As
Filed with the Securities and Exchange Commission on June 17,
2005.
REGISTRATION
NO. 333-__________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
______________________________________
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
|
FUELCELL
ENERGY, INC.
|
|
(Exact
Name of Registrant as Specified in Its Charter)
|
|
Delaware
|
|
(State
or Other Jurisdiction of Incorporation or
Organization)
|
|
06-0853042
|
|
(I.R.S.
Employer Identification Number)
|
|
3
Great Pasture Road
Danbury,
Connecticut 06813
(203)
825-6000
|
|
(Address,
Including Zip Code, and Telephone Number, Including Area
Code,
of
Registrant’s Principal Executive Offices)
|
|
Jerry
D. Leitman
President
FuelCell
Energy, Inc.
3
Great Pasture Road
Danbury,
Connecticut 06813
(203)
825-6000
|
|
(Name,
Address, Including Zip Code, and Telephone Number, Including Area
Code, of
Agent for Service)
|
Copies
of
All Communications to:
Richard
A. Krantz, Esq.
Robinson
& Cole LLP
Financial
Centre
695
East Main Street
Stamford,
Connecticut 06904
(203)
462-7500
Approximate
Date of Commencement of Proposed Sale to the Public: From time to time after
the
effective date of this registration statement.
If
the
only securities being registered on this form are being offered pursuant
to
dividend or interest reinvestment plans, please check the following box.
[_]
If
any of
the securities being registered on this form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered 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, 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, check
the following box. [_]
CALCULATION
OF REGISTRATION FEE
|
Title
of Each Class of Securities to
Be Registered
|
|
Amount
To
Be
Registered
|
|
Proposed
Maximum
Offering
Price
Per Share
|
|
Proposed
Maximum
Aggregate
Offering
Price
|
|
Amount
of
Registration
Fee
|
|
|
5%
Series B Cumulative Convertible Perpetual Preferred Stock
|
|
|
48,645
|
|
$
|
1,000(1
|
)
|
$
|
48,645,000(1
|
)
|
$
|
5,725.52(1
|
)
|
|
Common
Stock
|
|
|
(2)
4,139,990
|
|
$
|
-----(3
|
)
|
$
|
-----(3
|
)
|
$
|
-----(3
|
)
|
(1
) The
Registrant is hereby registering shares of convertible preferred securities
and
the publicly traded common stock which may be issued upon conversion thereof
at
the same time. The proposed offering price for the convertible security offered
hereby is $1,000 per share, which is based upon the price offered to the
initial
purchasers of such convertible securities.
(2)
Represents
the number of shares of the Registrant’s common stock that are issuable upon
conversion of the 5% Series B Cumulative Convertible Perpetual Preferred
Stock
(“Series B preferred stock”) (i) in a primary offering of such shares to
potential transferees of the Series B preferred stock and (ii) in a resale
offering of these common shares by the current selling security holders.
For
purposes of estimating the number of shares of common stock to be included
under
this registration statement, the Registrant calculated the number of shares
issuable upon conversion of the Series B preferred stock based on a conversion
rate of 85.1064 shares of common stock for each share of Series B preferred
stock. Cash will be paid in lieu of fractional shares resulting from the
conversion of the shares of the Series B preferred stock. In addition to
the
shares set forth in the table, pursuant to Rule 416 under the Securities
Act of 1933, as amended, the amount to be registered includes an indeterminate
number of shares of common stock issuable upon conversion of the Series B
preferred stock, as this amount may be adjusted as a result of among others,
stock splits, stock dividends and antidilution provisions.
(3)
No
additional consideration will be received for the shares of common stock
issuable upon conversion of the Series B preferred stock and, therefore,
no
registration fee is required pursuant to Rule 457(i) under the Securities
Act of
1933, as amended.
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 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.
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD 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 JUNE 17, 2005
PROSPECTUS
[LOGO]
48,645
Shares of 5% Series B Cumulative Convertible
Perpetual
Preferred Stock
and
4,139,990
Shares of Common Stock, Subject to Adjustment,
Issuable
Upon Conversion of
5%
Series
B Cumulative Convertible Perpetual Preferred Stock
This
prospectus relates to the resale of 48,645
shares of our 5% Series B Cumulative Convertible Perpetual Preferred Stock
(“Series B preferred stock”) held of record by certain of our shareholders and
4,139,990 shares of our common stock, subject to adjustment, issuable upon
conversion of such shares of our Series B preferred stock. These shareholders
are referred to as the “selling shareholders” in this prospectus. The shares may
be offered and sold from time to time by selling shareholders, and any pledgees,
donees, transferees or other successors-in-interest of the shares, through
public or private transactions at fixed prices, at prevailing market prices
at
time of sale, at varying prices determined at time of sale or at negotiated
prices. Information regarding the identities of the selling shareholders,
the
manner in which they acquired or will acquire their shares and the manner
in
which the shares are being offered and sold is provided in the “Selling
Shareholders” and “Plan of Distribution” sections of this
prospectus.
We
will
not receive any of the proceeds from the sale of the shares. We have agreed
to
bear all of the expenses in connection with the registration and sale of
the
shares, except for sales commissions.
Our
common stock is quoted on the Nasdaq National Market under the symbol “FCEL”.
The last reported sale price of our common stock on the Nasdaq National Market
on June 13, 2005 was $8.63 per share. No public market currently exists for
shares of our Series B preferred stock. We expect that shares of our Series
B
preferred stock will be eligible for trading in the Portal Market, the National
Association of Securities Dealers’ screen-based automated market for trading of
securities eligible for resale under Rule 144A.
For
a
detailed description of the terms and conditions of the Series B preferred
stock, see “Description of Capital Stock - Series B Preferred
Stock.”
Our
principal executive offices are located at 3 Great Pasture Road, Danbury,
Connecticut 06813, and our telephone number is (203) 825-6000.
Investing
in our Series B preferred stock and common stock involves risks. See “Risk
Factors” beginning on page 4.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date
of this prospectus is June [__],
2005.
You
should rely only on the information contained in this prospectus. We have
not
authorized anyone 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 that the information contained in this prospectus is accurate
as of any date other than the date on the front of this prospectus.
________________
TABLE
OF CONTENTS
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Page
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FORWARD-LOOKING
STATEMENTS
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ii
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ABOUT
THIS PROSPECTUS
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ii
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SUMMARY
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1
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RISK
FACTORS
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4
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USE
OF PROCEEDS
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16
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DESCRIPTION
OF CAPITAL STOCK
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16
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SELLING
SHAREHOLDERS
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24
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PLAN
OF DISTRIBUTION
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28
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LEGAL
MATTERS
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30
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EXPERTS
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30
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WHERE
YOU CAN FIND MORE INFORMATION
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30
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INCORPORATION
BY REFERENCE
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31
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This
prospectus includes forward-looking statements within the meaning of Section
27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of
1934. Words such as
“expects,”“anticipates,”“approximates,”“believes,”“estimates,”“intends” and
“hopes” and variations of such words and similar expressions are intended to
identify such forward-looking statements. We intend such forward-looking
statements, all of which are qualified by this statement, to be covered by
the
safe harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995 and are including this statement
for
purposes of complying with these safe harbor provisions. We have
based
these statements on our current expectations and projections about future
events. These forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties that could cause actual
results to differ materially from those projected in these statements.
These risks and uncertainties include those set forth under “Risk
Factors.” The forward-looking statements contained in this prospectus
include, among others, statements about:
| · |
the
development and commercialization schedule for our fuel cell technology
and products;
|
| · |
future
funding under government research and development
contracts;
|
| · |
the
expected cost competitiveness of our fuel cell technology and
products;
|
| · |
our
intellectual property;
|
| · |
the
timing and availability of our
products;
|
| · |
the
electric power supply industry and the distributed generation
market;
|
| · |
our
business strategy; and
|
| · |
general
economic conditions in the electric power supply industry and our
target
markets.
|
Except
for our ongoing obligations to disclose material information under the federal
securities laws, we are not obligated to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this prospectus might
not
occur.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission, or SEC, using a continuous offering process. Under
this
continuous offering process, the selling shareholders may, from time to time,
sell the securities described in this prospectus in one or more offerings.
This
prospectus provides you with a general description of the securities that
may be
offered by the selling shareholders. Each time a selling shareholder sells
securities, the selling shareholder is required to provide you with this
prospectus and, in certain cases, a prospectus supplement containing more
specific information about the selling shareholder and the terms of the
securities being offered. That prospectus supplement may also add, update
or
change information in this prospectus. If there is any inconsistency between
the
information in this prospectus and any prospectus supplement, you should
rely on
the information in that prospectus supplement. This prospectus, together
with
any applicable prospectus supplements, includes all material information
relating to this offering. You should carefully read both this prospectus
and
any prospectus supplement together with the additional information described
in
the section entitled “Where You Can Find More Information.”
SUMMARY
This
summary highlights information contained elsewhere in this prospectus and
in the
documents incorporated by reference herein and does not contain all of the
information you should consider in making your investment decision. You should
read this summary together with the more detailed information, including
our
business information, financial statements and the related notes, incorporated
by reference in this prospectus, as well as the information set forth in
any
prospectus supplement. You should carefully consider, among other things,
the
matters discussed in the section entitled “Risk Factors.”
FuelCell
Energy, Inc.
We
are a
leader in the development and manufacture of fuel cell power plants for clean,
efficient and reliable electric power generation. We have been developing
fuel
cell technology since our founding in 1969. We are currently commercializing
our
core carbonate fuel cell products and continuing to develop our next generation
of fuel cell products.
Our
executive offices are located at 3 Great Pasture Road, Danbury, Connecticut
06813. Our telephone number is (203) 825-6000. We maintain a web
site at
the following Internet address: www.fuelcellenergy.com. The information
on our web site is not part of this prospectus.
Unless
the context otherwise requires, references in this prospectus to
“FuelCell,”“we,”“us” and “our” refer to FuelCell Energy, Inc. Direct
FuelCell®
and
DFC®
are
registered trademarks of FuelCell Energy, Inc.
As
used in this prospectus, all degrees refer to Fahrenheit (oF),
and kilowatt and megawatt numbers designate nominal or rated capacity of
the
referenced power plant. As used in this prospectus, “kilowatt” (kW) means 1,000
watts; “megawatt” (MW) means 1,000,000 watts; and “kilowatt hour” (kWh) is equal
to 1 kW of power supplied to or taken from an electric circuit steadily for
one
hour. All dollar amounts are in U.S. dollars unless otherwise
noted.
Direct
FuelCell (DFC) Power Plants
Increasing
demand for reliable power worldwide, supplemented by air pollution concerns
caused by older, combustion power generation, and unreliable electrical grid
delivery systems present significant market opportunities for our core
distributed generation products. Our proprietary carbonate DFC power plants
electrochemically produce electricity directly from readily available
hydrocarbon fuels, such as natural gas and wastewater treatment gas.
We
believe our products offer significant advantages compared to other power
generation technologies, including:
| · |
Flexible
siting and permitting requirements;
|
| · |
Ability
to provide electricity and heat for cogeneration applications,
such as
district heating, process steam, hot water and absorption chilling
for air
conditioning;
|
| · |
Potentially
lower operating, maintenance and generation costs than alternative
distributed power generation technologies;
and
|
| · |
Because
our DFC power plants produce hydrogen from readily available fuels
such as
natural gas and wastewater treatment gas, they can be used to
cost-effectively cogenerate hydrogen as well as electricity and
heat.
|
Our
current products, the DFC300MATM,
DFC1500
and DFC3000, are rated in capacity at 250 kW, 1 MW and 2 MW, respectively,
and
are scalable for distributed applications up to 10 MW or larger.
Our
products are designed to meet the base load power requirements of a wide
range
of commercial and industrial customers including wastewater treatment plants
(municipal, such as sewage treatment facilities, and industrial, such as
breweries and food processors), data centers, manufacturing facilities, office
buildings, hospitals, universities, prisons, mail processing facilities and
hotels, as well as in grid support applications for utility
customers.
Through
May 2005, more than 70 million kWh
of
electricity have been generated by fuel cell power plants worldwide
incorporating our DFC technology. This is more than double the 35 million
kWh
reported
a year ago. Approximately 7 percent was generated from our first MW DFC1500
power plant for King County. This increase in operating hours at customer
sites
has provided additional experience for improvement of the performance and
availability of DFC power plants. From January 2003 through April 2005, the
fleet availability for our DFC power plants was 89 percent.
Recent
Developments
We
closed
a $100 million private offering of shares of our 5% Series B cumulative
convertible perpetual preferred stock on November 17, 2004, with net proceeds
to
us of approximately $93.5 million. On January 14, 2005, we closed on the
sale of
an over-allotment of this same offering providing an additional $5.5 million
of
net proceeds. Total net proceeds to us from the sale of these securities
was
approximately $99.0 million and is intended to be used for product development,
product commercialization and general corporate purposes.
