This
prospectus covers the resale by selling shareholders of up to 37,523,627 shares
of our common stock, $0.001 par value. The securities will be offered for sale
by the selling shareholders identified in this prospectus in accordance with
the
terms described in the section of this prospectus entitled “Plan of
Distribution.” We will not receive any of the proceeds from the sale of the
common stock by the selling shareholders.
Our
securities are not listed on any national securities exchange or the Nasdaq
Stock Market. Our common stock is quoted on the OTC Bulletin Board under the
symbol “CPTC.” On April 16, 2007, the closing sale price of our common stock on
the OTC Bulletin Board was $1.49 per share.
INVESTING
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE OUR
SECURITIES ONLY IF YOU CAN AFFORD LOSING YOUR ENTIRE INVESTMENT. SEE “RISK
FACTORS” BEGINNING ON PAGE 5 FOR A DISCUSSION OF THESE AND OTHER
RISKS.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS
APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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 information in this prospectus is accurate only as
of
the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of our common stock. You should not consider any
information in this prospectus or in the documents incorporated by reference
herein to be investment, legal or tax advice. Consult your own counsel,
accountant and other advisors for legal, tax, business, financial and related
advice regarding the purchase of our common stock.
This
summary contains basic information about us and this offering. You should read
the entire prospectus carefully, including the “Risk Factors” section and the
documents incorporated by reference into this prospectus, including our
financial statements and the related notes included in those documents before
making an investment decision. Some of the statements contained in this
prospectus and the documents incorporated herein by reference are
forward-looking statements and may involve a number of risks and uncertainties.
Our actual results and future events may differ significantly from these
predictions based upon factors, including, but not limited to, those set forth
below in the section entitled “Risk Factors”. You should not put undue reliance
on the forward-looking statements in this document, which speak only as of
the
date on the cover of this prospectus.
In
this
prospectus, we refer to Composite Technology Corporation and its subsidiaries
as
“we,”“our,” or “CTC,” or “the Company.” We refer to our subsidiaries
collectively as “Subsidiaries.”
Our
Company
We
are a
leading innovator in renewable and energy efficient electrical energy products.
CTC’s products share the common goal of providing improved performance in
electrical transmission systems and wind energy generators to the utility
customer. CTC products benefit from proprietary and patented technology and
processes that result in next generation products that we believe have
substantial economic benefits over similar traditional products. These products
include our Aluminum Conductor Composite Core or, ACCC, conductors and our
DeWind 8.2 wind energy generators.
Operating
Divisions
We
operate through two divisions accounted for as separate segments, CTC Cable
and
DeWind. CTC Cable operates under the name CTC Cable Corporation. This division
sells ACCC conductors, an advanced composite core overhead electrical
transmission conductor, as well as manufactures and sells the composite core
component of the ACCC conductor and various accessories.
In
July
2006, CTC acquired EU Energy Ltd. (“EU” or “EUE”), a manufacturer of world-class
wind generation turbines under the brand name, “DeWind.” Since the acquisition,
we have continued to operate EU Energy Ltd. and its subsidiaries, and have
also
organized DeWind’s US operations under a new corporation, DeWind Inc. These
companies form CTC’s wind energy turbine division. To reflect the recent
diversification as a result of the merger, our shareholders passed a resolution
authorizing that the corporation’s name be changed to “CTC Energy, Inc.” at the
annual meeting of our shareholders held on March 6, 2007.
We
were
incorporated in Florida on February 26, 1980 and reincorporated in Nevada on
June 27, 2001. We maintain our principal offices at 2026 McGaw Avenue, Irvine,
California92614. Our telephone number at that address is (949) 428-8500. Our
Website address is www.compositetechcorp.com. The information contained on
our
Website is not a part of this prospectus. Further, our reference to this website
is intended to be inactive textual reference only.
1
Shares
Registered in this Prospectus
Private
Placement of Shares of Common Stock underlying Convertible Notes and
Warrants
Between
February 12, 2007 and February 27, 2007 we closed a financing transaction in
which we sold 8.0% convertible debentures to select institutional accredited
investors in order to raise a total of $22,825,000. The convertible debentures
mature on January 31, 2010. Interest on the notes started accruing on February12, 2007 and are payables in arrears, in cash, on the last day of each calendar
quarter during the time period from February 12, 2007 until the debentures
mature. The investors also received warrants to purchase an aggregate of
10,979,585 shares of common stock (“shares”) for a term of 36 months at an
exercise price of $1.13 per share.
The
investors may convert the debentures into our common stock for $1.04 per share
prior to January 31, 2010. The debentures are convertible at $1.04 per share
or
may be converted into 21,947,134 shares. The investors, however, may not
voluntarily convert the notes if after giving effect to such conversion, an
investor would beneficially own in excess of 4.99% of the number of shares
of
our common stock outstanding, unless they provide 60 days prior written notice
to us that they wish to increase such percentage, and in any case, may not
convert a note if after giving effect to such conversion, an investor would
beneficially own in excess of 9.99% of the number of shares of our common stock
outstanding.
CapStone
Investments acted as our placement agent and financial advisor in connection
with the placement of the debentures and warrants. In consideration for
CapStone’s services, it received a fee comprising a cash payment in an amount of
six percent of the face value of the Debentures, together with a warrant to
purchase up to 1,211,947 shares of common stock of the Company with an exercise
price per share of $1.13 exercisable during a three year term.
Shares
included in this prospectus due to the February, 2007 private placement
include:
·
21,947,134
shares issuable upon conversion of 8.0% Senior Convertible Notes
we issued
to certain of the selling shareholders between February 12, 2007
and
February 21, 2007 in a private placement
transaction.
