As filed with the Securities and Exchange Commission on February 15, 2002
Registration Statement No. 333-___________
=====================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ENOVA SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
California 3711
--------------------------------------- -----------------------------------
(State or Other Jurisdiction of (Primary Standard Industrial
Incorporation or Organization) Classification Code Number)
95-3056150
----------
(I.R.S. Employer
Identification Number)
------------------------------
19850 South Magellan Drive
Torrance, California 90502
(310) 527-2800
(Address, Including Zip Code, and Telephone Number
Including Area Code, of Registrant's Principal Executive Offices)
------------------------------
Carl D. Perry
Chief Executive Officer
Enova Systems, Inc.
19850 South Magellan Drive
Torrance, California 90502
(310) 527-2800
(Name, Address, Including Zip Code, and Telephone Number
Including Area Code, of Agent for Service)
------------------------------
Copies to:
Donald C. Reinke, Esq.
Kay F. Rubin, Esq.
Crosby, Heafey, Roach & May
1999 Harrison Street, Suite 2200
Oakland, California 94612
(510) 763-2000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant under Rule 415 of the Securities Act of
1933, check the following box. [ ]
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 this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Title of Each Class of Proposed Maximum Proposed Maximum
Securities To Be Amount to be Offering Price Aggregate Amount of
Registered Registered (1) Per Share Offering Price Registration Fee (2)
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Common Stock, no par
value 6,000,000 $ 0.15 $ 900,000 $ 82.80
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
(1) Includes an indeterminate number of additional shares of common stock as may
from time to time become issuable by reason of stock splits, stock dividends and
other similar transactions, which shares are registered hereunder pursuant to
Rule 416 under the Securities Act.
(2) The price of $0.165 per share, which was the average of the bid and asked
prices for the common stock on March 13, 2002, is set forth solely for the
purpose of calculating the registration fee in accordance with Rule 457(c) of
the Securities Act.
================================================================================
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this 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 is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 28, 2002
Prospectus
6,000,000 Shares
Common Stock
This is a public offering of up to 6,000,000 shares of common stock of Enova
Systems, Inc. and an indeterminate number of shares that may become available by
reason of stock splits, stock dividends and other similar transactions. All of
these shares are being offered by the selling shareholder identified in this
prospectus. We will not receive any of the proceeds from the sale of shares by
the selling shareholder. The shares offered by this prospectus may be sold from
time to time by the selling shareholder in the national over-the-counter market
at their prevailing prices, or in negotiated transactions.
Our common stock is traded on the National Association of Securities Dealers,
Inc. Electronic Bulletin Board ("OTC Bulletin Board") under the symbol "ENVA".
On March 13, 2002, the OTC Bulletin Board reported that the bid price per share
was $0.155 and the asked price per share was $0.165.
-------------------------------------------------------
Investing in the common stock involves risks.
See "Risk Factors" beginning on page _.
-------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock offered by this prospectus have not been registered
under the blue sky or securities laws of any jurisdiction, and any broker or
dealer should assure itself of the existence of an exemption from registration
or the effect of such registration in connection with the offer and sale of such
shares.
The date of this prospectus is March 28, 2002
-1-
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. This
summary is not complete and does not contain all the information you should
consider before buying shares in this offering. You should read the entire
prospectus carefully, including the risk factors and consolidated financial
statements and related notes appearing elsewhere in this prospectus. The
prospectus contains forward-looking statements, which involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
those described under "Risk Factors" and elsewhere in this prospectus. See
"Cautionary Note on Forward-Looking Statements."
Our Company
Enova Systems believes it is a leader in the development and production of
commercial digital power management systems. Our business activities focus on
the development of electric and hybrid electric drive systems and related
components, fuel cell power management systems for both mobile and stationary
power applications, vehicle systems integration and the performance of various
engineering contracts for government and commercial enterprises.
Enova is now building, under contract with global vehicle and technology
companies, efficient, robust, cost effective digital power processing and energy
management enabling technologies for electric, hybrid electric and fuel cell
powered vehicles. These power management technologies are now being applied to
commercialization of fuel cell power generation for stationary non-automotive
applications.
Our development and production program with Ballard Power, formerly Ecostar
Electric Drive Systems, for low voltage electric drive system components for use
in Ford's Global Th!nk City is progressing as planned. Ford has announced that
an all-electric vehicle is scheduled to be introduced in the 2nd half of 2002
for markets in North America. Enova is designing and manufacturing the
electronics for the drive system as well as certain auxiliary components. The
final prototype systems are currently undergoing pre-production testing and
validation in the Ford Th!nk vehicle. Enova plans to provide production systems
for Ballard in mid 2002.
Enova continues to expand its alliances with Hyundai, Ford, other Original
Equipment Manufacturers or "OEMs" and Tier-One suppliers for sales of its
automotive products. We offer our modular drive systems to OEMs and other
customers. These drive systems have been installed in various passenger vehicles
and buses operating in North America, Europe and Asia.
We have successfully integrated our newest hybrid electric PantherTM 120kW drive
system (utilizing the Capstone Microturbine as its power source) into vehicles
manufactured by Wrights Environment, a division of Wrights Bus, one of the
largest low-floor bus manufacturers in the United Kingdom. This is the initial
delivery to Wrights as part of our agreement to manufacture and integrate pure
electric and hybrid electric drive systems into Wrights' low floor, mid-size
buses for sale in the United Kingdom and the European Continent. We have
additionally delivered a pure electric PantherTM 120kW drive system to Wrights
for integration into their Crusader II bus.
-2-
Enova has also delivered seventeen 120 kW hybrid drive systems to Eco Power
Technology ("EPT") in Italy along with three 40kW Fast Charger system. EPT is
integrating these systems into its midsize shuttle buses and we believe EPT may
purchase twenty to thirty additional systems during 2002. EPT is an integrator
of medium size transit buses for the European shuttle bus market with key
contacts in Rome and Genoa.
Our stationary power programs continue to attract new potential partners and
customers from both fuel cell manufacturers and petroleum companies. It is
management's belief that utilizing our power management systems for stationary
applications for fuel cells will open new markets for our company. Enova is
developing applications for its products in the telecommunications and
distributed generation markets. Discussions are progressing well and we
anticipate an initial development contract within the first quarter of 2002.
Our company continues to attract new development and integration contracts with
the U. S. Government's Department of Transportation, or "DOT". Enova, Hyundai
Motor Company and the State of Hawaii introduced 15 Hyundai Santa Fe electric
vehicles in Honolulu Hawaii for test and evaluation prior to their entry into
the U.S. markets. This program will utilize Hawaii's rapid charging stations,
manufactured by AeroVironment, now being installed.
Additionally, we are integrating, in conjunction with DOT and the State of
Hawaii, its drive systems into several vehicles. We completed the manufacture
and integration of a PantherTM 120kW drive system into an Enoa trolley for
evaluation in the Hawaii tourist market. Enoa operates in the Hawaii tourist
industry, providing scenic transportation services to the islands. We will also
be upgrading eight Chevrolet S-10 trucks owned by the City of Honolulu to its
PantherTM 60kW drive system including its Battery Care Unit (BCU-II) to
incorporate fast-charge capability for Hawaii. Also, we are converting an
Eldorado 30-foot bus utilizing our PantherTM 120kW drive system for the Hickam
Air Force base in Honolulu Hawaii. All of these programs are funded in
conjunction with the Hawaii Electric Vehicle Development Project, the U.S. DOT
and State of Hawaii.
Our contract with the U.S. DOT to design and test a three-car tram utilizing the
Panther 120kW drive system is nearing completion. This tram, capable of carrying
100 passengers, was delivered in January 2002 to the Honolulu International
Airport for test and evaluation. Enova intends to market this tram system to
international markets for application to other airports, national and
recreational parks and other high capacity transit applications.
The development of our 240kW drive system continues to progress. We are working
in conjunction with other motor and gear manufacturers to develop a robust,
efficient and powerful drive system for heavy-duty applications including
transit buses, heavy-duty trucks and other applications. We are continually
creating new alliances in these markets for introduction in early 2002.
We have had significant technology advances with Hyundai Motor Company of Korea,
or HMC, the world's seventh largest automobile manufacturer, with engineering
-3-
contracts to design, develop and test electric and hybrid electric drive systems
and related products. Having successfully completed our hybrid drive system and
fuel cell EV program, we are working with HMC to earn the production contract
for their upcoming parallel hybrid drive system program. Furthermore, HMC has
produced four additional fuel cell SUV's for test and evaluation utilizing our
Panther 90kW drive systems.
Our principal executive offices are located at 19850 South Magellan Drive,
Torrance, California, 90502, and our telephone number is (310) 527-2800.
The Offering
Common stock offered by the selling shareholder: 6,000,000 shares
Securities to be outstanding after this offering (1): 302,502,000 shares of common stock
2,844,336 shares of Series A Convertible Preferred
Stock (convertible into an aggregate of 2,844,336
shares of common stock) ("Series A Stock")
1,217,196 shares of Series B Convertible Preferred
Stock (convertible into an aggregate of 2,434,392
shares of common stock)("Series B Stock")
Voting Rights:
Common Stock: 302,502,000 votes
Series A Stock: 2,844,336 votes
Series B Stock: 2,434,392 votes
Use of proceeds from this offering: We will not receive any of the proceeds from the shares
of common stock sold by the selling shareholder. See
"Selling Shareholder".
OTC Bulletin Board symbol: "ENVA"
-----------------------
(1) Securities outstanding on March 13, 2002. Excludes (A) 30,544,702 shares of
common stock issuable upon exercise of outstanding options granted under our
stock option plans plus an additional 19,455,298 shares reserved for issuance
under our stock option plans, and (B) 15,000,000 shares issuable upon exercise
of outstanding warrants.
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Summary Financial Data
As of and for the year ended December 31, Five Months Fiscal Years ending
(in thousands, except per share data) ended Dec 31 July 31,
2001 2000 1999 1999 1998 1997
---- ---- ---- ---- ---- ----
NET SALES $ 3,780 $ 2,883 $ 629 $ 2,774 $ 1,938 $ 4,484
COST OF SALES 2,783 2,013 377 1,460 2,765 2,042
--------- --------- --------- --------- --------- ---------
GROSS MARGIN 997 870 252 1,314 (827) 2,442
--------- --------- --------- --------- --------- ---------
OTHER COSTS AND EXPENSES
Research and Development 879 626 262 499 445 1,218
Selling, general and administrative 2,894 1,999 796 1,141 1,697 3,116
Interest and financing fees 113 174 724 724 665 792
Other expense (income) (7) 6 -- (41) (67) 274
Acquisition of research and
development -- -- -- -- -- 1,630
Gain on Warranty Reevaluations -- -- -- (474) -- --
Legal Settlements 900 755 125 -- -- --
--------- --------- --------- --------- --------- ---------
Total other costs and expenses 4,779 2,880 1,427 1,849 2,740 7,030
--------- --------- --------- --------- --------- ---------
LOSS FROM CONTINUING OPERATIONS (3,782) (2,010) (1,175) (535) (3,567) (4,588)
GAIN ON DEBT RESTRUCTURING 354 1,551 214 140 42 53
--------- --------- --------- --------- --------- ---------
NET LOSS $ (3,428) $ (459) $ (961) $ (395) $ (3,525) $ (4,535)
========= ========= ========= ========= ========= =========
PER COMMON SHARE:
Loss from continuing operations $ (0.01) $ (0.01) $ (0.01) $ (0.01) $ (0.02) $ (0.03)
Gain on debt restructuring -- $ 0.01 -- -- -- --
--------- --------- --------- --------- --------- ---------
Net loss per common share $ (0.01) $ 0.00 $ (0.01) $ (0.01) $ (0.02) $ (0.03)
========= ========= ========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 275,189 235,199 251,994 152,077 151,265 133,806
========= ========= ========= ========= ========= =========
Total Assets $ 4,340 $ 3,094 $ 2,697 $ 3,940 $ 1,658 $ 4,513
========= ========= ========= ========= ========= =========
Long-term debt $ 3,332 $ 3,332 $ 3,332 $ 3,332 $ 3,332 $ 3,639
========= ========= ========= ========= ========= =========
Shareholders' equity (deficit) $ (232) $ (1,648) $ (5,015) $ (7,316) $ (12,615) $ (9,095)
========= ========= ========= ========= ========= =========
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RISK FACTORS
You should carefully consider the following risks and all other information
contained in this prospectus before you decide to buy our common stock. We have
included a discussion of each material risk that we have identified as of the
date of this prospectus. However, additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also impair our
business operations. If any of the following risks actually occur, our business,
financial condition or operating results could suffer. If this occurs, the
trading price of our common stock could decline, and you could lose all or part
of the money you paid to buy our common stock.
Risks Relating to this Offering
There has been a limited market for our common stock, an active market may not
develop and the market price of our common stock may fluctuate significantly.
Our common stock trades on the OTC Bulletin Board. Securities traded on the OTC
Bulletin Board are for the most part thinly traded. We cannot be certain that an
active market for our shares will ever develop. Numerous factors, many of which
are beyond our control, may cause the market price of the common stock to
fluctuate significantly. These factors include, but are not limited to, the
following:
o continued losses;
o announcements concerning us, our competitors or our customers;
o market conditions in the electric vehicle and the hybrid
electric vehicle industry and the general state of the
securities markets.
General economic, political and market conditions, including recession,
international instability or military tension or conflicts may adversely affect
the market price of our common stock. If we are named as a defendant in any
securities-related litigation as a result of decreases in the market price of
our shares, we may incur substantial costs, and our management's attention may
be diverted, for lengthy periods of time. The market price of our common stock
may not increase above the offering price or maintain its price at or above any
particular level.
We do not expect to pay dividends in the foreseeable future
We have not declared or paid any cash dividends in the past and do not expect to
pay cash dividends in the foreseeable future. We intend to retain our future
earnings, if any, to finance the development of our business. We are required to
pay dividends on our Series A Stock and our Series B Stock before we may pay
dividends on our common stock. At December 31, 2001, we had an accumulated
deficit of approximately $90,293,000 and, until this deficit is eliminated, we
are prohibited from paying dividends on any class of our stock except out of net
profits unless we can meet certain assets and other tests under Sections 500
through 511 of the California Corporations Code. Our board of directors will
determine any future dividend policy in light of the all of the foregoing
information and then existing conditions, including our earnings, financial
-6-
condition and financial requirements. You may never receive dividend payments
from us.
As of the date of this prospectus, we have outstanding 302,502,000 shares of
common stock, 2,844,336 shares of Series A Stock, each of which is convertible
into one share of common stock, and 1,217,196 shares of Series B Stock, each of
which is convertible into two shares of common stock. Sales of a substantial
number of shares of our common stock in the public market following this
offering could cause our stock price to decline. All the shares sold in this
offering will be freely tradable. Currently 93,676,002 shares of common stock
are freely tradable and an additional 5,278,728 shares of Series A Stock or
Series B Stock would be freely tradable upon conversion to common stock. An
additional 131,494,137 shares of common stock are eligible for sale in the
public market subject to volume restrictions of Rule 144, shares of common stock
issuable upon exercise of outstanding options will become freely tradable upon
issuance. In addition, the sale of these shares could impair our ability to
raise capital through the sale of additional stock. See "Shares Eligible for
Future Sale."
Our principal shareholders, executive officers and directors have substantial
control over most matters submitted to a vote of the shareholders, thereby
limiting your power to influence corporate action.
Our officers, directors and principal shareholders beneficially own
approximately 60% of our common stock (including in that percentage shares of
our Series A Stock and Series B Stock). As a result, these shareholders have the
power to control the outcome of most matters submitted to a vote of
shareholders, including the election of members of our board, and the approval
of significant corporate transactions. The shareholders purchasing shares in
this offering will have little influence on these matters. This concentration of
ownership may also have the effect of making it more difficult to obtain the
needed approval for some types of transactions that these shareholders oppose,
and may result in delaying, deferring or preventing a change in control of our
company.
The effects of anti-takeover provisions in our charter and bylaws could inhibit
the acquisition of us by others.
Several provisions of our articles of incorporation and bylaws could discourage
potential acquisition proposals and could delay or prevent a change in control
of our company.
Risks Related to Our Business
Our industry is new, is subject to technological changes and is subject to
competition from a variety of companies and industries.
The mobile and stationary power markets including electric vehicle ("EV") and
Hybrid EVs ("HEV") continues to be subject to rapid technological change. There
are many large and small companies, both domestic and foreign, now in this
industry. Most of the major domestic and foreign automobile manufacturers: (1)
have produced electric and hybrid vehicles, and/or (2) have developed improved
electric storage, propulsion and control systems, and/or (3) are now entering or
have entered into production. Various non-automotive companies are also
developing improved electric storage, propulsion
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and control systems. Growth of the present limited demand for electric,
hybrid-electric and fuel cell powered vehicles depends upon various factors
including:
o future regulation and legislation requiring more use of non-polluting
or low-emission vehicles;
o the environmental consciousness of customers; and
o the ability of electric and hybrid-electric vehicles to successfully
compete with vehicles powered with internal combustion engines on price
and performance.
In addition, the stationary power market is still in its infancy. A number of
established energy companies are developing new technologies to capture early
market share in this promising field. Cost-effective methods to reduce price per
kilowatt must be established before the stationary power market becomes viable.
Many of our competitors, both in the automotive and non-automotive industries,
are larger and have substantially greater financial, personnel, and other
resources than us.
We have increasing and continued losses.
Our Company was founded in 1976 as Clover Solar Corporation, but initial sales
were very limited and were unprofitable as a manufacturer of solar powered toys.
The name was then changed to Solar Electric Engineering in 1978. We have been
profitable in only one year, fiscal year 1986. In July 2000, we changed our name
to Enova Systems, Inc. Our company was previously known as U. S. Electricar,
Inc.