On
November 1, 2004, we closed on our agreement to combine the Canadian solid
oxide
fuel cell (SOFC) operations into Versa Power Systems (Versa) in exchange
for
Versa stock. Under the terms of the agreement, all SOFC intellectual property
and the majority of the fixed assets of Fuel Cell Energy, Ltd., our Canadian
subsidiary, was combined with Versa in exchange for 5,714 shares. We now
own
7,714 shares or 42 percent of the common shares of Versa. No cash was exchanged
in this transaction and employees of FuelCell Energy, Ltd. became Versa
employees.
| Securities offered: |
|
| |
|
|
5%
Series B
Cumulative Convertible Perpetual
Preferred Stock
|
48,645 shares. |
| |
|
| Common
stock
|
4,139,990 shares. |
| |
|
| Securities outstanding after this
offering: |
|
| |
|
|
5%
Series B
Cumulative Convertible Perpetual
Preferred Stock
|
57,230 shares.(1) |
| |
|
| Common
stock |
52,426,456 shares.(2) |
| |
|
| Risk factors |
Investment in our securities involves
a high
degree of risk. You should carefully consider the risk factors
described
under the section entitled “Risk Factors”, as well as any other
information in this prospectus and any prospectus supplement before
purchasing any of our securities. Each of these risk factors could
adversely affect our business, operating results and financial
condition,
as well as adversely affect the value of an investment in our
securities. |
| |
|
| Use of proceeds |
The proceeds from the sale of the
shares of
our Series B preferred stock and common stock being offered by
the selling
shareholders pursuant to this prospectus, net of any broker’s fee or
commissions, will belong to the selling shareholders. We will not
receive
any of the proceeds from the sale of these shares. See section
entitled
“Use of Proceeds”. |
| |
|
| Plan of Distribution |
The shares may be offered and sold
from time
to time by selling shareholders, and any pledgees, donees, transferees
or
other successors-in-interest of the shares, through public or private
transactions at fixed prices, at prevailing market prices at time
of sale,
at varying prices determined at time of sale or at negotiated prices.
See
section entitled “Plan of Distribution”. |
| |
|
| Nasdaq National Market symbol |
FCEL. |
| |
|
(1) The
above outstanding share information is based upon shares of our Series B
preferred outstanding as of June 13, 2005, and such number assumes that 48,645
shares of Series B preferred stock have been converted into 4,139,990 shares
of
our common stock.
(2) The
above outstanding share information is based upon shares of our common stock
outstanding as of June 13, 2005 and assumes that 48,645 shares of Series
B
preferred stock have been converted into 4,139,990 shares of our common stock.
The above outstanding share information excludes approximately 4,870,639
shares
of our common stock issuable upon conversion of 57,230 shares of our Series
B
preferred stock (see “Description of Capital Stock - Series B Preferred Stock”);
225,286 shares of our common stock issuable upon conversion of the Series
1
preferred shares issued by FuelCell Energy, Ltd., our wholly-owned Canadian
subsidiary (formerly known as FCE Canada, Inc.) (see “Description of Capital
Stock - Series 1 Preferred Shares”); 1,300,000 shares of our common stock
issuable upon exercise of warrants outstanding at June 13, 2005 at a weighted
average exercise price of $17.27 per share; 5,837,661 shares of our common
stock
issuable upon exercise of options outstanding at June 13, 2005 at a weighted
average exercise price of $10.20 per share under our stock option plans;
672,566
shares of our common stock available for future issuance under our stock
option
plans; and 396,171 shares of our common stock available for future issuance
under our employee stock purchase plan.
RISK
FACTORS
Investing
in our securities involves risks. Before investing in our securities, you
should
carefully consider the following risk factors as well as the other information
included and incorporated by reference in this prospectus. If any of the
following risks actually occur, our business, financial condition, or results
of
operations and could be materially and adversely affected. In such cases,
the
trading price of our securities could decline, and you may lose all or part
of
your investment.
We
have recently incurred losses and anticipate continued losses and negative
cash
flow.
We
have
been transitioning from a U.S. government contract research and development
company to a commercial products developer and manufacturer. As such, we
have
not achieved profitability since our fiscal year ended October 31, 1997 and
expect to continue to incur net losses and generate negative cash flow until
we
can produce sufficient revenues to cover our costs.
We
incurred net losses of $86.4 million and $33.3 million for the fiscal year
ended
October 31, 2004 and the six months ended April 30, 2005, respectively. We
anticipate that we will continue to incur losses and generate negative cash
flow
until we can cost-effectively produce and sell our Direct FuelCell products,
which we do not expect to occur for several years. We may never become
profitable. Even if we do achieve profitability, we may be unable to sustain
or
increase our profitability in the future. For the reasons discussed in more
detail below, there are substantial uncertainties associated with our achieving
and sustaining profitability.
Our
cost reduction strategy may not succeed or may be significantly delayed,
which
may result in our inability to offer our products at competitive prices and
may
adversely affect our sales.
Our
cost
reduction strategy is based on the assumption that a significant increase
in
production will result in economies of scale. In addition, certain aspects
of
our cost reduction strategy rely on advancements in our manufacturing process,
engineering design and technology (including projected power output) that,
to a
large degree, are currently not ascertainable. Our failure to achieve a lower
Direct FuelCell product cost structure through economies of scale, improvements
in the manufacturing process and engineering design and technology maturation
would have a material adverse effect on our commercialization plans and,
therefore, our business, prospects, results of operations and financial
condition.
The
production costs of our initial commercial products are higher than their
sales
prices. We recognize that successfully implementing our strategy and obtaining
a
significant share of the distributed generation market requires that we offer
our Direct FuelCell products at competitive prices, which can only be
accomplished when production costs are cut substantially from current levels.
If
we are unable to produce Direct FuelCell products at competitive prices relative
to alternative technologies and products, our target market customers will
be
unlikely to buy our fuel cell products.
Our
products will compete with products using other energy sources, and if the
prices of the alternative sources are lower than energy sources used by our
products, sales of our products will be adversely
affected.
Our
Direct FuelCell has been operated using a variety of hydrocarbon fuels,
including natural gas, methanol, diesel, biogas, coal gas, coal mine methane
and
propane. If these fuels are not readily available or if their prices increase
such that electricity produced by our products costs more than electricity
provided by other generation sources, our products would be less economically
attractive to potential customers. In addition, we have no control over the
prices of several types of competitive energy sources such as oil, gas or
coal.
Significant decreases in the price of these fuels could also have a material
adverse effect on our business because other generation sources could be
more
economically attractive to consumers than our products.
Commercialization
of our products depends on conducting successful field trials, and any delay,
performance failure or perceived problem with our field trials could have
a
material adverse effect on our business, prospects, results of operations
and
financial condition.
One
key
aspect of our strategy is to leverage the success of our demonstration, field
trial and field follow projects into long-term distributor-type relationships
that will result in these distributors marketing our Direct FuelCell products
directly to energy customers. For example, we are operating fourteen Direct
FuelCell units in the United States and five Direct FuelCell units in Japan
and
MTU CFC Solutions GmbH is currently field-testing eight 250 kW power plants
in
Germany and Spain that incorporate the Direct FuelCell as their fuel cell
components. We believe that our Direct FuelCell commercialization program
depends upon our conducting additional commercial field trials and demonstration
projects of our power plants and completing substantial additional research
and
development.
Our
demonstration, field trial and field follow projects may encounter problems
and/or delays for a number of reasons, including the failure of our technology,
the failure of the technology of others (including our balance of plant
suppliers), the failure to combine these technologies properly (including
control system coordination) and the failure to maintain and service the
test
prototypes properly. Many of these potential problems and delays are beyond
our
control. A failure by us to conduct field trials and demonstration projects
of
our megawatt class products or a failure to site the scheduled sub-megawatt
power plants and complete these commercial field trials and research and
development as currently planned could delay the timetable by which we believe
we can begin to commercially sell our Direct FuelCell products. The failure
of
planned commercial field trials to perform as well as we anticipate could
also
have a material adverse effect on our commercialization plans, including
the
ability to enter into long-term distributor-type relationships for our Direct
FuelCell products. Any delay, performance failure or perceived problem with
our
field trials could hurt our reputation in the distributed generation market
and,
therefore, could have a material adverse effect on our business, prospects,
results of operations and financial condition.
We
currently face and will continue to face significant
competition.
Our
Direct FuelCell currently faces, and will continue to face, significant
competition. We compete on the basis of our products’ reliability, fuel
efficiency, environmental considerations and cost. Technological advances
in
alternative energy products or improvements in the electric grid or other
fuel
cell technologies may negatively affect the development or sale of some or
all
of our products or make our products non-competitive or obsolete prior to
commercialization or afterwards. Other companies, some of which have
substantially greater resources than ours, are currently engaged in the
development of products and technologies that are similar to, or may be
competitive with, our products and technologies.
Many
companies in the United States are involved in fuel cell development, although
we believe we are the only domestic company engaged in significant manufacturing
and commercialization of carbonate fuel cells in the sub-megawatt and megawatt
classes. Emerging fuel cell technologies (and companies developing them)
include
proton exchange membrane fuel cells (Ballard Power Systems, Inc.; United
Technologies Corp. or UTC Fuel Cells; and Plug Power), phosphoric acid fuel
cells (UTC Fuel Cells) and solid oxide fuel cells (Siemens Westinghouse Electric
Company, Sulzer Hexis, McDermott, GE/ Honeywell, Delphi and Accumentrics).
Each
of these competitors has the potential to capture market share in our target
markets.
There
are
other potential carbonate fuel cell competitors internationally. In Asia,
Ishikawajima Harima Heavy Industries is active in developing carbonate fuel
cells. In Europe, a company in Italy, Ansaldo Fuel Cells, is actively engaged
in
carbonate fuel cell development and is a potential competitor. Our licensees
in
Germany, MTU CFC Solutions GmbH, and its partners have been the most active
in
Europe.
Other
than fuel cell developers, we must also compete with such companies as
Caterpillar, Cummins, and Detroit Diesel, which manufacture more mature
combustion-based equipment, including various engines and turbines, and have
well-established manufacturing, distribution, and operating and cost features.
Significant competition may also come from gas turbine companies like General
Electric, Ingersoll Rand, Solar Turbines and Kawasaki, which have recently
made
progress in improving fuel efficiency and reducing pollution in large-size
combined cycle natural gas fueled generators. These companies have also made
efforts to extend these advantages to smaller sizes.
We
may not meet our product development and commercialization milestones, which
may
have a material adverse effect on our operations and stock
price.
We
have
established product development and commercialization milestones that we
use to
assess our progress toward developing commercially viable Direct FuelCell
products. These milestones relate to technology and design improvements as
well
as to dates for achieving development goals. To gauge our progress, we operate,
test and evaluate our Direct FuelCell products under actual conditions. If
our
systems exhibit technical defects or are unable to meet cost or performance
goals, including power output, useful life and reliability, our
commercialization schedule could be delayed and potential purchasers of our
initial commercial Direct FuelCell products may decline to purchase them
or
choose to purchase alternative technologies. We cannot be sure that we will
successfully achieve our milestones in the future or that any failure to
achieve
these milestones will not result in potential competitors gaining advantages
in
our target market. Failure to meet publicly announced milestones might have
a
material adverse effect on our operations and our stock price.
We
have limited experience manufacturing our Direct FuelCell products on a
commercial basis, which may adversely affect our planned increases in production
capacity and our ability to satisfy customer
requirements.
To
date,
we have focused primarily on research and development and conducting
demonstrations and field trials. We have limited experience manufacturing
our
Direct FuelCell products on a commercial basis. We have installed equipment
that
will allow us to produce 50 MW of Direct FuelCell products per year. We expect
that we will then increase our manufacturing capacity based on market demand.
We
believe that we can expand our manufacturing capacity to between 125 and
150 MW
of Direct FuelCell products at our current facility. We cannot be sure that
we
will be able to achieve our planned increases in production capacity. Also,
as
we scale up our production capacity, we cannot be sure that unplanned failures
or other technical problems relating to the manufacturing process will not
occur.
Even
if
we are successful in achieving our planned increases in production capacity,
we
cannot be sure that we will do so in time to meet our product commercialization
schedule or to satisfy the requirements of our customers. Given our dependence
on government research and development contracts and the necessity of providing
government entities with substantial amounts of information, our sales process
has historically been long and time-consuming. We will need to continue to
shorten the time from initial contact to final product delivery if we hope
to
expand production, reach a wider customer base and forecast revenues with
any
degree of certainty. Additionally, we cannot be sure that we will be able
to
develop efficient, low-cost manufacturing capabilities and processes (including
automation) that will enable us to meet our cost goals and profitability
projections. Our failure to shorten the sales cycle for our Direct FuelCell
products or to develop these advanced manufacturing capabilities and processes,
or meet our cost goals, could have a material adverse effect on our business,
prospects, results of operations and financial condition.
Unanticipated
increases or decreases in business growth may result in adverse financial
consequences for us.