Other
Shares
In
addition to the shares included in this prospectus based on the February, 2007
private placement, this prospectus covers:
·
12,225,284
shares issued on July 3, 2006 in conjunction with the acquisition
of EU
Energy, plc.;
2
·
1,276,939
shares issued in September, 2006 pursuant to a settlement of and
inducement to convert $1,325,000 of our March, 2006 Bridge Notes
principal;
·
367,792
shares issuable upon the exercise of warrants issued in September,
2006
and February, 2007 pursuant to anti-dilution protection provisions
of our
March, 2006 Bridge Notes;
·
150,000
shares of common stock underlying warrants issued for services rendered
in
conjunction with obtaining our March, 2006 Bridge Notes
financing;
·
150,489
shares of common stock issued for services rendered in conjunction
with
obtaining our October, 2005 debtor-in-possession and March, 2006
Bridge Notes financings;
·
191,466
shares of common stock underlying warrants issued in May, 2006 for
legal
services rendered;
·
220,000
shares of common stock underlying warrants issued in November, 2006
in
lieu of cash interest on notes
payable;
·
300,000
shares of common stock underlying warrants issued in July, 2001 for
services rendered in 2001;
·
227,523
shares of common stock issued in November, 2006 for sales and research
related consulting services; and
·
467,000
shares of common stock underlying warrants issued in September, 2004
for
management consulting services rendered in
2004.
3
The
September, 2006 settlement related to 14% Bridge Notes in the aggregate
principal amount of $1,325,000 and related warrants issued on March 3, 2006.
The
holders of these notes converted their principal into 854,840 shares of stock
registered under a Form S-3 declared effective on September 14, 2006. The
additional 1,427,428 shares registered hereby were issued in return for the
holders voluntarily converting the principal and amending and modifying the
Bridge Notes and related warrants.
The
Offering
Common
Stock offered by the selling shareholders
37,523,627 shares
Shares
of our Common Stock outstanding as of March 8, 2007
178,862,848
shares
Selling
Shareholders
See
“Selling Shareholders” for more information on the selling shareholders in
this transaction
Use
of Proceeds
We
will not receive any proceeds from the sale of shares in this
offering
An
investment in the common stock offered under this prospectus involves a high
degree of risk. In addition to the other information in this prospectus and
the
documents incorporated by reference in this prospectus, the following risk
factors should be considered carefully in evaluating CTC and our business.
All
forward-looking statements are inherently uncertain as they are based on current
expectations and assumptions concerning future events or future performance
of
CTC. Do not place undue reliance on the forward-looking statements in this
document, which are only predictions and speak only as of the date on the cover
of this prospectus. In evaluating such statements, prospective investors should
review carefully various risks and uncertainties identified in this prospectus,
including the matters set forth below and in our other SEC filings which are
incorporated in this prospectus by reference. These risks and uncertainties
could cause our actual results to differ materially from those indicated in
the
forward-looking statements. We undertake no obligation to update or publicly
announce revisions to any forward-looking statements to reflect future events
or
developments, except as required by law.
WE
EXPECT
FUTURE LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN.
Prior
to
acquiring Transmission Technology Corporation, or TTC, in November 2001, we
were
a shell corporation having no operating history, revenues from operations,
or
assets since December 31, 1989. We have recorded approximately $5.6 million
in
ACCC product sales since inception and we have $17.9 million in wind turbine
and
related services revenues as a result of the acquisition on July 3, 2006.
Historically, we have incurred substantial losses and we may experience
significant quarterly and annual losses for the foreseeable future. We may
never
become profitable. If we do achieve profitability, we may not be able to sustain
or increase profitability on a quarterly or annual basis. We expect the need
to
significantly increase our general administrative and product prototype and
equipment prototype production expenses, as necessary. As a result, we will
need
to generate significant revenues and earnings to achieve and maintain
profitability.
OUR
INDEPENDENT AUDITORS HAVE ISSUED A QUALIFIED REPORT AS OF AND FOR THE YEAR
ENDED
SEPTEMBER 30, 2006 WITH RESPECT TO OUR ABILITY TO CONTINUE AS A GOING CONCERN,
AND WE MAY NEVER ACHIEVE PROFITABILITY.
Since
inception, our accountants have issued a report relating to our audited
financial statements which contains a qualification with respect to our ability
to continue as a going concern because, among other things, our ability to
continue as a going concern is dependent upon our ability to generate profitable
operations in the future or to obtain the necessary financing to meet our
obligations and repay our liabilities from normal business operations when
they
come due. There is no guarantee that the products will be accepted or provide
a
marketable advantage, and therefore, no guarantee that the commercialization
will ever be profitable. For the fiscal quarter ended December 31, 2006, we
had
a net loss of $6,949,324 and negative cash flows from operations of $4,635,971.
For the year ended September 30, 2006, we had a net loss of $28,523,192 and
negative cash flows from operations of $6,263,703. For the fiscal year ended
September 30, 2005, we had a net loss of $40,163,407 and negative cash flows
from operations of $12,449,211. For the fiscal year ended September 30, 2004,
we
had net losses of $14,687,875 and negative cash flows from operations of
$8,725,376. As of December 31, 2006, our accumulated deficit was
$102,075,283.
5
BECAUSE
WE ARE IN AN EARLY STAGE OF COMMERCIALIZATION, OUR LIMITED HISTORY OF CABLE
OPERATIONS MAKES EVALUATION OF OUR BUSINESS AND FUTURE GROWTH PROSPECTS
DIFFICULT.
Since
our
reorganization in 2001, we have had a limited operating history and are at
an
early stage of commercialization of a new technology product to a market unused
to using new technologies. We made our ACCC available and entered into our
first
commercial agreement in 2003. We recently acquired our wind energy division
in
July 2006.
