Prospectus Supplement Filed Pursuant to Rule 424(b)(2)
(to Prospectus dated July 20, 2001) SEC File No. 333-63514
Electric Fuel(R)
Corporation
1,503,759 Shares of Common Stock
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We are offering by this prospectus supplement an aggregate of 1,503,759
shares of our common stock. Our common stock is listed on the Nasdaq National
Market under the symbol "EFCX." The last reported sale price for the common
stock on November 19, 2001 as quoted on the Nasdaq National Market was $1.69
per share.
The purchaser identified in the table set forth below under the caption
"Plan of Distribution" has agreed to purchase the number of shares of our common
stock set forth opposite its name. This sale will result in total proceeds to us
of approximately $2,000,000, before deducting offering expenses payable by us.
We expect to deliver the shares against payment therefor in New York, New York
on November 21, 2001.
See "Risk Factors" on page 3 of the accompanying prospectus for various
risks you should consider before you purchase any shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement is truthful or complete. Any representation to the
contrary is a criminal offense.
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The date of this prospectus supplement is November 21, 2001
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the attached prospectus. We have not
authorized any person to provide you with any information or to make any
representations not contained or incorporated by reference in this prospectus
supplement or the attached prospectus dated July 20, 2001. This prospectus
supplement is part of, and you must read it in addition to, the attached
prospectus. You should assume that the information contained or incorporated by
reference in this prospectus supplement and the attached prospectus is accurate
as of the date on the front cover of this prospectus supplement only.
The distribution of this prospectus supplement and the attached
prospectus, and the offering of the common stock, may be restricted in some
jurisdictions. You should inform yourself about, and observe, any of these
restrictions. This prospectus supplement and the attached prospectus do not
constitute, and may not be used in connection with, an offer to sell or a
solicitation of an offer to buy any of the shares offered hereby in any
jurisdiction to any person to whom it is unlawful to make such an offer in that
jurisdiction.
THE OFFERING
Pursuant to the terms of a Securities Purchase Agreement dated as of
October 25, 2001, by and between us and Orsay Services Inc.("Orsay"), on
November 21, 2001 we will issue and sell to Orsay, for an aggregate purchase
price of $2,000,000, 1,503,759 shares of our common stock, $.01 par value per
share, at a purchase price per share of $1.48, less a discount of 10%. The
purchase price was based on the average of the "Closing Prices" of our common
stock (defined as the average of the closing bid price and the offer price of
our common stock on such trading day on the Nasdaq National Market (as reported
by Bloomberg L.P.) for the close of regular session trading for such trading
day) from and including October 23, 2001 to and including November 19, 2001.
The foregoing description of the Securities Purchase Agreement is
qualified in its entirety by reference to the agreement itself. A copy of the
Securities Purchase Agreement is attached as Exhibit 4.1 to our current report
on Form 8-K filed by us with the Securities and Exchange Commission on November
21, 2001, and is incorporated herein by reference.
USE OF PROCEEDS
We will receive net proceeds from the sale of the common stock offered
by us, after deducting estimated offering expenses of approximately $10,000
payable by us, of approximately $1,990,000. We intend to use all of the net
proceeds from this sale of common stock to fund general corporate purposes.
PLAN OF DISTRIBUTION
Subject to the securities purchase agreement between us and the
purchaser named below, we have agreed to sell to the purchaser, and the
purchaser has agreed to purchase from us, the total number of shares of our
common stock set forth opposite its name in the following table.
Shares of Aggregate
Purchaser Common Stock Purchase Price
--------- ------------ --------------
Orsay Services Inc. 1,503,759 $2,000,000
The purchaser has advised us that it is not acting as an underwriter,
placement agent, broker or dealer in connection with its acquisition of our
common stock and that it is purchasing our common stock for its own account and
not with a view to distribution.
2
Electric Fuel(R)
Corporation
5,400,000 Shares
Common Stock
_____________
We may offer from time to time, in one or more issuances, up to 5,400,000
shares of our common stock.
We will provide you with the specific terms of any particular offering in
supplements to this prospectus at the time a particular offer is made. You
should read this prospectus and any supplement carefully before you invest. This
prospectus may not be used to sell shares unless accompanied by a prospectus
supplement.
We will offer our common stock in an amount and on terms that market
conditions will determine at the time of the offering. Our common stock is
listed on the Nasdaq National Market under the ticker symbol "EFCX". The last
reported sale price for our common stock on July 19, 2001 as quoted on the
Nasdaq National Market was $2.35 per share.
See "Risk Factors" on page 3 for various risks that you should consider before
you purchase any shares of our common stock.