If
our
business grows more quickly than we anticipate, our existing and planned
manufacturing facilities may become inadequate and we may need to seek out
new
or additional space, at considerable cost to us. If our business does not
grow
as quickly as we expect, our existing and planned manufacturing facilities
would, in part, represent excess capacity for which we may not recover the
cost;
in that circumstance, our revenues may be inadequate to support our committed
costs and our planned growth and our gross margins and business strategy
would
be adversely affected.
Our
commercialization plans are dependent on market acceptance of our Direct
FuelCell products.
Our
commercialization plans are dependent upon market acceptance of, as well
as
enhancements to, those products. Fuel cell systems represent an emerging
market,
and we cannot be sure that potential customers will accept fuel cells as
a
replacement for traditional power sources. As is typical in a rapidly evolving
industry, demand and market acceptance for recently introduced products and
services are subject to a high level of uncertainty and risk. Since the
distributed generation market is new and evolving, it is difficult to predict
with certainty the size of the market and its growth rate. The development
of a
market for our Direct FuelCell products may be affected by many factors that
are
out of our control, including:
• the
cost
competitiveness of our fuel cell products;
• the
future costs of natural gas and other fuels used by our fuel cell
products;
• consumer
reluctance to try a new product;
• consumer
perceptions of the safety of our fuel cell products;
• the
pace
of utility deregulation nationwide, which could affect the market for
distributed generation;
• local
permitting and environmental requirements; and
• the
emergence of newer, more competitive technologies and products.
If
a
sufficient market fails to develop or develops more slowly than we anticipate,
we may be unable to recover the losses we will have incurred in the development
of Direct FuelCell products and may never achieve profitability.
As
we
continue to commercialize our Direct FuelCell products, we will continue
to
develop warranties, production guarantees and other terms and conditions
relating to our products that will be acceptable to the marketplace, and
continue to develop a service organization that will aid in servicing our
products and obtain self-regulatory certifications, if available, with respect
to our products. Failure to achieve any of these objectives may also slow
the
development of a sufficient market for our products and, therefore, have
a
material adverse effect on our results of operations.
Our
government research and development contracts are subject to the risk of
termination by the contracting party and we may not realize the full amounts
allocated under the contracts due to the lack of Congressional
appropriations.
Our
fuel
cell revenues have been principally derived from a long-term cooperative
agreement and other contracts with the U.S. Department of Energy (“DOE”), the
U.S. Department of Defense, the U.S. Navy and the National Aeronautics and
Space
Administration. These agreements are important to the continued development
and
commercialization of our technology and our products.
Generally,
our U.S. government research and development contracts, including the DOE
(Product Design Improvement) cooperative
agreement, are subject to the risk of termination at the convenience of the
contracting agency. Furthermore, these contracts, irrespective of the amounts
allocated by the contracting agency, are subject to annual congressional
appropriations and the results of government or agency sponsored audits of
our
cost reduction efforts and our cost projections. We can only receive funds
under
these contracts ultimately made available to us annually by Congress as a
result
of the appropriations process. Accordingly, we cannot be sure whether we
will
receive the full amount allocated by the DOE under our DOE cooperative
agreements or the full amounts awarded under our other government research
and
development contracts. Failure to receive the full amounts under any of our
government research and development contracts could materially and adversely
affect our commercialization plans and, therefore, our business, prospects,
results of operations and financial condition.
The
United States government has certain rights relating to our intellectual
property, including restricting or taking title to certain
patents.
Many
of
our United States patents relating to our carbonate fuel cell technology
are the
result of government-funded research and development programs, including
the DOE
cooperative agreement. Four of our patents that were the result of DOE-funded
research prior to January 1988 (the date that we qualified as a “small
business”) are owned by the United States government and have been licensed to
us. This license is revocable only in the limited circumstances where it
has
been demonstrated that we are not making an effort to commercialize the
invention. We own all patents resulting from research funded by our DOE
contracts awarded after January 1988 to date, based on our “small business”
status when each contract was awarded. Under current regulations, patents
resulting from research funded by government agencies other than the DOE
are
owned by us, whether or not we are a “small business.”
Fourteen
United States patents that we own have resulted from government-funded research
and are subject to the risk of exercise of “march-in” rights by the government.
March-in rights refer to the right of the United States government or a
government agency to exercise its non-exclusive, royalty-free, irrevocable
worldwide license to any technology developed under contracts funded by the
government if the contractor fails to continue to develop the technology.
These
“march-in” rights permit the United States government to take title to these
patents and license the patented technology to third parties if the contractor
fails to utilize the patents. In addition, our DOE-funded research and
development agreements also require us to agree that we will not provide
to a
foreign entity any fuel cell technology subject to that agreement unless
the
fuel cell technology will be substantially manufactured in the U.S. Accordingly,
we could lose some or all of the value of these patents.
A
failure to qualify as a “small business” could adversely affect our rights to
own future patents under DOE-funded contracts.
Qualifying
as a “small business” under DOE contracts allows us to own the patents that we
develop under DOE contracts. A “small business” under applicable government
regulations generally consists of no more than 500 employees. If we continue
to
grow, we will no longer qualify as a “small business” and no longer own future
patents we develop under contracts, grants or cooperative agreements funded
by
the DOE based on such certification, unless we obtain a patent waiver from
the
DOE. As a result of our acquisition of Global, the number of our employees
increased and therefore, we temporarily did not qualify as a “small business.”
Following the sale of Global and its TEG product line on May 27, 2004, we
again
qualify as a “small business”; however, we cannot assure you that we will
continue to qualify as a “small business” in the future.
Our
future success and growth is dependent on our distribution
strategy.
We
do not
plan to establish a direct distribution infrastructure for our Direct FuelCell
products. A key aspect of our strategy is to use multiple third-party
distribution channels to ultimately service our diverse customer base. Depending
on the needs of the customer, our Direct FuelCell products could be distributed
through a value-added distributor who could provide a package of our products
and various other components such as flywheels and battery storage devices;
through an energy services company that could arrange various ancillary services
for the customer; or through power generation equipment suppliers.
We
cannot
assure you that we will enter into distributor relationships that are consistent
with, or sufficient to support, our commercialization plans or our growth
strategy or that these relationships will be on terms favorable to us. Even
if
we enter into these types of relationships, we cannot assure you that the
distributors with which we form relationships will focus adequate resources
on
selling our products or will be successful in selling them. Some of these
distributor arrangements have or will require that we grant exclusive
distribution rights to companies in defined territories. These exclusive
arrangements could result in us being unable to enter into other arrangements
at
a time when the distributor with which we form a relationship is not successful
in selling our products or has reduced its commitment to marketing our products.
In addition, two of our current distributor arrangements include, and some
future distributor arrangements may also include, the issuance of equity
and
warrants to purchase our equity, which may have an adverse effect on our
stock
price. To the extent we enter into distributor relationships, the failure
of
these distributors in assisting us with the marketing and distribution of
our
products may adversely affect our results of operations and financial
condition.
We
cannot
be sure that MTU will continue to, or original equipment manufacturers (“OEMs”)
will, manufacture or package products using our Direct FuelCell components.
In
this area, our success will largely depend upon our ability to make our products
compatible with the power plant products of OEMs and the ability of these
OEMs
to sell their products containing our products. In addition, some OEMs may
need
to redesign or modify their existing power plant products to fully incorporate
our products. Accordingly, any integration, design, manufacturing or marketing
problems encountered by MTU or other OEMs could adversely affect the market
for
our Direct FuelCell products and, therefore, our business, prospects, results
of
operations and financial condition.
We
depend on third party suppliers for the development and supply of key components
for Direct FuelCell products.
We
purchase several key components of our Direct FuelCell products from other
companies and rely on third-party suppliers for the balance-of-plant components
in our Direct FuelCell products. There are a limited number of suppliers
for
some of the key components of Direct FuelCell products. A supplier’s failure to
develop and supply components in a timely manner or to supply components
that
meet our quality, quantity or cost requirements or technical specifications
or
our inability to obtain alternative sources of these components on a timely
basis or on terms acceptable to us could harm our ability to manufacture
our
Direct FuelCell products. In addition, to the extent the processes that our
suppliers use to manufacture components are proprietary, we may be unable
to
obtain comparable components from alternative suppliers.
We
do not
know when or whether we will secure long-term supply relationships with any
of
our suppliers or whether such relationships will be on terms that will allow
us
to achieve our objectives. Our business, prospects, results of operations
and
financial condition could be harmed if we fail to secure long-term relationships
with entities that will supply the required components for our Direct FuelCell
products.
We
depend on our intellectual property, and our failure to protect that
intellectual property could adversely affect our future growth and
success.
Failure
to protect our existing intellectual property rights may result in the loss
of
our exclusivity or the right to use our technologies. If we do not adequately
ensure our freedom to use certain technology, we may have to pay others for
rights to use their intellectual property, pay damages for infringement or
misappropriation or be enjoined from using such intellectual property. We
do not
currently conduct freedom to operate analyses. We rely on patent, trade secret,
trademark and copyright law to protect our intellectual property. The patents
that we have obtained will expire between 2005 and 2023 and the average
remaining life of our U.S. patents is approximately 10.7 years.
Some
of
our intellectual property is not covered by any patent or patent application
and
includes trade secrets and other know-how that is not patentable, particularly
as it relates to our manufacturing processes and engineering design. In
addition, some of our intellectual property includes technologies and processes
that may be similar to the patented technologies and processes of third parties.
If we are found to be infringing third-party patents, we do not know whether
we
will able to obtain licenses to use such patents on acceptable terms, if
at all.
Our patent position is subject to complex factual and legal issues that may
give
rise to uncertainty as to the validity, scope and enforceability of a particular
patent. Accordingly, we cannot assure you that:
|
|
• |
any
of the U.S., Canadian or other foreign patents owned by us or other
patents that third parties license to us will not be invalidated,
circumvented, challenged, rendered unenforceable or licensed to
others;
or
|
|
|
• |
any
of our pending or future patent applications will be issued with
the
breadth of claim coverage sought by us, if issued at
all.
|
In
addition, effective patent, trademark, copyright and trade secret protection
may
be unavailable, limited or not applied for in certain foreign
countries.
We
also
seek to protect our proprietary intellectual property, including intellectual
property that may not be patented or patentable, in part by confidentiality
agreements and, if applicable, inventors’ rights agreements with our
subcontractors, vendors, suppliers, consultants, strategic partners and
employees. We cannot assure you that these agreements will not be breached,
that
we will have adequate remedies for any breach or that such persons or
institutions will not assert rights to intellectual property arising out
of
these relationships. Certain of our intellectual property has been licensed
to
us on a non-exclusive basis from third parties that may also license such
intellectual property to others, including our competitors. If our licensors
are
found to be infringing third-party patents, we do not know whether we will
be
able to obtain licenses to use the intellectual property licensed to us on
acceptable terms, if at all.
If
necessary or desirable, we may seek extensions of existing licenses or further
licenses under the patents or other intellectual property rights of others.
However, we can give no assurances that we will obtain such extensions or
further licenses or that the terms of any offered licenses will be acceptable
to
us. The failure to obtain a license from a third party for intellectual property
that we use at present could cause us to incur substantial liabilities, and
to
suspend the manufacture or shipment of products or our use of processes
requiring the use of that intellectual property.
While
we
are not currently engaged in any material intellectual property litigation,
we
could become subject to lawsuits in which it is alleged that we have infringed
the intellectual property rights of others or commence lawsuits against others
who we believe are infringing upon our rights. Our involvement in intellectual
property litigation could result in significant expense to us, adversely
affecting the development of sales of the challenged product or intellectual
property and diverting the efforts of our technical and management personnel,
whether or not that litigation is resolved in our favor.
Our
future success will depend on our ability to attract and retain qualified
management and technical personnel.
Our
future success is substantially dependent on the continued services and on
the
performance of our executive officers and other key management, engineering,
scientific, manufacturing and operating personnel, particularly Jerry Leitman,
our President and Chief Executive Officer. The loss of the services of any
executive officer, including Mr. Leitman, or other key management, engineering,
scientific, manufacturing and operating personnel, could materially adversely
affect our business. Our ability to achieve our development and
commercialization plans will also depend on our ability to attract and retain
additional qualified management and technical personnel. Recruiting personnel
for the fuel cell industry is competitive. We do not know whether we will
be
able to attract or retain additional qualified management and technical
personnel. Our inability to attract and retain additional qualified management
and technical personnel, or the departure of key employees, could materially
and
adversely affect our development and commercialization plans and, therefore,
our
business, prospects, results of operations and financial condition.
Our
management may be unable to manage rapid growth
effectively.
We
expect
to rapidly expand our manufacturing capabilities, accelerate the
commercialization of our products and enter a period of rapid growth, which
will
place a significant strain on our senior management team and our financial
and
other resources. The proposed expansion will expose us to increased competition,
greater overhead, marketing and support costs and other risks associated
with
the commercialization of a new product. Our ability to manage our rapid growth
effectively will require us to continue to improve our operations, to improve
our financial and management information systems and to train, motivate and
manage our employees. Difficulties in effectively managing the budgeting,
forecasting and other process control issues presented by such a rapid expansion
could harm our business, prospects, results of operations and financial
condition.
