive license pursuant to an Amended and Restated License Agreement with EKI
(the "License Agreement") to use that technology. We can only use the technology
to develop, manufacture and sell specified foodservice disposables for use in
the foodservice industry and we have no right to exploit opportunities to apply
this technology or improve it outside this field of use. EKI may cancel the
license if we are in breach of any material obligations under the License
Agreement and do not cure the breach within a specified period. If EKI were to
file for or be declared bankrupt, we would likely be able to retain our rights
under the License Agreement with respect to U.S. patents. However, it is
possible that EKI could take steps to terminate our rights under the License
Agreement with respect to international patents.
We share one key executive with EKI (Simon Hodson). EKI also
provides significant scientific and technical services to us pursuant to an
Amended and Restated Technical Services and Sublease Agreement (the "Technical
Services Agreement"), which runs through December 31, 2002, to support the
continued design and development of EarthShell Products. We also depend on EKI
to further develop and refine the basic technology used in EarthShell Products,
although EKI is not obligated to complete any further development or refinement
under the terms of the License Agreement. If anything disrupted the operations
or financial condition of EKI, it would expose us to the risk that EKI might
fail to perform services that we require.
BECAUSE ONE MAJORITY SHAREHOLDER CONTROLS BOTH EKI AND EARTHSHELL, CONFLICTS MAY
ARISE BETWEEN THE COMPANIES WITH RESPECT TO CORPORATE OPPORTUNITIES AND WE
CANNOT ASSURE YOU THAT THESE CONFLICTS WILL ALWAYS BE RESOLVED IN EARTHSHELL'S
FAVOR.
Mr. Essam Khashoggi is the indirect majority equity owner of
and therefore controls both EarthShell and EKI, which means that Mr. Khashoggi
owns a majority interest in both EarthShell and EKI through other entities which
he controls. Mr. Khashoggi is the beneficial owner of approximately 70% of the
outstanding shares of EarthShell's common stock directly or indirectly through
various entities that he controls, including EKI. As a result, Mr. Khashoggi is
able to:
o elect all of the directors of EarthShell;
o control the direction and policies of EarthShell;
o determine the outcome of corporate transactions requiring the
approval of EarthShell's stockholders, including mergers,
consolidations and the sale of all or substantially all of the
assets of EarthShell; and
o prevent or cause a change in control of EarthShell.
Mr. Khashoggi also has the power to control our relationship
with EKI, which he also controls, and upon which we depend for, among other
things, research and development. We cannot assure you that we will always agree
with Mr. Khashoggi's decisions regarding our business.
Conflicts may arise between EKI and EarthShell, particularly
with respect to corporate opportunities, including:
o developing new markets and uses for products based on the
EarthShell Products;
o allocating research and development resources;
o the time that the common directors and officers devote to
EarthShell and EKI; and
o how each of EKI and EarthShell performs its obligations under
the License Agreement, the Technical Services Agreement and the
Amended and Restated Agreement for the Allocation of Patent Costs
(the "Patent Allocation Agreement").
Under the Patent Allocation Agreement, we are obligated to pay
or reimburse EKI for all costs and expenses associated with filing, prosecuting,
acquiring and maintaining some patents or patent applications. EKI will control
the costs and expenses incurred in connection with these patents and patent
applications. Any patents granted will be the property of EKI, and EKI may
obtain a benefit from those patents other than under the License Agreement,
including using and/or licensing the patents and related technology in a manner
or for uses unrelated to the license which EKI granted to EarthShell in the
foodservice disposables field of use. We cannot assure that conflicts of
interest that arise between EKI and EarthShell will always be resolved in
EarthShell's favor.
DESPITE OUR ATTEMPTS TO PROTECT OUR PATENTED TECHNOLOGY, IT IS POSSIBLE THAT
THIRD PARTIES WILL INFRINGE OUR PATENTS, THAT NEW PRODUCTS THAT WE DEVELOP WILL
NOT BE COVERED BY OUR EXISTING PATENTS OR THAT WE COULD SUFFER AN ADVERSE
DETERMINATION IN A PATENT INFRINGEMENT PROCEEDING, ANY AND ALL OF WHICH COULD
ALLOW OUR COMPETITORS TO DUPLICATE OUR PRODUCTS WITHOUT HAVING HAD TO INCUR THE
RESEARCH AND DEVELOPMENT COSTS WE HAVE INCURRED AND THEREFORE ALLOW THEM TO
PRODUCE AND MARKET THOSE PRODUCTS MORE PROFITABLY THAN EARTHSHELL.