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 date of this prospectus is July 20, 2001
Table of Contents
Page
----
About This Prospectus........................................... 2
Where You Can Find Additional Information....................... 2
Incorporation of Documents by Reference......................... 3
Risk Factors.................................................... 3
Information Regarding Forward-Looking Statements................ 9
About Electric Fuel Corporation................................. 9
Use of Proceeds................................................. 10
Plan of Distribution............................................ 11
Description of Capital Stock.................................... 10
Legal Matters................................................... 13
Experts......................................................... 13
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that Electric Fuel
Corporation ("we" or "Electric Fuel") filed with the Securities and Exchange
Commission using a "shelf" registration process. Using this process, we may
offer up to 350,000 of the shares of common stock described in this prospectus
in one or more offerings. This prospectus provides you with a general
description of the shares we may offer. Each time we offer shares, we will
provide you a prospectus supplement and any pricing supplement that will contain
information about the specific terms of that particular offering. The prospectus
supplement or pricing supplement may also add, update or change information
contained in this prospectus. To obtain additional information that may be
important to you, you should read the exhibits filed by us with this
registration statement or our other filings with the Securities and Exchange
Commission. You also should read this prospectus and any prospectus supplement
or pricing supplement together with the additional information described under
the heading "Where You Can Find More Information."
Unless the context otherwise requires, references to us - Electric Fuel -
refer to Electric Fuel Corporation and our subsidiaries.
Our executive offices are located at 632 Broadway, Suite 301, New York, New
York 10012. Our telephone number at that address is (212) 529-9200, and our
Internet address is www.electric-fuel.com . Information on our website does not
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constitute part of this prospectus.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You can read and copy
any materials we file with the Securities and Exchange Commission at its Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its
regional offices located at Seven World Trade Center, New York, New York 10048
and at 500 West Madison Street, Chicago, Illinois 60661. You can obtain
information about the operations of the Securities and Exchange Commission
Public Reference Room by calling the Securities and Exchange Commission at
1-800-SEC-0330. The Securities and Exchange Commission also maintains a Website
that contains information we file electronically with the Securities and
Exchange Commission, which you can access over the Internet at
http://www.sec.gov.
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This prospectus is part of a registration statement we have filed with the
Securities and Exchange Commission relating to the shares of our common stock
being offered hereby. As permitted by Securities and Exchange Commission rules,
this prospectus does not contain all of the information we have included in the
registration statement and the accompanying exhibits we file with the Securities
and Exchange Commission. You may refer to the registration statement and the
exhibits for more information about us and our common stock. The registration
statement and the exhibits are available at the Securities and Exchange
Commission's Public Reference Room or through its Website.
2
INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information we incorporate by reference is an important part of this prospectus,
and later information that we file with the Securities and Exchange Commission
will automatically update and supersede some of this information. We incorporate
by reference the documents listed below, and any future filings we make with the
Securities and Exchange Commission under Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until we sell all of the shares of our
common stock being offered by this prospectus, or we terminate the offering. The
documents we incorporate by reference are:
. our quarterly report on Form 10-Q for the fiscal quarter ended
March 31, 2001;
. Our two current reports on Form 8-K filed with the Securities and
Exchange Commission on May 7, 2001;
. our annual report on Form 10-K for the year ended December 31,
2000; and
. the description of our common stock contained in our registration
statement on Form 8-A, Commission File No. 0-23336, as filed with
the Securities and Exchange Commission on February 2, 1994.
We will provide to each person, including any beneficial owner, to whom
this prospectus and applicable prospectus supplement are delivered, upon
request, a copy of these filings (other than an exhibit to the filings unless we
have specifically incorporated that exhibit by reference into the filing), at no
cost, by writing or telephoning us at the following address:
Electric Fuel Corporation
632 Broadway, Suite 301
New York, New York 10012
Attention: Chief Executive Officer
(212) 529-9200
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We may only use this
prospectus to sell shares of common stock if it is accompanied by a prospectus
supplement. This prospectus may only be used where it is legal to sell the
shares of common stock being offered hereby. You should not assume that the
information appearing in this prospectus or in any applicable prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
RISK FACTORS
You should consider carefully the following risk factors in addition to the
other information in this prospectus and any prospectus supplement before
purchasing our common stock. Investing in our common stock involves a high
degree of risk. Any of the following risks could seriously harm our business and
could result in a complete loss of your investment. See also the section
entitled "Information Regarding Forward-Looking Statements" on page 9, below.
We have had a history of losses and may incur future losses.
We were incorporated in 1990 and began our operations in 1991. We have
funded our operations principally from funds raised in each of the initial
public offering of our common stock in February 1994, the offering of our common
stock in February 1996, a private placement of our common stock in October 1996,
and private placements of our common stock in December 1999, January 2000 and
May 2000, and our public offerings in November 2000 and May 2001; funds from
licensing arrangements; research contracts and supply contracts; funds received
under research and development grants from the Government of Israel; and sales
of Instant Power batteries, Instant Power chargers, and lifejacket lights. We
incurred significant operating losses for the years ended December 31,
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1996, 1997, 1998, 1999 and 2000 and for the quarter ended March 31, 2001, and
expect to continue to incur significant operating losses in the remainder of
2001. These losses may increase as we expand our research and development
activities and establish production facilities, and these losses may fluctuate
from quarter to quarter. There can be no assurance that we will ever achieve
profitability or that our business will continue to exist.
We need significant amounts of capital to operate and grow our business.