We
may be affected by environmental and other governmental
regulation.
As
we
begin to commercialize our Direct FuelCell products, we will be subject to
federal, state, provincial or local regulation with respect to, among other
things, emissions and siting. Assuming no co-generation applications are
used in
conjunction with our larger Direct FuelCell plants, they will discharge humid
flue gas at temperatures of approximately 700-800o
F, water
at temperatures of approximately 10-20o
F above
surrounding air temperatures and carbon dioxide. These emissions will require
permits that we expect (but cannot ensure) will be similar to those applicable
to generating units.
In
addition, it is possible that industry-specific laws and regulations will
be
adopted covering matters such as transmission scheduling, distribution and
the
characteristics and quality of our products, including installation and
servicing. This regulation could limit the growth in the use of carbonate
fuel
cell products, decrease the acceptance of fuel cells as a commercial product
and
increase our costs and, therefore, the price of our Direct FuelCell products.
Accordingly, compliance with existing or future laws and regulations as we
begin
to commercialize and site our products could have a material adverse effect
on
our business, prospects, results of operations and financial
condition.
Utility
companies could impose customer fees or interconnection requirements on our
customers that could make our products less
desirable.
Utility
companies commonly charge fees to larger, industrial customers for disconnecting
from the electric grid or for having the capacity to use power from the electric
grid for back up purposes. These fees could increase the cost to our customers
of using our Direct FuelCell products and could make our products less
desirable, thereby harming our business, prospects, results of operations
and
financial condition.
Several
states (Texas, New York, California and others) have created and adopted
or are
in the process of creating their own interconnection regulations covering
both
technical and financial requirements for interconnection to utility grids.
Depending on the complexities of the requirements, installation of our systems
may become burdened with additional costs that might have a negative impact
on
our ability to sell systems. There is also a burden in having to track the
requirements of individual states and design equipment to comply with the
varying standards. The Institute of Electrical and Electronics Engineers
has
been working to create an interconnection standard addressing the technical
requirements for distributed generation to interconnect to utility grids.
Many
parties are hopeful that this standard will be adopted nationally when it
is
completed to help reduce the barriers to deployment of distributed generation
such as fuel cells; however this standard may be delayed or never completed
thereby limiting the commercial prospects and profitability of our fuel cell
systems.
Changes
in government regulations and electric utility industry restructuring may
affect
demand for our Direct FuelCell products.
Our
target market, the distributed generation market, is driven by deregulation
and
restructuring of the electric utility industry in the United States and
elsewhere and by the requirements of utilities, independent power producers
and
end users. Deregulation of the electric utility industry is subject to
government policies that will determine the pace and extent of deregulation.
Many states have recently delayed the implementation of deregulation as a
result
of power disturbances in California several summers ago. Changes in government
and public policy over time could further delay or otherwise affect deregulation
and, therefore, adversely affect our prospects for commercializing our Direct
FuelCell products and our financial results. We cannot predict how the
deregulation and restructuring of the electric utility industry will ultimately
affect the market for our Direct FuelCell products.
We
could be liable for environmental damages resulting from our research,
development or manufacturing operations.
Our
business exposes us to the risk of harmful substances escaping into the
environment, resulting in personal injury or loss of life, damage to or
destruction of property, and natural resource damage. Depending on the nature
of
the claim, our current insurance policies may not adequately reimburse us
for
costs incurred in settling environmental damage claims, and in some instances,
we may not be reimbursed at all. Our business is subject to numerous federal,
state and local laws and regulations that govern environmental protection
and
human health and safety. These laws and regulations have changed frequently
in
the past and it is reasonable to expect additional and more stringent changes
in
the future.
Our
operations may not comply with future laws and regulations and we may be
required to make significant unanticipated capital and operating expenditures.
If we fail to comply with applicable environmental laws and regulations,
governmental authorities may seek to impose fines and penalties on us or
to
revoke or deny the issuance or renewal of operating permits and private parties
may seek damages from us. Under those circumstances, we might be required
to
curtail or cease operations, conduct site remediation or other corrective
action, or pay substantial damage claims.
We
may be required to conduct environmental remediation activities, which could
be
expensive.
We
are
subject to a number of environmental laws and regulations, including those
concerning the handling, treatment, storage and disposal of hazardous materials.
These environmental laws generally impose liability on present and former
owners
and operators, transporters and generators for remediation of contaminated
properties. We believe that our businesses are operating in compliance in
all
material respects with applicable environmental laws, many of which provide
for
substantial penalties for violations. We cannot assure you that future changes
in such laws, interpretations of existing regulations or the discovery of
currently unknown problems or conditions will not require substantial additional
expenditures. Any noncompliance with these laws and regulations could subject
us
to material administrative, civil or criminal penalties or other liabilities.
In
addition, we may be required to incur substantial costs to comply with current
or future environmental and safety laws and regulations.
Our
products use inherently dangerous, flammable fuels, operate at high temperatures
and use corrosive carbonate material, each of which could subject our business
to product liability claims.
Our
business exposes us to potential product liability claims that are inherent
in
hydrogen and products that use hydrogen. Hydrogen is a flammable gas and
therefore a potentially dangerous product. Hydrogen is typically generated
from
gaseous and liquid fuels that are also flammable and dangerous, such as propane,
natural gas or methane, in a process known as reforming. Natural gas and
propane
could leak into a residence or commercial location and combust if ignited
by
another source. In addition, our Direct FuelCell products operate at high
temperatures and our Direct FuelCell products use corrosive carbonate material,
which could expose us to potential liability claims. Any accidents involving
our
products or other hydrogen-using products could materially impede widespread
market acceptance and demand for our Direct FuelCell products. In addition,
we
might be held responsible for damages beyond the scope of our insurance
coverage. We also cannot predict whether we will be able to maintain our
insurance coverage on acceptable terms.
We
are subject to risks inherent in international
operations.
Since
we
plan to market our Direct FuelCell products both inside and outside the United
States and Canada, our success depends, in part, on our ability to secure
international customers and our ability to manufacture products that meet
foreign regulatory and commercial requirements in target markets. We have
limited experience developing and manufacturing our products to comply with
the
commercial and legal requirements of international markets. In addition,
we are
subject to tariff regulations and requirements for export licenses, particularly
with respect to the export of some of our technologies. We face numerous
challenges in our international expansion, including unexpected changes in
regulatory requirements, fluctuations in currency exchange rates, longer
accounts receivable requirements and collections, difficulties in managing
international operations, potentially adverse tax consequences, restrictions
on
repatriation of earnings and the burdens of complying with a wide variety
of
international laws. Any of these factors could adversely affect our operations
and revenues.
We
have large and influential stockholders, which may make it difficult for
a third
party to acquire our common stock.
MTU
currently owns approximately 5.69% of our outstanding common stock (based
upon
the number of shares of our common stock outstanding as of June 13, 2005).
James
D. Gerson beneficially owns approximately 2.78% of our outstanding common
stock.
Loeb Investors Co. LXXV and Warren Bagatelle (a managing director of an
affiliate of Loeb Investors Co. LXXV) collectively beneficially own
approximately 2.30% of our outstanding common stock (based upon the number
of
shares of our common stock outstanding as of June 13, 2005). These ownership
levels could make it difficult for a third party to acquire our common stock
or
have input into the decisions made by our board of directors, which include
Michael Bode (Chief Executive Officer of MTU CFC Solutions GmbH), James D.
Gerson, Warren Bagatelle and Thomas L. Kempner (Chairman and Chief Executive
Officer of an affiliate of Loeb Investors Co. LXXV). MTU is also a licensee
of
our technology and a purchaser of our Direct FuelCell products. Therefore,
it
may be in MTU’s interest to possess substantial influence over matters
concerning our overall strategy and technological and commercial development.
In
addition, Wellington
Management Company, LLP owns
approximately 13.77% of our outstanding common stock and is therefore in
a
position to substantially influence matters submitted to a vote of our security
holders. Included in above noted percentages are options exercisable within
60
days of June 13, 2005.
MTU
may develop competing technologies for its own
products.
MTU
is
currently developing carbonate fuel cell technologies based on the know-how
that
we have provided to MTU under license. If MTU develops its own carbonate
fuel
cell design before our license expires in 2010, it must use good faith efforts
to license the technology to us. If MTU is successful but does not grant
us a
license, it may be directly competing with us while having a significant
ownership interest in us, and a seat on our board of directors. We have agreed
with MTU to continue developing products with as much commonality as possible.
However, the license agreement between us and MTU provides that each of us
retains the right to independently pursue the development of carbonate fuel
cell
technologies.
Our
stock price has been and could remain volatile.
The
market price for our common stock has been and may continue to be volatile
and
subject to extreme price and volume fluctuations in response to market and
other
factors, including the following, some of which are beyond our
control:
• failure
to meet our product development and commercialization milestones;
• variations
in our quarterly operating results from the expectations of securities analysts
or investors;
• downward
revisions in securities analysts’ estimates or changes in general market
conditions;
• announcements
of technological innovations or new products or services by us or our
competitors;
• announcements
by us or our competitors of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
• additions
or departures of key personnel;
• investor
perception of our industry or our prospects;
• insider
selling or buying;
• demand
for our common stock; and
• general
technological or economic trends.
In
the
past, following periods of volatility in the market price of their stock,
many
companies have been the subjects of securities class action litigation. If
we
became involved in securities class action litigation in the future, it could
result in substantial costs and diversion of management’s attention and
resources and could harm our stock price, business, prospects, results of
operations and financial condition.
Provisions
of Delaware and Connecticut law and of our charter and by-laws may make a
takeover more difficult.
Provisions
in our certificate of incorporation and by-laws and in Delaware and Connecticut
corporate law may make it difficult and expensive for a third party to pursue
a
tender offer, change in control or takeover attempt that is opposed by our
management and board of directors. Public stockholders who might desire to
participate in such a transaction may not have an opportunity to do so. These
anti-takeover provisions could substantially impede the ability of public
stockholders to benefit from a change in control or change in our management
and
board of directors.
We
depend on relationships with strategic partners, and the terms and
enforceability of many of these relationships are not
certain.
We
have
entered into relationships with strategic partners for design, product
development and distribution of our existing products, and products under
development, some of which may not have been documented by a definitive
agreement. The terms and conditions of many of these agreements allow for
termination by the partners. Termination of any of these agreements could
adversely affect our ability to design, develop and distribute these products
to
the marketplace. We cannot assure you that we will be able to successfully
negotiate and execute definitive agreements with any of these partners, and
failure to do so may effectively terminate the relevant
relationship.
Future
sales of substantial amounts of our common stock could affect the market
price
of our common stock.
Future
sales of substantial amounts of our common stock, or securities convertible
or
exchangeable into shares of our common stock, into the public market, including
shares of our common stock issued upon exercise of options and warrants,
or
perceptions that those sales could occur, could adversely affect the prevailing
market price of our common stock and our ability to raise capital in the
future.
The
rights of the Series 1 preferred shares and Series B preferred shares
could
negatively impact our company.
The
terms
of the Series 1 preferred shares issued by FuelCell Energy, Ltd., our
wholly-owned, indirect subsidiary, provide rights to the holder, Enbridge,
Inc.
(Enbridge), including dividend and conversion rights among others that could
negatively impact us. For example, the terms of the Series 1 preferred shares
provide that the holders are entitled to receive cumulative dividends for
each
calendar quarter for so long as such shares are outstanding. Assuming the
exchange rate for Canadian dollars is Cdn.$1.3104 to U.S.$1.00 at the time
of
the applicable dividend payment date, we could be required to pay a preferred
dividend of approximately $238,477 per calendar quarter, subject to reduction
in
accordance with the terms of the Series 1 preferred shares. The terms of
the
Series 1 preferred shares also require that the holder be paid any accrued
and
unpaid dividends on December 31, 2010. To the extent that there is a significant
amount of accrued dividends that is unpaid as of December 31, 2010 and we
do not
have sufficient working capital at that time to pay the accrued dividends,
our
financial condition could be adversely affected. We have guaranteed these
dividend obligations, including paying a minimum of Cdn.$500,000 in cash
annually to Enbridge for so long as Enbridge holds the Series 1 preferred
shares. We have also guaranteed the liquidation obligations of FuelCell Energy,
Ltd. under the Series 1 preferred shares.
We
are
also required to issue common stock to the holder of the Series 1 preferred
shares if and when the holder exercises its conversion rights. The number
of
shares of common stock that we may issue upon conversion could be significant
and dilutive to our existing stockholders. For example, assuming the holder
of
the Series 1 preferred shares exercises its conversion rights after July
31,
2020, the exchange rate for Canadian dollars is Cdn.$1.3104 to U.S.$1.00
at the
time of such conversion and our common stock price is $14.62 at the time
of such
conversion, we would be required to issue approximately 1,373,615 shares
of our
common stock.