Our ability to compete effectively with conventional packaging
will depend, in part, on our ability to protect our proprietary rights to the
licensed technology. Although EKI and EarthShell endeavor to protect the
licensed technology through, among other things, U.S. and foreign patents, the
duration of these patents is limited and we cannot assure you that the patents
and patent applications licensed to us are sufficient to protect our technology.
We also cannot assure you that any patent that EKI obtains and licenses to us
will be held valid, or that others will not circumvent or infringe those
patents. We also rely on trade secrets and proprietary know-how that we try to
protect in part by confidentiality agreements with our licensee manufacturers,
proposed joint venture partners, employees and consultants. These agreements
have limited terms and we cannot assure you that these agreements will not be
breached, that we will have adequate remedies for any breach or that our
competitors will not learn our trade secrets or independently develop them.
It is necessary for us to litigate from time to time to
enforce patents issued or licensed to us, to protect our trade secrets or
know-how and to determine the enforceability, scope and validity of the
proprietary rights of others. As an example of this type of litigation, on
August 2, 1999, Novamont S.p.A., an Italian company specializing in the
manufacture of a biodegradable plastic resin and products, filed a complaint in
the United States District Court for the Northern District of Illinois alleging
infringement of three patents. We have analyzed all three patents and believe we
have strong meritorious defenses and have been vigorously defending the lawsuit.
Although we know of no other alleged or actual infringement by EarthShell or EKI
of third party patents, it is always possible that a third party could assert
infringement. Patent and patent applications on formulations of the new
composite material are based in part on specific proportional mixtures of the
components of the material. We continue to test and modify the components and
their proportional mixtures to balance environmental, economic and performance
concerns. We cannot assure you that the mixture that we ultimately determine to
be optimal will be protected under our patents or that it will not be subject to
a patent held by others. If our patents do not protect the optimal mixture, or
if the mixture is subject to a patent held by a third party and the third party
asserts patent infringement, this would restrict our ability to produce and
market our products.
We believe that we own or have the rights to use all of the
technology that we expect to incorporate into EarthShell Products, but an
adverse determination in litigation or infringement proceedings to which we are
or may become a party could subject us to significant liabilities and costs to
third parties or require us to seek licenses from third parties. Although patent
and intellectual property disputes are often settled through licensing or
similar arrangements, costs associated with those arrangements could be
substantial and could include ongoing royalties. Furthermore, we cannot assure
you that we could obtain the necessary licenses on satisfactory terms or at all.
We could incur substantial costs attempting to enforce our licensed patents
against third party infringement, or the unauthorized use of our trade secrets
and proprietary know-how or in defending ourselves against claims of
infringement by others. Accordingly, if we suffered an adverse determination in
a judicial or administrative proceeding or failed to obtain necessary licenses,
it would prevent us from manufacturing or licensing others to manufacture some
of our products.
ESTABLISHED COMPETITORS IN THE FOODSERVICE DISPOSABLES INDUSTRY COULD IMPROVE
THE ABILITY TO RECYCLE THEIR EXISTING PRODUCTS OR DEVELOP NEW ENVIRONMENTALLY
PREFERABLE, DISPOSABLE FOODSERVICE CONTAINERS WHICH COULD RENDER OUR TECHNOLOGY
OBSOLETE AND COULD NEGATIVELY IMPACT OUR ABILITY TO COMPETE.
Competition among existing food and beverage container
manufacturers in the foodservice industry is intense. At present, most of our
competitors have substantially greater financial and marketing resources at
their disposal than we do, and many have well-established supply, production and
distribution relationships and channels. Companies producing products utilizing
competitive materials such as paper, plastic or polystyrene may reduce their
prices or engage in advertising or marketing campaigns designed to protect their
respective market shares and impede market acceptance of EarthShell Products.