For the twelve months ended December 31, 2001, the Corporation lost an
additional $3,428,000 on sales of $ 3,780,000. There can be no assurance that we
will achieve profitability in the near or foreseeable future.
We are highly subject to general economic conditions.
The financial success of our company is sensitive to adverse changes in general
economic conditions, such as inflation, unemployment, and consumer demand for
our products. These changes could cause the cost of supplies, labor, and other
expenses to rise faster than we can raise prices. Such changing conditions also
could significantly reduce demand in the marketplace for our products. We have
no control over any of these changes.
We are an early growth stage company.
Although our company was originally founded in 1976, many aspects of our
business are still in the early growth stage development, and our proposed
operations are subject to all of the risks inherent in a start-up or growing
business enterprise, including the likelihood of continued operating losses. The
likelihood of our success must be considered in light of the problems, expenses,
difficulties, complications, and delays frequently encountered in connection
with the growth of an existing business, the development of new products and
channels of distribution, and current and future development in several key
technical fields, as well as the competitive and regulatory environment in which
we operate.
-8-
We are highly dependent on a few key personnel and will need to retain and
attract such personnel in a labor competitive market.
Our success is largely dependent on the performance of our key management and
technical personnel, including Carl Perry, our Chief Executive Officer, Abas
Goodarzi, our Chief of Technology, Don Kang, our Vice President of Engineering
and Larry Lombard, Finance and Administration, the loss of one or more of whom
could adversely affect our business. Additionally, in order to successfully
implement our anticipated growth, we will be dependent on our ability to hire
additional qualified personnel. There can be no assurance that we will be able
to retain or hire other necessary personnel. We do not maintain key man life
insurance on any of our key personnel. We believe that our future success will
depend in part upon our continued ability to attract, retain, and motivate
additional highly skilled personnel in an increasingly competitive market.
We are subject to competitive forces.
There are many companies, including numerous major automobile companies and
electronic firms, actively engaged in the research and development of power
management and power conversion systems. Many have far greater resources and
marketing abilities than we possess.
Our business is subject to rapid technological change.
Our existing products are designed for use with, and are dependent upon,
existing electric vehicle technology. As technologies change, and subject to our
limited available resources, we plan to upgrade or adapt our products in order
to continue to provide products with the latest technology. There can be no
assurance, however, that we will be able to avoid technological obsolescence of
our products or that our research and development efforts will be able to adapt
to changes in or create the necessary "leading-edge" technology to stay
competitive. Further proprietary technology development by others could prohibit
us from using our own technology.
There are minimal barriers to entry in our market.
Other than five pending patents, trademarks, trade secrets and distribution
agreements with suppliers of subcomponents, we presently license or own a
limited amount of proprietary technology and, therefore, have created little or
no barrier to entry for competitors other than the time and significant expense
required to assemble and develop similar production and design capabilities. Our
competitors may enter into exclusive arrangements with our current or potential
suppliers, thereby giving them a competitive edge which we may not be able to
overcome.
Our industry is affected by political and legislative changes.
Because vehicles powered by internal combustion engines cause pollution, there
has been significant public pressure in Europe and Asia, and enacted or pending
legislation in the United States at the federal level and in certain states, to
promote or mandate the use of vehicles with no tailpipe emissions ("zero
emission vehicles") or reduced tailpipe emissions ("low emission vehicles").
Legislation requiring or promoting zero or low emission vehicles is necessary to
create a significant market for electric vehicles. The
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California Air Resources Board (CARB) has recently confirmed its mandatory
limits for zero emission and low emission vehicles. We cannot assure you there
will not be further legislation enacted or that current legislation or state
mandates will not be repealed or amended, or that a different form of zero
emission or low emission vehicle will not be invented, developed and produced,
and achieve greater market acceptance than electric or hybrid electric vehicles.
Extensions, modifications or reductions of current federal and state
legislation, mandates and potential tax incentives could adversely affect our
business prospects if implemented.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
Some of the matters discussed under the captions "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this prospectus include
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events.
In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "should," "could," "predicts," "potential," "continue,"
"expects," "anticipates," "future," "intends," "plans," "believes," "estimates"
and similar expressions. These statements are based on our current beliefs,
expectations and assumptions and are subject to a number of risks and
uncertainties. Actual results, levels of activity, performance, achievements and
events may vary significantly from those implied by the forward-looking
statements. A description of risks that could cause our results to vary appears
under the caption "Risk Factors" and elsewhere in this prospectus. These
forward-looking statements are made as of the date of this prospectus, and,
except as required under applicable securities law, we assume no obligation to
update them or to explain the reasons why actual results may differ.
-10-
USE OF PROCEEDS
All proceeds from any sale of shares of common stock offered by the selling
shareholder will be received by the selling shareholder and not by us.
PRICE RANGE OF COMMON STOCK
Our common stock is traded in the National Association of Securities Dealers,
Inc. Electronic Bulletin Board ("OTC Bulletin Board") under the symbol "ENVA".
The following table sets forth, for the fiscal quarters indicated, the high and
low prices for our common stock as reported on the OTC Bulletin Board by the
National Quote Bureau. The following over-the-counter market quotations reflect
inter-dealer prices, without retail mark-up, markdown or commission, and may not
necessarily represent actual transactions.
Common Stock Average Daily
High Price Low Price Volume
---------- --------- ------
Fiscal 2000
First Quarter $ 0.77 $ 0.31 1,337,885
Second Quarter $ 0.47 $ 0.23 476,538
Third Quarter $ 0.44 $ 0.20 476,523
Fourth Quarter $ 0.42 $ 0.16 332,731
Fiscal 2001
First Quarter $ 0.31 $ 0.17 237,760
Second Quarter $ 0.31 $ 0.15 245,504
Third Quarter $ 0.26 $ 0.13 116,110
Fourth Quarter $ 0.31 $ 0.13 197,554
Fiscal 2002
First Quarter (through $ 0.23 $ 0.14 332,731
March 8, 2002)
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DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
retain any future earnings to fund our business. Additionally, we are required
to pay dividends on our Series A Stock and our Series B Stock before we may pay
dividends on our common stock. Therefore, we do not anticipate paying cash
dividends on our common stock in the foreseeable future. At December 31, 2001,
we had an accumulated deficit of approximately $90,293,000. Until this deficit
is eliminated, we are prohibited from paying dividends on any class of our stock
except out of net profits unless we can meet certain assets and other tests
under Sections 500 through 511 of the California Corporations Code. Our board of
directors will determine any future dividend policy in light of the all of the
foregoing information and then existing conditions, including our earnings,
financial condition and financial requirements.
CAPITALIZATION
The following table summarizes our balance sheet data as of December 31, 2001
and December 31, 2000:
SHAREHOLDERS DEFICIT: As of As of
12/31/2001 12/31/2000
Series A preferred stock - No par value; 30,000,000 shares authorized;
2,844,000 shares issued and outstanding at 12/30/01 and 12/31/00 1,867 1,867
Series B preferred stock - No par value; 5,000,000 shares authorized;
1,217,000 shares issued and outstanding at 12/30/01 and 12/31/00 2,434 2,434
Stock notes receivable (1,208) (1,149)
Common Stock - No par value; 500,000,000 shares authorized; 302,502,000
and 244,249,000 shares issued and outstanding at 12/31/01 and 12/31/00 79,859 75,680
Common stock subscribed 160 13
Additional paid-in capital 6,949 6,372
Accumulated deficit (90,293 (86,865)
-------------- --------------
Total Shareholders Deficit (232) (1,648)
-------------- --------------
-------------- --------------
TOTAL CAPITALIZATION $ (232) $ (1,648)
============== ==============
This information should be read together with our Financial Statements and the
related Notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this prospectus.
SELECTED FINANCIAL DATA
The following selected financial data tables set forth selected financial data
for the year ended December 31, 2001 and 2000, the five month period ended
December 31, 1999 and the fiscal years ended July 31, 1999, 1998 and 1997. The
five-month period is related to a change in the fiscal year end which was
effective December 31, 1999. The statement of income data and balance sheet data
for and as of the end of the year ended December 31, 2001 and 2000, the five
month period ended December 31, 1999 and the three years ended July 31, 1999 are
derived from the audited Financial Statements of Enova. The following selected
financial data should be read in conjunction with, and are
-12-
qualified in their entirety by, our financial statements, including the notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this document.
As of and for the year ended December 31, Five Months Fiscal Years ending
(in thousands, except per share data) ended Dec 31 July 31,
2001 2000 1999 1999 1998 1997
---- ---- ---- ---- ---- ----
NET SALES $ 3,780 $ 2,883 $ 629 $ 2,774 $ 1,938 $ 4,484
COST OF SALES 2,783 2,013 377 1,460 2,765 2,042
--------- --------- --------- --------- --------- ---------
GROSS MARGIN 997 870 252 1,314 (827) 2,442
--------- --------- --------- --------- --------- ---------
OTHER COSTS AND EXPENSES
Research and Development 879 626 262 499 445 1,218
Selling, general and administrative 2,894 1,999 796 1,141 1,697 3,116
Interest and financing fees 113 174 724 724 665 792
Other expense (income)
(7) 6 -- (41) (67) 274
Acquisition of research and
development -- -- -- -- -- 1,630
Gain on Warranty Reevaluations -- -- (474) --
Legal Settlements 900 755 125 -- -- --
--------- --------- --------- --------- --------- ---------
Total other costs and expenses 4,779 2,880 1,427 1,849 2,740 7,030
--------- --------- --------- --------- --------- ---------
LOSS FROM CONTINUING OPERATIONS (3,782) (2,010) (1,175) (535) (3,567) (4,588)
GAIN ON DEBT RESTRUCTURING 354 1,551 214 140 42 53
--------- --------- --------- --------- --------- ---------
NET LOSS $ (3,428) $ (459) $ (961) $ (395) $ (3,525) $ (4,535)
========= ========= ========= ========= ========= =========
PER COMMON SHARE:
Loss from continuing operations $ (0.01) $ (0.01) $ (0.01) $ (0.01) $ (0.02) $ (0.03)
Gain on debt restructuring -- $ 0.01 -- -- -- --
--------- --------- --------- --------- --------- ---------
Net loss per common share $ (0.01) $ 0.00 $ (0.01) $ (0.01) $ (0.02) $ (0.03)
========= ========= ========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 275,189 235,199 251,994 152,077 151,265 133,806
========= ========= ========= ========= ========= =========
Total Assets $ 4,340 $ 3,094 $ 2,697 $ 3,940 $ 1,658 $ 4,513
========= ========= ========= ========= ========= =========
Long-term debt $ 3,332 $ 3,332 $ 3,332 $ 3,332 $ 3,332 $ 3,639
========= ========= ========= ========= ========= =========
Shareholders' equity (deficit) $ (232) $ (1,648) $ (5,015) $ (7,316) $ (12,615) $ (9,095)
========= ========= ========= ========= ========= =========
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read this Management's Discussion and Analysis of Financial Condition
and Results of Operations in conjunction with our 2001 Financial Statements and
Notes thereto. The matters addressed in this Management's Discussion and
Analysis of Financial Condition and Results of Operations, with the exception of
the historical information presented contains certain forward-looking statements
involving risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under the heading "Risk Factors."
Overview
Enova develops and produces advanced software, firmware and hardware for
applications in the alternative power industry. Our focus is digital power
conversion, power management, and system integration, for two broad market
applications - vehicle power generation and stationary power generation.
Specifically, we develop, design and produce drive systems and related
components for electric, hybrid-electric, fuel cell and microturbine-powered
vehicles. We also develop, design and produce power management and power
conversion components for stationary power generation - both on-site distributed
power and on-site telecommunications back-up power applications. These
stationary applications also employ fuel cells, microturbines and advanced
batteries for power storage and generation. Additionally, Enova performs
research and development to augment and support others' and our own related
product development efforts.
Enova's products and systems are the enabling technologies for power systems.
Without these types of enabling technologies, power cannot be converted into the
appropriate form required by the vehicle or device; nor is power properly
managed to protect the battery, vehicle or device, and user.
Our product development strategy is to design and introduce to market
successively advanced products, each based on our core technical competencies.
In each of our product / market segments, Enova provides products and services
to leverage its core competencies in digital power management, power conversion
and system integration. We believe that the underlying technical requirements
shared among the market segments will allow us to more quickly transition from
one emerging market to the next, with the goal of capturing early market share.
The financial statements present our financial condition as of December 31, 2001
and 2000, the results of operations and cash flows for the year ended December
31, 2001 and 2000 and the five month period ended December 31, 1999, as well as
the three preceding fiscal years ended July 31, 1999, 1998 and 1997. All
references to the 1999 fiscal year denote the twelve months ended July 31, 1999.
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During 2001, we expanded our sales and development efforts to capture additional
global market share for our product line and our technical expertise. We
expanded into European and Asian markets with our heavy duty drive systems and
continued to progress on our development programs with Ford, Ballard, Hyundai
and the U.S. DOT. Our balance sheet strengthened, we are now focusing on
building our product line, increasing our market share and developing the next
generation of advanced power management and conversion systems.
Our operations during the year ended December 31, 2001 were financed by
development contracts and product sales, as well as an additional equity
infusion of $3,000,000 from Jagen Pty, Ltd and Anthony Rawlinson for the
purchase of 50,000,000 shares of common stock, as previously reported.
We have completed the restructuring of our prior liabilities and debt. It is our
intention to continue to seek additional financing through private placements
and other means to increase research and development spending, procure inventory
and seek additional alliances to market our products. As of March 8, 2002, we
have no firm commitments for additional financing.
The financial statements present our financial condition at December 31, 2001
and 2000.
Three Years Ended December 31, 2001
Our fiscal year ends December 31. All year references refer to fiscal years.
During 1999, we concentrated on creating new business in the mobile power
management and conversion markets as well as reducing operating costs and
outstanding debt. Our business activities focused on the development of electric
and hybrid electric drive trains and related components, fuel cell systems,
vehicle systems integration and the performance of various engineering
contracts. Enova completed several key contracts with the U.S. Government's
Defense Advanced Research Project Agency or DARPA and the Department of
Transportation or DOT, including the analysis of a new plastic lithium ion
vehicle battery concept, testing of advanced vehicle batteries and development
of an airport electric passenger tram system. We have enhanced our relationship
with Hyundai Motor Company of Korea or HMC, the world's seventh largest
automobile manufacturer, with several engineering contracts to design, develop
and test electric and hybrid electric drive systems and related products. We
completed development of an advanced charging unit and a parallel hybrid
production vehicle, and continue to produce the family of PantherTM drive
systems for their electric vehicles. Our Company has also developed a high power
charger for use with its drive systems. HMC has adapted a customized version of
the PantherTM 60 for their production electric vehicle, the Santa Fe sports
utility vehicle.
Beginning in 2000, we started working with Ecostar Electric Drive Systems, now
known as Ballard Power, to develop and manufacture low voltage electric drive
system components for use in Ford's Global Th!nk City. Ballard has announced
that an all-electric vehicle is scheduled to be introduced in late 2002 for
markets in North America. Enova is designing and manufacturing the electronics
for the drive system as well as certain auxiliary components. The final
prototype systems are currently undergoing pre-
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production testing and validation in the Ford Th!nk vehicle. We continue to
develop our relationships with Hyundai, Ballard and other Original Equipment
Manufacturers or OEMs and Tier-One suppliers for sales of its automotive
products. We offer modular drive systems to OEMs and other customers. These
drive systems have been installed in various vehicles operating in North
America, Europe and Asia.
In 2001, Enova entered into several key supplier agreements and commenced new
development programs with automotive and transit OEMs both domestically and
internationally. Additionally, we completed various research and development
programs sponsored by the U.S. Government and private corporations.
Ford Motor Company Programs
In July 2001, we entered into a strategic relationship with Ford Motor Company
under which Enova was selected by Ford Motor Company's Th!nk brand to develop
and manufacture a high power, high voltage conversion module "HEC" for their
upcoming fuel cell vehicle. The HEC module will convert high voltage power from
the fuel cell into a lower voltage. Enova is currently in the second phase of
this program having successfully designed and tested the proof of concept
prototype.
This strategic relationship also grants Ford warrants to purchase up to 4.6% of
our outstanding common stock over the life of the relationship. The vesting of
these warrants is dependent upon Ford meeting specific milestones with regards
to new production programs between Ford and Enova. The relationship will last
for five years during which Ford will evaluate Enova for future programs.
Our development and production program with Ballard Power for low voltage
electric drive system components for use in Ford's Global Th!nk City has moved
into its production phase. Ford has announced that the all-electric vehicle is
scheduled to be introduced in 2002 for markets in North America and Europe.
Enova is designing and manufacturing the electronics for the drive system
including the power inverter, charger and controller. In conjunction with
Hyundai Autonet of Korea, Enova is finalizing production planning for initial
production systems to be delivered in mid 2002. We anticipate these systems to
provide significant revenues in the upcoming years.
Hyundai Motor Company Programs
We continue to develop hybrid and fuel cell based systems with Hyundai Motor
Company of Korea "HMC", the world's seventh largest automobile manufacturer.
Enova, having successfully completed our hybrid drive system and fuel cell EV
program will work with HMC on advanced hybrid and fuel cell applications in
2002. We have delivered four series hybrid drive systems for use in HMC's county
bus at the World Cup Soccer in Seoul, Korea in June 2002.
HMC continues to contract with Enova for the development of advanced hybrid and
fuel cell powered drive systems. In regards to passenger vehicle programs, Enova
continues in our efforts to develop a commercially producible parallel hybrid
motor and controller for HMC's new hybrid vehicle to be introduced in 2004. The
first prototype for this program
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will be delivered in the first quarter of 2002 for evaluation. This program is a
result of Enova's ongoing development efforts with HMC since 1995.