The
terms
of the Series B preferred shares also provide rights to their holders that
could
negatively impact us. Holders of the Series B preferred shares
are
entitled to receive cumulative dividends at the rate of $50 per share per
year,
payable either in cash or in shares of our common stock.
To the
extent the dividend is paid in shares, additional issuances could be dilutive
to
our existing stockholders and the sale of those shares could have a negative
impact on the price of our common stock. The Series B preferred stock
is
also convertible into common stock at a price of $11.75 per share.
Conversion of the Series B preferred stock at a time when the price of our
common stock is greater than $11.75 per share would also have a dilutive
impact
on our existing stockholders. Furthermore, the conversion rate applicable
to the preferred stock is subject to adjustment upon the occurrence of certain
events.
USE
OF PROCEEDS
DESCRIPTION
OF CAPITAL STOCK
General
The
following is a summary of the rights of our common stock and preferred stock
and
related provisions of our certificate of incorporation and bylaws. For more
detailed information, please see our certificate of incorporation and bylaws,
as
amended.
Authorized
and Outstanding Capital Stock
Our
authorized capital stock consists of 150,000,000 shares of common stock,
par
value $.0001 per share, and 250,000 shares of preferred stock, par value
$.01
per share, issuable in one or more series designated by our board of directors,
of which 105,875 shares of our preferred stock have been designated as 5%
Series
B Cumulative Convertible Perpetual Preferred Stock. On June 13, 2005, 48,286,466
shares of our common stock were issued and outstanding and 105,875 shares
of our
Series B preferred stock were issued and outstanding. No other shares of
our
preferred stock are issued and outstanding.
In
addition, as of June 13, 2005, there were outstanding options to purchase
5,837,661 shares of our common stock under our stock options plans, 672,566
shares of our common stock were available for future issuance under our stock
option plans, 396,171 shares of our common stock were available for future
issuance under our employee stock purchase plan, and there were outstanding
warrants to purchase 1,300,000 shares of our common stock. In addition, as
of
June 13, 2005, we were obligated, if and when the holder exercises its
conversion rights, to issue approximately 225,286 shares of our common stock
upon conversion of the Series 1 preferred shares. At June 13, 2005, there
were
819 holders of record of our common stock.
Common
Stock
Voting
Rights
The
holders of our common stock have one vote per share. Holders of our common
stock
are not entitled to vote cumulatively for the election of directors. Generally,
all matters to be voted on by shareholders must be approved by a majority,
or,
in the case of the election of directors, by a plurality, of the votes entitled
to be cast at a meeting at which a quorum is present by all shares of our
common
stock present in person or represented by proxy, voting together as a single
class, subject to any voting rights granted to holders of any then outstanding
preferred stock.
Dividends
Holders
of our common stock will share ratably in any dividends declared by the board
of
directors, subject to the preferential rights of any of our preferred stock
then
outstanding. Dividends consisting of shares of our common stock may be paid
to
holders of shares of our common stock.
Other
Rights
In
the
event of our liquidation, dissolution or winding up, after payment of
liabilities and liquidation preferences on any of our preferred stock then
outstanding, the holders of shares of our common stock are entitled to share
ratably in all assets available for distribution. Holders of shares of our
common stock have no preemptive rights or rights to convert their shares
of our
common stock into any other securities. There are no redemption or sinking
fund
provisions applicable to the common stock.
Preferred
Stock
Under
our
certificate of incorporation, our board of directors has the authority, without
further shareholder action, to issue from time to time, preferred stock in
one
or more series and for such consideration as may be fixed from time to time
by
our board of directors. Our board also has the authority to fix and determine,
in the manner provided by law, the relative rights and preferences of the
shares
of any series so established, such as dividend and voting rights. Our
certificate of incorporation authorizes 250,000 shares of preferred stock.
Prior
to the issuance of each series of preferred stock, our board will adopt
resolutions creating and designating the series as a series of preferred
stock.
The board of directors may, without shareholder approval, issue preferred
stock
with voting and other rights that could adversely affect the voting power
and
other rights of the holders of our common stock and could have anti-takeover
effects.
Series
1 Preferred Shares
On
August
4, 2003, we entered into a combination agreement with Global Thermoelectric
Inc.
to combine Global with us in a share-for-share exchange pursuant to a Plan
of
Arrangement subject to approval by the Court of Queen’s Bench of Alberta,
Canada. On October 31, 2003, our shareholders and the shareholders of Global
approved the combination. On October 31, 2003, the Court of Queen’s Bench of
Alberta issued an order approving the combination. On November 3, 2003, the
combination transaction was consummated. In the aggregate, we issued
approximately 8.2 million shares of our common stock and exchangeable shares
in
the acquisition. Following our acquisition of Global, Global’s Series 2
preferred shares remained outstanding in Global. At the time of the sale
of our
TEG business, the holder of the Series 2 preferred shares exchanged them
for
Series 1 Class A cumulative redeemable exchangeable preferred shares (which
were
referred to as the Series 1 preferred shares) issued by FuelCell Energy,
Ltd.,
one of our indirect, wholly-owned subsidiaries. We have guaranteed the
obligations of FuelCell Energy, Ltd. under the Series 1 preferred
shares.
Series
1 Preferred Shares
The
Series 1 preferred shares may be converted into shares of our common stock
at
the following “conversion prices”:
• Cdn.$110.97
per share of our common stock until July 31, 2005;
• Cdn.$120.22
per share of our common stock after July 31, 2005 until July 31,
2010;
• Cdn.$129.46
per share of our common stock after July 31, 2010 until July 31,
2015;
• Cdn.$138.71
per share of our common stock after July 31, 2015 until July 31, 2020;
and
• at
any
time after July 31, 2020, the price equal to 95% of the then current market
price (converted to Cdn.$ at the time of such calculation) of shares of our
common stock at the time of conversion.
The
foregoing “conversion prices” are subject to adjustment for certain subsequent
events. As illustrated below, the number of shares of our common stock issuable
upon conversion of the Series 1 preferred shares after July 31, 2020 may
be
significantly greater than the number of shares issuable prior to that
time.
The
following examples illustrate the number of shares of our common stock that
we
will be required to issue to the holder(s) of the Series 1 preferred shares
if
and when the holder(s) exercise their conversion rights pursuant to the terms
of
the Series 1 preferred shares. The following examples are based upon
Cdn.$25,000,000 of Series 1 preferred shares outstanding (which is the amount
currently outstanding) and assume that all accrued dividends on the Series
1
preferred shares have been paid through the time of the conversion and, in
the
case of conversions occurring after July 31, 2020, that the exchange rate
for
Canadian dollars is Cdn.$1.3104 to U.S.$1.00 at the time of the
conversion:
• if
the
Series 1 preferred shares convert prior to July 31, 2005, we would be required
to issue approximately 225,286 shares of our common stock;
• if
the
Series 1 preferred shares convert after July 31, 2005, but prior to July
31,
2010, we would be required to issue approximately 207,952 shares of our common
stock;
• if
the
Series 1 preferred shares convert after July 31, 2010, but prior to July
31,
2015, we would be required to issue approximately 193,110 shares of our common
stock;
• if
the
Series 1 preferred shares convert after July 31, 2015, but prior to July
31,
2020, we would be required to issue approximately 180,232 shares of our common
stock; and
• if
the
Series 1 preferred shares convert any time after July 31, 2020, assuming
our
common stock price is U.S.$14.62 at the time of conversion, we would be required
to issue approximately 1,373,615 shares of our common stock.
Subject
to the Business Corporations Act (Alberta), the holder of the Series 1 preferred
shares is not entitled to receive notice of or to attend or vote at any meeting
of the FuelCell Energy, Ltd. common shareholders. At present, we own all
of the
FuelCell Energy, Ltd. common stock.
Quarterly
dividends of Cdn.$312,500 accrue on the Series 1 preferred shares (subject
to
possible reduction pursuant to the terms of the Series 1 preferred shares
on
account of increases in the price of our common stock). We have agreed to
pay a
minimum of Cdn.$500,000 in cash or common stock annually to Enbridge, the
sole
current holder of the Series 1 preferred shares, as long as Enbridge holds
the
shares. Interest accrues on cumulative unpaid dividends at a 2.45% quarterly
rate, compounded quarterly, until payment thereof. All cumulative unpaid
dividends must be paid by December 31, 2010. From 2010 through 2020, we would
be
required to pay annual dividend amounts totaling Cdn.$1.25 million. Cumulative
unpaid dividends of $2.7 million on the Series 1 preferred shares were
outstanding as of October 31, 2004. We have guaranteed the dividend obligations
of FuelCell Energy, Ltd. under the Series 1 preferred shares.
Subject
to the Business Corporations Act (Alberta), we may redeem the Series 1 preferred
shares, in whole or part, at any time, if on the day that the notice of
redemption is first given, the volume-weighted average price at which our
common
stock is traded on the applicable stock exchange during the 20 consecutive
trading days ending on a date not earlier than the fifth preceding day on
which
the notice of redemption is given was not less than a 20% premium to the
current
conversion price on payment of Cdn.$25.00 per Series 1 Preferred Share to
be
redeemed, together with an amount equal to all accrued and unpaid dividends
to
the date fixed for redemption. On or after July 31, 2010, the Series 1 preferred
shares are redeemable by us at any time on payment of Cdn.$25.00 per Series
1
Preferred Share to be redeemed together with an amount equal to all accrued
and
unpaid dividends to the date fixed for redemption. There are currently 1,000,000
Series 1 preferred shares outstanding.
In
the
event of the liquidation, dissolution or winding up of FuelCell Energy, Ltd.,
whether voluntary or involuntary, or any other distribution of its assets
among
its shareholders for the purpose of winding up its affairs, the holder of
the
Series 1 preferred shares will be entitled to receive the amount paid on
such
Series 1 preferred shares (currently Cdn.$25,000,000) together with an amount
equal to all accrued and unpaid dividends thereon, before any amount will
be
paid or any of FuelCell Energy, Ltd.’s property or assets will be distributed to
the holders of FuelCell Energy, Ltd.’s common stock. After payment to the holder
of the Series 1 preferred shares of the amounts so payable to them, the holder
of the Series 1 preferred shares will not be entitled to share in any other
distribution of FuelCell Energy, Ltd.’s property or assets. We have guaranteed
the liquidation obligations of FuelCell Energy, Ltd. under the Series 1
preferred shares.
Series
B Preferred Stock
On
November 17, 2004, we sold to Citigroup Global Markets Inc., RBC Capital
Markets
Corporation, Adams Harkness, Inc., and Lazard Freres & Co., LLC
(collectively referred to as the “Initial Purchasers”) in a private placement
under Rule 144A, 100,000 shares of our 5% Series B Cumulative Convertible
Perpetual Preferred Stock (Liquidation Preference $1,000) (“Series B preferred
stock”) pursuant to a certain purchase agreement. Under the terms of the
purchase agreement with the Initial Purchasers, the Initial Purchasers were
granted an over-allotment option to purchase up to an additional 35,000 shares
of Series B preferred stock through January 25, 2005.
On
January 14, 2005, we sold an additional 5,875 shares of our Series B preferred
stock to the Initial Purchasers as part of the over-allotment option. Net
proceeds to us was approximately $99 million.
The
following is a summary of certain provisions of our Series B preferred stock.
The shares of our Series B preferred stock and the shares of our common stock
issuable upon conversion of the shares of our Series B preferred stock
are
covered
by a registration rights agreement.
Ranking
Shares
of
our Series B preferred stock rank with respect to dividend rights and rights
upon our liquidation, winding up or dissolution:
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senior
to shares of our common stock;
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junior
to our debt obligations; and
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effectively
junior to our subsidiaries' (i) existing and future liabilities
and (ii)
capital stock held by others.
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Dividends
The
Series B preferred stock pays cumulative annual dividends of $50 per share
which
are payable quarterly in arrears on February 15, May 15, August 15 and November
15, commencing February 15, 2005, when, as and if declared by the board of
directors. Dividends will be paid on the basis of a 360-day year consisting
of
twelve 30-day months. Dividends on the shares of our Series B preferred stock
will accumulate and be cumulative from the date of original issuance.
Accumulated dividends on the shares of our Series B preferred stock will
not
bear any interest.
The
dividend rate on the Series B preferred stock is subject to upward adjustment
as
set forth in the certificate of designation, as amended, of the Series B
preferred stock if we fail to pay, or to set apart funds to pay, dividends
on
the shares of our Series B preferred stock for any quarterly dividend period.
The dividend rate on the Series B preferred stock is also subject to upward
adjustment as set forth in the registration rights agreement entered into
with
the Initial Purchasers if we fail to satisfy our registration obligations
with
respect to the Series B preferred shares (or the underlying common shares)
set
forth in the registration rights agreement.