We require substantial funds to conduct the necessary research, development
and testing of our products; to establish commercial scale manufacturing
facilities; and to market our products. In order to satisfy existing orders of
batteries in commercial quantities, we need to implement our automated
production line and, in the future, may need to upgrade or expand our automated
production line to satisfy future orders. We plan to expand both sales and
production activities, which will require additional funding. We continue to
seek additional funding, including through the issuance of equity or debt
securities. However, there can be no assurance that we will obtain any such
additional financing in a timely manner and on acceptable terms. If additional
funds are raised by issuing equity securities, stockholders may incur further
dilution. If additional funding is not secured, we will have to modify, reduce,
defer or eliminate parts of our anticipated future commitments and/or programs.
We cannot assure you of market acceptance of our products.
In 2000, we began commercial deliveries of our cell phone battery and
charger products. However, our battery and charger for cell phones have not yet
been widely accepted by the consumer products market for this application.
Furthermore, while we have developed batteries and chargers for several models
of cell phones and PDAs, we do not have such products for many models. We cannot
assure you that the Electric Fuel cell phone battery or charger will be
competitive either in terms of price or performance or that we will be able to
sell our cell phone batteries or chargers in commercial quantities. While we
have successfully marketed our products to retailers such as Wal-Mart, certain
of our customers have indicated to us in response to slower than anticipated
initial sales results that we would benefit from educating consumers as to the
advantages of disposable batteries and chargers for cellphones and PDAs.
Other than our cell phone battery and charger and a signal light powered by
water-activated batteries for use in life jackets and other rescue apparatus, we
currently have no commercial products available for sale. While we expect to
increase production of our cell phone batteries and chargers to commercial
levels in 2001, significant resources will be required to develop our capacity
to produce cell phone batteries and chargers on a commercial scale. Additional
development will also be necessary in order to commercialize our technology and
each of the components of the Electric Fuel System for electric vehicles and
defense products. We cannot assure you that we will be able to successfully
develop, engineer or commercialize our products, technology or system
components, or that we will be able to develop products for commercial sale or
that, if developed, they can be produced in commercial quantities or at
acceptable costs or be successfully marketed. The likelihood of our future
success must be considered in light of the risks, expenses, difficulties and
delays frequently encountered in connection with the operation and development
of a relatively early stage business and with development activities generally.
We believe that public pressure and government initiatives are important
factors in creating an electric vehicle market. However, there can be no
assurance that there will be sufficient public pressure or that further
legislation or other governmental initiatives will be enacted, or that current
legislation will not be repealed, amended, or have its implementation delayed.
In addition, we are subject to the risk that even if an electric fuel vehicle
market develops, a different form of zero emission or low emission vehicle will
dominate the market. In addition, we cannot assure you that other solutions to
the problem of containing emissions created by internal combustion engines will
not be invented, developed and produced. Any other solution could achieve
greater market acceptance than electric vehicles. The failure of a significant
market for electric vehicles to develop would have a material adverse effect on
our ability to commercialize this aspect of our technology. Even if a
significant market for electric vehicles develops, there can be no assurance
that our technology will be commercially competitive within that market.
4
We will need to develop the experience to manufacture our products in commercial
quantities and at competitive prices.
We currently have limited experience in manufacturing in commercial
quantities and have, to date, produced only limited quantities of components of
the batteries for electric vehicles. In order for us to be successful in the
commercial market, our products must be manufactured to meet high quality
standards in commercial quantities at competitive prices. The development of the
necessary manufacturing technology and processes will require extensive lead
times and the commitment of significant amounts of financial and engineering
resources, which may not be available to us. We cannot assure you that we will
successfully develop this technology or these processes. Moreover, we cannot
assure you that we will be able to successfully implement the quality control
measures necessary for commercial manufacturing.
The price of our common stock is volatile.
The market price of our common stock has been volatile in the past and may
change rapidly in the future. The following factors, among others, may cause
significant volatility in our stock price:
. Announcements by us, our competitors or our customers;
. The introduction of new or enhanced products and services by us or
our competitors;
. Changes in the perceived ability to commercialize our technology
compared to that of our competitors;
. Rumors relating to our competitors or us;
. Actual or anticipated fluctuations in our operating results; and
. General market or economic conditions.
Our field of business is highly competitive.
The competition to develop consumer batteries, defense and safety products
and electric vehicle battery systems, and to obtain funding for the development
of these products is, and is expected to remain, intense. Our technology
competes with other battery technologies, as well as other zinc-air
technologies. The competition consists of development stage companies, major
international companies and consortia of such companies, including battery
manufacturers, automobile manufacturers, energy production and transportation
companies, consumer goods companies and defense contractors, many of which have
financial, technical, marketing, sales, manufacturing, distribution and other
resources significantly greater than ours.
Various battery technologies are being considered for use in electric
vehicles, consumer batteries and defense and safety products by other
manufacturers and developers, including the following: lead-acid, nickel-
cadmium, nickel-iron, nickel-zinc, nickel-metal hydride, sodium-sulfur, sodium-
nickel chloride, zinc-bromine, lithium-ion, lithium-polymer, lithium-iron
sulfide, primary lithium, rechargeable alkaline and zinc-air. Additionally, some
manufacturers of primary alkaline batteries offer alkaline battery packs for
cell phone users.
Some of the components of our technology and our products pose potential safety
risks which could create potential liability exposure for us.