We anticipate additional contracts for both development and purchase of our
components during 2002 for HMC's alternative vehicle applications.
Light-Duty Drive Systems
In addition to the 30kW motor controller, charger and DC-DC converter which we,
in alliance with Hyundai Autonet, are manufacturing for Ballard, we are also
selling Panther 90kW drive systems. Our 90kW controller, motor and gear unit
provide outstanding performance for light duty vehicles such as midsize
automobiles and delivery vehicles. We have received a purchase order for over
200 Panther 90kW drive systems for 2002-2003 from an integrator of specialty
vehicles in the U.S. Additionally, we are discussing further sales of this
system configuration to other domestic and international customers.
Heavy-Duty Drive Systems
Sales of Panther 120kW drive systems continue to provide increased revenues for
our company. We have entered into supplier agreements with manufacturers in
Europe and Japan as well as domestically.
Eco Power Technology "EPT" in Italy purchased 15 Panther 120 electric drive
systems, which were delivered during the 2001, as well as three of our Fast
Chargers. Under the terms of our supplier agreement, EPT has given notice of
their production requirements for 2002, which range from 25 - 30 Panther 120
systems and additional Fast Chargers. EPT is one of the largest integrators of
medium size transit buses for the European shuttle bus market with key customers
in Rome and Genoa.
Wrights Environment, a division of Wrights Bus, one of the largest low-floor bus
manufacturers in the United Kingdom, has integrated Enova's hybrid electric
PantherTM 120kW drive system (utilizing the Capstone Microturbine as its power
source). Wrights has purchased additional pure electric drive systems for their
midsize buses for sale in the United Kingdom and the European Continent.
Furthermore, Wrights has begun discussions to purchase both our new 240kW drive
system and our Fast Charger system. We anticipate additional orders for both
electric and hybrid-electric P120 drive systems during 2002.
Enova has entered the Japanese bus market with two new customers, Tomoe
Electro-Mechanical Engineering and Manufacturing, Inc. "Tomoe" and Moriah
Corporation. Both of these companies have entered into supplier agreements with
us. Enova has delivered its first Panther 120 system to Tomoe and believes both
companies will purchase additional systems during the first half of 2002.
The development of the Southern California Edison utility vehicle utilizing
Enova's 120kW drive system and Capstone's 30kW microturbine continues on
schedule. Enova is developing additional power management accessories for this
vehicle so it can run power applications such as drills and motors for use by
the technicians. This line service truck is
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a demonstration vehicle, which will potentially lead to sales to utility
companies throughout the U.S.
In the high performance heavy-duty drive system area; we have completed the
first prototype of our Panther 204kW drive system. In conjunction with Hyundai
Heavy Industries and Ricardo, Inc, of Michigan, a developer and manufacturer of
advanced transmissions, we have produced a robust, efficient and powerful drive
system for heavy-duty applications including transit buses, heavy-duty trucks
and other applications. We have been in discussions with Wrights of the United
Kingdom, Hyundai Motor Company and a major alternative transit bus manufacturer
in the U.S. regarding the purchase of these drive systems in 2002.
Research and Development Programs
Our development and integration contracts with the DOT and the State of Hawaii
continue to create new opportunities for our drive systems.
During 2001, Enova, HMC and the State of Hawaii introduced 15 Hyundai Santa Fe
electric vehicles in Honolulu Hawaii for test and evaluation prior to their
entry into the U.S. markets. The program will utilize Hawaii's rapid charging
stations, manufactured by AeroVironment. The contract has two elements, one for
integration of our Battery Care Unit "BCU II" to allow the vehicles to accept
fast charging and a second contract for maintenance of the vehicles over the
two-year program. The participants in the program include state and local
offices as well as Hickam Air Force base. The vehicles are performing well and
initial reactions to their performance and handling is positive.
Our contract with the DOT to design and test a three-car tram utilizing the
Panther 120kW drive system has been completed and has been delivered to the High
Technology Development Corporation's "HTDC" facility in Honolulu. This tram,
capable of carrying 100 passengers, will now be delivered to the Honolulu
International Airport for further test and evaluation. We intend to market this
tram system to international markets for application to other airports, national
and recreational parks and other high capacity transit applications.
We completed the integration of our drive systems into several State of Hawaii
and DOT vehicles. Enova upgraded eight Chevrolet S-10 trucks owned by the City
of Honolulu to its PantherTM 60kW drive system, including our BCU-II for
fast-charge capability for Hawaii. Also, we are converting an Eldorado 30-foot
bus utilizing our PantherTM 120kW drive system for the Hickam Air Force base in
Hawaii. All of these programs are funded in conjunction with the Hawaii Electric
Vehicle Development Project, the DOT and State of Hawaii.
We will continue to establish new development programs with the Hawaii HTDC as
well as other state and federal government agencies as funding becomes available
in our areas of research.
Stationary Power Applications
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Enova's stationary power programs continue to attract new potential partners and
customers from both fuel cell manufacturers and petroleum companies. It is our
belief that utilizing our power management systems for stationary applications
for fuel cells will open new markets for Enova. Enova is developing applications
for our products in the telecommunications and distributed generation markets.
Enova's Fuel Cell Care Unit "FCU" is being delivered to UTC Fuel Cell, a
division of United Technologies, for use in their stationary fuel cell systems.
To date, we have delivered approximately 20 FCUs to UTC Fuel Cell and Hamilton
Sundstrand. The Hyundai companies have expressed interest in working with Enova
on the development of advanced fuel cell management technologies as well as
other domestic energy companies. We believe this market will play a key role in
our future and continues to pursue alliances with leading manufacturers in this
space.
Enova views stationary power applications of our power management systems as an
important new strategy for product development. In the stationary power
management field, Enova is developing applications for our products in the
telecommunications and distributed generation markets. We believe our approach
of providing the enabling technology in power management and conversion to power
generation companies is key to early access to these markets. Our joint
marketing and development efforts with Capstone Turbine, Avestor and IFC have
the potential to assist Enova in penetrating these markets. As discussed
earlier, Enova is now producing and selling an advanced version of our BCU-II
and FCU for use with fuel cells in both stationary and mobile systems, starting
with IFC and ISE Research.
Investment Funding
We are seeking new investment capital to fund research and development and
create new market opportunities. In order to fuel our growth in the stationary
power market, we will need additional capital in order to create additional
intellectual property. In May 2001, Jagen Pty, Ltd exercised warrants to
purchase 41,666,666 shares of common stock at $0.06 per share for a total of
$2,500,000. In July 2001, Anthony Rawlinson, our chairman, exercised warrants to
purchase 8,333,334 shares of common stock at $0.06 per share for a total of
$500,000. Jagen and Mr. Rawlinson represented that they were accredited
investors. We relied on Rule 506 of Regulation D and Section 4(2) of the
Securities Act of 1933, as amended, for the exemption from registration of the
sale of such shares.
In June 2001, we issued warrants to purchase 15,000,000 shares of common stock
of Enova Systems to Ford Motor Company with respect to a participation program.
We relied on Rule 506 of Regulation D and Section 4(2) of the Securities Act of
1933, as amended, for the exemption from registration of the sale of such
shares.
In early 2001, we retained Merrill Lynch as our investment advisor to pursue
equity financing options and other strategic alternatives. Enova intends to
vigorously pursue obtaining additional equity capital in order to fund new
product development and enhance our NASDAQ listing to the National NASDAQ
Market.
Liquidity and Capital Resources
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Enova has experienced cash flow shortages due to operating losses primarily
attributable to research, development, marketing and other costs associated with
our strategic plan to become an international manufacturer and supplier of
electric propulsion and power management systems and components. Due to
increased research and development spending, cash flows from operations have not
been sufficient. We therefore have to raise funds through private financial
transactions. At least until we reach breakeven volume in sales and develop
and/or acquire the capability to manufacture and sell our products profitably,
we will need to continue to rely on cash from external financing. We anticipate
that we will require additional outside financing for at least the next twelve
months.
During the year ended December 31, 2001, our operations required $3,023,000 more
in cash then was generated. Enova continues to increase research and development
spending, as well as increased sales, marketing and administrative expenses
necessary for expansion to meet customer demand. Accounts receivable increased
by $233,000 from $1,004,000, or 23% from the balance at December 31, 2000, as we
continued to expand our customer base and increased sales. Inventory increased
by $520,000 from $406,000 or 128% from December 31, 2000 balances. As we
continue to enter into additional production contracts with companies such as
EPT, Ford, Ballard and other, we will continue to require additional raw
materials and finished goods to meet demand.
Fixed assets increased by $219,000 or 28% before depreciation for the year ended
December 31, 2001 from the prior year balance of $784,220 as we increased both
the number of engineers and the complexity of our programs. Increases in test
equipment, production machinery and both technical hardware and software
attributed to the increase.
Other assets increased by $668,000 during 2001 from $68,000 in 2000 primarily
due to the booking of an asset in relation to the Ford Value Participation
Agreement. We determined, utilizing the Black Scholes method, the value of the
initial tranche of the vested warrants under this program is $577,000. As
additional warrants become vested in the coming years, they will be valued under
the same methodology and booked as an expense and into stockholders equity.
Additionally, increases were due to intellectual property expenses being applied
as they relate to several new patents on Enova technology.
As of December 31, 2001, we eliminated our antecedent accounts payable of
$210,000 as of December 31, 2000.
The future unavailability or inadequacy of financing to meet future needs could
force us to delay, modify, suspend or cease some or all aspects of our planned
operations.
RESULTS OF OPERATIONS
Net sales of $3,780,000 for the twelve months ended December 31, 2001
increased $897,000 or 31% from $2,883,000 during the same period in 2000. Our
-20-
further expansion into production programs of our Panther 120kw systems as well
as new contracts with Ford and the DOT accounted for the increase in sales. We
changed our fiscal year end from July 31 to December 31 effective December 31,
1999. All comparisons of year-to-year financial data for 2000 to 1999 are for
the twelve months ended December 31, 2000 and the twelve months ended July 31,
1999. Net sales of $2,883,000 for the twelve months ended December 31, 2000
increased $109,000 or 4% from $2,774,000 during the same period in 1999.
Cost of sales of $2,783,000 for the year ended December 31, 2001
reflect an increase of $770,000, or 38%, from $2,013,000 for the year ended
December 31, 2000. Cost of sales as a percentage of sales remained at
approximately 70% in 2001 which is consistent with 2000. As our sales mix
changes from primarily development contract revenues to more product sales, we
believe this gross margin will remain the same or improve on a year-to-year
basis. Cost of sales of $2,013,000 for the year ended December 31, 2000
increased $553,000, or 37%, from $1,460,000 during the same period ending July
31, 1999. During the fiscal year ended July 31, 1999, we sold a technology
license to Hyundai Heavy Industries which did not have associated costs of sales
which accounted for the lesser amount in 1999.
Product development costs incurred in the performance of engineering
development contracts for the U.S. Government and private companies are charged
to cost of sales for this contract revenue. Non-funded development costs are
reported as research and development expense. Research and development expense
increased in 2001 to $879,000 from $626,000 for the same period in 2000, an
increase of $253,000, or 40%. Research and development expense increased in 2000
to $626,000 from $499,000 in fiscal 1999, an increase of $127,000 or 25%. As
part of our long-term strategic plan, we will continue to expend funds for
research and development for new technologies to enhance existing products as
well as develop new products in the areas of mobile and stationary power
management and conversion. Examples of these internally funded development
programs include the 240kW drive system and our advanced power management
systems for fuel cells and turbines.
Selling, general and administrative expense increased in the year ended
December 31, 2001 to $2,894,000 from $1,999,000 for the similar period in 2000.
Increased legal and accounting fees for the Fontal matter of approximately
$400,000, as well as increased regulatory requirements, account for the majority
of the rise in expense. We do not anticipate this level of professional fees to
continue. Additionally, we continue to increase sales, marketing and travel
expenses in relation to acquiring new business, creating alliances and servicing
current customers, which has resulted in additional sales for 2001 and will
facilitate in increasing sales for 2002. During 2001 and 2000, we continued to
add employees to accommodate our increased sales and customer services.
For the year ended December 31, 2001, interest and financing fees
decreased by $61,000 to $113,000, a decrease of 35%. The reduction was due to
restructuring of our long-term debt by forgiveness or conversion into equity. In
2000, interest and financing fees decreased to $174,000 from $724,000 in 1999, a
decrease of 76%, due to the forgiveness of $4,300,000 of debt, formerly the
Itochu debt, and the conversion of $1,000,000 of debt into common stock.
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In 2001, we completed our restructuring of the remainder of our
antecedent payables, reducing those accounts to zero from $210,000 in 2000,
which resulted in contributing to an extraordinary gain of $354,000 for the
year. Our liabilities and long-term debt are now current. During the year ended
December 31, 2000, several unsecured creditors agreed to settle their trade debt
claims for amounts less than the original debt owed to them. Additionally, other
trade debt, which has had no activity for over four years and has now become
uncollectible pursuant to state statute of limitations, was recaptured. The
reductions from the original amounts owed and the settlement amounts resulted in
a gain on debt restructuring of $1,551,000 during the year ended December 31,
2000. Additional settlements resulted in a gain on debt restructuring of
$140,000 in fiscal 1999.
During 2001, we settled a lawsuit brought against Enova by Fontal
International. The settlement requires us to issue 6,000,000 share of common
stock at a cost of $900,000, non-cash, exclusive of our legal fees. This expense
is recorded as legal settlements for 2001. Legal settlements for 2000 and 1999
were $75,000 and $125,000, respectively, and related to matters involving claims
made in 1996 and 1998 respectively.
During 2001, we incurred several non-recurring professional expenses of
$400,000 and the legal settlement of $900,000 with respect to the Fontal
International lawsuit for an increase in operating expense of approximately
$1,300,000. Without these charges, our net loss from operations would be
$2,382,000, an increase of $372,000 or 18% from our $2,010,000 loss from
operations for the same period in 2000. We do not believe these types of
expenses will occur in 2002. The increase in net loss is attributable to a
number of factors as discussed previously in this Prospectus including the
increased legal and accounting fees, the legal settlement with respect to the
Fontal matter, increased research and development expenses and increased
marketing and administrative expenses relating to further establishing ourselves
as a key player in the mobile power conversion and management markets and to
develop new systems for the stationary markets. We anticipate continued
increases in engineering, production, and support personnel as we deem necessary
to meet our current and prospective customer needs. The loss from operations for
2000 of $2,010,000 represented an increase of $1,001,000 or 99% from the
$1,009,000 loss in fiscal 1999, which excludes the recapture of approximately
$474,000 of prior warranty reserves.
Fiscal Year Ended December 31, 2000 v. Fiscal Year Ended July 31, 1999
Effective December 31, 1999 we changed our fiscal year end from July 31 to
December 31. Because we do not experience seasonal fluctuations in revenues and
expenses, all comparisons of year-to-year financial data are for the twelve
months ended December 31, 2000 and the twelve months ended July 31,1999.
During the year ended December 31, 2000, operations required $2,358,000 more in
cash then were generated. We continued to encounter increased research and
development costs, as well as increased sales and marketing and administrative
expenses necessary for expansion. Accounts receivable increased by $432,000 from
$572,000 as we continued to expand our product and customer bases and to
increase
-22-
sales. Customer Deposits decreased by $102,000 from $102,000 as we applied an
advance payment from one of our customers for engineering services performed.
Inventory increased by $151,000 from $256,000. The increase was due the purchase
of raw materials for current development and production contracts.
Results of Operations
Net sales of $2,883,000 for the twelve months ended December 31, 2000 increased
$109,000 or 4% from $2,774,000 during the same period in 1999. Of total sales
for the year ended December 31, 2000, $2,662,900, or 92% were revenues realized
on engineering contracts with Ecostar, the DOT, the Hyundai Group of Korea and
other customers.
Cost of sales of $2,013,000 for the year ended December 31, 2000 reflect an
increase of $553,000, or 37%, from $1,460,000 during the same period ending July
31, 1999. During the fiscal year ended July 31, 1999, we sold a technology
license to Hyundai Heavy Industries that did not have associated costs of sales
and thus accounted for the lesser amount in 1999.
Cost of sales as a percentage of sales increased to 70% in fiscal 2000 from 53%
in fiscal 1999. As stated, sales revenue for fiscal 1999 included a sale of a
technology license of $600,000. Excluding the sale of the technology license,
cost of sales for fiscal 1999 was 67% of sales.
Research and development expense increased in the year ended December 31, 2000
to $626,000 from $499,000 in the year ended July 31, 1999. Product development
costs incurred in the performance of engineering development contracts are
charged to cost of sales for this contract revenue. Non-funded development costs
are reported as research and development expense. Research and development
expense increased in 2000 to $626,000 from $499,000 in fiscal 1999, an increase
of $127,000, or 25%.
Selling, general and administrative expense increased in the year ended December
31, 2000 to $1,999,000 from $1,141,000 for the similar period in 1999. The
increase was due to increased sales, marketing, legal and travel expenses in
relation to acquiring new business and creating alliances with several key
manufacturers during 2000, including Gillig Bus, Capstone Turbine, Wright Bus of
Ireland and EPT of Italy. Selling, general and administrative expense was
$1,141,000 in fiscal 1999, which declined by $1,697,000, or 33%, from fiscal
1998, as we reduced spending and consolidated operations. During 1999 and 2000,
we began to increase operations as we began to move from a pure research and
development company to a more diversified development and production business.