No
dividends or other distributions may be paid or set apart for payment upon
our
common shares (other than a dividend payable solely in shares of a like or
junior ranking) unless all accumulated and unpaid dividends have been paid
or
funds or shares of common stock therefor have been set apart on our Series
B
preferred stock.
We
may
pay dividends on the Series B preferred stock:
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at
the option of the holder, in shares of our common stock, which
shares will
be treated as restricted securities and therefore, will not be
transferable by the holder thereof except pursuant to an effective
registration statement or pursuant to an exemption from the registration
requirements of the Securities Act of 1933, as
amended.
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Liquidation
The
Series B preferred stock has a liquidation preference of $1,000 per share.
Upon
any voluntary or involuntary liquidation, dissolution or winding up of our
company resulting in a distribution of assets to the holders of any class
or
series of our capital stock, each holder of shares of our Series B preferred
stock will be entitled to payment out of our assets available for distribution
of an amount equal to the liquidation preference per share of Series B preferred
stock held by that holder, plus all accumulated and unpaid dividends on those
shares to the date of that liquidation, dissolution, or winding up, before
any
distribution is made on any junior shares, including shares of our common
stock,
but after any distributions on any of our indebtedness or senior shares (if
any). After payment in full of the liquidation preference and all accumulated
and unpaid dividends to which holders of shares of our Series B preferred
stock
are entitled, holders of shares of our Series B preferred stock will not
be
entitled to any further participation in any distribution of our assets.
Conversion
A
share
of our Series B preferred stock may be converted at any time, at the option
of
the holder, into 85.1064 shares of our common stock (which is equivalent
to an
initial conversion price of $11.75 per share) plus cash in lieu of fractional
shares. The conversion rate is subject to adjustment upon the occurrence
of
certain events, as described below, but will not be adjusted for accumulated
and
unpaid dividends. Upon conversion, holders of Series B preferred stock will
not
receive a cash payment for any accumulated dividends. Instead accumulated
dividends, if any, will be cancelled.
On
or
after November 20, 2009 we may, at our option, cause shares of our Series
B
preferred stock to be automatically converted into that number of shares
of our
common stock that are issuable at the then prevailing conversion rate. We
may
exercise our conversion right only if the closing price of our common stock
exceeds 150% of the then prevailing conversion price for 20 trading days
during
any consecutive 30 trading day period, as described in the certificate of
designation, as amended, for the Series B preferred stock.
If
there
is a fundamental change in the ownership or control of FuelCell (as described
in
the certificate of designation, as amended), holders of our Series B preferred
stock may require us to purchase all or part of their shares at a redemption
price equal to 100% of the liquidation preference of the shares of our Series
B
preferred stock to be repurchased, plus accrued and unpaid dividends, if
any, in
the manner set forth in the certificate of designation, as amended.
If
holders of shares of our Series B preferred stock elect to convert their
shares
in connection with certain fundamental changes (as described in the certificate
of designation, as amended), we will in certain circumstances increase the
conversion rate by a number of additional shares of common stock upon conversion
or, in lieu thereof, we may in certain circumstances elect to adjust the
conversion rate and related conversion obligation so that shares of our Series
B
preferred stock are converted into shares of the acquiring or surviving company,
in each case as described in the certificate of designation, as
amended.
The
conversion price of the Series B preferred stock is subject to adjustment
in
certain circumstances as set forth in the certificate of designation, as
amended, to prevent dilution of the interests of the holders of the Series
B
preferred shares, including on account of the following:
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issuances
of common stock as a dividend or distribution to holders of our
common
stock;
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| · |
common
stock share splits or share
combinations;
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issuances
to holders of our common stock of any rights, warrants or options
to
purchase our common stock for a period of less than 60 days; and
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distributions
of assets, evidences of indebtedness or other property to holders
of our
common stock.
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Voting
Holders
of shares of our Series B preferred stock have no voting rights unless (1)
dividends on any shares of our Series B preferred stock or any other class
or
series of stock ranking on a parity with the shares of our Series B preferred
stock with respect to the payment of dividends shall be in arrears for dividend
periods, whether or not consecutive, containing in the aggregate a number
of
days equivalent to six calendar quarters or (2) we fail to pay the repurchase
price, plus accrued and unpaid dividends, if any, on the fundamental change
repurchase date for shares of our Series B preferred stock following a
fundamental change (as described in the certificate of designation, as amended,
for the Series B preferred stock). In each such case, the holders of shares
of
our Series B preferred stock (voting separately as a class with all other
series
of other preferred stock on parity with our Series B preferred stock upon
which
like voting rights have been conferred and are exercisable, if any) will
be
entitled to vote for the election of two directors in addition to those
directors on the board of directors at such time at the next annual meeting
of
shareholders and each subsequent meeting until the repurchase price or all
dividends accumulated on the shares of our Series B preferred stock have
been
fully paid or set aside for payment. The term of office of all directors
elected
by the holders of shares of our Series B preferred stock will terminate
immediately upon the termination of the right of holders of shares of our
Series
B preferred stock to vote for directors.
So
long
as any shares of our Series B preferred stock remain outstanding, we will
not,
without the consent of the holders of at least two-thirds of the shares of
our
Series B preferred stock outstanding at the time (voting separately as a
class
with all other series of preferred stock, if any, on parity with our Series
B
preferred stock upon which like voting rights have been conferred and are
exercisable) issue or increase the authorized amount of any class or series
of
shares ranking senior to the outstanding shares of our Series B preferred
stock
as to dividends or upon liquidation. In addition, we will not, subject to
certain conditions, amend, alter or repeal provisions of our certificate
of
incorporation, including the certificate of designation, as amended, relating
to
our Series B preferred stock, whether by merger, consolidation or otherwise,
so
as to adversely amend, alter or affect any power, preference or special right
of
the outstanding shares of our Series B preferred stock or the holders thereof
without the affirmative vote of not less than two-thirds of the issued and
outstanding shares of our Series B preferred stock.
Anti-Takeover
Provisions
Provisions
of our Certificate of Incorporation and By-Laws
A
number
of provisions of our certificate of incorporation and by-laws concern matters
of
corporate governance and the rights of shareholders. Some of these provisions,
including, but not limited to, the inability of shareholders to take action
by
unanimous written consent, supermajority voting provisions with respect to
any
amendment of voting rights provisions, the filling of vacancies on the board
of
directors by the affirmative vote of a majority of the remaining directors,
and
the ability of the board of directors to issue shares of preferred stock
and to
set the voting rights, preferences and other terms thereof, without further
shareholder action, may be deemed to have anti-takeover effect and may
discourage takeover attempts not first approved by the board of directors,
including takeovers which shareholders may deem to be in their best interests.
If takeover attempts are discouraged, temporary fluctuations in the market
price
of shares of our common stock, which may result from actual or rumored takeover
attempts, may be inhibited. These provisions, together with the ability of
the
board of directors to issue preferred stock without further shareholder action,
could also delay or frustrate the removal of incumbent directors or the
assumption of control by shareholders, even if the removal or assumption
would
be beneficial to our shareholders. These provisions could also discourage
or
inhibit a merger, tender offer or proxy contest, even if favorable to the
interests of shareholders, and could depress the market price of our common
stock. The board of directors believes these provisions are appropriate to
protect our interests and the interests of our shareholders. The board of
directors has no present plans to adopt any further measures or devices which
may be deemed to have an “anti-takeover effect.”
Delaware
Anti-Takeover Provisions
We
are
subject to Section 203 of the Delaware General Corporation Law, which prohibits
a publicly-held Delaware corporation from engaging in a “business combination,”
except under certain circumstances, with an “interested shareholder” for a
period of three years following the date such person became an “interested
shareholder” unless:
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•
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before
such person became an interested shareholder, the board of directors
of
the corporation approved either the business combination or the
transaction that resulted in the interested shareholder becoming
an
interested shareholder;
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• |
upon
the consummation of the transaction that resulted in the interested
shareholder becoming an interested shareholder, the interested
shareholder
owned at least 85 percent of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding shares
held
by directors who are also officers of the corporation and shares
held by
employee stock plans; or
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• |
at
or following the time such person became an interested shareholder,
the
business combination is approved by the board of directors of the
corporation and authorized at a meeting of shareholders by the
affirmative
vote of the holders of 66 2/3 percent of the outstanding voting
stock of
the corporation which is not owned by the interested
shareholder.
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The
term
“interested shareholder” generally is defined as a person who, together with
affiliates and associates, owns, or, within the three years prior to the
determination of interested shareholder status, owned, 15 percent or more
of a
corporation’s outstanding voting stock. The term “business combination” includes
mergers, asset or stock sales and other similar transactions resulting in
a
financial benefit to an interested shareholder. Section 203 makes it more
difficult for an “interested shareholder” to effect various business
combinations with a corporation for a three-year period. The existence of
this
provision would be expected to have an anti-takeover effect with respect
to
transactions not approved in advance by the board of directors, including
discouraging attempts that might result in a premium over the market price
for
the shares of our common stock held by shareholders. A Delaware corporation
may
“opt out” of Section 203 with an express provision in its original certificate
of incorporation or any amendment thereto. Our certificate of incorporation
does
not contain any such exclusion.
Connecticut
Anti-Takeover Provisions
The
laws
of the State of Connecticut, where our principal executive offices are located,
impose restrictions on certain transactions between certain foreign corporations
and significant shareholders. Section 33-840 of the Connecticut Business
Corporation Act prohibits certain publicly-held foreign corporations that
are
based in Connecticut from engaging in a “business combination” (including the
issuance of equity securities which have an aggregate market value of 5 percent
or more of the total market value of the outstanding shares of the company)
with
an “interested shareholder” as defined in the Connecticut Business Corporation
Act for a period of five years from the date of the shareholder’s purchase of
stock, unless approved in a prescribed manner. The application of this statute
could prevent a change of control. Generally, approval is required by the
board
of directors, by 80 percent of the outstanding voting shares and two-thirds
of
the voting power of the outstanding shares of the voting stock other than
shares
held by the interested shareholder. We can give no assurance that these
provisions would not prevent us from entering into a business combination
that
otherwise would be beneficial to us or to our shareholders.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock and preferred stock is
Continental Stock Transfer & Trust Company, New York, New York.
SELLING
SHAREHOLDERS
The
shares of our Series B preferred stock and shares of our common stock that
may
be offered with this prospectus will be offered by the selling shareholders,
which include their transferees, pledgees or donees or their successors.
The
following table sets forth certain information concerning the shares of our
Series B preferred stock and shares of common stock beneficially owned by
each
selling shareholder that may be offered from time to time with this prospectus.
We
have
prepared the table below based on information given to us by the selling
shareholders prior to the date of this prospectus. However, any or all of
the
shares of our Series B preferred stock and the shares of our common stock
issuable upon the conversion of our Series B preferred stock listed below
may be
offered for sale with this prospectus by the selling shareholders from time
to
time. Accordingly, no estimate can be given as to the amount of shares of
our
Series B preferred stock or shares of our common stock that will be held
by the
selling shareholders upon consummation of any sales.
Information
about the selling shareholders may change over time. Any changed information
will be set forth in prospectus supplements or post-effective amendments.
From
time to time, however, the shares of our Series B preferred stock and shares
of
our common stock may be owned by persons not named in the table below and
of
whom we are unaware.
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Name
and Address
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Number
of Shares Beneficially Owned Before this Offering
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|
Number
of Shares Being Offered For Sale in this Offering
|
|
Number
of Shares Beneficially Owned After this Offering
(4)
|
|
Percentage
Beneficially Owned After this Offering
|
|
| |
|
Series
B
Preferred
Stock
|
|
Common
Stock (1)
|
|
Series
B
Preferred
Stock
|
|
Common
Stock
(2)
(3)
|
|
Series
B
Preferred
Stock
|
|
Common
Stock
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADAR
Investment Fund Ltd.
c/o
ADAR Investment Management LLC
156
West 56th
Street, Suite 801
New
York, New York 10019
Attn:
Aaron Morse
|
|
|
5,550
|
|
|
472,340
|
|
|
5,550
|
|
|
472,340
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Astrazeneca
Holdings Pension
c/o
Froley Revy Investment Co. Inc.
10900
Wilshire Blvd., Suite 900
Los
Angeles, CA 90024
Attn:
Lee Y. Garnet
|
|
|
265
|
|
|
22,553
|
|
|
265
|
|
|
22,553
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
BNP
Paribas Equity Strategies, SNC
c/o
CooperNeff Advisors, Inc.
555
Croton Road, Fourth Floor
King
of Prussia, PA 19406
Attn:
Dawn K. Papciak
|
|
|
280
|
|
|
34,245
|
|
|
280
|
|
|
23,829
|
|
|
0
|
|
|
10,416
|
|
|
*
|
|
|
Boilermakers
Blacksmith Pension Trust
c/o
Froley Revy Investment Co. Inc.