Some of the components of our technology contain elements that are known to
pose potential safety risks. Also, because electric vehicle batteries contain
large amounts of electrical energy, they may cause injuries if not handled
properly. In addition to these risks, and although we incorporate safety
procedures in our research, development and manufacturing processes, there can
be no assurance that accidents in our facilities will not occur. Any accident,
whether occasioned by the use of all or any part of our products or technology
or by our manufacturing operations, could adversely affect commercial acceptance
of our products and could result in significant production delays or claims for
damages resulting from injuries. Any of these occurrences would materially
adversely affect our operations and financial condition.
5
Failure to receive required permits from or to comply with the various
regulatory regimes we are subject to could adversely affect our business.
Regulations in Europe, Israel, the United States and other countries impose
various controls and requirements relating to various components of our
technology. While we believe that our current and contemplated operations
conform to those regulations we cannot assure you that we will not be found to
be in non-compliance. We have applied for, and received, the necessary permits
under the Israel Dangerous Substances Law, 5753-1993, required for the use of
potassium hydroxide and zinc metal. However, there can be no assurance that
changes in regulations will not impose costly compliance requirements on us or
otherwise subject us to future liabilities.
Our business is dependent on patents and proprietary rights that may be
difficult to protect and could affect our ability to compete effectively.
Our ability to compete effectively will depend on our ability to maintain
the proprietary nature of our technology and manufacturing processes through a
combination of patent and trade secret protection, non-disclosure agreements and
licensing arrangements. We hold patents, or patent applications, covering
elements of our technology in the United States and in Europe. In addition, we
have patent applications pending in the United States and in foreign countries,
including the European Community, Israel and Japan. We intend to continue to
file patent applications covering important features of our technology. We
cannot assure you, however, that patents will issue from any of these pending
applications or, if patents issue, that the claims allowed will be sufficiently
broad to protect our technology. In addition, we cannot assure you that any of
our patents will not be challenged or invalidated or that any of our issued
patents will afford protection against a competitor.
Litigation, or participation in administrative proceedings, may be
necessary to protect our patent position. This type of litigation can be costly
and time consuming, and this could harm us even if we were to be successful in
the litigation. The invalidation of patents owned by or licensed to us could
have a material adverse effect on our business. In addition, patent applications
filed in foreign countries are subject to laws, rules and procedures that differ
from those of the United States. Therefore, there can be no assurance that
foreign patent applications related to patents issued in the United States will
be granted. Furthermore, even if these patent applications are granted, some
foreign countries provide significantly less patent protection than the United
States. In the absence of patent protection, and despite our reliance upon our
proprietary confidential information, our competitors may be able to use
innovations similar to those used by us to design and manufacture products
directly competitive with our products. In addition, no assurance can be given
that others will not obtain patents that we will need to license or design
around. To the extent any of our products are covered by third-party patents, we
could require a license under such patents to develop and market our patents.
Despite our efforts to safeguard and maintain our proprietary rights, we
may not be successful in doing so. In addition, competition is intense, and
there can be no assurance that our competitors will not independently develop or
patent technologies that are substantially equivalent or superior to our
technology. Moreover, in the event of patent litigation, we cannot assure you
that a court would determine that we were the first creator of inventions
covered by our issued patents or pending patent applications or that we were the
first to file patent applications for those inventions. If existing or future
third-party patents containing broad claims were upheld by the courts or if we
were found to infringe third party patents, we may not be able to obtain the
required licenses from the holders of such patents on acceptable terms, if at
all. Failure to obtain these licenses could cause delays in the introduction of
our products or necessitate costly attempts to design around such patents, or
could foreclose the development, manufacture or sale of our products. We could
also incur substantial costs in defending ourselves in patent infringement suits
brought by others and in prosecuting patent infringement suits against
infringers.
We also rely on trade secrets and proprietary know-how that we seek to
protect, in part, through non-disclosure and confidentiality agreements with our
customers, employees, consultants, strategic partners and potential strategic
partners. We cannot assure you that these agreements will not be breached, that
we would have adequate remedies for any breach or that our trade secrets will
not otherwise become known or be independently developed by competitors.
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We are dependent on key personnel and our business would suffer if we fail to
retain them.
We are highly dependent on certain members of our management and
engineering staff, and the loss of the services of one or more of these persons
could adversely affect us. We are especially dependent on the services of our
President and Chief Executive Officer, Yehuda Harats, and our Chairman of the
Board of Directors and Chief Financial Officer, Robert S. Ehrlich. The loss of
either of these persons could have a material adverse effect on us. We are party
to employment agreements with Messrs. Harats and Ehrlich, each of which
agreements expires in 2002, with an option on our part to extend to 2003. We do
not have key-man life insurance.
We are subject to significant influence by some stockholders that may have the
effect of delaying or preventing a change in control.
As of May 31, 2001, our directors, executive officers and principal
stockholders and their affiliates collectively owned approximately 28.6% of the
outstanding shares of our common stock. As a result, these stockholders are able
to exercise significant influence over matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership may have the effect of delaying or
prevent a change in control.
If we are unable to manage our growth, our operating results will be impaired.