For the year ended December 31, 2000, interest and financing fees decreased by
$550,000 to $174,000, a decrease of 76%. The reduction was due to continued
restructuring of long-term debt by forgiveness or conversion into equity. In
fiscal 1999, interest and financing fees increased to $724,000 from $665,000 in
1998, an increase of 9%, due mainly to default interest rates becoming effective
on certain notes payable. The forgiveness of $4,300,000 of debt, formerly the
Itochu debt, and the conversion of $1,000,000 of Fontal debt, reduced interest
expense significantly during 2000.
-23-
During the year ended December 31, 2000, several unsecured creditors agreed to
settle their trade debt claims for amounts less than the original debt owed to
them. Additionally, other trade debt, which has had no activity for over four
years and has now become uncollectible pursuant to state statute of limitations,
was recaptured. The reductions from the original amounts owed and the settlement
amounts resulted in a gain on debt restructuring of $1,551,000 during the year
ended December 31, 2000. Additional settlements resulted in a gain on debt
restructuring of $140,000 in fiscal 1999 and $42,000 in 1998.
As a result of the foregoing changes in net sales, cost of sales, other costs
and expenses and gain on debt restructuring, the net loss of $459,000 increased
16% from the $395,000 loss during the similar period in 1999. As noted
previously, the increase in net loss is attributed primarily to efforts to
establish our company as a key player in the mobile power conversion and
management markets and to develop new systems for the stationary markets. The
net loss for fiscal 1999 of $395,000 decreased $3,130,000 or 89% from the
$3,525,000 loss in 1998. These results reflect the successful shift from an
electric vehicle conversion business to a mobile and stationary power
electronics components developer and producer.
Fiscal Year Ended July 31, 1999 v. Fiscal year Ended July 31, 1998
During 1999, we continued to concentrate on the reduction of operating costs and
outstanding debt. Our business activities focus primarily on the development of
electric and hybrid electric drive-trains and related components, fuel cell
systems, vehicle systems integration and the performance of various engineering
contracts.
We received capital investments from Jagen, Pty, Ltd. in the amount of
$2,500,000 on June 4, 1999 and from Anthony Rawlinson in the amount of $500,000
on July 30, 1999, which enabled us to further develop our hybrid drive systems
as well as embark on other in-house funded research and development.
During 1999, we spent $798,000 in cash on operating activities to fund the net
loss of $395,000, resulting from the factors explained in the following section
of this discussion and analysis. Accounts receivable increased by $560,000 as we
increased the number of engineering contracts from HMC and Hyundai Heavy
Industries ("HHI"). Customer Deposits decreased by $387,000 as we completed
various contracts started in 1998 and moved toward a milestone based billing
procedure. Inventory decreased by $329,000, net of write-downs of $36,000. The
decrease was primarily caused by our reclassification of certain finished goods
inventory to fixed assets to reflect the assets current usage. These items will
now be depreciated over their useful lives.
Our operations during 1999 were financed primarily by the funds received on
engineering contracts and partly on funds received from the sale of a technology
license to HHI. In June and July 1999, we received $3,000,000 from two
investors, Jagen. Pty., Ltd. Of Australia and Anthony Rawlinson
Results of Operations
Net sales of $2,774,000 for 1999 increased $836,000 or 43% from $1,938,000 in
1998. Two primary factors caused the increase. In 1999, we sold a technology
license to HHI
-24-
for $600,000. Secondly, we increased engineering, development and testing of
electric and hybrid drive trains and related components in conjunction with
Hyundai Motor Company of Korea and the U.S. Government through United States
Postal Service, DARPA and DOT programs. Of our total sales for 1999, $1,954,000,
or 70% were revenues realized on engineering contracts with DARPA, the Hyundai
Group of Korea and other customers.
Cost of sales as a percentage of sales decreased to 53% in 1999 from 143% in
1998. Sales revenue for 1999 included a sale of a technology license of
$600,000. Excluding the sale of the technology license, cost of sales for 1999
was 67% of sales.
Research and development expense increased in 1999 to $499,000 from $445,000 in
1998, an increase of $54,000, or 12%. While we reduced staff and cut costs in
all areas, our focus continues to be centered on research and development. The
product development cost incurred in the performance of engineering development
contracts is charged to cost of sales for this contract revenue. Non-funded
development costs are reported as research and development expense.
Selling, general and administrative expense of $1,141,000 in 1999 continued to
decline from $1,697,000, or 33% from 1998, as we continued to reduce spending
and consolidated operations.
In 1999, interest and financing fees increased slightly to $724,000 from
$665,000 in 1998, an increase of 9% due mainly to a default interest rate on
certain notes payable becoming effective.
During 1999, several unsecured creditors agreed to settle their trade debt
claims for amounts less than the original debt owed to them. The reductions from
the original amounts owed and the settlement amounts resulted in a gain on debt
restructuring of $140,000 in 1999. Additional settlements resulted in a gain on
debt restructuring of $42,000 in 1998.
As a result of the foregoing changes in net sales, cost of sales, other costs
and expenses and gain on debt restructuring, the 1999 net loss of $395,000
decreased $3,130,000 or 89% from the $3,525,000 loss in 1998. These results
reflect a significant change in our operating condition. Our cost structure and
operating conditions are now more in line with the sales volume and the scope of
business.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has recently issued the following
Financial Accounting Standards (FAS):
FAS No. 140, " Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities", provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities.
This Statement replaces FAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities". It revises the standards
for accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures. This statement is effective for
transfers and servicing of financial assets and
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extinguishments of liabilities occurring after March 31, 2001.
FAS No. 141, "Business Combinations", addresses financial accounting and
reporting for business combinations and supersedes Accounting Principles Board
Opinion No. 16. This Statement requires that all business combinations are to be
accounted for using the purchase method of accounting. The provisions of this
Statement apply to all business combinations initiated after June 30, 2001.
FAS No. 142, "Goodwill and Other Intangible Assets", addresses financial
accounting and reporting for acquired goodwill and other intangible assets. It
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition. This Statement
also addresses how goodwill and other intangible assets should be accounted for
after they have been initially recognized in the financial statements.
FAS No. 143, " Accounting for Asset Retirement Obligations", addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. This
Statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002.
FAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets",
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This statement is effective for financial statements issued
for fiscal years beginning after December 15, 2001.
Implementation of the above financial accounting pronouncements are not expected
to have a material effect on our financial position or results of operations.
BUSINESS
General
In July 2000, we changed our name to Enova Systems, Inc. from U.S. Electricar,
Inc. We were incorporated in California on July 30, 1976.
We believe that Enova is a leader in the development and production of
commercial digital power management systems. We are now producing, under
contract with global vehicle and technology companies, digital power processing
and energy management enabling technologies for electric, hybrid electric, and
fuel cell powered vehicles. These power management technologies are now being
applied to commercialization of fuel cell power generation for stationary
non-automotive applications. Our business activities continue to be focused on
the development of electric and hybrid electric drive systems and related
components, fuel cell power management systems for both mobile and stationary
power applications, vehicle systems integration and the performance of various
engineering contracts.
Our fiscal year ends December 31. All year references refer to fiscal years.
In 1998, we restructured our top management, realigned our product base and
concentrated on the reduction of overall company operating costs. We closed
facilities,
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streamlined operations, and developed new product lines. During 2000 and 2001,
we increased our product line and began to penetrate new markets for our
products. Accordingly, at December 31, 2001, we had increased our headcount to
39 employees and 6 independent contractors from 35 in 2000.
During 1999, we concentrated on creating new business in the mobile power
management and conversion markets as well as reducing operating costs and
outstanding debt. Our business activities focused on the development of electric
and hybrid electric drive trains and related components, fuel cell systems,
vehicle systems integration and the performance of various engineering
contracts. Enova completed several key contracts with the U.S. Government's
Defense Advanced Research Project Agency or DARPA and the Department of
Transportation or DOT, including the analysis of a new plastic lithium ion
vehicle battery concept, testing of advanced vehicle batteries and development
of an airport electric passenger tram system. We have enhanced our relationship
with HMC, the world's seventh largest automobile manufacturer, with several
engineering contracts to design, develop and test electric and hybrid electric
drive systems and related products. We completed development of an advanced
charging unit and a parallel hybrid production vehicle, and continue to produce
the family of PantherTM drive systems for their electric vehicles. Our Company
has also developed a high power charger for use with our drive systems. HMC has
adapted a customized version of the PantherTM 60 for their production electric
vehicle, the Santa Fe sports utility vehicle.
Beginning in 2000, we started working with Ecostar Electric Drive Systems, a
joint venture of Ford, Daimler Chrysler and Ballard Power to develop and
manufacture low voltage electric drive system components for use in Ford's
Global Th!nk City. Ecostar has announced that an all-electric vehicle is
scheduled to be introduced in early 2002 for markets in North America. Enova is
designing and manufacturing the electronics for the drive system as well as
certain auxiliary components. The final prototype systems are currently
undergoing pre-production testing and validation in the Ford Th!nk vehicle. We
continue to develop our relationship with Hyundai, Ecostar and other Original
Equipment Manufacturers or OEMs and Tier-One suppliers for sales of our
automotive products. We offer our modular drive systems to OEMs and other
customers. These drive systems have been installed in various vehicles operating
in North America, Europe and Asia.
In 2001, Enova entered into several key supplier agreements and commenced new
development programs with automotive and transit OEMs both domestically and
internationally. Additionally, we completed various research and development
programs sponsored by the U.S. Government and private corporations.
For marketing our larger drive systems, we are discussing sales of the system to
various transit bus manufacturers in the U.S. and Europe, to develop and
manufacture series hybrid electric transit buses utilizing our 240kW hybrid
drive system. Additionally, Enova has entered into a development, manufacturing
and marketing agreement with Wrights Environment, a division of Wrights Bus, one
of the largest low-floor bus manufacturers in the United Kingdom, to develop,
manufacture and integrate pure electric and hybrid electric drive systems into
Wrights' low floor, mid-size buses for sale in the United Kingdom and the
European Continent. In January 2001, Enova received an order for a Panther 120kW
hybrid drive system from Wrights which utilizes the Capstone microturbine as our
primary power source.
-27-
We continue to expand our markets by creating alliances with other component
suppliers. Capstone Turbine has recently teamed with us to jointly develop and
market hybrid electric drive systems using Capstone's microturbine in
conjunction with our power management and drive systems. We currently utilize
Capstone's microturbine in our drive systems for Eco Power Technology (EPT) in
Italy, as well as for Wright's bus in the United Kingdom.
Our engineering contracts with DARPA and the DOT continue to progress on
schedule. These programs include the development of an airport electric
passenger tram system for the Honolulu Airport and an EV commercialization
program for the State of Hawaii. Our contract with the U.S. Department of
Transportation to design and test this tram system utilizes the Panther 120kW
drive system. The tram was developed in conjunction with APS, an electric bus
manufacturer in Oxnard, California. This tram, capable of carrying 100
passengers, was delivered in the 1st quarter of 2002 to the Honolulu, Hawaii
Airport for test and evaluation. We intend to market this tram system to
international markets for application to other airports, national and
recreational parks and other high capacity transit applications. Another
Enova/DOT program, the Hawaii/Hyundai commercialization program, which we
established, has been enhanced to include the testing of 15 Hyundai Santa Fe
electric vehicles in Honolulu, Hawaii prior to their entry into the U.S.
markets. We have also begun work on a electric trolley for the Hawaii market in
conjunction with the DOT and Enova, a manufacturer and operator of stand-alone
trolleys in Hawaii. Our Hawaii operations in Honolulu are both a development and
maintenance installation for various DARPA/DOT programs. The facility also
maintains the electric vehicle fleets for different state and local government
agencies as well as private institutions.
We continue to further our relationship with Hyundai Motor Company of Korea, or
HMC, the world's seventh largest automobile manufacturer, with engineering
contracts to design, develop and test electric and hybrid electric drive systems
and related products. We have completed development work on Hyundai's parallel
hybrid production vehicle and a series hybrid electric drive system. These
hybrid systems are slated to be integrated into HMC's new Santa Fe sport utility
vehicle. HMC has adapted a customized version of the Panther(TM) 60 for their
production electric vehicle and intends to utilize our hybrid drive system and
battery management for their next generation alternative fuel vehicles. We have
also developed a high power fast charger for use with our drive systems in
conjunction with HMC.
We view stationary power applications of our power management systems as an
important new strategy for product development. In the stationary power
management field, we are developing applications for our products in the
telecommunications and distributed generation markets. We believe our approach
of providing the enabling technology in power management and conversion to power
generation companies is key to early access to these markets. Our joint
marketing and development efforts with Capstone Turbine, Avestor and IFC have
the potential to assist us in penetrating these markets. As discussed earlier,
we are now producing and selling an advanced version of our BCU-II (Battery Care
Unit) and FCU (Fuelcell Care Unit) for use with fuel cells in both stationary
and mobile systems, starting with IFC and ISE Research.
We continue to seek new investment capital to fund research and development and
create new market opportunities. We received capital investments of $1,000,000
each
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from Perla Blanca Investments and Kafig Pty, Ltd for the purchase of 3,333,333
shares of common stock each during the twelve months ended December 31, 2000. In
early 2001, we retained Merrill Lynch as our investment advisor to pursue equity
financing options and other strategic alternatives. We intend to vigorously
pursue obtaining additional equity capital in order to fund new product
development and enhance our NASDAQ listing to the National NASDAQ Market. In
July 2001, Anthony Rawlinson exercised warrants to purchase 8,333,334 shares of
our common stock at $0.06 per share for a total of $500,000.
Debt Restructuring
We completed our balance sheet restructuring during 2001. Overall, we have
reduced outstanding indebtedness and liabilities by approximately $10,000,000
since it began our restructuring program in 1999. We have also been reducing our
outstanding past due accounts payable and other accrued liabilities. At December
31, 2001, we have eliminated all of our antecedent accounts payable and
non-current accrued liabilities. Environmental Initiatives and Legislation
Federal legislation was enacted to promote the use of alternative fuel vehicles,
including electric vehicles. Several states have also adopted legislation that
sets deadlines for the introduction of zero emission vehicles ("ZEV"). The State
of California delayed the mandated introduction of ZEVs from 1998 to 2003 and
established a required percentage of ZEV and new hybrid-electric vehicles for
2003 at 10% of total new vehicle sales in California from the six major
automobile manufacturers. The State of California estimates that a combination
of approximately 100,000 electric and hybrid electric vehicles will be required
to meet the State's 2003 mandate. The California Air Resources Board recently
confirmed their commitment to these percentages, adding that hybrid-electric
vehicles may offset a portion of the required percentage. Enova Systems has
taken an aggressive position in diversifying our product base to include various
hybrid-electric platforms in our product mix. The U.S. Department of Energy also
modified their rules governing how state fleets and utility fleets must comply
with the Energy Policy Act of 1992 on alternative fuel transportation programs.
Strategic Alliances, Partnering And Technology Developments
We continue to adapt ourselves to the ever-changing environment of alternative
power markets for both stationary and mobile applications. Originally focusing
on pure electric drive systems, we are now positioned as a global supplier of
drive systems for electric, hybrid and fuel cell applications. Enova is now
entering stationary power markets with our power management systems and intends
to develop other systems to monitor and control the complex fuel cell and
ancillary device systems being developed for distributed generation and mobile
applications.
Enova continues to seek and establish alliances with major players in the
automotive,
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stationary power and telecommunication fields. For instance, we are partnering
with the Hyundai Group of Korea in the development of advanced drive-train
technology and related systems. Additionally, Enova has begun to partner with
Ford and Ballard on other automotive programs and is looking to further develop
these relationships. We continue our strategy as a "systems integrator" by
establishing relationships to utilize other independently developed technologies
such as those provided by UTC Fuel Cells and Capstone Turbine. We have
implemented our plans to outsource manufacturing of our components to companies
such as Hyundai Heavy Industries, Ricardo, Hyundai Autonet and other Asian
manufacturers. Enova believes that our competitive advantage is our ability to
identify, attract and integrate the latest technology available to produce state
of the art products at competitive prices.
Our products are "production-engineered," meaning they are designed so they can
be commercially produced: all formats and files are designed with
manufacturability in mind, from the start. For the automotive market, Enova
designs our products to QS9000 manufacturing and quality standards. Enova's
redundancy of systems, robustness of design, and rigorous quality standards
result in high performance and reduced risk. For every component and piece of
hardware, there are detailed performance specifications. Each piece is tested
and evaluated against these specifications, which enhances the value of the
systems to OEM customers.
We perform low-volume production and assembly and out source mass production.
Outsourcing enables us to keep our capital investment to a minimum, reducing
expenditures for hardware, installation and training, and it allows us to avoid
the problems of manufacturing equipment obsolescence. Outsourcing also enables
Enova to search out and work with a number of the best QS 9000-certified
manufacturers worldwide. Enova's strategy ensures that our OEM customers have
the highest confidence in our products, and receive the highest-quality
products.
Products
Enova's focus is digital power management, power conversion, and system
integration. Our software, firmware and hardware manage and control the power
that drives a vehicle or device. They convert the power into the appropriate
forms required by the vehicle or device, whether DC to AC, AC to DC or DC to DC,
and they manage the flow of this energy to protect the battery, the vehicle or
device, and the driver or operator. Enova's systems work "from drive train to
drive wheel" for both vehicle and stationary applications.
The latest state-of-the-art technologies such as hybrid vehicles, fuel cell and
micro turbine based systems, and stationary power generation all require some
type of power management and conversion mechanism. Enova Systems supplies these
essential components. Our drive train systems work with any kind of fuel/power
source, from electric to hybrid to fuel cell to turbine, and they are essential
components for any vehicle, system or device that uses power.