10900
Wilshire Blvd., Suite 900
Los
Angeles, CA 90024
Attn:
Lee Y. Garnet
|
|
|
1,085
|
|
|
92,340
|
|
|
1,085
|
|
|
92,340
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Name
and Address
|
|
Number
of Shares Beneficially Owned Before this Offering
|
|
Number
of Shares Being Offered For Sale in this Offering
|
|
Number
of Shares Beneficially Owned After this Offering
(4)
|
|
Percentage
Beneficially Owned After this Offering
|
|
| |
|
Series
B
Preferred
Stock
|
|
Common
Stock (1)
|
|
Series
B
Preferred
Stock
|
|
Common
Stock
(2)
(3)
|
|
Series
B
Preferred
Stock
|
|
Common
Stock
|
|
|
|
| |
|
Coastal
Convertibles Ltd.
c/o
Harbor Capital
2777
Summer Street
Stamford,
CT 06905
Attn:
Jay Lurie
|
|
|
1,000
|
|
|
85,106
|
|
|
1,000
|
|
|
85,106
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
CooperNeff
Convertible Strategies (Cayman) Master Fund, LP
c/o
CooperNeff Advisors, Inc.
555
Croton Road, Fourth Floor
King
of Prussia, PA 19406
Attn:
Dawn K. Papciak
|
|
|
150
|
|
|
12,765
|
|
|
150
|
|
|
12,765
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Delaware
PERS
c/o
Froley Revy Investment Co. Inc.
10900
Wilshire Blvd., Suite 900
Los
Angeles, CA 90024
Attn:
Lee Y. Garnet
|
|
|
500
|
|
|
42,553
|
|
|
500
|
|
|
42,553
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Froley,
Revy Convertible Arbitrage Offshore
c/o
Froley Revy Investment Co. Inc.
10900
Wilshire Blvd., Suite 900
Los
Angeles, CA 90024
Attn:
Lee Y. Garnet
|
|
|
50
|
|
|
4,255
|
|
|
50
|
|
|
4,255
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Highbridge
International LLC
Jim
Jordon-c/o HCM
9
West 57th
Street
New
York, New York 10019
|
|
|
700
|
|
|
59,574
|
|
|
700
|
|
|
59,574
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
ICI
American Holdings Trust
c/o
Froley Revy Investment Co. Inc.
10900
Wilshire Blvd., Suite 900
Los
Angeles, CA 90024
Attn:
Lee Y. Garnet
|
|
|
190
|
|
|
16,170
|
|
|
190
|
|
|
16,170
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Kamunting
Street Master Fund, Ltd.
140
East 45th
Street, 15th
Floor
New
York, NY 10017
Attn:
Jason Abrams
|
|
|
18,375
|
|
|
1,563,829
|
|
|
15,250
|
|
|
1,297,872
|
|
|
3,125
|
|
|
265,957
|
|
|
___
|
|
|
Lyxor/Convertible
Arbitrage Fund Limited
c/o
CooperNeff Advisors, Inc.
555
Croton Road, Fourth Floor
King
of Prussia, PA 19406
Attn:
Dawn K. Papciak
|
|
|
37
|
|
|
3,148
|
|
|
37
|
|
|
3,148
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Name
and Address
|
|
Number
of Shares Beneficially Owned Before this Offering
|
|
Number
of Shares Being Offered For Sale in this Offering
|
|
Number
of Shares Beneficially Owned After this Offering
(4)
|
|
Percentage
Beneficially Owned After this Offering
|
|
| |
|
Series
B
Preferred
Stock
|
|
Common
Stock (1)
|
|
Series
B
Preferred
Stock
|
|
Common
Stock
(2)
(3)
|
|
Series
B
Preferred
Stock
|
|
Common
Stock
|
|
|
|
| |
|
Phaeton
International (BUI) Limited
600
Fifth Avenue, 27th Floor
New
York, NY 10020
Attn:
Joann McNiff
|
|
|
2,536
|
|
|
215,829
|
|
|
2,536
|
|
|
215,829
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Phoenix
Partners L.P.
600
Fifth Avenue, 27th Floor
New
York, NY 10020
Attn:
Joann McNiff
|
|
|
2,832
|
|
|
241,021
|
|
|
2,832
|
|
|
241,021
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Phoenix
Partners II L.P.
600
Fifth Avenue, 27th Floor
New
York, NY 10020
Attn:
Joann McNiff
|
|
|
932
|
|
|
79,319
|
|
|
932
|
|
|
79,319
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Privilege
Portfolio Sicav
c/o
MFM International
31
Milk Street, Suit 1111
Boston,
MA 02109
Attn:
Chris Palmiter
|
|
|
2,000
|
|
|
170,212
|
|
|
2,000
|
|
|
170,212
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Provident
Premier Master Fund Ltd.
c/o
RNK Capital LLC
527
Madison Avenue, 6th
Floor
New
York, NY 10022
Attn:
Zor Rothman
|
|
|
500
|
|
|
42,553
|
|
|
500
|
|
|
42,553
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Provident
Premier Master Fund Ltd.
c/o
Pine River Capital Management L.P.
800
Nicollet Mall, Suite 2710
Minneapolis,
MN 55402
Attn:
Natalie Abbott
|
|
|
575
|
|
|
48,936
|
|
|
575
|
|
|
48,936
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Singlehedge
U.S. Convertible Arbitrage Fund
c/o
CooperNeff Advisors, Inc.
555
Croton Road, Fourth Floor
King
of Prussia, PA 19406
Attn:
Dawn K. Papciak
|
|
|
55
|
|
|
4,680
|
|
|
55
|
|
|
4,680
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Sturgeon
Limited
Washington
Mall - Phase I
Church
Street, 3rd
Floor
Hamilton
HM 11 Bermuda
Attn:
Chris Bond
|
|
|
48
|
|
|
4,085
|
|
|
48
|
|
|
4,085
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Name
and Address
|
|
Number
of Shares Beneficially Owned Before this Offering
|
|
Number
of Shares Being Offered For Sale in this Offering
|
|
Number
of Shares Beneficially Owned After this Offering
(4)
|
|
Percentage
Beneficially Owned After this Offering
|
|
| |
|
Series
B
Preferred
Stock
|
|
Common
Stock (1)
|
|
Series
B
Preferred
Stock
|
|
Common
Stock
(2)
(3)
|
|
Series
B
Preferred
Stock
|
|
Common
Stock
|
|
|
|
| |
|
Syngenta
AG
c/o
Froley Revy Investment Co. Inc.
10900
Wilshire Blvd., Suite 900
Los
Angeles, CA 90024
Attn:
Lee Y. Garnet
|
|
|
110
|
|
|
9,361
|
|
|
110
|
|
|
9,361
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
|
Whitebox
Convertible Arbitrage Partners, L.P.
3033
Excelsior Blvd., Suite 300
Minneapolis,
MN 55403
Attn:
Rebecca Lesmeister
|
|
|
14,000
|
|
|
1,191,489
|
|
|
14,000
|
|
|
1,191,489
|
|
|
0
|
|
|
0
|
|
|
0
|
%
|
_______________
* Less
than 1%
(1) Includes
shares of common stock issuable upon conversion of shares of Series B preferred
stock held by such selling shareholder.
(2) Shares
of our Series B preferred stock are converted into common stock at a conversion
rate of 85.1064 shares of our common stock for each share of Series B preferred
stock.
(3) Cash
will be paid in lieu of fractional shares resulting from the conversion of
the
shares of our Series B preferred stock.
(4) Assumes
all shares of our Series B referred stock and the shares of our common stock
issuable upon the conversion of our Series B preferred stock listed in the
above
table will be sold by the selling shareholders.
None
of
the selling shareholders has, or within the past three years has had, any
position, office or other material relationship with us or any of our
predecessors or affiliates.
Only
selling shareholders identified above who beneficially own the securities
set
forth opposite each such selling shareholder’s name in the foregoing table, on
the effective date of the registration statement of which this prospectus
forms
a part, may sell such securities under this prospectus. Prior to any use
of this
prospectus in connection with an offering of the Series B preferred stock
and/or
the common stock by any holder not identified above, this prospectus will
be
supplemented or amended to set forth the name and other information about
the
selling shareholder intending to sell such Series B preferred stock and the
common stock. The prospectus supplement or post-effective amendment will
also
disclose whether any selling shareholder selling in connection with such
prospectus supplement or post-effective amendment has held any position or
office with, been employed by or otherwise has had a material relationship
with,
us or any of our affiliates during the three years prior to the date of the
prospectus supplement or post-effective amendment if such information has
not
been disclosed in this prospectus.
PLAN
OF DISTRIBUTION
Background
On
November 17, 2004, we sold to Citigroup Global Markets Inc., RBC Capital
Markets
Corporation, Adams Harkness, Inc., and Lazard Freres & Co., LLC
(collectively referred to as the “Initial Purchasers”) in a private placement
under Rule 144A, 100,000 shares of our 5% Series B Cumulative Convertible
Perpetual Preferred Stock (Liquidation Preference $1,000) (“Series B preferred
stock”) pursuant to a certain purchase agreement. Under the terms of the
purchase agreement with the Initial Purchasers, the Initial Purchasers were
granted an over-allotment option to purchase up to an additional 35,000 shares
of Series B preferred stock through January 25, 2005.
On
January 14, 2005, we sold an additional 5,875 shares of our Series B preferred
stock to the Initial Purchasers as part of the over-allotment option. Net
proceeds to us was approximately $99 million.
Pursuant
to the 144A private placement, we entered into a registration rights agreement
with the initial purchasers for their benefit and the benefit of any holder
of
Series B preferred stock thereafter, whereby we agreed to register shares
of our
Series B preferred stock and shares of our common stock issuable upon conversion
of the shares of our Series B preferred stock, provided we receive from the
holder of Series B preferred stock a notice requesting registration of such
shares under the Securities Act of 1933, as amended (the “Securities Act”). We
filed a registration statement on Form S-1 (File No. 122241) with the Securities
and Exchange Commission, that was declared effective on May 17, 2005, in
connection the registration of the resale of 60,250 shares of our Series
B
preferred stock held of record by certain of our shareholders who requested
registration of such shares and 5,127,648 shares of our common stock, subject
to
adjustment, issuable upon conversion of such shares of our Series B preferred
stock. As
of the
date of this prospectus, we have received notices from additional selling
shareholders named in this prospectus to have their respective shares registered
as described in this prospectus. We will supplement or amend this prospectus
in
the event we are notified by other holders of our Series B preferred stock
to
have their respective shares registered but we are not required to do so
more
than once every sixty days.
General
The
shares of our Series B preferred stock and the shares of our common stock
being
offered for sale pursuant to this prospectus may be sold by the selling
shareholders or by pledgees, donees, transferees or other successors in interest
of the selling shareholders for their respective own accounts.
We
will
receive none of the proceeds from the sale of the shares being offered by
this
prospectus. We have agreed to bear all of the expenses in connection with
the
registration and sale of the shares, except for brokerage commissions or
other
charges and expenses incurred in the sale of the shares, and we will reimburse
the selling shareholders for reasonable disbursements of one firm or counsel
which shall initially be Cleary, Gottlieb, Steen & Hamilton, but which may
be another nationally recognized law firm experienced in securities matters
designated to act as counsel in connection herewith by the selling shareholders
holding a majority of the shares being offered for sale by this prospectus.
The
distribution of the shares by the selling shareholders is not subject to
any
underwriting agreement. The shares offered by the selling shareholders may
be
sold from time to time at fixed prices, at market prices prevailing at the
time
of sale, at varying prices determined at the time of sale or at negotiated
prices. In addition, the selling shareholders may sell their shares covered
by
this prospectus through customary brokerage channels, either through
broker-dealers acting as agents or brokers, or through broker-dealers acting
as
principals, who may then resell the shares, or at private sale or otherwise,
at
fixed prices, at market prices prevailing at the time of sale, at varying
prices
determined at the time of sale or at negotiated prices. Such sales may be
effected in one or more transactions (which may involve block
transactions):
| |
•
|
on
any national securities exchange or quotation service on which
the shares
of our Series B preferred stock or shares of our common stock,
as the case
maybe, may be listed or quoted at the time of
sale;
|
| |
• |
in the over-the-counter
market; |
| |
•
|
in
transactions otherwise than on exchanges or services or in the
over-the-counter market; or
|
| |
• |
through the writing of
options. |
The
selling shareholders may effect such transactions by selling the shares to
or
through broker-dealers, and such broker-dealers may receive compensation
in the
form of underwriting discounts, concessions, commissions, or fees from the
selling shareholders and/or purchasers of the shares for whom such
broker-dealers may act as agent or to whom they sell as principal, or both
(which compensation to a particular broker-dealer might be in excess of
customary commissions).
The
selling shareholders may enter into hedging transactions with broker-dealers
in
connection with distributions of the shares or otherwise. In these transactions,
broker-dealers may engage in short sales of the shares in the course of hedging
the positions they assume with selling shareholders. The selling shareholders
may also sell shares short and redeliver the shares to close out such short
positions. The selling shareholders may enter into options or other transactions
with broker-dealers that require the delivery to the broker-dealer of the
shares. The broker-dealer may then resell or otherwise transfer such shares
pursuant to this prospectus. The selling shareholders also may loan or pledge
the shares to a broker-dealer. The broker-dealer may sell the shares so loaned,
or upon default, the broker-dealer may sell the pledged shares pursuant to
this
prospectus.