We are currently experiencing a period of development activity which could
place a significant strain on our personnel and resources. Our activity has
resulted in increased levels of responsibility for both existing and new
management personnel. Many of our management personnel have had limited or no
experience in managing growing companies. We have sought to manage our current
and anticipated growth through the recruitment of additional management and
technical personnel and the implementation of internal systems and controls.
However, our failure to manage growth effectively could adversely affect our
results of operations.
We may be subject to increased United States taxation.
We believe that we and our wholly-owned Israeli subsidiary, Electric Fuel
Limited, will be treated as personal holding companies for purposes of the
personal holding company (PHC) rules of the Internal Revenue Code of 1986. Under
the PHC rules, a PHC is subject to a special 39.6% tax on its "undistributed PHC
income," in addition to regular income tax. We believe that we and Electric Fuel
Limited have not had any material undistributed PHC income. However, no
assurance can be given that we and Electric Fuel Limited will not have
undistributed PHC income in the future.
Approximately 20.9% of the stock of Electric Fuel Limited was owned
(indirectly by application of certain attribution rules) as of May 31, 2001 by
two United States citizens. If 50% of our shares is ever acquired or deemed to
be acquired by five or fewer individuals (including, if applicable, those
individuals who currently own an aggregate of 20.9% of our shares) who are
United States citizens or residents, Electric Fuel Limited would satisfy the
foreign personal holding company (FPHC) stock ownership test under the Internal
Revenue Code, and we could be subject to additional U.S. taxes (including PHC
tax) on any "undistributed FPHC income" of Electric Fuel Limited. We believe
that Electric Fuel Limited has not had any material undistributed FPHC income.
However, no assurance can be given that Electric Fuel Limited will not become a
FPHC and have undistributed FPHC income in the future.
A significant portion of our operations takes place in Israel.
The offices and facilities of our principal subsidiary are located in
Israel. Although we expect that most of our sales will be made to customers
outside Israel, we are nonetheless directly affected by economic, political and
military conditions in that country. Accordingly, any major hostilities
involving Israel or the interruption or curtailment of trade between Israel and
its present trading partners could have a material adverse effect on our
operations. Since the establishment of the State of Israel in 1948, a state of
hostility has existed, varying in degree and intensity, between Israel and the
Arab countries, and, since October 2000, there has been a significant increase
in violence between Israel and the Palestinians, primarily in the West Bank and
Gaza Strip areas. Historically, Arab states have boycotted any direct trade with
Israel and to varying degrees have imposed a secondary boycott on any company
carrying on trade with or doing business in Israel. Although in October 1994,
the states comprising the Gulf Cooperation Council (Saudi Arabia, the United
Arab Emirates, Kuwait, Dubai, Bahrain and Oman) announced that they
7
would no longer adhere to the secondary boycott against Israel, and Israel has
entered into certain agreements with Egypt, Jordan, the Palestine Liberation
Organization and the Palestinian Authority, no prediction can be made as to
whether a full resolution of these problems will be achieved or as to the nature
of any such resolution.
Many of our employees are currently obligated to perform annual reserve
duty in the Israel Defense Forces and are subject to being called for active
military duty at any time. No assessment can be made of the full impact of such
requirements on us in the future, particularly if emergency circumstances occur,
and no prediction can be made as to the effect on the Company of any expansion
of these obligations.
Any failure to obtain the tax benefits from the State of Israel that we expect
to receive could negatively impact our plans and prospects.
We benefit from various Israeli government programs, grants and tax
benefits, particularly as a result of the "approved enterprise" status of a
substantial portion of our existing facilities and the receipt of grants from
the Office of the Chief Scientist of the Israeli Ministry of Industry and Trade.
To be eligible for some of these programs, grants and tax benefits, we must
continue to meet certain conditions, including producing in Israel and making
specified investments in fixed assets. If we fail to meet such conditions in the
future, we could be required to refund grants already received, adjusted for
inflation and interest. From time to time, the government of Israel has
discussed reducing or eliminating the benefits available under approved
enterprise programs. We cannot assure you that these programs and tax benefits
will be continued in the future at their current levels or at all. The
Government of Israel has announced that programs receiving approved enterprise
status in 1996 and thereafter will be entitled to a lower level of government
grants than was previously available. The termination or reduction of certain
programs and tax benefits (particularly benefits available to us as a result of
the approved enterprise status of a substantial portion of our existing
facilities and approved programs and as a recipient of grants from the office of
the Chief Scientist) could have a material adverse effect on our business,
results of operations and financial condition. In addition, our Israeli
subsidiary has granted a floating charge over all of its assets as a security to
the State of Israel to secure its obligations under the approved enterprise
programs.
Exchange rate fluctuations between the dollar and the NIS may negatively affect
our earnings.
Although a substantial majority of our revenues and a substantial portion
of our expenses are denominated in U.S. dollars, a significant portion of our
costs, including personnel and facilities-related expenses, is incurred in New
Israeli Shekels (NIS). Inflation in Israel will have the effect of increasing
the dollar cost of our operations in Israel, unless it is offset on a timely
basis by a devaluation of the NIS relative to the dollar.
A substantial number of our shares are available for sale in the public market
and sales of those shares could adversely affect our stock price.