Enova is moving to expand our product base into new markets outside of the
traditional electric and hybrid-electric automotive fields. Key areas which
Enova has begun to
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penetrate include energy management in the telecommunications industry,
distributed generation in the utility industry, and stand-by/backup power
generation in the commercial electronics industry. All three of these markets
can be served with our existing energy management and power control products.
Enova has entered into agreements or begun discussions with various alternative
power generation manufacturers such as Capstone Turbine and International Fuel
Cells, as well as others. Enova believes our enabling technologies will prove
beneficial to these types of companies in their strategies to bring these new
power systems to commercialization.
Enova has embraced fuel cell technology and has begun to develop various power
management and control systems to enable fuel cell manufacturers and their
ancillary industries to achieve greater efficiencies from their systems. These
systems will also provide added reliability and safety by monitoring, adjusting
and reporting on operation of the unit.
PantherTM Electric and Hybrid-Electric Drive Systems
Enova's Panther electric drive system provides all the functionality one would
find under the hood of an internal combustion engine powered vehicle. The
Panther system consists of an enhanced electric motor and the electronic
controls that regulate the flow of electricity to and from the batteries at
various voltages and power to propel the vehicle. In addition to the motor and
controller, the system includes a gear reduction/differential unit. The system
is designed to be installed in a "drop in," fully integrated turnkey fashion, or
on a modular, "as-needed" basis.
Enova's family of light-duty drive systems includes 30kW, 60kW, 90kW
all-electric drives, 90kW fuel cell powered series-hybrid drive, and a 10kW
parallel-hybrid drive unit. Our family of heavy-duty electric drive systems
includes a 120kW all-electric drive, a 120kW turbine powered series-hybrid
drive, and a new 240kW turbine powered series-hybrid drive system.
Electric Drive Motors
The electric drive unit is essentially an electric motor with additional
features and functionality. The motor is liquid-cooled, environmentally sealed,
designed to handle automotive shock and vibration, and includes parking pawl,
which stops the vehicle when the driver parks the car. It also permits
regenerative braking to provide power recovery, in which the mechanical energy
of momentum is converted into electrical energy as the motor slows during
braking or deceleration. The optional gear reduction unit takes the electric
motor's high rpm and gears it down to the lower rpm required by the vehicle's
conventional drive shaft. As the rpm goes down, the torque of the electric motor
increases.
The Panther drive system exclusively utilizes induction AC motors for their high
performance, power density, robustness and low cost. The AC drive system is
scaleable and can be customized for different applications. Due to the large
operating range that the propulsion systems offer, all parameters can be
optimized; the user will not have to choose between acceleration, torque or
vehicle speed.
Electric Motor Controllers
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The controller houses all the components necessary to control the powering of a
vehicle, in one easy-to-install package. Our main component is an inverter,
which converts DC electricity to AC electricity. Enova also offers optional
controllers for the air conditioning, power steering and heat pump, 12VDC/24VDC
DC-to-DC converter for vehicle auxiliary loads such as cell phones, radio,
lights, and a 6.6kW AC-to-DC on-board conductive charger which allows for direct
110 VAC or 220 VAC battery charging. These are located in the same housing as
the controller, thus extra interconnects are not required. This approach
simplifies the vehicle wiring harness and increases system reliability.
Using our proprietary Windows(TM) based software package, vehicle interfaces and
control parameters can be programmed in-vehicle. Real-time vehicle performance
parameters can be monitored and collected.
Hybrid Drive Systems
The Enova Panther hybrid-electric drive systems are based on the component
building blocks of the electric drive family, including the motor, controller
and optional components. As an example, the 120/30 kW series hybrid system uses
the 120kW electric drive components to propel the vehicle, and uses a 30kW
micro-turbine to generate power while the vehicle is in operation. This synergy
of design reduces the development cost of our hybrid systems by taking advantage
of existing designs. Accessories for these drives include battery management,
chargers and 12-volt power supplies, as for the electric drive family.
Enova's hybrid systems are designed to work with a variety of hybrid power
generation technologies. In our 120/60kW hybrid system, an internal combustion
engine connected to a motor and motor controller performs the power generation.
Other power options include liquid fueled turbines, such as the Capstone system,
fuel cells, such as the IFC system, or many others. In all of these examples,
Our battery management system provides the power management to allow for proper
power control.
Enova Systems will pursue a two-part market penetration strategy. Initial
development will focus on power management and power conditioning components to
be marketed directly to key DG System suppliers. By moving aggressively, Enova
hopes to capture early market share as a key component supplier for these
companies.
The second part of the strategy is the development of complete DG systems for
first the residential market, and then the commercial/industrial market. These
systems would be marketed through well-known and well-established distribution
company such as Wal-Mart, Home-Depot or others. These companies have the
existing infrastructure necessary to support the sale, installation, and field
servicing of the units.
Battery Care Unit
We place a great amount of focus on our power management systems. Enova's
Battery Care Unit "BCU" monitors, manages, protects, and reports. It controls
and manages battery performance, temperature, voltage and current to avoid harm
to the batteries, to the entire system, and to the driver, operator and
passengers. It also allows for monitoring for service to the battery and drive
system. This battery
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management system is capable of providing communication to both inductive and
conductive chargers simultaneously and managing the on-board and off-board
charging systems with multiple technologies. The versatility of this system
allows us to adapt the hardware and software for a variety of power sources such
as batteries, turbines and fuel cells.
Our BCU monitors, manages, protects, and reports on the condition of the
vehicles battery pack. It controls and manages battery performance, temperature,
voltage and current to avoid harm to the batteries, to the entire system, and to
the driver, operator and passengers. It also allows for monitoring for service
to the battery and drive system. The BCU reports state-of-charge, amp hours and
kilowatt-hours.
The BCU monitors the battery pack voltage and 28 additional individual voltages
with a range of 0 to 18vDC. Optional expansion modules allow 28 additional
inputs per module, with up to 16 modules permitted. The BCU has eight
user-programmable outputs and four user-programmable inputs to allow full
integration into the vehicle. These can be used to customize input and output
parameters, and to provide for other custom monitoring and battery pack control.
The BCU directly interfaces with the Panther and other drive systems, and
controls the Safety Disconnect Unit. It is capable of supporting any battery
technology, and provides each type with optimized charging and protection
algorithms. An internal real-time clock allows the BCU to wake up at
user-specified times to initiate battery charging or pack monitoring. A
precision shunt allows it to offer a wide dynamic range for monitoring charging
and motoring current, without errors commonly associated with other types of
sensors.
The non-volatile built-in memory allows the BCU to update, store and report key
battery pack parameters such as amp hours, kilowatt-hours and state of change.
Using Enova's proprietary Windows(TM)-based diagnostic software, the BCU control
parameters can be programmed in-vehicle. Additionally, battery performance can
be monitored in real-time. Reports can be output to a laptop computer.
Hybrid Control Unit
Enova has reconfigured our BCU to perform the critical role of hybrid
controller. The Hybrid Control Unit "HCU" continuously monitors the condition of
the battery pack through communications with the BCU, monitors the driver
commands through communications with the motor controller, and the state of the
hybrid generator. Based upon the data received, the HCU provides continuous
updates to the hybrid generator with instructions on mode of operation and power
level. This innovative control loop ensures that the entire system is optimized
to provide quick response to driver commands while providing the best possible
system efficiency.
Safety Disconnect Unit
The Safety Disconnect Unit "SDU" is under the control of the BCU, and allows
vehicle systems to gracefully connect and disconnect from the battery pack when
necessary to prevent damage or harm. It also disconnects the battery pack during
charging, protects it from surges, and constantly verifies that the battery pack
is isolated from the vehicle
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chassis. In the event a ground isolation fault is detected, the BCU commands the
SDU to break the battery connection. The SDU is available in two configurations
to match the requirements of the drive systems.
Fast Charger
We have also developed a 40kW rapid charger for electric vehicles, which reduces
charging time from six to eight hours to 20 to 30 minutes. The charger was
developed in conjunction with Hyundai Motor Company for Hyundai electric
vehicles initially. The Fast Charger is also ideal for small or shuttle buses,
trams and trucks. We are currently selling rapid chargers to EPT of Italy.
Fuel Cell Power Conditioning Unit
Enova's has developed ands is now producing a 30kW bi-directional Fuel Cell
Power Conditioning System. This system has been designed to meet the demands of
an automotive Fuel Cell propulsion system. This unique unit, not much larger
than a conventional briefcase, provides a transparent interface between the Fuel
Cell or Turbine, the battery pack, accessory loads, and the output load. Fast
response time allows the output load to be serviced without interruption while
the Fuel Cell or Turbine ramps up.
This unit is designed to interface directly with the master controller of the
vehicle over a CAN bus. Other communications protocols supported are SAE J-1850,
RS-232, and RS-485. This proprietary package allows all key parameters of the
Power Conditioner to be monitored and control boundaries to be adjusted.
50kW ICE Generator Unit
Enova provides a complete 50kW Internal Combustion Engine Generator Set. This
unit is powered by a 4-cylinder direct injection diesel engine and is controlled
over the common CAN bus shared with the rest of the Panther product line. The
same Hybrid Control Unit that controls the Capstone micro-turbine in other Enova
series hybrid configurations provides power command, start command, and stop
commands.
Fuel Cell Management Unit
Enova has added a Fuel Cell Control Unit (FCU) to broaden our market in the
power management field. The FCU is designed to manage fuel cell powered systems
whether stationary or mobile such as automobiles. The FCU can be adapted to
regulate the input and output to and from the fuel cell as well as regulate
temperature and communications. Enova continues to develop our current systems
for new products and markets.
Enova has reconfigured our Battery Management Unit to perform the functions
required to monitor, manage, and report on the status of a Fuel Cell Stack. This
new unit, the FCU, is currently being used by UTC Fuel Cells as a Fuel Stack
Management System.
An internal real-time clock allows the FCU to wake up at user-specified times to
initiate battery charging or pack monitoring. A precision shunt allows it to
offer a wide dynamic range for monitoring charging and motoring current, without
errors commonly
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associated with other types of sensors. The non-volatile RAM allows the FCU to
update, store and report key battery pack parameters such as amp hours,
kilowatt-hours and state of change. Using Enova's proprietary Windows(TM)-based
diagnostic software, the FCU control parameters can be programmed in-system.
Additionally, fuel cell performance can be monitored in real-time. Reports can
be output to a laptop computer.
Distributed Power Generation for Industrial / Commercial / Residential
Applications
Enova's distributed generation products are virtually identical in system
configuration to that of a series hybrid vehicle, including a controller and
battery management. For this market segment, Enova will provide DC-DC and DC-AC
power conversion components to convert power supplied by batteries, fuel cells,
generators and turbines to AC power that will be used by the end customer.
Additionally, our Battery Care Unit (BCU II) will provide power management
functions to control the entire system. The main difference is that the 3-phase
AC power typically supplied to the motor for propulsion power is, in this case,
sent to the customer to supply power for their household or business.
Back-Up Power for Telecommunications
As in the distributed generation market, telecommunications products are
virtually identical in system configuration to a series hybrid vehicle,
including a controller and battery management unit. For this market segment
Enova will provide DC-DC and DC-AC power conversion components to convert power
supplied by batteries, fuel cells, generators, and turbines to AC power that
will be used by the communications link. The Battery Care Unit will provide
power management functions to control the entire system. When the grid goes
down, the AC power typically supplied to the motor for propulsion power is, in
this case, sent to the communications link (or router) to supply power as a
backup.
Competitive Conditions
The competition to develop and market electric, hybrid and fuel cell powered
vehicles has increased during the last year and we expect this trend to
continue. The competition consists of development stage companies as well as
major U.S. and international companies. Our future prospects will be highly
dependent upon the successful development and introduction of new products that
are responsive to market needs and can be manufactured and sold at a profit.
There can be no assurance that we will be able to successfully develop or market
any such products.
The development of hybrid-electric and alternative fuel vehicles, such as
compressed natural gas, fuel cells and hybrid cars poses a competitive threat to
our markets for low emission vehicles or LEVs but not in markets where
government mandates call for zero emission vehicles or ZEVs. Enova is involved
in the development of hybrid vehicles and fuel cell systems in order to meet
future requirements and applications.
Various providers of electric vehicles have proposed products or offer products
for sale in this emerging market. These products encompass a wide variety of
technologies aimed at both consumer and commercial markets. The critical role of
technology in this market is demonstrated through several product offerings. As
the industry matures, key
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technologies and capabilities are expected to play critical competitive roles.
Our goal is to position itself as a long term competitor in this industry by
focusing on electric, hybrid and fuel cell powered drive systems and related sub
systems, component integration, technology application and strategic alliances.
The addition of new strategies to penetrate stationary power markets with
current technologies will assist in creating a more diversified product mix. We
believe that this strategy will enhance our position as a power management and
conversion components supplier to both the mobile and stationary power markets.
Research and Development
Enova believes that timely development and introduction of new technology and
products is essential to maintaining a competitive advantage. We are currently
focusing our development efforts primarily in the following areas:
*Power Control and Drive Systems and related technologies for vehicle
applications;
*Stationary Power Management and Conversion and related technologies;
*Heavy Duty Drive System development for Shuttle and Transit Buses;
*Systems Integration of these technologies;
*Technical and product development under DARPA/DOT and Hyundai Group
Contracts; and
*OEM Technical and Product development.
For the year ended December 31, 2001 and 2000, we spent $879,000 and $626,000,
respectively, on internal research and development activities. For the five
months ending December 31, 1999 and the fiscal years ended July 31, 1999 and
1998, we spent $262,000, $499,000 and $445,000, respectively, on internal
research and development activities. Enova continually evaluating and updating
the technology and equipment used in developing each of our products. The power
management and conversion industry utilizes rapidly changing technology and we
will endeavor to modernize our current products as well as continue to develop
new leading edge technologies to maintain our competitive edge in the market.
Intellectual Property
Enova currently holds one patent for crash management safety, which was
originally issued in 1997, and has submitted applications for four additional
patents and several trademarks or service marks in the United States. We
continually review and append our protection of proprietary technology. The
status of patents involves complex legal and factual questions, and the breadth
of claims allowed is uncertain. Accordingly, there can be no assurance that
patent applications filed by us will result in patents being issued. Moreover,
there can be no assurance that third parties will not assert claims against us
with respect to existing and future products. Although we intend to vigorously
protect our rights, there can be no assurance that these measures will be
successful. In the event of litigation to determine the validity of any third
party claims
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such litigation could result in significant expense to Enova. Additionally, the
laws of certain countries in which our products are or may be developed,
manufactured or sold may not protect our products and intellectual property
rights to the same extent as the laws of the United States.
Employees
As of December 31, 2001, we had 39 employees, of whom 38 are full-time and 1
part-time. Additionally, we employ six individuals as independent contractors,
engaged on an hourly basis, two of whom are domiciled in South Korea. The
departmental breakdown of these individuals includes 3 in administration, 1 in
sales, 30 in engineering and research and development, and 11 in production.
Facilities
Enova's corporate offices are located in Torrance, California, in leased office
space of approximately 20,000 square feet. This facility houses our various
departments, including engineering, operations, executive, finance, planning,
purchasing, investor relations and human resources. This lease terminates in
February, 2003. The monthly lease expense is $13,500. Enova also has a leased
office in Hawaii which is rented on a month to month basis at $1,500 per month.
Legal Proceedings
We may from time to time become a party to various legal proceedings arising in
the ordinary course of business. However, we are not currently a party to any
material legal proceedings.
We have settled a lawsuit brought against us by Fontal International in June
2000, which was filed in the United States District Court, Central District of
California as previously disclosed in our March 31, 2000 Form 10Q. The suit
alleged breach of contract with respect to certain warrants to purchase
10,833,332 shares of Enova System's common stock. The settlement agreement
requires us to issue 6,000,000 shares of common stock which are to be registered
and freely tradable on, or before, March 31, 2002.
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MANAGEMENT
The following table sets forth certain information regarding our directors and
executive officers as of December 31, 2001.
Name Age Position
---- --- --------
Anthony N. Rawlinson 47 Chairman of the Board
Carl D. Perry 69 President, Chief Executive Officer, Chief
Financial Officer and Secretary
Malcolm R. Currie, Ph.D. (1) 72 Director
Donald H. Dreyer (2) 64 Director
John J. Micek III (2) 49 Director
Edwin O. Riddell (1) 59 Director
James M. Strock 46 Director
(1) Member of Compensation Committee
(2) Member of Audit Committee
Anthony N. Rawlinson, Chairman of the Board
Mr. Rawlinson was appointed Chairman in July 1999. Since 1996, Mr. Rawlinson has
been Managing Director of The Global Value Investment Portfolio Management Pte.
Ltd., a Singapore based international fund management company managing
discretionary equity portfolios for institutions, pension funds and clients
globally. Mr. Rawlinson has more than twenty years experience in international
fund management. Mr. Rawlinson is a specialist in analysis and investment in
high technology companies. Mr. Rawlinson is currently Chairman of Matrix Oil NL,
an Australian publicly listed company with Indonesian oil and gas interests. He
is also a director of Cardsoft Inc., a software company with secure Java based
solutions for mobile phones and handheld devices.
Carl D. Perry, Director, Chief Executive Officer, President
Mr. Perry was elected Chairman, Chief Executive Officer, Acting Chief Financial
Officer and Secretary in November 1997. Mr. Perry served as a director and as an
Executive Vice President from 1993 until 1997. In 1997, Mr. Perry was elected as
Chairman and Chief Executive, and was elected President in June 1999. In July
1999, Mr. Perry resigned his position as Chairman to allow Mr. Anthony Rawlinson
to become Chairman. Previously, he was Executive Vice President of Canadair
Ltd., Canada's largest aerospace corporation responsible for all worldwide joint
ventures, strategic planning and global operations. He was also Executive Vice
President of Howard Hughes Helicopter Company, now known as Boeing Helicopter
Company, where he was responsible for all general management and worldwide
operations. Mr. Perry has a
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B.S. in Political Science from the University of California at Los Angeles.