Recently, a number of paper and plastic disposable packaging manufacturers and
converters have tried to increase recycling of their products. Increased
recycling of paper and plastic products could reduce their negative
environmental impact, which is one significant basis upon which we intend to
compete. A number of companies have introduced starch-based materials or are
attempting to develop plastics that they claim are biodegradable and other
specialty polymers as potential environmentally superior packaging alternatives.
We expect that many existing packaging manufacturers may actively seek
competitive alternatives to our products and processes. The development of
competitive, environmentally preferable, disposable foodservice containers,
whether or not based on our products and technology, could render our technology
obsolete and could impair our ability to compete.
OUR LOSS OF KEY TECHNICAL AND MANAGEMENT PERSONNEL COULD BE HIGHLY DISRUPTIVE TO
OUR BUSINESS OPERATIONS.
At present we depend upon obtaining and retaining the services
of qualified scientific and technical personnel, many of whom are employees of
EKI and whose services are provided pursuant to the Technical Services
Agreement. We are highly dependent on our Vice Chairman of the Board, President
and Chief Executive Officer, Simon K. Hodson, who has been involved with
EarthShell since its inception. We do not hold "key man" insurance on any of our
personnel. If we lost the services of any of our key employees, it could be
highly disruptive to our business operations.
IF THE U.S. FOOD AND DRUG ADMINISTRATION (THE "FDA") WERE TO FIND THAT OUR
PRODUCTS DID NOT COMPLY WITH FDA REGULATIONS, THEY COULD ASK US TO VOLUNTARILY
WITHDRAW OUR PRODUCTS FROM THE MARKETPLACE OR SEEK LEGAL REMEDIES AND SANCTIONS
TO FORCE US TO WITHDRAW OUR PRODUCTS, EITHER OF WHICH WOULD PREVENT US FROM
REALIZING FUTURE REVENUES FROM THOSE PRODUCTS.
The FDA regulates the manufacture, sale and use of EarthShell
Products. The FDA's regulations are concerned with substances used in food
packaging materials, not with specific finished food packaging products. Thus,
food or beverage containers will comply with FDA regulations if the components
used in the food and beverage containers:
o are approved by the FDA as indirect food additives for their
intended uses and comply with the applicable FDA indirect
food additive regulations; or
o are generally recognized as safe for their intended uses and are
of suitable purity for those intended uses.
Each of the components of the EarthShell Big Mac(R) sandwich
container and all other current prototype products is either approved by the FDA
as an indirect food additive for its intended use, codified in the FDA's
regulations as generally recognized as safe for its intended use, or a commonly
recognized food ingredient that we and our consultants regard as generally
recognized as safe for its intended use. However, we have not asked the FDA
whether it concurs with our determination. We intend to ensure that the raw
materials used in the EarthShell Big Mac(R) sandwich container are of suitable
purity for their intended uses by specifying standards to be met by suppliers of
raw materials and by material and product testing. The FDA does not require that
manufacturers of EarthShell Products seek FDA concurrence that components are
generally recognized as safe for their intended uses or that the raw materials
are of suitable purity for their intended uses. As a result, we believe that the
EarthShell Big Mac(R) sandwich container and other current prototype EarthShell
Products will comply with all requirements of the FDA and do not require FDA
approval. We cannot assure you, however, that the FDA would agree with these
conclusions.
If the FDA were to disagree with our determinations with
respect to the EarthShell sandwich container or future products, the FDA could
ask us to voluntarily withdraw the products from the marketplace. They could
also begin legal action to remove the products from the marketplace and, if
appropriate, pursue additional sanctions against us and our management. Such
actions by the FDA would prevent us from realizing future revenues from those
products.
FLUCTUATIONS OR DECREASES IN THE TRADING PRICE OF OUR COMMON STOCK MAY ADVERSELY
AFFECT THE LIQUIDITY OF THE STOCK'S TRADING MARKET AND OUR ABILITY TO RAISE
CAPITAL THROUGH FUTURE OFFERINGS OF CAPITAL STOCK.