Our
electric cable technology is a relatively new advance for the electrical utility
industry technology and has not yet achieved widespread adoption. We do not
have
enough experience in selling our products at a level consistent with broad
market acceptance and do not know whether we can do so and generate a profit.
As
a result of these factors, it is difficult to evaluate our prospects, and our
future success is more uncertain than if we had a longer or more proven history
of operations.
IF
OUR
CONDUCTOR AND TURBINE PRODUCTS ARE NOT ACCEPTED BY OUR POTENTIAL CUSTOMERS,
IT
IS UNLIKELY THAT WE WILL EVER BECOME PROFITABLE.
The
electrical utility industry has historically used a variety of technologies
which have been proven over time to be reliable. Compared to these conventional
technologies, our technology is relatively new and unproven, and the number
of
companies using our technology is limited. The commercial success of our
conductor product will depend upon the widespread adoption of our technology
as
a preferred method by major utility companies to transmit electricity and the
commercial success of our turbine products will depend on our ability to
convince wind farm operators that our new turbine design will result in a
reliable wind turbine. In order to be successful, our products must meet the
technical and cost requirements for electric generation and transmission within
the electric utility industry. Market acceptance will depend on many factors,
including:
(ii)
our
ability to convince prospective strategic partners and customers that our
technology is an attractive alternative to conventional methods used by the
electric utility industry;
(iii)
our
ability to convince wind farm operators and designers of wind farms to use
our wind energy turbines that incorporate our WinDrive® power train
solution;
6
(iv)
our
ability to change our customers' evaluation of the economics of powerline
construction, changing their focus on limiting initial capital costs to
evaluating the cost and benefit of the full life of a line liberating capital
funding to acquire our products that can overall reduce costs in power
transmission; and
(v)
our
ability to sell sufficient quantities of our products.
Because
of these and other factors, our product may not gain market acceptance or become
the industry standard for the electrical utility industry. The failure of
utility companies to purchase our products would have a material adverse effect
on our business, results of operations and financial condition.
OUR
NEW
DEWIND D8.2 MODEL HAS NOT BEEN SUCCESSFULLY DEMONSTRATED IN REAL WORLD WIND
GENERATION APPLICATIONS. THE WINDRIVE TM
DRIVETRAIN IS UNPROVEN IN WIND GENERATION APPLICATIONS AND HAS NOT BEEN
CERTIFIED FOR COMMERCIAL APPLICATIONS.
The
DeWind D8.2 model incorporates the Voith WinDrive® component as a key
modification to our existing turbine technology. However, we have not
successfully completed the tests required to obtain certification to utilize
this technology in wind generation applications in either Europe or the United
States. Certification involves erecting the turbine on a test location site
and
conducting and evaluating the results of tests under real world conditions.
If
the certification is not obtained, is delayed due to product performance issues
or regulatory concerns, we may be required to perform additional re-engineering
or redesign work resulting in additional product delays. Such delays may require
additional investment in product development. If we are not certified in a
timely manner, our current and potential customers may cancel their orders
and
require the refund of any advance payments they may have made. Finally, any
business decisions made based on the assumption of cash flows from these
turbines will have to be re-evaluated, our forecasted revenues forecast may
not
be attained, additional costs may be incurred, and our business may be
significantly impacted.
7
ALTHOUGH
OUR DEWIND SUBSIDIARY HAS SUCCESSFULLY PRODUCED WIND TURBINES IN THE PAST,
DEWIND HAS NOT PRODUCED A TURBINE COMMERCIALLY FOR OVER A YEAR AND HAS LIMITED
OPERATIONAL PRODUCTION CAPABILITY.
As
a
result of strategic management decisions to direct marketing efforts to our
new
D8.2 turbines, DeWind has not produced wind turbines at commercially viable
levels since 2005 and the first commercial shipments of wind turbines is not
expected until the second half of calendar year 2007. This lack of production
experience and know-how may result in additional costs or delays when commercial
production is resumed. We are currently evaluating our commercial production
options including the use of contract facilities at various locations around
the
world. We have limited experience contracting out for such facilities which
may
involve additional expenditures or product issues including inadequate product
quality or product shipment delays. We may also not adequately transition the
required production knowledge resulting in additional costs or delays until
such
time as the contractor solutions are sufficiently efficient, or if quality
is
not sufficiently high for our turbine products.
OUR
DEWIND PRODUCTS UTILIZE TECHNOLOGY AND INTELLECTUAL PROPERTY OWNED BY OTHER
ENTITIES AND WE MAY BE REQUIRED TO LICENSE THIS TECHNOLOGY OR BE PREVENTED
FROM
SELLING OUR PRODUCTS BY OTHERS.
For
our
existing turbines, we are subject to the licensing requirements of General
Electric corporation, and potentially others, for the conversion of rotational
power into usable electricity and for connection of the turbine to the power
grid. In addition, General Electric has prohibited the sale of certain of our
turbines that utilize their technology into territories such as the United
States and Canada and requires us to pay a royalty on turbines using their
technology in other territories. In the future, we may be subject to additional
restrictions on or license fees payable for our turbines which may negatively
impact our business. Further, other wind energy manufacturers, including
without limitation, General Electric, may file intellectual property
infringement claims on our new turbines, file injunctions against their sale
or
delivery, or attempt to impose additional licensing requirements which, even
if
adjudicated in our favor, may result in the delay of payments or deliveries
which could significantly impact our business.