Malcolm R. Currie, Ph.D., Director
Dr. Currie was re-elected to our board of directors in 1999. Dr. Currie had
served as a director from 1995 through 1997. Since 1994, he has served as
Chairman of Currie Technologies, a developer of electric transportation. From
1986 until 1992, Dr. Currie served as Chairman and Chief Executive Officer of
Hughes Aircraft Co., and from 1985 until 1988, he was the Chief Executive
Officer of Delco Electronics. His career in electronics and management has
included research with many patents and pap s in microwave and millimeter wave
electronics, laser, space systems, and related fields. He has led major programs
in radar, commercial satellites, communication systems, and defense electronics.
He served as Undersecretary of Defense for Research and Engineering, the Defense
Science Board, and currently serves on the boards of Inamed Corporation ,
Investment Company of America, and LSI Logic. He is President of the American
Institute of Aeronautics and Astronautics, and is a Member (former Chairman) of
the Board of Trustees of the University of Southern California.
John J. Micek III, Director
Mr. Micek was elected to our board of directors in 1999. Mr. Micek served as our
Vice President, General Counsel, and Secretary from March 1994 to March 1997.
From 1997 to the present, he has been Managing Director of Silicon Prairie
Partners, L.P., a venture fund. From 1987 to 1994, Mr. Micek held several
positions with Armanino Foods of Distinction, Inc., including General Counsel
and Chief Financial Officer from 1987 to 1988, Vice President from 1989 to 1994,
and director from 1988 to 1989. Mr. Micek is also a practicing attorney
specializing in corporate finance and business development in Palo Alto,
California. He is a board member of Universal Warranty and sits on the boards
Burst.com, Inc. and Pelion Systems, Inc.
Donald H. Dreyer, Director
Mr. Dreyer was elected a director in 1997. Mr. Dreyer is President and CEO of
Dreyer & Company, Inc., a consultancy in credit, accounts receivable and
insolvency services which was established in 1990. Mr. Dreyer has served as
Chairman of the Board of Credit Managers Association of California during the
1994 and 1995 term, and continues to serve as a member of the Advisory Committee
of that organization. Mr. Dreyer is currently the co-Chair of the Creditors
Committees' Subcommittee of the American Bankruptcy Institute and is a member of
the Western Advisory Committee of Dun & Bradstreet, Inc. [He is also a member of
the Board of the National Association of Credit Management.]
Edwin O. Riddell, Director
Mr. Riddell has been one of our directors since 1995. From March 1999 to the
present, Mr. Riddell has been President of CR Transportation Services, a
consultant to the electric vehicle industry. From January 1991 to March 1999,
Mr. Riddell served as Manager of the Transportation Business Unit at the
Electric Power Research Institute in Palo Alto, California, and from 1985 until
November 1990, he served with the Transportation Group, Inc. as Vice President,
Engineering, working on electric public
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transportation systems. From 1979 to 1985, he was Vice President and General
Manager of Lift-U, Inc., the leading manufacturer of handicapped wheelchair
lifts for the transit industry. Mr. Riddell has also worked with Ford, Chrysler,
and General Motors in the area of auto design (styling), and has worked as a
member of senior management for a number of public transit vehicle
manufacturers. Mr. Riddell has been a member of the American Public
Transportation Association's (APTA) Member Board of Governors for over 15 years,
and has served on APTA's board of directors. Mr. Riddell was also Managing
Partner of the U.S. Advanced Battery Consortium.
James M. Strock, Director
Mr. Strock was elected a Director of Enova in June, 2000. From 1991-1997, Mr.
Strock served in Governor Pete Wilson's cabinet as California's first Secretary
for Environmental Protection. He led an organization with an annual budget of
more than $800 million with 4,000 employees. The Agency includes many of the
world's leading environmental improvement programs relating to air and water
quality, toxics and pesticide regulation, and solid waste. From 1989 until 1991,
Mr. Strock served in President Bush's subcabinet as Assistant Administrator for
Enforcement (chief law enforcement officer) of the U.S. Environmental Protection
Agency. Currently, he is principal of jamesstrock.com, inc., a San Francisco
firm providing consulting, communications and mediation services. Mr. Strock is
a graduate of Harvard College and Harvard Law School, and is a member of the
Council on Foreign Relations. He is the author of Reagan on Leadership:
Executive Lessons from the Great Communicator, and Theodore Roosevelt: Executive
Lessons from the Bully Pulpit.
There are no family relationships among any of the directors or executive
officers of our company.
Board of Directors, Committees and Compensation
Each of the directors is elected to serve a one-year term and until his
successor if duly elected and qualified. The authorized number of directors is
currently fixed at seven. The holders of the Series B Stock, voting as a
separate class, are entitled to elect two directors. The holders of the Series A
Stock and the common stock, voting together as a single class, are entitled to
elect the balance of the directors. See "Description of Capital Stock."
The Board currently has two committees: the Compensation Committee and the Audit
Committee. The Compensation Committee currently consists of Mr. Edwin Riddell
and Dr. Malcolm Currie. Its functions are to establish and apply our
compensation policies with respect to our executive officers, and to administer
our stock option plans. The Audit Committee currently consists of Messrs. Donald
Dreyer and John Micek. The Audit Committee recommends engagement of the
independent auditors and is primarily responsible for approving the services
performed by the independent auditors and for reviewing and evaluating the our
accounting principles and system of internal accounting controls.
In September 1999, our board of directors unanimously approved a compensation
package for outside directors consisting of the following: for each meeting
attended in person, each outside director is to receive $1,000 in cash and
$2,000 of stock valued on
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the date of the meeting at the average of the closing ask and bid prices; for
each telephonic board meeting, each outside director is to receive $250 in cash
and $250 of stock valued on the date of the meeting at the average of the
closing ask and bid prices; for each meeting of a board committee attended in
person, the committee chairman is to receive $500 in cash and $500 of stock
valued on the date of the meeting at the average of the closing ask and bid
prices. All directors are reimbursed for expenses incurred in connection with
attending board and committee meetings.
Executive Compensation
The following table sets forth all compensation earned by our company's Chief
Executive Officer and each of the other most highly compensated executive
officers whose annual salary and bonus exceeded $100,000 for the years ended
December 31, 2001, 2000 and 1999 (collectively, the "Named Executive Officers").
Mr. Carl D. Perry is the sole executive officer of Enova whose salary currently
exceeds $100,000.
Long Term Compensation Awards
-----------------------------
Salary Bonus Securities Underlying Options/SARs
Year ($) ($) (#)
---- --------- ---- ---
Carl D. Perry, Chief 2001 $136.118 $30,000 0
Executive Officer, Chief 2000 $128,170 $ 0 0
Financial Officer, 1999 $ 75,000 $ 0 0
President and Secretary
Option/SAR Grants
No grants of stock options or stock appreciation rights ("SARs") were made
during fiscal 2001 to the Named Executive Officers.
Option Exercises and Option Values
The following table sets forth information concerning option exercises during
2001, and the aggregate value of unexercised options as of December 31, 2001,
held by each of the Named Executive Officers:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
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Number of Securities Value Of Unexercised
Underlying Unexercised In-The-Money
Options/SARs At Fiscal Options/SARs At Fiscal
Shares Acquired Year-End Exercisable/ Year-End Exercisable/
Name On Exercise (#) Value Realized ($) Unexercisable (#) Unexercisable ($)
---- --------------- ------------------ ----------------- -----------------
Carl D. Perry 1,200,000/0 $ 72,000
------------------------
(1) Calculated on the basis of the average of the high bid and low ask prices of
the Common Stock on December 31, 2001 of $0.16 per share, minus the exercise
price.
Stock Option Plans
A general description of the principal terms of the 1996 Plan are set forth
below. This description is qualified in its entirety by the terms of the 1996
Plan. A copy of the actual 1996 Plan document has been previously filed with the
Securities and Exchange Commission.
Our board of directors of the adopted the 1996 Plan in October 1996. A total of
15,000,000 shares were reserved for issuance under the 1996 Plan. Options
granted under the 1996 Plan may be either incentive stock options, as defined in
Section 422 of the Internal Revenue Code of 1986, or nonstatutory stock options.
In 1999, our board of directors and shareholders approved an amendment to the
1996 Plan to increase the number of shares of common stock reserved for issuance
thereunder by 30,000,000 shares, bringing the total number of shares issuable
under the 1996 Plan to 45,000,000. The share increase to the 1996 Plan assured
that a sufficient reserve of common stock are available to provide us with the
continuing opportunity to utilize equity incentives to attract and retain the
services of employees essential to our long-term growth and financial success.
With respect to the grant of options to directors or employees who are also
officers or directors, the 1996 Plan is administered by (i) our board of
directors, or (ii) a committee designated by the board and constituted in such a
manner as to comply with applicable laws to permit such grants and related
transactions to be exempt from Section 16(b) of the Exchange Act in accordance
with Rule 16b-3. With respect to grants to employees or consultants who are
neither officers nor directors of Enova, the 1996 Plan is administered by the
board or by a committee of the board.
The administrators of the 1996 Plan have full power to select, from among our
employees, directors and consultants eligible for grants, the individuals to
whom options will be granted, to determine the specific terms and conditions of
each grant, including the number of shares subject to each option, to amend the
terms of outstanding options granted under the 1996 Plan (except that any
amendments that would adversely affect an optionee's rights under an outstanding
option may not be made without the optionee's written consent), and to interpret
and construe the terms of the 1996 Plan and options granted thereunder, all
subject to the provisions of the 1996 Plan. The interpretation and construction
of any provision of the 1996 Plan by the administrators shall be final and
conclusive. Members of the board receive no additional compensation for their
services in connection with the administration of the 1996 Plan.
The 1996 Plan provides that options may be granted to employees (including
officers and directors who are also employees), directors and consultants.
Incentive stock options may only be granted to employees.
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Each option granted under the 1996 Plan is to be evidenced by a written stock
option agreement between Enova and the optionee and is subject to the following
additional terms and conditions:
The board or its committee determines on the date of grant when options will
become exercisable. An option is exercised by giving written notice of exercise,
specifying the number of full shares of common stock to be purchased and
tendering payment of the purchase price.
The exercise price of options granted under the 1996 Plan is determined on the
date of grant. The exercise price of incentive stock options must be at least
100% of the fair market value per share of the common stock at the time of
grant. In the case of incentive stock options granted to an employee who at the
time of grant owns more than 10% of the voting power of all classes of stock or
any parent or subsidiary, the exercise price must be at least 110% of the fair
market value per share of the common stock at the time of grant. The exercise
price of nonstatutory stock options must be at least 85% of the fair market
value per share of the common stock at the time of grant. The exercise price of
nonstatutory stock options granted to an employee who at the time of grant owns
more than 10% of the voting power of all classes of Enova stock including stock
of any parent or subsidiary, the exercise price must be at least 110% of the
fair market value per share of the common stock at the time of grant. In the
event of the grant of a nonstatutory option with an exercise price below the
then fair market value of the common stock, the difference between fair market
value on the date of grant and the exercise price would be treated as a
compensation expense for accounting purposes and would therefore affect the our
earnings. For purposes of the 1996 Plan, fair market value is defined as the
closing sale price of the common stock as reported on the OTC Bulletin Board on
last market trading day prior to the time of grant.
If the optionee's employment, directorship or consulting relationship with us is
terminated for any reason (other than death or disability), options may be
exercised within such period as is determined by the board or its committee (up
to three months in the case of incentive stock options) after such termination
as to all or part of the shares as to which the optionee was entitled to
exercise at the date of such termination, provided that the option is exercised
no later than its expiration date.
At the time an option is granted, the board or its committee determines the
period within which the option may be exercised. In no event may the term of an
incentive stock option be longer than ten (10) years. No option may be exercised
by any person after the expiration of its term. An incentive stock option
granted to an optionee who, at the time such option is granted, owns stock
possessing more than 10% of the voting power of all classes of Enova stock, may
not have a term of more than five (5) years.
An incentive stock option is not transferable by the optionee, other than by
will or the laws of descent and distribution, and is exercisable during the
optionee's lifetime only by the optionee. A nonstatutory option shall be
transferable to the extent determined by the administrator and as provided in an
optionee's option agreement.
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The option agreement may contain such other terms, provisions and conditions not
inconsistent with the 1996 Plan as may be determined by the board or its
committee.
In the event any change, such as a stock split, reverse stock split, stock
dividend, or combination or reclassification of the common stock, is made in the
our capitalization without receipt of consideration, which results in an
increase or decrease in the number of outstanding shares of common stock, an
appropriate adjustment shall be made in the number of shares under the 1996 Plan
and the price per share covered by each outstanding option.
In the event we merge or consolidate with another entity and we are not the
surviving corporation, or a proposed sale, transfer or other disposition of all
or substantially all of our assets in connection with complete liquidation or
dissolution, or a reverse merger in which we are the surviving entity but in
which securities possessing more than 50% of the total combined voting power of
our outstanding securities are transferred to a person or persons different from
those who held such securities immediately prior to such merger, each
outstanding option shall automatically become fully vested and exercisable and
released from any restrictions on transfer and repurchase or forfeiture rights,
unless the option is assumed or substituted by the successor corporation or
replaced with a comparable option with respect to shares in the surviving
corporation, or the option is replaced with a comparable cash incentive program
of the successor corporation, or unless the vesting, exercisability and release
of the option is subject to other limitations imposed by the 1996 Plan
administrators at the time of granting the options.
The board may amend the 1996 Plan at any time or from time to time or may
suspend or terminate the 1996 Plan without approval of the shareholders;
provided, however, that shareholder approval is required for any amendment to
the 1996 Plan for which shareholder approval would be required under applicable
law, as in effect at the time. Any amendment, suspension or termination of the
1996 Plan shall not affect options already granted, and such options shall
remain in full force and effect, unless mutually agreed otherwise in writing
between the optionee and the Plan administrators. The board may accelerate any
option or waive any condition or restriction pertaining to such option at any
time. The board may also substitute new stock options for previously granted
stock options, including previously granted stock options having higher option
prices, and may reduce the exercise price of any option to the then current fair
market value, if the fair market value of the common stock covered by such
option shall have declined since the date the option was granted. In any event,
the 1996 Plan shall terminate in October 2006. Any options outstanding under the
1996 Plan at the time of its termination shall remain outstanding until they
expire by their terms.
We cannot now determine the number of options to be granted in the future under
the 1996 Plan, as proposed to be amended, to executive officers, directors or
employees. During 2001, 7,080,000 stock options were granted to employees under
the 1996 Plan.
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Compensation Committee Interlocks and Insider Participation
Our Compensation Committee currently consists of Mr. Edwin Riddell, as Chairman,
and Dr. Malcolm Currie. Mr. Riddell was elected Chairman in August 1998. Dr.
Currie was elected to the Compensation Committee in July 1999 and also served on
the Compensation Committee during his prior term as a director until his
resignation in 1998.
Limitation on Liabilities and Indemnification Matters
Our articles of incorporation limits the personal liability of our directors to
our shareholders to the maximum extent permitted by California law. California
law provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except with
respect to liability for:
o acts or omissions that involve intentional misconduct or a knowing
and culpable violation of law;
o acts or omissions that a director believes to be contrary to the best
interests of the corporation or our shareholders or that involve the
absence of good faith on the part of the director;
o any transaction from which the director derived an improper personal
benefit.
o acts or omissions that show a reckless disregard for the director's
duty to the corporation or our shareholders in circumstances in which
the director was aware, or should have been aware, in the ordinary
course of performing a director's duties, of a risk of serious injury
to the corporation or our shareholders;
o acts or omissions that constitute an unexcused pattern of inattention
that amounts to an abdication of the director's duty to the corporation
or our shareholders;
o contracts or other transactions in which the director has a material
financial interest that are not approved in the manner set forth under
Section 310 of the California General Corporation Law; or
o certain distributions or the making of certain loans or guarantees
approved by (or deemed to have been approved by) directors as provided
under Section 316 of the California General Corporations Law.
This provision will have no effect on any non-monetary remedies that may be
available to us or to our shareholders, nor will it relieve us or other officers
or directors from compliance with federal or state securities laws.
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Our articles of incorporation and bylaws also generally provide that we will
indemnify, to the fullest extent permitted under the California General
Corporation Law, any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit, investigation,
administrative hearing or any other proceeding by reason of the fact that he or
she is or was a director or officer of ours, or is or was serving at our request
as a director, officer, employee or agent of another entity, against expenses
incurred by him or her in connection that proceeding. An officer or director
will not be entitled to indemnification by us if:
o the officer or director did not act in good faith and in a manner
reasonably believed to be in our best interests; and
o with respect to any criminal action or proceeding, the officer or
director had no reasonable cause to believe his or her conduct was
unlawful.
At the present time there is no pending litigation or proceeding involving any
of our directors, officers, employees or agents for which indemnification will
be required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for indemnification.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2001, there were no transactions or series of similar transactions to
which we were or are to be a party in which the amount involved exceeds $60,000
and in which any of our directors, executive officers or holders of more than 5%
of our common stock, or an immediate family member of any of the foregoing, had
or will have a direct or indirect interest other than:
o compensation arrangements, which are described where required under
"Management"; and
o the transactions described below.
In May 2001, Jagen Pty, Ltd. exercised warrants to purchase 41,666,666 shares of
common stock at $0.06 per share for a total of $2,500,000. Jagen represented
that it was an accredited investor under the definition set forth by the
Securities and Exchange Commission. We relied on Rule 506 of Regulation D and
Section 4(2) of the Securities Act of 1933, as amended, for the exemption from
registration of the sale of such shares.