The stock market from time to time experiences extreme price
and volume fluctuations which are often unrelated to the operating performance
of particular companies. Since our initial public offering in March 1998, the
market price of our common stock has been volatile, and it may continue to be
volatile in the future. Factors that may significantly impact the market price
and marketability of our common stock include, but are not limited to:
o insufficient cash to finance our business;
o changes in our technological innovations or new commercial
products or those of our competitors;
o unacceptable economics of manufacturing our products;
o inability to license the technology to third parties;
o development or disputes concerning proprietary rights;
o failure to meet analysts' earnings estimates;
o loss of key management;
o adverse regulatory actions or decisions;
o general economic and other external factors; and
o period-to-period fluctuations in our financial results.
Fluctuations or decreases in the trading price of our common
stock may adversely affect the liquidity of the stock's trading market and our
ability to raise capital through future offerings of capital stock.
OVER 70 MILLION, OR MORE THAN 70%, OF OUR TOTAL OUTSTANDING SHARES MAY BE SOLD
INTO THE MARKET IN THE NEAR FUTURE. THIS COULD CAUSE THE MARKET PRICE OF OUR
COMMON STOCK TO DROP SIGNIFICANTLY, EVEN IF OUR BUSINESS IS DOING WELL.
Approximately 70 million of EarthShell's 100,045,166
outstanding shares of common stock are "restricted securities" within the
meaning of Rule 144 ("Rule 144") promulgated under the Securities Act of 1933.
This means that they may not be sold without first being registered under the
Securities Act unless an exemption from registration is available, including the
exemptions contained in Rule 144. These approximately 70 million shares, which
are held by current stockholders, are eligible for sale pursuant to Rule 144,
subject to the volume and manner of sale limitations under Rule 144. In
addition, we granted "demand" and "piggy-back" registration rights to all of our
stockholders who owned our preferred stock and common stock before our initial
public offering, including EKI. We cannot predict the effect, if any, that
public sales of these shares or the availability of shares for sale will have on
the market price of our common stock from time to time. Nevertheless, if our
stockholders, and particularly our directors and officers, sell substantial
amounts of our common stock in the public market, or if the public perceives
that such sales could occur, this could have an adverse impact on the market
price of our common stock, even if there is no relationship between such sales
and the performance of our business.
OUR CHARTER DOCUMENTS AND DELAWARE LAW INCLUDE PROVISIONS THAT MAY DISCOURAGE A
POTENTIAL TAKEOVER, EVEN IF IT WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.
Our Certificate of Incorporation and Bylaws and the Delaware
General Corporation Law include provisions that may discourage persons from
pursuing a non-negotiated takeover of EarthShell and prevent changes of control
under some circumstances, even if doing so would be beneficial to our
stockholders.
OUR PROJECTED INTERNATIONAL REVENUES ARE SUBJECT TO RISKS INHERENT IN
INTERNATIONAL BUSINESS ACTIVITIES.
We expect sales of our products and services in foreign
countries to account for a material portion of our revenues. These sales are
subject to risks inherent in international business activities, including: o any
adverse change in the political or economic environments in these countries; o
economic instability; o any adverse change in tax, tariff and trade or other
regulations; o the absence or significant lack of legal protection for
intellectual property rights; o exposure to exchange rate risk for revenues
which are denominated in currencies other than U.S. dollars; and o difficulties
in managing joint venture businesses spread over various jurisdictions.
Our revenues could be substantially less than we expect if
these risks affect our ability to successfully sell our products in the
international market.
<PAGE>
USE OF PROCEEDS
We will receive all of the net proceeds from the sale of our
common stock registered by the registration statement of which this prospectus
is a part. The proceeds we receive will be used for general corporate purposes
or as may be stated in a supplement or supplements to this prospectus.
PLAN OF DISTRIBUTION
Our common stock may be offered for sale and sold in one or
more transactions, including block transactions, at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at prices determined on a negotiated
or competitive bid basis. Shares of common stock may be sold directly, through
agents designated from time to time, or by such other means as may be specified
in the supplement to this prospectus. Participating agents or broker-dealers in
the distribution of any of the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended. Any
discount or commission received by any underwriter and any participating agents
or broker-dealers, and any profit on the resale of shares of common stock
purchased by any of them may be deemed to be underwriting discounts or
commissions under the Securities Act.