Sales of a substantial number of shares of common stock into the public
market, or the perception that those sales could occur, could adversely affect
our stock price or could impair our ability to obtain capital through an
offering of equity securities. As of May 31, 2001, we had 26,359,397 shares of
common stock issued and outstanding. Of these shares, 19,311,134 are freely
transferable without restriction under the Securities Act of 1933 and 7,048,263
may be sold subject to the volume restrictions, manner-of-sale provisions and
other conditions of Rule 144 under the Securities Act of 1933.
Exercise of the warrants could adversely affect our stock price.
Holders of our warrants will probably exercise them only at a time when the
price of our common stock is higher than the exercise price of the warrants.
Accordingly, we may be required to issue shares of our common stock at a price
substantially lower than the market price of our stock. This could adversely
affect our stock price.
Investors should not purchase our common stock with the expectation of receiving
cash dividends.
We currently intend to retain any future earnings for funding growth and,
as a result, do not expect to pay any cash dividends in the foreseeable future.
8
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
When used in this prospectus, the words "expects," "anticipates,"
"estimates" and similar expressions identify forward-looking statements. We
believe that these statements are "forward-looking" statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. These statements, which include statements under the caption "Risk Factors"
and elsewhere in this prospectus, refer to the stage of development of our
products, the uncertainty of the market for disposable cell phone batteries,
significant future capital requirements and our plans to implement our growth
strategy, continue our research and development, expand our manufacturing
capacity, develop strategic relationships for marketing and other purposes and
carefully manage our growth. The forward-looking statements also include our
expectations concerning factors affecting the markets for our products.
These forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from the results that we
anticipate. These risks and uncertainties include, but are not limited to, those
risks discussed in this prospectus and in the documents incorporated by
reference in this prospectus.
We assume no obligation to update these forward-looking statements or to
update the reasons actual results could differ materially from the results
anticipated in the forward-looking statements.
You should rely only on the information in this prospectus and the
additional information described under the heading "Where You Can Find More
Information." We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely upon it. You should assume that the information
in this prospectus was accurate on the date of the front cover of this
prospectus only. Our business, financial condition, results of operations and
prospects may have changed since that date.
ABOUT ELECTRIC FUEL CORPORATION
We are a world leader in primary and refuelable Zinc-Air fuel cell
technology, pioneering advancements in consumer electronics, electric vehicles
and defense and safety products.
We based our line of Instant Power disposable batteries for cellular
telephones on our patented Zinc-Air fuel cell technology. The batteries, which
come fully charged and ready to use right out of the pack, provide consumers
with up to five times more talk and stand-by time when compared with
conventional batteries (of equivalent size or weight). Instant Power disposable
batteries are currently compatible with select models of Ericsson, Motorola,
Nokia and Samsung cellphones and are on sale at retail outlets throughout the
United States, Europe and Israel, including at such well-known retailers as
Circuit City, CompUSA, Fred Meyer Stores, CarToys, and Wal-Mart (under the
EverActive brand name) , and other cellular and retail stores in the United
States, and at the Carphone Warehouse, BT Retail, and other cellular and retail
stores in the United Kingdom.
Additionally, we recently began selling our new Instant Power charger for
cellphones and PDAs, a pocket-sized recharger weighing less than three ounces
that plugs directly into a cellphone or PDA, allowing it to be recharged and
used on the move without an electrical outlet.
We are also engaged in the design, development and commercialization of our
proprietary battery technology for other portable consumer electronic devices,
such as camcorders, as well as for electric vehicles and defense and safety
product applications. We are also seeking ways to continue to commercialize our
disposable zinc-air battery technology for other such devices, such as notebook
and laptop computers.
We have been engaged in research and development in the field of zinc-air
electrochemistry and battery design for over ten years, as a result of which we
have developed our current technology and its applications. We have successfully
applied our technology to our Instant Power line of disposable high-capacity
zinc-air batteries and rechargers for cellular telephones. We have also applied
our technology to the development of a refuelable zinc-air battery for powering
zero emission electric vehicles, which we have successfully demonstrated in "on-
the-road" programs in Germany, Sweden, Italy, Israel and the United States.
Through these efforts, we have sought to position ourselves as a world leader in
the application of zinc-air technology to innovative primary and refuelable
battery systems.
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While zinc-air technology has been in use for over a century in a great
variety of typically low-power devices (such as hearing aids), we have developed
technologies that provide our (environmentally-friendly) batteries with enhanced
performance in both power and energy at a low manufacturing cost. Our high-
energy, high-power zinc-air battery is composed of a zinc anode and an air
(oxygen reduction) cathode. It is different from most other battery technologies
in that one of the electrodes - the air cathode - is not consumed during
discharge, but instead acts as a kind of electrochemical membrane that extracts
oxygen from the atmosphere and introduces it into the cell. During discharge,
the oxygen is electrochemically reduced to hydroxide ions at the cathode, and
zinc at the anode is consumed by conversion to zinc oxide. In electric vehicles,
fresh zinc replaces the oxidized zinc in a regeneration process. In our
batteries and rechargers for consumer electronics devices, we construct the
entire pack from low-cost, recyclable components and thus can be disposed of in
an environmentally-safe manner.