Any
broker-dealers that participate with the selling shareholders in the
distribution of the shares being offered pursuant to this prospectus may
be
deemed to be underwriters and any commissions received by them and any profit
on
the resale of shares positioned by them might be deemed to be underwriting
discounts and commissions within the meaning of the Securities Act, in
connection with such sales.
Our
common stock is quoted on the Nasdaq National Market under the symbol “FCEL”. No
public market currently exists for shares of our Series B preferred stock.
Although we intend shares of our Series B preferred stock will be eligible
for
trading in the Portal Market, the National Association of Securities Dealers’
screen-based automated market for trading of securities eligible for resale
under Rule 144A, there can be no assurance.
Any
shares covered by this prospectus that qualify for sale pursuant to Rule
144
under the Securities Act may be sold under Rule 144 rather than pursuant
to this
prospectus.
Under
the
registration rights agreement, we and the selling shareholders will be
indemnified by the other against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act, or will be entitled
to contributions in connection with these liabilities. To our knowledge,
none of
the selling shareholders has entered into any agreements, understandings
or
arrangements with any underwriters or broker-dealers regarding the sale of
their
shares of our common stock, nor is there an underwriter or coordinating broker
acting in connection with a proposed sale of shares by any of the selling
shareholders. If we are notified by any selling shareholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
offered pursuant to this prospectus, we will, if required, file a supplement
to
this prospectus. If the selling shareholders use this prospectus for any
sale of
the shares, they will be subject to the prospectus delivery requirements
of the
Securities Act.
Each
selling shareholder will be subject to applicable provisions of the Exchange
Act
and the associated rules and regulations under the Exchange Act, including
Regulation M, which provisions may limit the timing of purchases and sales
of
shares of our common stock by the selling shareholders.
The
4,139,990 shares of our common stock offered pursuant to this prospectus
which
are issuable upon the conversion of the Series B preferred stock will be
issued
in accordance with the terms of the Series B preferred stock. Cash will be
paid
in lieu of fractional shares resulting from the conversion of shares of our
Series B preferred stock.
LEGAL
MATTERS
The
validity of the securities offered hereby has been passed upon for us by
Robinson & Cole LLP, Stamford, Connecticut.
EXPERTS
Our
consolidated financial statements as of October 31, 2004 and 2003, and for
each
of the three years in the period ended October 31, 2004, incorporated by
reference in this prospectus and in the registration statement of which this
prospectus is a part, from our Annual Report on Form 10-K for the year ended
October 31, 2004, have been audited by KPMG LLP, independent registered public
accounting firm, as stated in their report, and have been so incorporated
in
reliance upon the report given on their authority as experts in accounting
and
auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed with the Securities and Exchange Commission (SEC) a registration statement
on Form S-3 under the Securities Act with respect to the shares of our Series
B
preferred stock and common stock offered hereby. This prospectus, which
constitutes a part of the registration statement, does not contain all of
the
information set forth in the registration statement or the exhibits and
schedules filed therewith. For further information about us and the Series
B
preferred stock and common stock offered hereby, reference is made to the
registration statement and the exhibits and schedules filed therewith.
Statements contained in this prospectus regarding the contents of any contract
or any other document that is filed as an exhibit to the registration statement
are not necessarily complete, and each such statement is qualified in all
respects by reference to the full text of such contract or other document
filed
as an exhibit to the registration statement. A copy of the registration
statement and the exhibits and schedules filed therewith may be inspected
without charge at the public reference room maintained by the SEC, located
at
450 Fifth Street, N.W., Room 1200, Washington, D.C. 20549, and copies
of
all or any part of the registration statement may be obtained from such offices
upon the payment of the fees prescribed by the SEC. Please call the SEC at
1-800-SEC-0330 for further information about the public reference room. The
SEC
also maintains an Internet web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The address of the site is http://www.sec.gov.
We
are
subject to the informational requirements of the Securities Exchange Act
of 1934
and, therefore, we file annual, quarterly and current reports, proxy statements
and other information with the SEC. Such periodic reports, proxy
statements and other information are available for inspection and copying
at the
public reference room and web site of the SEC referred to above. Our common
stock is quoted on the Nasdaq National Market, and you may also inspect and
copy
our SEC filings at the offices of the National Association of Securities
Dealers, Inc. located at 1735 K Street, N.W., Washington, D.C. 20549.
You
should rely only on the information provided in this prospectus and the
registration statement. We have not authorized anyone else to provide you
with
different information. These securities are not being offered in
any state
where the offer is not permitted. You should assume that the information
in this prospectus is accurate only as of the dates of those documents.
Our business, financial condition, results of operations and prospects may
have
changed since those dates.
The
Securities
and Exchange Commission
(SEC)
allows us to “incorporate by reference” information that we file with it, which
means that we can disclose important information to you by referring you
to
those documents. The information incorporated by reference is an important
part
of this prospectus. Information in this prospectus supersedes information
incorporated by reference that we filed with the SEC prior to the date of
this
prospectus, while information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference into this
registration statement and prospectus the documents listed below, and any
future
filings we will make with the SEC under Sections 13(a), 13(c), 14
or 15(d)
of the Securities
Exchange Act of 1934:
|
1.
|
Our
Annual Report on Form 10-K for the fiscal year ended October 31,
2004;
|
|
|
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2.
|
Our
Proxy for our shareholders’ meeting on March 29, 2005, filed on February
25, 2005;
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3.
|
Our
Quarterly Reports on Form 10-Q for the quarters ended January 31,
2005 and
April 30, 2005;
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4.
|
Our
Current Reports on Form 8-K filed January 20, 2005, February 18,
2005, March 11, 2005 and June 7, 2005; and
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5.
|
The
description of our common stock set forth in our registration statement
on
Form 8-A, filed with the SEC on June 6, 2000, including any amendments
or
reports filed for the purposes of updating this
description.
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We
will
furnish without charge to you, on written or oral request, a copy of any
or all
of the documents incorporated by reference, including exhibits to these
documents. You should direct any requests for documents to FuelCell Energy,
Inc., Attention: Corporate Secretary, 3 Great Pasture Road, Danbury, Connecticut
06813, telephone: (203) 825-6000.
[LOGO]
48,645
Shares of 5% Series B Cumulative Convertible
Perpetual
Preferred Stock
AND
4,139,990
Shares of Common Stock, Subject to Adjustment, Issuable Upon Conversion of
5%
Series B Cumulative Convertible
Perpetual
Preferred Stock
______________
PROSPECTUS
June
[__], 2005
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution.
The
following table sets forth all expenses payable by us in connection with
the
offering of the securities being registered. All such expenses are being
borne
by us.
| SEC Registration
Fee |
|
$
|
5,725.52 |
|
|
Accounting
Fees and Expenses*
|
|
$
|
|
|
|
Legal
Fees and Expenses*
|
|
$
|
|
|
|
Miscellaneous
Expenses*
|
|
$
|
|
|
|
|
|
|
|
|
|
Total*
|
|
$
|
|
|
*
Estimated.
Item
15. Indemnification of Directors and Officers
Section
145 of the Delaware General Corporation Law provides that a corporation may
indemnify any person, including an officer and director, who was or is, or
is
threatened to be made, a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason
of the
fact that such person is or was a director, officer, employee or agent of
such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership,
joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best interests
of
such corporation, and, with respect to any criminal actions and proceedings,
had
no reasonable cause to believe that his conduct was unlawful. A Delaware
corporation may indemnify any person, including an officer or director, who
was
or is, or is threatened to be made, a party to any threatened, pending or
contemplated action or suit by or in the right of such corporation, under
the
same conditions, except that no indemnification is permitted without judicial
approval if such person is adjudged to be liable to such corporation.
Where an officer or director of a corporation is successful, on the
merits
or otherwise, in the defense of any action, suit or proceeding referred to
above, or any claim, issue or matter herein, the corporation must indemnify
such
person against the expenses (including attorneys’ fees) which such officer or
director actually and reasonably incurred in connection therewith.
Our
certificate of incorporation provides that none of our directors will be
personally liable to us or our shareholders for monetary damages for breach
of
fiduciary duty as a director, except to the extent such exemption from liability
or limitation thereof is not permitted under the Delaware General Corporation
Law.
Our
by-laws provide for indemnification of our officers and directors to the
fullest
extent permitted by applicable law. We also maintain directors’ and officers’
liability insurance policies.
Item
16. Exhibits
The
following exhibits are included or incorporated herein by
reference:
| Exhibit
No. |
Description |
|
| |
|
|
|
4.1
|
Specimen
of Common Share Certificate (incorporated by reference to exhibit
of the
same number contained in the Company's Annual Report on Form 10K
for its
fiscal year ended October 31, 1999)
|
|
| |
|
|
|
5.1
|
Opinion
of Robinson & Cole LLP
|
|
| |
|
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm
|
|
| |
|
|
|
23.2
|
Consent
of Robinson & Cole LLP (included in Exhibit 5.1)
|
|
| |
|
|
|
24.1
|
Power
of Attorney
|
|
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, as amended;
(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
Securities and Exchange 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;
provided,
however,
that
paragraphs 1(i) and (1)(ii) of this section do not apply if the registration
statement is on Form
S-3,
Form
S-8
or
Form
F-3,
and 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
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,
as
amended, 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. The
undersigned registrant hereby undertakes 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 section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange
Act of
1934) that is incorporated by reference in the registration statement shall
be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be
the initial bona fide offering thereof.
5.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933,
as
amended, 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.
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 of the requirements
for
filing on Form S-3 and has duly caused this registration statement on Form
S-3
to be signed on its behalf by the undersigned, thereunto duly authorized,
in the
City of Danbury, State of Connecticut, on June 17, 2005.
| |
|
|
| |
FUELCELL
ENERGY, INC. |
|
|
|
| |
By: |
/s/ Joseph
G. Mahler |
| |
Joseph
G. Mahler |
| |
Senior
Vice President and Chief
Financial Officer |
Each
such
person whose signature appears below hereby appoints Jerry D. Leitman and
Joseph
G. Mahler, and each of them, each of whom may act without joinder of the
other,
as his or her true and lawful attorney-in-fact and agent, with full power
and
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to execute in the name and on behalf
of
such person any amendment or any post-effective amendment to this Registration
Statement, and any registration statement relating to any offering made in
connection with the offering covered by this Registration Statement that
is to
be effective on filing pursuant to Rule 462(b) under the Securities Act of
1933,
as amended, and to file the same, with exhibits thereto, and other documents
in
connection therewith, 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 appropriate or necessary to be done, as full
and
for all intents and purposes and 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.
|
SIGNATURE
|
TITLE
|
DATE
|
|
|
|
|
|
/s/
Jerry D. Leitman
|
Chairman
of the
Board, President and
|
June
17, 2005
|
|
Jerry
D. Leitman
|
Chief
Executive Officer
|
|
|
|
(Principal
Executive Officer)
|
|
| |
|
|
|
/s/
Joseph G. Mahler
|
Senior
Vice President, Chief Financial
|
June
17, 2005
|
|
Joseph
G. Mahler
|
Officer,
Corporate Secretary and Treasurer
|
|
|
|
(Principal
Accounting and Financial Officer)
|
|
| |
|
|
| /s/
Warren D. Bagatelle |
Director
|
|
|
Warren
D. Bagatelle
|
|
|
| |
|
|
|
/s/
Michael Bode
|
Director
|
June
16, 2005
|
|
Michael
Bode
|
|
|
|
|
|
|
|
/s/
James D. Gerson
|
Director
|
|
|
James
D. Gerson
|
|
|
|
|
|
|
|
/s/
Thomas L. Kempner
|
Director
|
June
13, 2005
|
|
Thomas
L. Kempner
|
|
|
|
|
|
|
|
/s/
William A. Lawson
|
Director
|
June
15, 2005
|
|
William
A. Lawson
|
|
|
|
|
|
|
|
/s/
Charles J. Murphy
|
Director
|
June
15, 2005
|
|
Charles
J. Murphy
|
|
|
|
|
|
|
|
|
Director
|
------------
|
|
John
A. Rolls
|
|
|
|
|
|
|
|
/s/
Thomas R. Casten
|
Director
|
June
15, 2005
|
|
Thomas
R. Casten
|
|
|
| |
|
|
| |
Director
|
------------
|
|
George
K. Petty
|
|
|
| |
|
|
| |
|
|
INDEX
OF
EXHIBITS
| Exhibit
No. |
Description |
| |
|
|
5.1
|
Opinion
of Robinson & Cole LLP
|
| |
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm
|
| |
|
|
23.2
|
Consent
of Robinson & Cole LLP (included in Exhibit 5.1)
|
| |
|
|
24.1
|
Power
of Attorney
|