Shares of our common stock may be sold through a broker-dealer
acting as agent or broker or to a broker-dealer acting as principal. In the
latter case, the broker-dealer may then resell such shares of common stock to
the public at varying prices to be determined by the broker-dealer at the time
of resale.
To the extent required, the number of shares of common stock
to be sold, information relating to the underwriters, the purchase price, the
public offering price, if applicable, the name of any underwriter, agent or
broker-dealer, and any applicable commissions, discounts or other items
constituting compensation to such underwriters, agents or broker-dealers with
respect to a particular offering will be set forth in an accompanying supplement
to this prospectus.
If underwriters are used in a sale, shares of common stock
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Shares of common stock may be offered to the public either
through underwriting syndicates represented by one or more managing underwriters
or directly by one or more firms acting as underwriters. The underwriter or
underwriters with respect to a particular underwritten offering of shares of
common stock will be named in the supplement to this prospectus relating to that
offering and, if an underwriting syndicate is used, the managing underwriter or
underwriters will be stated on the cover of the prospectus supplement.
Under the securities laws of some states, the shares of common
stock registered by the registration statement may be sold in those states only
through registered or licensed brokers or dealers.
Any person participating in the distribution of common stock
registered under the registration statement that includes this prospectus will
be subject to applicable provisions of the Securities Exchange Act of 1934, as
amended, and the applicable SEC rules and regulations, including, among others,
Regulation M, which may limit the timing of purchases and sales of any of our
common stock by any such person. Furthermore, Regulation M may restrict the
ability of any person engaged in the distribution of our common stock to engage
in market-making activities with respect to our common stock. These restrictions
may affect the marketability of our common stock and the ability of any person
or entity to engage in market-making activities with respect to our common
stock.
Upon sale under the registration statement that includes this
prospectus, the shares of common stock registered by the registration statement
will be freely tradable in the hands of persons other than our affiliates.
<PAGE>
LEGAL MATTERS
Gibson, Dunn & Crutcher LLP, Los Angeles, California, will
pass upon the legality of the common stock being offered by this prospectus for
EarthShell.
EXPERTS
The financial statements incorporated in this prospectus by
reference from EarthShell's Annual Report on Form 10-K for the year ended
December 31, 1999 have been audited by Deloitte & Touche llp, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, that involve risks and uncertainties. Forward-looking statements can
typically be identified by the use of forward-looking words, such as "may,"
"will," "could," "project," "believe," anticipate," "expect," "estimate,"
"continue," "potential," "plan," "forecasts," and the like. These statements
appear in a number of places in this prospectus and include statements regarding
our intentions, plans, strategies, beliefs or current expectations and those of
our directors or our officers with respect to, among other things: o our
financial prospects; o our financing plans; o trends affecting our financial
condition or operating results; o our strategies for growth, operations, and
product development and commercialization; and o conditions or trends in or
factors affecting the foodservice disposables industry.
Forward-looking statements do not guarantee future performance
and involve risks and uncertainties that could cause actual results to differ
materially from those anticipated. The information contained in this prospectus,
or incorporated by reference, identifies important factors that could cause such
differences.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
Registration Statement on Form S-3 under the Securities Act with respect to the
common stock offered by this prospectus. This prospectus, which constitutes part
of the Registration Statement, omits some of the information contained in the
Registration Statement and the exhibits and schedules thereto on file with the
SEC pursuant to the Securities Act of 1933 and the rules and regulations of the
SEC. We also file reports, proxy statements and other information with the SEC
under the Securities Exchange Act of 1934.
You may read and copy the Registration Statement, including
exhibits and schedules thereto, as well as our reports, proxy statements and
other information that we file, at the Public Reference Room maintained by the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for more information about the public reference rooms. The SEC
also maintains a web site that contains reports, proxy and information
statements and other information filed electronically with the SEC at
HTTP://WWW.SEC.GOV. Our web site is located at HTTP://WWW.EARTHSHELL.COM.
Our statements in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete. For a
complete understanding of any such contract or other document, you should read
that contract or document, which has been filed as an exhibit to the
Registration Statement.