To fully utilize our zinc-air battery technology for a wide selection of
applications, we operate in three business segments: Instant Power (formerly
Consumer Batteries), Electric Vehicles, and Defense and Safety Products.
Our Instant Power Division develops and has introduced our first consumer
products: disposable primary zinc-air batteries as a substitute for lower
performing and initially more expensive rechargeable batteries, and a ready-to-
use zinc-air charger for rechargeable cellphone batteries that gives consumers
the option to keep talking on an empty battery during the charging process. We
manufacture and market four different models of our Instant Power disposable
cellphone batteries, suitable for various models of cellphones produced by
Nokia, Motorola, Ericsson and Samsung. Additionally, we manufacture and market
the Instant Power charger for cellphones and PDAs, which lets wireless users
"charge without electricity" and keep talking or working while recharging, even
with a dead battery. These products are currently on sale at retail outlets
throughout the United States, the United Kingdom, certain countries in Europe
and Asia, and Israel. Other consumer and industrial applications based on the
same zinc-air cells are currently under development.
Through our Electric Vehicle Division, we are continuing to focus on fleet
applications of the zinc-air battery system with our partners in Europe and the
United States. The division is implementing, in cooperation with, among others,
General Electric, a program subcontracted to us by the U.S. federal government
for developing an all-electric battery-powered transit bus in Nevada that is
currently in Phase II of development, conducting evaluation of the system and
vehicle performance. As of early 2001, the division is also cooperating with a
consortium of industrial companies in Germany to advance the use of zinc-air
technology in fleet vehicles through a demonstration project partially funded by
the German government.
Our Defense and Safety Products Division continues to expand the
development of other uses of the battery technology, including a portable high-
power zinc-air battery pack for the U.S. Army. This division also oversees our
water-activated safety light products (based on our patented magnesium-cuprous
chloride technology) for the commercial aviation and marine markets and is
pursuing further development of the safety products business.
While marketing and establishing automatic production facilities for our
existing products, we also intend to develop new products based on the same
zinc-air cell technology.
We conduct our research, development and production activities primarily
through Electric Fuel Limited at its facility in Beit Shemesh, Israel. We also
have a small battery research and development facility in Auburn, Alabama that
builds and tests prototype cells and batteries.
USE OF PROCEEDS
We cannot guarantee that we will receive any proceeds in connection with
this offering.
Unless we inform you otherwise in the prospectus supplement, we will use
the net proceeds from the sale of the shares offered by this prospectus, if any,
for general corporate purposes. These purposes may include working capital and
capital expenditures. Pending their uses, we intend to invest the net proceeds
of this offering in interest-bearing bank accounts or in short-term, interest-
bearing, investment-grade securities.
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PLAN OF DISTRIBUTION
We may sell the shares offered under this prospectus through underwriters,
agents or dealers or directly to purchasers.
Shares may also be sold pursuant to what is known as an "equity line of
credit" or a "structured equity line financing" arrangement, whereby shares
would be sold at a discount to market to an investor, who would then resell some
or all of such shares to the public; such an investor would be considered an
"underwriter" within the meaning of Section 2(a)(11) of the Securities Act.
Additionally, we may from time to time issue shares to one or more
distributors, sales agents, sales persons, or other service providers in lieu of
cash payments in exchange for services rendered or as incentive awards.
The distribution of the shares may be effected from time to time in one or
more transactions:
. at a fixed price or prices, which may be changed from time to time;
. at market prices prevailing at the time of sale;
. at prices related to those prevailing market prices; or
. at negotiated prices.
Each prospectus supplement will describe the method of distribution of the
shares and any applicable restrictions.
The applicable prospectus supplement will describe the terms of the offering
of the shares, including the following:
. the name or names of any agents or underwriters;
. the public offering or purchase price;
. any discounts and commissions to be allowed or paid to the agent(s)
or underwriters;
. all other items constituting underwriting compensation;
. any discounts and commissions to be allowed or paid to dealers; and
. any exchanges on which the shares will be listed.
Only the agents or underwriters named in the prospectus supplement are agents
or underwriters in connection with the shares being offered pursuant to the
applicable prospectus supplement.
If the applicable prospectus supplement indicates, we will authorize dealers
or our agents to solicit offers by various institutions to purchase offered
shares from us pursuant to contracts that provide for payment and delivery on a
future date. We must approve all institutions, but they may include, among
others:
. commercial and savings banks;
. insurance companies;
. pension funds;
. investment companies; and
. educational and charitable institutions.
The institutional purchaser's obligations under a contract will be subject
only to the condition that the purchase of the offered shares at the time
delivery is allowed by any laws that govern the purchaser. The dealers and our
agents will not be responsible for the validity or performance of the contracts.
We may sell shares directly to the public, without the use of underwriters,
dealers or agents.
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Underwriters, dealers and agents participating in a sale of shares may be
deemed to be underwriters as defined in the Securities Act of 1933, and any
discounts and commissions received by them and any profit realized by them on
resale of the shares may be deemed to be underwriting discounts and commissions
under the Securities Act. We may have agreements with the agents, underwriters
and dealers to indemnify them against various civil liabilities, including
liabilities under the Securities Act, or to contribute to payments that the
agents, underwriters or dealers may be required to make as a result of those
civil liabilities.