OUR
WIND
TURBINES HAVE VERY LONG SALES AND PRODUCTION CYCLES AND OUR TURBINES ARE
TYPICALLY FINANCED BY BANKS AND OTHER LENDING INSTITUTIONS. OUR BUSINESS COULD
BE ADVERSELY AFFECTED FOR GLOBAL CHANGES TO THE WORLD WIND ENERGY, REGULATORY,
OR WORLD FINANCIAL MARKETS.
Our
wind
turbines require the sourcing of turbine parts as much as eight months in
advance of production and the cycle from turbine sale to commissioning in the
field is typically a twelve to eighteen month cycle. Our turbines are sold
under
long term contracts that typically require financing from banks and other
lending institutions. These institutions often have a worldwide presence and
may
be subject to international risks which may limit their ability to issue
additional financing. The geographical market for our turbines is limited to
those locations where sufficient, reliable wind speeds exist to make a wind
turbine farm an economically viable endeavor. Such locations may cross political
boundaries including national, state/province, or local government involving
a
variety of regulations and regulatory oversight. While we are currently focusing
our near term efforts in geographies with stable governments, future growth
will
depend on sales into less stable governments where it may be difficult to obtain
the necessary financing or regulatory approvals. Our future business may be
negatively impacted by the geo-political uncertainties inherent in current
sales
prospects such as Eastern Europe, South America, and Asia.
8
WE
HAVE
EXPOSURE TO FOREIGN CURRENCY RISK AND WE ARE NOT ADEQUATELY HEDGED AGAINST
SUCH
FOREIGN CURRENCY EXPOSURE.
With
the
acquisition of DeWind, we now have operations in Germany and sales opportunities
around the world denominated in the Euro and other currencies. In addition,
for
turbines sold into the US, we expect that for the foreseeable future, we will
purchase a substantial quantity of parts from European suppliers in Euro
denominations for delivery into the US and elsewhere. Our current sales
contracts have the revenue payments denominated in the local currencies and
at
contracted amounts. Since we currently do not have a foreign exchange hedging
strategy in place, if the local currency value depreciates against the Euro
we
may incur substantial foreign currency losses or incur additional
expenses.
9
OUR
INABILITY TO RAISE ADDITIONAL WORKING CAPITAL AT ALL OR TO RAISE IT IN A TIMELY
MANNER COULD NEGATIVELY IMPACT OUR ABILITY TO FUND OUR OPERATIONS, TO GENERATE
REVENUES, AND TO OTHERWISE EXECUTE OUR BUSINESS PLAN, LEADING TO THE REDUCTION
OR SUSPENSION OF OUR OPERATIONS AND ULTIMATELY LIQUIDATION OF OUR
BUSINESS.
While
we
have raised significant capital in the past through our debt offerings and
private equity placements, we anticipate that the sales of our ACCC conductor
and DeWind turbines will not be sufficient enough to sustain our operations,
and
further anticipate that we will continue to incur net losses due to our costs
exceeding our revenues for an indefinite period of time. For these reasons,
we
believe that we will need to raise additional capital until such time, if any,
as we become cash-flow positive. It is highly likely that we will continue
to
seek to raise money through public or private sales of our securities, debt
financing or short-term loans, corporate collaborations or a combination of
the
foregoing. Our ability to raise additional funds in the public or private
markets will be adversely affected if the results of our business operations
are
not favorable, if any products developed are not well-received or if our stock
price or trading volume is low. Moreover, additional funding may not be
available on favorable terms to us, or at all. To the extent that money is
raised through the sale of our securities, the issuance of those securities
could result in dilution to our existing shareholders. If we raise money through
debt financing, we may be required to secure the financing with all of our
business assets, which could be sold or retained by the creditor should we
default in our payment obligations. Should the financing we require to sustain
our working capital needs be unavailable or prohibitively expensive when we
require it, we may not be able to complete the commercialization of any products
that we may have developed. As a result, we may be required to discontinue
our
operations without obtaining any value for our products under development,
which
could eliminate shareholder equity, or we could be forced to relinquish rights
to some or all of our products in return for an amount substantially less than
we expended to develop such products.
IF
WE
FAIL TO PROPERLY MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS COULD BE ADVERSELY
AFFECTED.
The
transition from a small company focused on research and development of our
products to a company with the additional focus on commercial production,
marketing, and sales has placed and will continue to place a significant strain
on our managerial, operational, and financial resources. The failure to manage
our sales and growth effectively could have a material adverse effect on our
business, results of operations and financial condition. Significant additional
growth will be necessary for us to achieve our plan of operation.
WE
MUST
PROTECT OUR PROPRIETARY RIGHTS TO PREVENT THIRD PARTIES FROM USING OUR
TECHNOLOGY OR VERY SIMILAR TECHNOLOGY; PROPRIETARY RIGHTS LITIGATION COULD
BE
TIME-CONSUMING AND EXPENSIVE.
Failure
to adequately protect our proprietary rights could enable third parties to
use
our technology, or very similar technology, and could reduce our ability to
compete in the market, and any proprietary rights litigation could be time
consuming and expensive to prosecute and defend. Due to the importance of
proprietary technology in the electrical utility and wind energy industries,
establishment of patents and other proprietary rights is important to our
success and our competitive position. Performance in the electrical utility
and
wind energy industries can depend, among other factors, on patent protection.
Accordingly, we have filed patent applications in the U.S. and internationally
for all aspects of our composite materials, conductor and wind energy turbine
products and processes, including aspects of our product other than the
conductor core, and intend to devote substantial resources to the establishment
and protection of patents and other proprietary rights. Despite our efforts
to
establish and protect our patents or other proprietary rights, unauthorized
parties may attempt to copy aspects of our technology or to obtain and use
information that we regard as proprietary. In addition, the laws of some foreign
countries do not protect our proprietary rights to as great an extent as do
the
laws of the United States. Our means of establishing and protecting our
proprietary rights may not be adequate and our competitors may independently
develop similar technology, duplicate our products or design around our patents
or our other proprietary rights. As
a
result, our business involves a risk of overlap with third party patents and
subsequent litigation with competitors or patent-holders. Any claims, with
or
without merit, could be time-consuming, result in costly litigation, or cause
us
to enter into licensing agreements.