You should rely on the information provided in this
prospectus. We have not authorized anyone else to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume the information in this
prospectus is accurate as of any date other than the date on the front cover of
this prospectus.
INFORMATION INCORPORATED BY REFERENCE
Our annual report on Form 10-K for the fiscal year ended
December 31, 1999, which has been filed with the SEC, is incorporated by
reference into this prospectus.
All documents that we file with the SEC pursuant to Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
of this prospectus and before the termination of the offering of the shares of
common stock shall be deemed incorporated by reference into this prospectus and
to be a part of this prospectus from the respective filing dates of such
documents.
We will provide without charge to each person to whom a copy
of this prospectus is delivered, upon such person's written or oral request, a
copy of any and all of the information incorporated by reference in this
prospectus, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this prospectus
incorporates. Requests should be directed to Investor Relations, 800 Miramonte
Drive, Santa Barbara, California, 93109.
Any statement contained in a document incorporated or deemed
to be incorporated by reference in this prospectus shall be deemed modified,
superseded or replaced for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any subsequently filed document
that also is or is deemed to be incorporated by reference in this prospectus
modifies, supersedes or replaces such statement. Any statement so modified,
superseded or replaced shall not be deemed, except as so modified, superseded or
replaced, to constitute a part of this prospectus.
<PAGE>
- --------------------------------------------------------------------------------
5,000,000 Shares
EarthShell Corporation
Common Stock
______________
PRELIMINARY PROSPECTUS
MARCH 31, 2000
______________
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
YOU SHOULD NOT RELY UPON SUCH INFORMATION OR REPRESENTATIONS AS HAVING BEEN
AUTHORIZED BY EARTHSHELL OR THE SELLING STOCKHOLDER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT RELATES
IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS.
TABLE OF CONTENTS
PAGE
RISK FACTORS 4
USE OF PROCEEDS 13
PLAN OF DISTRIBUTION 13
LEGAL MATTERS 14
EXPERTS 14
WHERE YOU CAN FIND MORE INFORMATION 14
INFORMATION INCORPORATED BY REFERENCE 14
UNTIL ______, 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by
EarthShell in connection with the offering of our common stock being registered
hereby. All amounts are estimated except the SEC registration fee:
EXPENSES AMOUNT
SEC Registration Fee................................... $6,229
NASDAQ National Market Fees............................ $
Legal Fees and Expenses................................ $
Accounting Fees and Expenses........................... $
Miscellaneous Expenses................................. $
TOTAL................................ $
- -------------------
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law (the
"DGCL") makes provision for the indemnification of officers and directors in
terms sufficiently broad to indemnify officers and directors of EarthShell
Corporation (the "Company") under certain circumstances from liabilities
(including reimbursement for expenses incurred) arising under the Securities Act
of 1933. The Company's Charter and Bylaws provide, in effect, that, to the
fullest extent and under the circumstances permitted by Section 145 of the DGCL,
the Company will indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he is a director or officer of the Company or is or was serving
at the request of the Company as a director or officer of another corporation or
enterprise. The Company may, in its discretion, similarly indemnify its
employees and agents. The Charter relieves its directors from monetary damages
to the Company or its stockholders for breach of such director's fiduciary duty
as directors to the fullest extent permitted by the DGCL. Under Section
102(b)(7) of the DGCL, a corporation may relieve its directors from personal
liability to such corporation or its stockholders for monetary damages for any
breach of their fiduciary duty as directors except (i) for a breach of the duty
of loyalty, (ii) for failure to act in good faith, (iii) for intentional
misconduct or knowing violation of law, (iv) for willful or negligent violation
of certain provisions in the DGCL imposing certain requirements with respect to
stock repurchases, redemption and dividends, or (v) for any transactions from
which the director derived an improper personal benefit. Depending upon the
character of the proceeding, under Delaware law, the Company may indemnify
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with any action,
suit or proceeding if the person indemnified acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interest of
the Company, and, with respect to any criminal action or proceeding, had no
cause to believe his or her conduct was unlawful. To the extent that a director
or officer of the Company has been successful in the defense of any action, suit
or proceeding referred to above, the Company will be obligated to indemnify him
or her against expenses (including attorneys' fees) actually and reasonably
incurred in connection therewith.