In July 2001, Anthony Rawlinson exercised warrants to purchase 8,333,334 shares
of common stock at $0.06 per share for a total of $500,000. Mr. Rawlinson
represented that he was an accredited investor under the definition set forth by
the Securities and Exchange Commission. We relied on Rule 506 of Regulation D
and Section 4(2) of the Securities Act of 1933, as amended, for the exemption
from registration of the sale of such shares.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our stock as of March 8, 2002, (i) by each person (or group of
affiliated persons) who is
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known by Enova to own beneficially more than 5% of any class of our voting
securities, (ii) by each of our Directors, (iii) by each of our Named Executive
Officers listed in the Summary Compensation Table below, and (v) by our
Directors and executive officers as a group. Except as indicated in the
footnotes to this table and subject to applicable community property laws, the
persons named in the table, based on information provided by such persons, have
sole voting and investment power with respect to all shares of stock
beneficially owned by them.
-------------------------------------- ------------------------------ ----------------------------- ------------------
Name Shares Percentage of Shares Voting
Beneficially Owned (1) Beneficially Owned (2) Percentage (3)
-------------------------------------- ------------------------------ ----------------------------- ------------------
Jagen, Pty., Ltd. 125,000,000 35.31% 40.52%
9 Oxford Street, South Yorra 3141
Melbourne, Victoria Australia
-------------------------------------- ------------------------------ ----------------------------- ------------------
Carl D. Perry 11,200,500 (4) 3.16% 3.24%
c/o Enova Systems, Inc.
19850 South Magellan Drive
Torrance, CA 90502
-------------------------------------- ------------------------------ ----------------------------- ------------------
Citibank N.A. 31,655,754 8.94% 10.26%
111 Wall Street, 8th Floor
New York, NY 10043
-------------------------------------- ------------------------------ ----------------------------- ------------------
Anthony N. Rawlinson 25,208,873 7.12% 8.17%
c/o Enova Systems, Inc.
19850 South Magellan Drive
Torrance, CA 90502
-------------------------------------- ------------------------------ ----------------------------- ------------------
John J. Micek, III 817,383(5) * *
-------------------------------------- ------------------------------ ----------------------------- ------------------
Edwin O. Riddell 447,445 * *
-------------------------------------- ------------------------------ ----------------------------- ------------------
Dr. Malcolm Currie 325,878 * *
-------------------------------------- ------------------------------ ----------------------------- ------------------
Donald H. Dreyer 212,646 * *
-------------------------------------- ------------------------------ ----------------------------- ------------------
James M. Strock 67,056 * *
-------------------------------------- ------------------------------ ----------------------------- ------------------
Delphi Delco Electronics (6) 1,278,720 * *
-------------------------------------- ------------------------------ ----------------------------- ------------------
Jean Schulz (7) 1,329,111 * 1.12%
-------------------------------------- ------------------------------ ----------------------------- ------------------
All Directors and executive officers 38,279,781 (8) 10.81% 12.04%
as a group (7 persons)
-------------------------------------- ------------------------------ ----------------------------- ------------------
* Indicates less than 1%
(1) Number of Common Stock shares includes Series A Preferred Stock, Series
B Preferred Stock and Common Stock shares issuable pursuant to stock
options, warrants and other securities convertible into Common Stock
beneficially held by the person or class in question which may be
exercised or converted within 60 days after February 28, 2002.
(2) The percentages are based on the number of shares of Common Stock,
Series A Preferred Stock and Series B Preferred Stock owned by the
shareholder divided by the sum of: (i) the total Common Stock
outstanding, (ii) the Series A Preferred Stock owned by such
shareholder; (iii) the Series B Preferred Stock owned by such
shareholder; and (iv) Common Stock issuable pursuant to warrants,
options and
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other convertible securities exercisable or convertible by such
shareholder within sixty (60) days after February 28, 2002.
(3) The percentages are based on the number of shares of Common Stock,
Series A Preferred Stock and/or Series B Preferred Stock owned by the
shareholder divided by the sum of: (i) the total Common Stock
outstanding, (ii) the total Series A Preferred Stock outstanding and
(iii) the total Series B Preferred Stock outstanding. This percentage
calculation has been included to show more accurately the actual voting
power of each of the shareholders, since the calculation takes into
account the fact that the outstanding Series A Preferred Stock and
Series B Preferred Stock are entitled to vote together with the Common
Stock as a single class on certain matters to be voted upon by the
shareholders.
(4) Includes 1,200,000 shares of Common Stock issuable pursuant to stock
options issued under an employee stock option plan exercisable at a
price of $0.10 per share. The option exercise price, for Mr. Perry's
and other employees under the 1996 Stock Option Plan, was reset to
$0.10 per share from $0.30 per share on August 19, 1998 at the
direction of the Board of Directors.
(5) Includes 565,000 shares of Common Stock issuable pursuant to stock
options exercisable at a price of $0.10 per share. The option exercise
price was reset to $0.10 per share from $0.30 per share on June 10,
1999 at the direction of the Board of Directors.
(6) Series B Preferred Stock shareholder. Series B shares represent the
equivalent of two shares of Common Stock for every one share of Series
B Preferred stock.
(7) Series A Preferred Stock shareholder. Series A shares represent the
equivalent of one share of Common Stock for every one share of Series A
Preferred stock.
(8) Includes 1,765,000 shares of Common Stock issuable pursuant to stock
options exercisable at price of $.10 per share
SELLING SHAREHOLDER
The following table sets forth information, as of February 1, 2002, with respect
to the selling shareholder. We issued the shares of our common stock being
offered by the selling shareholder in a private placement in December 2001. We
issued 6,000,000 shares of our common stock at a price equivalent to $0.16 per
share. The shares were issued as consideration for the out-of-court settlement
of a lawsuit brought against us by Fontal International, the selling
shareholder. This prospectus covers the resale by the selling shareholder of
these shares, plus, in accordance with Rule 416 under the Securities Act of
1933, such additional number of shares of our common stock as may be issued due
to stock splits, stock dividends or other similar transactions. The number of
shares shown in the following table as being offered by the selling shareholders
does not include such presently indeterminate number of additional shares of our
common stock.
Any and all of the shares of common stock may be offered for sale pursuant to
this prospectus by the selling shareholder from time to time. Accordingly, no
estimate can be given as to the amounts of shares of our common stock that will
be held by the selling shareholder upon consummation of any such sales. In
addition, the selling shareholder may have sold, transferred or otherwise
disposed of all or a portion of our shares since the date on which the
information regarding the common stock was provided in transactions exempt from
the registration requirements of the Securities Act of 1933.
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The selling shareholder was a holder of Enova debt prior to December 31, 1999.
In 1999, the selling shareholder converted long-term debt of approximately
$1,247,000 including accrued interest into approximately 4,246,000 shares of our
common stock.
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Shares of
Shares of Common
Common Shares of Stock to be Percent of
Stock owned Common owned after Common
prior to the Stock Offered the Offering Stock Owned
Name Offering (#) (#) (#) after the Offering
---- ------------ --- --- ------------------
Fontal International 0 6,000,000 6,000,000 1.67%
(1) The number of shares listed in these columns include all shares
beneficially owned and all options and warrants to purchase shares held, whether
or not deemed to be beneficially owned, by the selling shareholder. The
ownership percentage listed in these columns includes only shares beneficially
owned by the selling shareholder. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. In
computing the percentage of shares beneficially owned by the selling
shareholder, shares of common stock subject to options or warrants held by the
shareholder that are exercisable now or within 60 days hereafter are deemed
outstanding, although those shares are not deemed outstanding for the purpose of
computing the percentage ownership of any other person. The ownership percentage
is calculated assuming that 297,227,095 shares of common stock, 2,844,336 shares
of Series A Stock and 1,217,196 shares of Series B Stock were outstanding
immediately prior to this offering.
PLAN OF DISTRIBUTION
We are registering all 6,000,000 of the shares of our common stock offered by
this prospectus on behalf of the selling shareholder, and will receive no
proceeds from this offering.
The selling shareholder, or pledgees, donees, transferees or other
successors-in-interest selling shares received from the selling shareholder as a
gift, partnership distribution or other non-sale related transfer after the date
of this prospectus are free to sell the shares from time to time. The selling
shareholder will act independently of us in making decisions with respect to the
timing, manner and size of each sale. The sales may be made in the national
over-the-counter market or otherwise, at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The selling shareholder may effect such transactions by selling
the shares to or through broker-dealers. The shares may be sold in one or more
transactions and by one or more of, or a combination of, the following:
o block trade in which the broker-dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its account pursuant to this prospectus;
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o an exchange distribution in accordance with the rules of such
exchange;
o a distribution or other transfer to one or more of the equity holders
of the selling shareholder;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o in privately negotiated transactions.
In effecting sales, broker-dealers engaged by the selling shareholder may
arrange for other broker-dealers to participate in the resales.
The selling shareholder may enter into hedging transactions with broker-dealers
in connection with distributions of the shares or otherwise. In such
transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with selling shareholder. The
selling shareholder also may sell shares short and redeliver the shares to close
out such short positions. The selling shareholder may enter into option 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 shareholder also may loan or
pledge the shares to a broker-dealer. The broker-dealer may sell the shares so
loaned, or upon a default the broker-dealer may effect sales of the pledged
shares pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of commissions,
discounts or concessions from the selling shareholder. Broker-dealers or agents
may also receive compensation from the purchasers of the shares for whom they
act as agents or to whom they sell as principals, or both. Compensation as to a
particular broker-dealer might be in excess of customary commissions and will be
in amounts to be negotiated in connection with the sale. Brokers-dealers or
agents and any other participating broker-dealers or the selling shareholders
may be deemed to be underwriters within the meaning of Section 2(11) of the
Securities Act of 1933, in connection with sales of the shares. Accordingly, any
such commission, discount or concession received by them and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
discounts or commissions under the Securities Act. Because the selling
shareholder may be deemed to be underwriters within the meaning of Section 2(11)
of the Securities Act, the selling shareholder will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this prospectus that qualify for sale pursuant to Rule 144 promulgated under
the Securities Act may be sold under Rule 144 rather than pursuant to this
prospectus. The selling shareholder has advised us that it has not entered into
any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of the shares; nor is any underwriter or
coordinating broker acting in connection with the proposed sale of the shares by
the selling shareholder.
The shares will be sold only through registered or licensed brokers or dealers
if required under applicable state securities laws. In addition, in certain
states the shares may not be sold unless they have been registered or qualified
for sale in the applicable state or
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an exemption from the registration or qualification requirements is available
and is complied with.
Under applicable rules and regulations under the Securities Exchange Act of
1934, any person engaged in the distribution of the shares may not
simultaneously engage in market-making activities with respect to our common
stock for a period of two business days prior to the commencement of such
distribution. In addition, we have advised the selling shareholder that it will
be subject to applicable provisions of the Exchange Act and the associated rules
and regulations under the Exchange Act, including the anti-manipulation rules
under Regulation M promulgated under the Exchange Act, which provisions may
limit the timing of purchases and sales of shares of our common stock by the
selling shareholder. We will make copies of this prospectus available to the
selling shareholder and we have informed it of the need for delivery of copies
of this prospectus to purchasers at or prior to the time of any sale of the
shares.
We will bear all costs, expenses and fees in connection with the registration of
the shares and will supplement and amend this prospectus from time to time as
may be required under the Securities Act. During any time when a supplement or
amendment is required, the selling shareholder will be required to cease sales
of the shares covered by this prospectus until it has been supplemented or
amended.
The selling shareholder will bear all commissions and discounts, if any,
attributable to the sales of the shares. The selling shareholder may agree to
indemnify any broker-dealer or agent that participates in transactions involving
sales of the shares against certain liabilities, including liabilities arising
under the Securities Act.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 500,000,000 shares of common stock, no
par value, and 35,000,000 shares of preferred stock. We currently have
303,227,095 shares of common stock outstanding, 2,844,336 shares of Series A
Stock and 1,217,196 shares of Series B Stock.
Common Stock
Voting Rights. Each outstanding share of common stock is entitled to one vote on
all matters submitted to a vote of our shareholders, including the election of
directors.
Dividends. Subject to the preferential dividend rights of the Series A Stock and
Series B Stock, holders of common stock are entitled to receive dividends at the
same rate if and when dividends are declared by our board of directors out of
assets legally available for the payment of dividends.
Liquidation. In the event of a liquidation, dissolution or winding up our
affairs, whether voluntary or involuntary, after payment of our debts or other
liabilities and making provisions for the holders of the outstanding shares of
preferred stock as described below, our remaining assets will be distributed
ratably among the holders of shares of common stock.
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Rights and Preferences. Our common stock has no preemptive, redemption,
conversion or subscription rights. The rights, powers, references and privileges
of holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock that we any
designate and issue in the future.
Fully Paid and Nonassessable. All of our outstanding shares of common stock,
including the shares offered by this prospectus, are fully paid and
nonassessable.
Preferred Stock
Voting Rights. Each outstanding share of Series A Stock is entitled to one vote
on all matters submitted to a vote of our shareholders, including the election
of the common/Series A directors. Each outstanding share of Series B Stock is
entitled to two votes on all matters submitted to a vote of our shareholders,
including the election of directors.
Dividends. Holders of preferred stock are entitled to receive dividends in an
amount equal to 6% of $0.60 per share of preferred stock per annum if and when
dividends are declared by our board of directors out of assets legally available
for the payment of dividends.
Liquidation. In the event of any liquidation, dissolution or winding up of the
affairs of the corporation, voluntarily or involuntarily, after payment or
provision for payment of all debts, liabilities and obligations of Enova, but
before any distribution to the holders of common stock, the holders of Series A
Stock shall be paid the amount of $0.60 per share for each share of Series A
Stock held by them, plus all dividends declared but unpaid on such shares of
Series A Stock. After payment to the holders of Series A Stock, the holders of
common stock shall be paid an amount per share equal to the per share Series A
Stock liquidation price paid to the holders of Series A Stock. Any remaining
assets shall be distributed to the holder of shares of stock of all classes and
series which have been converted into common stock as of the date of filing of
the Certificate of Dissolution Enova with the California Secretary of State.
Rights and Preferences.
Conversion Rights. While any Series A Stock remains outstanding:
a. Option to Convert. At the option of the holder, each share of
Series A Stock shall be convertible at any time into fully
paid and non-assessable shares of common stock at the
conversion price then in effect.
b. Automatic Conversion. Each share of Series A Stock will be
converted common stock at the then effective conversion price
upon (a) the consummation of the sale of the common stock in
an underwritten public offering registered under the
Securities Act of 1933, as amended (the "Securities Act"); or
(b) the registration of the underlying common stock of the
holders' Series A Stock under the Securities Act; or (c) a
merger or consolidation with or into another corporation or a
sale of more than fifty percent (50%) of our outstanding
voting securities or a sale of all or
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substantially all of our properties and assets.
c. Adjustment to Conversion Price for Diluting Issues. If we
declare or pay any dividend on common stock payable in common
stock or in any right to acquire common stock, or effect a
subdivision of the outstanding shares of common stock into a
greater number of shares of common stock (by stock split,
reclassification or otherwise than by payment of a dividend in
common stock or in any right to acquire common stock), then
and in any such event, appropriate adjustments in the
conversion price will be made.
Except upon the automatic conversion of the Series A Stock if, at any
time, there occurs any capital reorganization, or any reclassification
of our stock (other than a change in par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), or
our consolidation or merger with or into another entity (other than a
consolidation or merger in which we are the surviving entity and which
does not result in any change in the rights of the common stock), or
the sale or other disposition of all or substantially all our
properties and assets in entirety to any other person, then each share
of Series A Stock will, after such capital reorganization,
reclassification, consolidation, merger, sale or other disposition, be
converted into the kind and number of shares of stock or other
securities or property of the corporation or of the entity resulting in
the consolidation or surviving the merger or to which the properties
and assets shall have been sold or otherwise disposed to which the
holder would have been entitled if immediately prior to the capital
reorganization, reclassification, consolidation, merger, sale or other
disposition the holder had converted his or its shares of Series A
Stock into common stock. These provisions similarly apply to successive
capital reorganizations, reclassifications, consolidations, mergers,
sales, or other similar dispositions.
Fully Paid and Nonassessable. All of our outstanding shares of preferred stock
fully paid and nonassessable.
Our board of directors has the authority, without action by our shareholders, to
provide for the issuance of preferred stock in one or more classes or series and
to designate the rights, preferences and privileges of each class or series,
which may be greater than the rights of the common stock. We cannot predict the
effect of the issuance of any shares of preferred stock upon the rights of
holders of the common stock until the board of directors determines the specific
rights of the holders of the preferred stock. However, the effects could include
one or more of the following:
o restricting dividends on the common stock;
o diluting the voting power of the common stock;
o impairing the liquidation rights of the common stock; or
o delaying or preventing a change in control of us without further
action by the shareholders.
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We have no present plans to issue any additional shares of preferred stock.
Warrants
As of February 1, 2002, there were outstanding warrants to purchase 15,000,000
shares of common stock at an average exercise price of $0.29 per share (subject
to adjustment for certain anti-dilutive issuances).
Registration Rights
The warrants described above have so called "Piggyback" registration rights. If
we at any time propose to file on our behalf or on behalf of any of our security
holders a registration statement under the Securities Act on any form and other
than a registration statement on Form S-4 or S-8 for any class that is the same
or similar to the warrants, we must give written notice of the proposed offering
to the warrant holders at least thirty (30) days before the initial filing of
such registration statement, and offer to include the warrant holders in the
proposed offering.