10
WE
OCCASIONALLY MAY BECOME SUBJECT TO LEGAL DISPUTES THAT COULD HARM OUR
BUSINESS.
We
have
from time to time become engaged in, legal disputes such as claims by
consultants or other third parties. These disputes could result in monetary
damages or other remedies that could adversely impact our financial position
or
operations. We believe these claims are without merit and intend to vigorously
defend against them. However, even if we prevail in disputes such as this,
the
defense of these disputes will be expensive and time-consuming and may distract
our management from operating our business.
WE
DEPEND
ON KEY PERSONNEL IN A COMPETITIVE MARKET FOR SKILLED EMPLOYEES AND FAILURE
TO
ATTRACT AND RETAIN QUALIFIED EMPLOYEES COULD SUBSTANTIALLY HARM OUR
BUSINESS.
We
rely
to a substantial extent on the management, marketing and product development
skills of our key employees, particularly Benton H Wilcoxon, our Chief Executive
Officer, Michael Porter, our President, Jorg Kubitza, General Manager of our
Wind Division and Marv Sepe, President of our Cable Division. If Messrs.
Wilcoxon, Porter, Kubitza, or Sepe were unable to provide services to us for
whatever reason, our business would be adversely affected. Neither Mr. Wilcoxon
nor Mr. Sepe has entered into an employment agreement with the Company. In
addition, our ability to develop and market our products and to achieve
profitability will depend on our ability to attract and retain highly talented
personnel. We face intense competition for personnel from other companies in
the
electrical utility industry. The loss of the services of our key personnel
or
the inability to attract and retain the additional, highly-talented employees
required for the development and commercialization of our products, may
significantly delay or prevent the achievement of product development and could
have a material adverse effect on us.
11
A
FAILURE
TO ESTABLISH AND MAINTAIN RELATIONSHIPS WITH STRATEGIC PARTNERS MAY HARM OUR
BUSINESS.
Our
success is dependent upon establishing and maintaining relationships with
strategic partners, such as our relationships with General Cable, Lamifil,
and
Midal as our conductor wrapping partners and with Voith as our WinDrive® torque
converter supplier. We face numerous risks in successfully obtaining suitable
partners on terms consistent with our business model, including, among
others:
(i)
we
must typically undergo a lengthy and expensive process of building a
relationship with a potential partner before there is any assurance of an
agreement with such party;
(ii)
we
must persuade conductor manufacturers with significant resources to rely on
us
for critical technology on an ongoing and continuous basis rather than trying
to
develop similar technology internally;
(iv)
we
must successfully transfer technical know-how to our partners.
Moreover,
the success of our business model also depends on the acceptance of our products
by the utility companies who have historically been conservative in their
adoption of new products and technologies into their infrastructure. Further,
our partners will be selling our products that may compete with their existing
or future conductor products. Our partners are not required to sell our products
and they are not prohibited from discounting the prices of their products below
our prices.
Our
business could be seriously harmed if: (i) we cannot obtain suitable partners;
(ii) our partners fail to achieve significant sales of ACCC conductor or
products incorporating our technology; or (iii) we otherwise fail to implement
our business strategy successfully.
WE
CANNOT
CONTROL THE COST OF OUR RAW MATERIALS, WHICH MAY ADVERSELY AFFECT OUR
BUSINESS.
Our
principal ACCC conductor raw materials are glass and carbon fibers, plus various
polymer resins and aluminum. The prices for these raw materials are subject
to
market forces largely beyond our control, including energy costs, organic
chemical feed stocks, market demand, and freight costs. The prices for these
raw
materials have varied significantly and may vary significantly in the future.
We
may not be able to adjust our product prices, especially in the short-term,
to
recover the costs of increases in these raw materials. Our future profitability
may be adversely affected to the extent we are unable to pass on higher raw
material and energy costs to our customers.
12
INTERRUPTIONS
OF SUPPLIES FROM OUR KEY SUPPLIERS MAY AFFECT OUR RESULTS OF OPERATIONS AND
FINANCIAL PERFORMANCE.
Interruptions
or shortages of supplies from our key suppliers of raw materials or turbine
parts suppliers could disrupt production or impact our ability to increase
production and sales. We use a limited number of sources for most of the other
raw materials and turbine parts. We do not have long-term or volume purchase
agreements with most of our suppliers, and may have limited options in the
short-term for alternative supply if these suppliers fail, for any reason,
including their business failure or financial difficulties, to continue the
supply of materials or components. Moreover, identifying and accessing
alternative sources may increase our costs.
WE
ARE
CONTROLLED BY A SMALL NUMBER OF SHAREHOLDERS, WHOSE INTERESTS MAY DIFFER FROM
OTHER SHAREHOLDERS.
As
of
April 17, 2007, Benton H Wilcoxon, our Chairman of the Board, Chief Executive
Officer and Acting Chief Financial Officer, and Michael Porter, consultant,
former CTC President and former majority shareholder of EU Energy in the
aggregate beneficially own or control approximately 21% of the outstanding
common stock. As a result, these persons have significant influence in
determining the outcome of any corporate matters submitted to our shareholders
for approval, including mergers, consolidations and the sale of all or
substantially all of our assets, election of directors and other significant
corporate actions. They may also have the power to prevent or cause a change
in
control. The interests of these shareholders may differ from the interests
of
the other shareholders, and may limit the ability of other shareholders to
affect our management and affairs.