Our common stock is currently listed on the Nasdaq National Market system
under the symbol "EFCX." Unless we indicate differently in a prospectus
supplement, we will not list the shares of our common stock on any other
securities exchange. If we sell shares offered under this prospectus to an
underwriter for public offering and sale, the underwriter may make a market for
that security but is not obligated to do so. Therefore, we cannot give any
assurances to you concerning the liquidity of any shares offered under this
prospectus.
Agents and underwriters and their affiliates may be customers of, engage in
transactions with, or perform services for us or our subsidiary companies in the
ordinary course of business.
DESCRIPTION OF CAPITAL STOCK
General
Our authorized capital stock consists of 100,000,000 shares of common stock
par value $.01 per share, and 1,000,000 shares of preferred stock, par value
$.01 per share. As of May 31, 2001, 26,359,397 shares of common stock were
issued and outstanding, 5,333 shares of common stock were held as treasury
shares, and no shares of preferred stock were issued and outstanding.
The additional shares of our authorized stock available for issuance might
be issued at times and under circumstances so as to have a dilutive effect on
earnings per share and on the equity ownership of the holders of our common
stock. The ability of our board of directors to issue additional shares of stock
could enhance the board's ability to negotiate on behalf of the stockholders in
a takeover situation but could also be used by the board to make a change-in-
control more difficult, thereby denying stockholders the potential to sell their
shares at a premium and entrenching current management. The following
description is a summary of the material provisions of our capital stock. You
should refer to our restated certificate of incorporation, as amended, and
bylaws for additional information.
Common Stock
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Except as required
under Delaware law or the rules of the Nasdaq National Market, the rights of
stockholders may not be modified otherwise than by a vote of a majority or more
of the shares outstanding. Subject to preferences that may be applicable to any
outstanding shares of preferred stock, the holders of common stock are entitled
to receive ratably any dividends as may be declared by the board of directors
out of funds legally available for the payment of dividends. In the event of our
liquidation, dissolution or winding up, the holders of common stock are entitled
to share ratably in all assets, subject to prior distribution rights of the
preferred stock, if any, then outstanding. Holders of common stock have no
preemptive rights or rights to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and non-
assessable, and the shares of common stock to be issued in the offering will be
fully paid and non-assessable.
Preferred Stock
Our board of directors has the authority, within the limitations and
restrictions stated in our restated certificate of incorporation, to provide by
resolution for the issuance of shares of preferred stock, and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preference
and the number of shares constituting any series of the designation of such
series. The issuance of preferred stock could have the effect of decreasing the
market price of the common stock, impeding
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or delaying a possible takeover and adversely affecting the voting and other
rights of the holders of our common stock. At present, we have no plans to issue
preferred stock.
Stock Options
As of May 31, 2001:
. options to purchase a total of 2,724,425 shares of common stock
were outstanding, 1,151,913 of which were vested and exercisable
within 60 days, at a weighted average exercise price of $3.82 per
share; and
. up to 3,523,907 additional shares of common stock may be issued
under our 1993 Stock Option and Restricted Stock Purchase Plan and
our Non-Employee Director Stock Option Plan.
Warrants
As of May 31, 2001, there were outstanding warrants to purchase a total of
1,595,453 shares of common stock at a weighted average exercise price of $4.61
per share.
Certain Charter Provisions
Provisions of our restated certificate of incorporation may have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of us. These provisions could
limit the price that certain investors might be willing to pay in the future for
shares of our common stock.
These provisions:
. divide our board of directors into three classes serving staggered
three-year terms;
. only permit removal of directors by stockholders "for cause," and
require the affirmative vote of at least 85% of the outstanding
common stock to so remove; and
. allow us to issue preferred stock without any vote or further
action by the stockholders.
The classification system of electing directors and the removal provision
may tend to discourage a third-party from making a tender offer or otherwise
attempting to obtain control of us and may maintain the incumbency of our board
of directors, as the classification of the board of directors increases the
difficulty of replacing a majority of the directors. These provisions may have
the effect of deferring hostile takeovers, delaying changes in our control or
management, or may make it more difficult for stockholders to take certain
corporate actions. The amendment of any of these provisions would require
approval by holders of at least 85% of the outstanding common stock.
LEGAL MATTERS
Harris Beach LLP, Rochester, New York will pass upon the validity of the
shares of common stock offered by this prospectus for us.
EXPERTS
Our consolidated financial statements for the fiscal years ended December
31, 2000 and 1999, which have been incorporated by reference in this prospectus,
have been audited by independent accountants Kost Forer & Gabbay (a member firm
of Ernst & Young International Limited). Our consolidated financial statements
for the fiscal year ended December 31, 1998, which have also been incorporated
by reference in this prospectus, were audited by our former independent
accountants, Kesselman & Kesselman (a member firm of PricewaterhouseCoopers
International). Such financial statements have been so included in reliance on
the reports of such independent accountants given on the authority of such firms
as experts in accounting and auditing.
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5,400,000 Shares
Common Stock
Electric Fuel(R)
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PROSPECTUS
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July 20, 2001
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