ITEM 16. EXHIBITS.
See Exhibit Index attached hereto following the signature
pages and incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(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 end 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 a 20% 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;
provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished to
the Securities and Exchange Commission by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in 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 the time shall be deemed to be the
initial bona fide offering thereof; and
(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) To deliver or cause to be delivered with the prospectus,
to each person to whom the prospectus is sent or given, the latest annual report
to security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
(6) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Annapolis Junction, State of Maryland, on March
29, 2000.
EARTHSHELL CORPORATION
By: /S/ SIMON K. HODSON
-------------------------------------
Simon K. Hodson
Vice Chairman of the Board,
Chief Executive Officer and President
<PAGE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints Simon K. Hodson and D.
Scott Houston his or her true and lawful attorneys-in-fact and agents, each with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
to this Registration Statement, and to file the same, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
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 TITLE DATE
<S> <C> <C>
/S/ ESSAM KHASHOGGI Chairman of the Board March 29, 2000
- ------------------------------------
Essam Khashoggi
/S/ SIMON K. HODSON Vice Chairman of the Board and March 29, 2000
- ------------------------------------ Chief Executive Officer
Simon K. Hodson (Principal Executive Officer)
/S/ D. SCOTT HOUSTON Chief Financial Officer and Secretary March 29, 2000
- ------------------------------------ (Principal Financial and Accounting Officer)
D. Scott Houston
/S/ JOHN DAOUD Director March 29, 2000
- ------------------------------------
John Daoud
/S/ ELLIS B. JONES Director March 29, 2000
- ------------------------------------
Ellis B. Jones
/S/ LAYLA KHASHOGGI Director March 29, 2000
- ------------------------------------
Layla Khashoggi
/S/ WILLIAM A. MARQUARD Director March 29, 2000
- ------------------------------------
William A. Marquard
/S/ HOWARD J. MARSH Director March 29, 2000
- ------------------------------------
Howard J. Marsh
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE+
------ ----------- ----
<S> <C>
4.1 Specimen certificate of Common Stock.*
5.1 Opinion and consent of Gibson, Dunn & Crutcher LLP.**
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).**
23.3 Consent of CalRecovery, Inc.
24.1 Power of Attorney (included as part of signature page).
</TABLE>
- ---------------------
* Previously filed, as an exhibit to the Company's Registration Statement
on Form S-1 and amendments thereto (Registration No. 333-13287), and
incorporated herein by reference.
** To be filed by amendment.
+ Only contained in manually executed version.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
EarthShell Corporation on Form S-3 of our report dated March 15, 2000, appearing
in the Annual Report on Form 10-K of EarthShell Corporation for the year ended
December 31, 1999 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Baltimore, Maryland
March 27, 2000
EXHIBIT 23.3
March 31, 2000
Mr. George M Savage
Executive Vice President
CalRecovery, Inc.
1850 Gateway Blvd., Suit 1060
Concord, CA 94520
Dear George:
As we discussed, EarthShell Corporation (the "Company") intends to file a
Registration Statement with the Securities and Exchange Commission, which
references certain information contained in the studies you have performed and
identifies the studies as the source of such information. Following is the
excerpt from the Registration Statement regarding the studies:
"According to research on the performance of various formulations of
the EarthShell sandwich container which we commissioned and which was
performed by CalRecovery Inc., an international waste management
consulting company, when crushed or broken, such EarthShell sandwich
containers were shown to be biodegradable in a composting environment
and observed physically to dissolve in water. As a result, we believe
that EarthShell Products substantially reduce the risk to wildlife when
compared to polystyrene foodservice disposables and may help mitigate
litter created when consumers improperly dispose of them. In addition,
EarthShell Products can be composted and, as a result, they can offer
an environmentally acceptable disposal alternative not available with
polystyrene packaging."
Please consent to the Company's use of this information and its identification
of the studies in the Registration Statement by executing and dating this letter
in the space provided below.
Sincerely,
Teasha Blackman
Executive Assistant
Agreed to and consented to this _____ day of February, 2000.
/s/ GEORGE M. SAVAGE
- --------------------
George M. Savage