Until
and
unless we secure multiple customer relationships, it is likely that we will
experience periods during which we will be highly dependent on one or a limited
number of customers. Dependence on a single or a few customers will make it
difficult to satisfactorily negotiate attractive prices for our products and
will expose us to the risk of substantial losses if a single dominant customer
stops conducting business with us. Moreover, to the extent that we may be
dependent on any single customer, we could be subject to the risks faced by
that
customer to the extent that such risks impede the customer's ability to stay
in
business and make timely payments to us.
13
OUR
BUSINESS MAY BE SUBJECT TO INTERNATIONAL RISKS.
We
are
pursuing international business opportunities, including in Europe, India,
China, Mexico, Brazil, Europe, the Middle East, certain far eastern countries
and Africa. As to international business in the Middle East, our current target
markets include Saudi Arabia, Qatar, United Arab Emirates, Oman, Bahrain, Libya,
and Jordan. In Africa we are actively pursuing South Africa and Kenya as well
as
engaging in discussions with engineering companies that bid on trans-African
projects. There are no special additional risks related to these countries
that
are not disclosed in the list of risks affecting most international business.
To
date, we have not engaged in any transactions on these countries. Our wind
division has historically operated only in Western Europe, primarily Germany
and
Austria. Our Cable business model has been implemented only in the United States
and Canada where we produce the ACCC core for delivery to General Cable under
a
manufacturing agreement and for ACCC conductor orders in China. Expansion
internationally will depend on our adaptation of this model to international
markets and may be costly and time consuming. Risks inherent in international
operations in general include:
(i)
unexpected changes in regulatory requirements, export restrictions, tariffs
and
other trade barriers;
(ii)
challenges in staffing and managing foreign operations;
(iii)
differences in technology standards, employment laws and business
practices;
(iv)
longer payment cycles and problems in collecting accounts
receivable;
In
particular, certain of our target markets in the Middle East include Iraq and
Afghanistan in which there is considerable violent instability that may affect
our ability to operate in those markets.
COMPLIANCE
WITH ENVIRONMENTAL REGULATIONS COULD INCREASE OUR OPERATING COSTS, WHICH WOULD
ADVERSELY AFFECT THE COMMERCIALIZATION OF OUR TECHNOLOGY.
Our
intended operations are subject to various federal, state, and local laws and
regulations relating to the protection of the environment. These environmental
laws and regulations, which have become increasingly stringent, are implemented
principally by the Environmental Protection Agency and comparable state
agencies, and govern the management of hazardous wastes, the discharge of
pollutants into the air and into surface and underground waters, and the
manufacture and disposal of certain substances. There are no material
environmental claims currently pending or, to our knowledge, threatened against
us. In addition, we believe our planned operations will be implemented in
compliance with the current laws and regulations. We estimate that any expenses
incurred in maintaining compliance with current laws and regulations will not
have a material effect on our earnings or capital expenditures. However, there
can be no assurance that current regulatory requirements will not change, that
currently unforeseen environmental incidents will not occur, or that past
non-compliance with environmental laws will not be discovered.
14
CHANGES
IN INDUSTRY STANDARDS AND REGULATORY REQUIREMENTS MAY ADVERSELY AFFECT OUR
BUSINESS.
As
a
manufacturer and distributor of wire and conductor products we are subject
to a
number of industry standard-setting authorities, such as the Institute of
Electrical and Electronic Engineers, the Europe based International Council
on
Large Electric Systems, the American Society of Testing and Materials and the
Canadian Standards Association. In addition, many of our products may become
subject to the requirements of federal, state and local or foreign regulatory
authorities. Changes in the standards and requirements imposed by such
authorities could have an adverse effect on us. In the event we are unable
to
meet any such standards when adopted our business could be adversely affected.
In addition, changes in the legislative environment could affect the growth
and
other aspects of important markets served by us. While certain legislative
bills
and regulatory rulings are pending in the energy and telecommunications sectors
which could improve our markets, any delay or failure to pass such legislation
and regulatory rulings could adversely affect our opportunities and anticipated
prospects may not arise. It is not possible at this time to predict the impact
that any such legislation or regulation or failure to enact any such legislation
or regulation, or other changes in laws or industry standards that may be
adopted in the future, could have on our financial results, cash flows or
financial position.
Our
turbines are subject to regulatory approval and certification as described
above. Our turbine customers also rely upon tax credits as incentives to build
wind turbine farms. These tax credits may lapse or expire prior to the
installation of turbines or delays in shipments of turbines as the result of
production issues may result in the loss of such credits to the developer In
the
United States and elsewhere around the world, there are alternative energy
tax
credits and tax advantages that have been enacted that are designed to promote
the building of renewable and alternative energy including wind turbine farms.
These tax credits may be significant enough to swing the difference as to
whether a wind farm is economically feasible or not. Currently in the US, such
tax credits are set to expire at the end of 2007. While we believe that the
credits will be extended in substantially the same form as today, changes to
the
tax law structure may result in the reduction or elimination of these tax
credits.