Transfer Agent and Registrar
Computershare Investor Services, Inc. serves as our transfer agent and registrar
for our common stock.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of our common stock, and the availability of our common stock for
sale, may depress the market price for our common stock. Approximately
247,227,000 shares of our common stock currently are freely tradable, of which
131,000,000 shares are currently subject to the volume limitations of Rule 144
discussed below. All of the shares sold in this offering will be freely tradable
except for any shares purchased by our affiliates. In addition, 30,544,000
shares of our common stock previously issued or upon issuance pursuant to the
exercise of options granted under our stock option plans may be resold in
reliance on Rule 144 and Rule 701, as discussed below. All other shares of
common stock outstanding as of the date hereof are restricted or subject to
lock-up agreements. These other shares will be available for sale in the public
market as follows:
In general, under Rule 144, as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
o 1% of the number of shares of common stock then outstanding, which
will equal approximately shares immediately after this offering; or
o the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a notice on Form 144 with
respect to the sale.
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Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been one of our affiliates
at any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, including the holding
period of any prior owner other than an affiliate, is entitled to sell the
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits resales of shares in reliance upon
Rule 144 but without compliance with certain restrictions, including the holding
period requirement, of Rule 144. No shares of our common stock previously
issued, or when issued, pursuant to our stock option plans may be resold under
the provisions of Rule 701. Rule 701 permits affiliates to sell their Rule 701
shares under Rule 144 without complying with the holding period requirements of
Rule 144. Rule 701 further provides that non-affiliates may sell their shares in
reliance on Rule 144 without having to comply with the holding period, public
information, volume limitations or notice provisions of Rule 144.
We filed a Registration Statement on Form S-8 registering shares of common stock
subject to the 1996 Plan (including shares that may be resold under Rule 701,
discussed above). As of February 1, 2002, options to purchase a total of
30,544,000 shares were outstanding and 14,456,000 shares were reserved for
future issuance under our stock option plans. 24,762,898 of these options are
vested and available for immediate resale in the open market.
LEGAL MATTERS
The validity of the shares of common stock being offered will be passed for the
selling shareholder by Crosby, Heafey, Roach & May Professional Corporation,
Oakland, California.
EXPERTS
The financial statements as of and for the years ended December 31, 2001 and
2000, the five months ended December 31, 1999 and for the years ended July 31,
1999 and 1998 included in this prospectus and in the registration statement have
been audited by Moss Adams LLP, independent certified public accountants, to the
extent and for the periods set forth in their reports appearing elsewhere herein
and in the registration statement.
WHERE YOU CAN GET MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of
common stock being offered. This prospectus does not contain all of the
information described in the registration statement and the related exhibits and
schedules. For further information with respect to us and the common stock being
offered, reference is made to the registration statement and the related
exhibits and schedule. Statements contained in
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this prospectus regarding the contents of any contract or any other document to
which reference is made are not necessarily complete, and, in each instance,
reference is made to the copy of the contract or other document filed as an
exhibit to the registration statement, each statement being qualified in all
respects by the reference. A copy of the registration statement and the related
exhibits and schedule may be inspected without charge at the public reference
facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 233 Broadway, New York, New York 10279, and copies of all or
any part of the registration statement may be obtained from these offices upon
the payment of the fees prescribed by the Commission. Information on the
operation of the Public Reference Room may be obtained by calling the Commission
at 1-800-SEC-0330. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
site is http://www.sec.gov.
We intend to provide our shareholders with annual reports containing financial
statements audited by an independent accounting firm and to file with the
Commission quarterly reports containing unaudited financial data for the first
three quarters of each year.
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INDEX TO FINANCIAL STATEMENTS
Page
INDEPENDENT AUDITOR'S REPORT.................................................F-1
BALANCE SHEETS AT DECEMBER 31, 2001 AND 2000.................................F-2
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 2001 AND 2000 AND THE FIVE MONTHS
ENDED DECEMBER 31, 1999 AND YEAR ENDED
JULY 31, 1999......................................................F-3
STATEMENTS OF STOCKHOLDERS' DEFICIT FOR
THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND
THE FIVE MONTHS ENDED DECEMBER 31, 1999 AND YEAR
ENDED JULY 31, 1999.................................................F-4
STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31, 2001 AND 2000, AND THE FIVE MONTHS
ENDED DECEMBER 31, 1999 AND YEAR ENDED
JULY 31, 1999......................................................F-5
NOTES TO FINANCIAL STATEMENTS ..............................................F-6
You should rely only on the information contained in
this prospectus. We have not authorized anyone to
provide you with information different from that
contained in this prospectus. The selling shareholder 6,000,000 Shares
is offering to sell, and seeking offers to buy, shares ENOVA SYSTEMS, INC.
of common stock only in jurisdictions where offers and COMMON STOCK
sales are permitted. The information contained in this
prospectus is accurate only as the date of this
prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.
--------------------
TABLE OF CONTENTS
Page
----
Prospectus Summary................................... 2
Risk Factors......................................... 7
Cautionary Note on Forward-Looking
Statements.........................................11
Use of Proceeds......................................12
Price Range of Common Stock..........................12
Dividend Policy......................................13 _________________
Capitalization.......................................13
Selected Financial Data..............................13 PROSPECTUS
Management's Discussion and Analysis of Financial _________________
Condition and
Results of Operations................................15
Business.............................................22
Management...........................................33
Certain Relationships and Related
Transactions.......................................42
Principal Shareholders...............................42
Selling Shareholder..................................44
Plan of Distribution.................................45
Description of Capital Stock.........................47
Shares Eligible for Future Sale......................50
Legal Matters........................................51
Experts..............................................52
Where you can get more Information...................52
Index to Financial Statements........................53 March 28, 2002
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PART II
Item 13. Other Expenses of Issuance and Distribution.
The following table indicates the expenses to be incurred in connection
with the offering described in this Registration Statement, all of which will be
paid by us. All amounts are estimates, other than the SEC registration fee.
SEC Registration fees: $ 82.80
Accounting fees and expenses: $ 10,000.00
Legal fees and expenses: $ 40,000.00
Printing expenses: $ 1,500.00
Blue Sky fees and expenses: $ 2,500.00
Miscellaneous fees and expenses: $ 5,000.00
Total: $ 59,082.80
=================
Item 14. Indemnification of Directors and Officers
Section 317 of the California General Corporation Law (the "CGCL") provides that
a subject corporation shall have the power to indemnify any agent of the
corporation (including our directors and officers) who was or is a party to any
proceeding or threatened proceeding (other than an action by or in the right of
the corporation) against expenses, judgments, fines, settlements and other
amounts incurred if that person acted in good faith and in a manner reasonably
believed to be in the best interests of the corporation, and in the case of a
criminal proceeding, had no reasonable cause to believe the conduct of such
person was unlawful. Section 317 of the CGCL further provides that a subject
corporation shall have the power to indemnify any agent of the corporation who
was or is a party to any proceeding or threatened proceeding by or in the right
of the corporation against expenses incurred in connection with the defense or
settlement of the proceeding if the person acted in good faith and in a manner
the person believed to be in the best interests of the corporation and our
shareholders.
Under Section 317 of the CGCL, to the extent that an agent of a subject
corporation is successful on the merits in the defense of an action, the
corporation must indemnify such person for his or her actual and reasonable
expenses incurred in connection with such defense. Under Section 317 of the
CGCL, a subject corporation may advance expenses of an indemnifiable person in
defending an action; provided that such advancement of expenses may be made only
if the person provides an undertaking to reimburse the corporation if it is
ultimately determined that the person is not entitled to be indemnified against
such expenses.
The Registrant has entered into agreements to provide indemnification for our
directors and certain officers in addition to the indemnification provided for
in the Bylaws. These agreements, among other things, indemnify such parties to
the fullest extent permitted by California law for certain expenses (including
attorneys' fees), and all losses, claims,
II-1
liabilities, judgments, fines and settlement amounts incurred by such persons
arising out of or in connection with such persons' service as directors or
officers of the Registrant or an affiliate of the Registrant.
The above-described provisions relating to the indemnification of directors and
officers are sufficiently broad to permit the indemnification of such persons in
certain circumstances against liabilities (including reimbursement of expenses
incurred) arising under the Securities Act of 1993, as amended.
Item 15. Recent Sales of Unregistered Securities.
In July 2001, Anthony Rawlinson exercised warrants to purchase 8,333,334 shares
of common stock at $0.06 per share for a total of $500,000. Mr. Rawlinson
represented that he was an accredited investor under the definition set forth by
the Securities and Exchange Commission. Enova relied on Rule 506 of Regulation D
and Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), for the exemption from registration of the sale of the shares.
In May 2001, Jagen Pty, Ltd exercised warrants to purchase 41,666,666 shares of
common stock at $0.06 per share for a total of $2,500,000. Jagen, an Australian
company and the majority shareholder, represented that they were accredited
investors. Enova relied on Rule 506 of Regulation D and Section 4(2) of the
Securities Act for the exemption from registration of the sale of such shares.
In June 2001, we issued warrants to purchase 15,000,000 shares of our common
stock to a customer. Enova relied on Rule 506 of Regulation D and Section 4(2)
of the Securities Act for the exemption from registration of the sale of such
shares.
In September 2000, Perla Blanca Investments, Ltd. purchased 3,333,333 shares of
common stock for $1,000,000. Perla Blanca, a British Virgin Islands company,
represented that they were accredited investors. Enova relied on Rule 506 of
Regulation D and Section 4(2) of the Securities Act for the exemption from
registration of the sale of such shares.
In January 2000, Kafig Pty, Ltd. purchased 3,333,333 shares of common stock for
$1,000,000. Kafig, an Australian company, represented that they were accredited
investors. Enova relied on Rule 506 of Regulation D and Section 4(2) of the
Securities Act for the exemption from registration of the sale of such shares.
II-2
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation of the Registrant (filed
as Exhibit 3.1 to the Registrant's Annual Report on Form 10K for the
year ended December 31, 2000 filed on March 30, 2001 and incorporated
herein by reference).
3.2 Bylaws of Registrant (filed as Exhibit 3.12 to the Registration
Statement on Form 10 filed on November 29, 1994, and incorporated
herein by reference).
4.1 Cashless Exercise Warrants dated October 25, 1996 issued to Fontal
International, Ltd. (filed as Exhibit 4.1 to the Registrant's Annual
Report on Form 10-K for the year ended July 31, 1996, as filed on
November 12, 1996, and incorporated herein by reference).
5.1* Opinion of Crosby, Heafey, Roach & May Professional Corporation as to
the legality of the securities being registered.
10.1 Form of Stock Option Agreement under 1993 Employee and Consultant Stock
Plan (filed as Exhibit 10.15 to the Registration Statement on Form 10
filed on November 29, 1994, and incorporated herein by reference).
10.2 Form of Solar Electric Engineering, Inc. 1993 Employee and Consultant
Stock Plan (filed as Exhibit 10.16 to the Registration Statement on
Form 10 filed on November 29, 1994, and incorporated herein by
reference).
10.3 Form of Confidential Private Placement Memorandum and Debt
Restructuring Disclosure Statement of U.S. Electricar, Inc., dated
January 2, 1996, delivered by Enova to certain of our unsecured trade
creditors, including exhibits (filed as Exhibit 10.91 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
January 31, 1996, as filed on March 18, 1996, and incorporated herein
by reference).
10.4 Form of Stock Purchase, Note and Debt Exchange Agreement dated January
2, 1996 between Enova and certain unsecured trade creditors (filed as
Exhibit 10.92 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended January 31, 1996, as filed on March 18, 1996, and
incorporated herein by reference).
10.5 Form of Indemnification Agreement (filed as Exhibit 10.63 to the
Registration Statement on Form 10 filed on November 29, 1994, and
incorporated herein by reference).
10.6 Form of Security Agreement made as of May 31, 1995, between Enova and
Credit Managers Association of California, Trustee (filed as Exhibit
10.85 to the Registrant's Quarterly Report on Form 24 10-Q for the
quarter ended April 30,
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1996, as filed on June 14, 1996, and incorporated herein by reference).
10.7 Amended 1996 Employee and Consultant Stock Option Plan (filed as
Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for fiscal
year ended July 31, 1999, as filed on October 29, 1999, and
incorporated herein by reference).
10.8 Stock Purchase Agreement and Technology License Agreement dated
February 27, 1997, by and between Enova and Hyundai Motor Company and
Hyundai Electronics Industries Co., Ltd. (filed as Exhibit 10.98 to the
Registrant's Quarterly Report on Form 10-Q for fiscal quarter ended
January 31, 1997, as filed on March 14, 1997, and incorporated herein
by reference).
10.9 Loan Agreement for $400,000 convertible promissory note with Fontal
International, Ltd., dated April 30, 1997 (filed as Exhibit 10.99 to
the Registrant's Quarterly Report on Form 10-Q for fiscal quarter ended
April 30, 10997, as filed on June 13, 1997, and incorporated herein by
reference).
10.10 Agreement of Debt Forgiveness by and between Carl D. Perry and the
Registrant dated July 30, 1999 (filed as Exhibit 10.10 to the
Registrant's Annual Report on Form 10-K for fiscal year ended July 31,
1999, as filed on October 29, 1999, and incorporated herein by
reference).
10.11 Agreement of Terms by and between the Registrant and Carl D. Perry
(filed as Exhibit 10.11 to the Registrant's Annual Report on Form 10-K
for fiscal year ended July 31, 1999, as filed on October 29, 1999, and
incorporated herein by reference).
10.12 Securities Purchase Agreement dated as of June 1, 1999, by and between
the Registrant and Jagen Pty, Ltd. and Anthony N. Rawlinson (filed as
Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for fiscal
year ended July 31, 1999, as filed on October 29, 1999, and
incorporated herein by reference).
10.13 Shareholders' Agreement dated as of June 1, 1999, by and among Jagen
Pty, Ltd. and Anthony N. Rawlinson, Carl D. Perry and the Registrant
(filed as Exhibit 10.13 to the Registrant's Annual Report on Form 10-K
for fiscal year ended July 31, 1999, as filed on October 29, 1999, and
incorporated herein by reference).
10.14 Loan and Security Agreement dated as of June 1, 1999, by and among the
Registrant, Jagen Pty, Ltd. and Anthony N. Rawlinson (filed as Exhibit
10.14 to the Registrant's Annual Report on Form 10-K for fiscal year
ended July 31, 1999, as filed on October 29, 1999, and incorporated
herein by reference).
10.15 Convertible Secured Promissory Note dated June 1, 1999 by the
Registrant in favor of Jagen Pty, Ltd. in the principal amount of
$400,000 (filed as Exhibit 10.15 to the Registrant's Annual Report on
Form 10-K for fiscal year ended July 31, 1999, as filed on October 29,
1999, and incorporated herein by reference).
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10.16 Letter of Intent between Registrant and a domestic supplier, dated
December 9, 1999, to design, develop and manufacture low voltage
electric drive system components (filed as Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K for fiscal year ended December
31, 2000 and incorporated herein by reference).
10.17 Put/Call Option to sell Itochu shares between Registrant and Carl D.
Perry dated September 1, 1999 (filed as Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K for fiscal year ended December
31, 2000 and incorporated herein by reference).
23.1* Consent of Moss Adams, LLP, Independent Auditor's
23.2 Consent of Crosby, Heafey, Roach & May Professional Corporation
(included in Exhibit 5.1 hereto).
24* Power of Attorney (included on signature page)
-------------------
* Filed herewith.
(b) Financial Statements
Audited Financial Statements - Fiscal Year ended July 31, 1999
Audited Financial Statements - Five months ended December 31, 1999
Audited Financial Statements - Fiscal Year ended December 31, 2000
Audited Financial Statements - Fiscal Year ended December 31, 2001
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement;
and
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(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 (i) and (ii) do not apply if the Registration Statement is on Form
S-3 or Form S-8, and the information required to be included in a post-effective
amendment by (i) and (ii) is contained in periodic reports filed with or
furnished to the SEC by the Registrant pursuant to Section 13 or 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,
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.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14, 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
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or is there a
stray paragraph there? 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 our 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 pubic
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Torrance, State of
California, on March 28, 2002.
ENOVA SYSTEMS, INC.
By: /s/ Carl D. Perry
-----------------
Carl D. Perry, Chief Executive Officer
We, the undersigned directors and/or officers of Enova Systems, Inc. (the
"Registrant"), hereby severally constitutes and appoint Carl D. Perry with full
powers of substitution and resubstitution, our true and lawful attorney, with
full powers to sign for us, in our names and in the capacities indicated below,
the Registration Statement on Form S-1 filed with the Securities and Exchange
Commission, and any and all amendments to said Registration Statement (including
post-effective amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of equity securities
of the Registrant, and to file or cause to be filed with the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney, and his
substitute or substitutes, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, and
hereby ratifying and confirming all that said attorney or his substitute or
substitutes, shall do or cause to be done by virtue of this Power of Attorney.
This Power of Attorney may be executed in counterparts.
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.
Name Title Date
---- ----- ----
/s/ Carl D. Perry Chief Executive Officer, Chief Financial
----------------- Officer and Director (Principal Executive
Carl D. Perry Officer and Principal Financial Officer) March 28, 2002
/s/ Anthony N. Rawlinson
------------------------
Anthony N. Rawlinson Chairman March 28, 2002
/s/ Malcolm Currie
------------------
Malcolm Currie Director March 28, 2002
S-1
/s/ Edwin O. Ridell Director March 28, 2002
-------------------
Edwin O. Riddell
/s/ John J. Micek, III Director March 28, 2002
----------------------
John J. Micek, III
/s/ Donald H. Dreyer Director March 28, 2002
--------------------
Donald H. Dreyer
/s/ James M. Strock Director March 28, 2002
-------------------
James M. Strock
S-2
EXHIBIT INDEX
Exhibit Description