The
market in which we compete is intensely competitive. Our conductor competitors
include makers of traditional bare overhead wire and other companies with
developmental-stage products that may be marketing or developing products that
compete with our products or would compete with them if developed. Our wind
competitors include several established and much better capitalized companies
such as General Electric and Vestas who could exert downward pricing pressure
which could be catastrophic for our wind energy turbine business plan. Our
competitors will be able to better access capital. They may also achieve
unique technological advances that render our products obsolete. We believe
our
competitors will continue to improve the design and performance of their
products and to introduce new products with competitive price and performance
characteristics. We expect that we will be required to continue to invest in
product development, productivity improvements and customer service and support
in order to compete in our markets. Such competitors could develop a more
efficient product or undertake more aggressive and costly marketing campaigns
than us which may adversely affect our marketing strategies and could have
a
material adverse effect on our business, results of operations or financial
condition. In addition, as we introduce new products, we will compete directly
with a greater number of companies. There is no assurance that we will compete
successfully against current or future competitors nor can there be any
assurance that competitive pressures faced by us will not result in increased
marketing costs, loss of market share or otherwise will not materially adversely
affect our business, results of operations and financial condition.
OUR
TITLE
11 PROCEEDINGS MAY RESULT IN A NEGATIVE PUBLIC PERCEPTION OF US THAT MAY
ADVERSELY AFFECT OUR RELATIONSHIPS WITH CUSTOMERS, AS WELL AS OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
Although
our plan of reorganization was confirmed by the Bankruptcy Court and we have
exited bankruptcy, our Title 11 filing may hinder our ongoing business
activities and our ability to operate, fund and execute our business plan
by:
(i)
impairing relations with existing and potential customers;
(ii)
negatively impacting our ability to attract, retain and compensate key
executives and associates and to retain employees generally;
(iii)
limiting our ability to obtain additional funding; and
(iv)
impairing present and future relationships with strategic partners.
WE
MAY
NOT REALIZE ANY BENEFITS FROM THE ACQUISITION OF EU ENERGY.
16
We
are in
the process of integrating EU Energy's products and services offerings. If
we
cannot integrate the products effectively or if management spends too much
time
on integration issues, it could harm the combined company's business, financial
condition and results of operations. The difficulties, costs and delays involved
in integrating the companies, which could be substantial, include the
following:
·
distraction
of management and other key personnel from the business of the combined
company;
·
integrating
technology, product lines, services and development
plans;
·
inability
to demonstrate to customers and suppliers that the business combination
will not result in adverse changes in product standards or business
focus;
·
inability
to retain and integrate key
personnel;
·
disruptions
in the combined sales forces that may result in a loss of current
customers or the inability to close sales with potential
customers;
·
expending
time, money and attention on integration that would otherwise be
spent on
developing either company's own products and
services;
·
additional
financial resources that may be needed to fund the combined operations;
and
·
impairment
of relationships with employees and customers as a result of changes
in
management.
We
have
no experience in integrating operations on the scale represented by the
acquisition, and we are not certain that Composite Technology Corporation and
EU
Energy can be successfully integrated in a timely or efficient manner or that
any of the anticipated benefits of the acquisition will be realized. Failure
to
do so could have a material adverse effect on the business, financial condition
and operating results of the combined company.
17
THE
ACQUISITION OF EU ENERGY MAY RESULT IN ADDITIONAL SARBANES-OXLEY ISSUES AND
MATERIAL WEAKNESSES IN THE CONTROL STRUCTURE OF COMPOSITE TECHNOLOGY
CORPORATION.
EU
Energy
is a UK company that has not been subject to the requirements of the
Sarbanes-Oxley Act of 2002. The operations of EU Energy are expected to be
material to the results of the post-acquisition combined entity and management
may not have sufficient time to document, assess, test, and remedy the control
structure of EU; to identify any material control weaknesses; and to disclose
any such weaknesses in time to comply with the reporting requirements of
Sarbanes-Oxley.
We
are
currently assessing the control structure of EU Energy/DeWind, and we expect
to
conclude on its control structure at the end of our fiscal year ending September30, 2007.
Risks
Related To Our Securities
THERE
IS
CURRENTLY A LIMITED TRADING MARKET FOR OUR COMMON STOCK, SO YOU MAY BE UNABLE
TO
LIQUIDATE YOUR SHARES IF YOU NEED MONEY.
Our
common stock is traded in the Over-the-Counter market through the OTC
Bulletin Board. There is currently an active trading market for the common
stock; however there can be no assurance that an active trading market will
be
maintained. Trading of securities on the OTC Bulletin Board is generally limited
and is effected on a less regular basis than that effected on other exchanges
or
quotation systems, such as the NASDAQ Stock Market, and accordingly investors
who own or purchase common stock will find that the liquidity or transferability
of the common stock is limited. Additionally, a shareholder may find it more
difficult to dispose of, or obtain accurate quotations as to the market value,
of common stock. There can be no assurance that the common stock will ever
be
included for trading on any stock exchange or through any other quotation
system, including, without limitation, the NASDAQ Stock Market.
THE
APPLICATION OF THE PENNY STOCK RULES COULD ADVERSELY AFFECT THE MARKET PRICE
OF
OUR COMMON STOCK.
THE
PRICE
OF OUR COMMON STOCK IS VOLATILE. VOLATILITY MAY INCREASE IN THE FUTURE, WHICH
COULD AFFECT OUR ABILITY TO RAISE CAPITAL IN THE FUTURE OR MAKE IT DIFFICULT
FOR
INVESTORS TO SELL THEIR SHARES.
The
market price of our common stock may be subject to significant fluctuations
in
response to our operating results, announcements of new products or market
expansions by us or our competitors, changes in general conditions in the
economy, the financial markets, the electrical power transmission and
distribution industry, or other developments and activities affecting us, our
customers, or our competitors, some of which may be unrelated to our
performance. The sale or attempted sale of a large amount of common stock into
the market may also have a significant impact on the trading price of our common
stock. During the last 12 months, the closing bid prices for our common stock
have fluctuated from a high of $1.61 to a low of $0.72. Fluctuations in the
trading price or liquidity of our common stock may adversely affect our ability
to raise capital through future equity financings.
19
WE
DO NOT
ANTICIPATE PAYING DIVIDENDS IN THE FORESEEABLE FUTURE. THE LACK OF DIVIDENDS
MAY
REDUCE YOUR RETURN ON AN INVESTMENT IN OUR COMMON STOCK.
AS
OF
APRIL 17, 2007, 55,635,795 COMMON SHARES ARE ISSUABLE UPON EXERCISE OF ALL
OUTSTANDING OPTIONS, WARRANTS AND CONVERSION OF CONVERTIBLE NOTES FOR LESS
THAN
THE MARKET PRICE OF $1.60 PER SHARE. CASH PROCEEDS RESULTING FROM THE FULL
EXERCISE AND CONVERSION OF THESE SECURITIES WOULD BE APPROXIMATELY $31,143,740.
THE EXERCISE OR CONVERSION OF THESE SECURITIES COULD RESULT IN THE SUBSTANTIAL
DILUTION OF THE COMPANY IN TERMS OF A PARTICULAR PERCENTAGE OWNERSHIP IN THE
COMPANY AS WELL AS THE BOOK VALUE OF THE COMMON SHARES. THE SALE OF A LARGE
AMOUNT OF COMMON SHARES RECEIVED UPON EXERCISE OF THESE OPTIONS OR WARRANTS
ON
THE PUBLIC MARKET TO FINANCE THE EXERCISE PRICE OR TO PAY ASSOCIATED INCOME
TAXES, OR THE PERCEPTION THAT SUCH SALES COULD OCCUR, COULD SUBSTANTIALLY
DEPRESS THE PREVAILING MARKET PRICES FOR OUR SHARES. FULL CONVERSION OF SUCH
SHARES WOULD INCREASE THE OUTSTANDING COMMON SHARES BY 31.1% TO APPROXIMATELY
234,520,600 SHARES.
The
exercise price or conversion price of outstanding options, warrants and
convertible notes may be less than the current market price for our common
shares. In the event of the exercise of these securities, a shareholder could
suffer substantial dilution of his, her or its investment in terms of the
percentage ownership in us as well as the book value of the common shares held.
At the April 17, 2007 market price of $1.60 per share, 55,635,795 shares would
be exercisable or convertible for less than the market prices. Full exercise
and
conversion of these below market shares would result in us receiving cash
proceeds of $31,143,740 and would increase the outstanding common shares by
31.1% to approximately 234,520,000 shares.
20
OUR
FUTURE REVENUE IS UNPREDICTABLE AND COULD CAUSE OUR OPERATING RESULTS TO
FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER.
Our
quarterly revenue and operating results are difficult to predict and may
fluctuate significantly from quarter to quarter. Because we have not had any
substantial ACCC product revenues to date, we can have no assurance that our
revenues will materialize. Since our revenues may fluctuate and are difficult
to
predict, and our expenses are largely independent of revenues in any particular
period, it is difficult for us to accurately forecast revenues and
profitability.
OUR
BUSINESS IS SUBJECT TO A VARIETY OF ADDITIONAL RISKS, WHICH COULD MATERIALLY
ADVERSELY AFFECT QUARTERLY AND ANNUAL OPERATING RESULTS, INCLUDING:
(i)
market acceptance of our composite technologies by utility companies and our
technologically improved wind turbine by wind farm operators;
(ii)
significant delays in sales that could adversely impact our cash flow relating
to turbine purchase delays or additional potential lengthy lead times for the
implementation of new lines or the reconductoring of existing
lines;
(iii)
the
loss of a strategic relationship or termination of a relationship with a
conductor partner;
(iv)
announcements or introductions of new technologies or products by us or our
competitors;
(v)
delays or problems in the introduction or performance of enhancements or of
future generations of our technology;
(vi)
failures or problems in our utility conductor product, particularly during
the
early stages of the introduction of the product;
(vii)
delays in the adoption of new industry standards or changes in market perception
of the value of new or existing standards;
(viii)
competitive pressures resulting in lower revenues;
(ix)
personnel changes, particularly those involving engineering and technical
personnel;
(xi)
potential failures by customers to make payments under their
contracts;
21
(xii)
market-related issues, including lower ACCC conductor demand brought on by
excess conductor inventory and lower average selling prices for ACCC conductor
as a result of market surpluses and lower market demand for wind
turbines;
(xiii)
increased costs or shortages of key raw materials including aluminum, carbon
fiber and glass fiber and turbine components;
We
will
not receive any proceeds from the sale of the shares by the selling
shareholders. All proceeds from the sale of the shares offered under this
prospectus will be for the account of the selling shareholders, as described
below in the sections entitled “Selling Shareholders” and “Plan of
Distribution.” With the exception of any brokerage fees and commission which are
the obligation of the selling shareholders, we are responsible for the fees,
costs and expenses of this offering which are estimated to be $27,208.75 ,
inclusive of our legal and accounting fees, printing costs and filing and other
miscellaneous fees and expenses.
Of
the
shares of common stock being offered by the selling shareholders, up to
21,947,134 shares are issuable upon conversion of the convertible notes issued
in the private placement that closed in February 2007.
We
are
also registering:
·
12,225,284
shares issued on July 3, 2006 in conjunction with the acquisition
of EU
Energy, plc.;
·
1,276,939
shares issued in September, 2006 pursuant to a settlement of and
inducement to convert $1,325,000 of our March, 2006 Bridge Notes
principal;
·
367,792
shares issuable upon the exercise of warrants issued in September,
2006
and February, 2007 pursuant to anti-dilution protection provisions
of our
March, 2006 Bridge Notes;
·
150,489
shares of common stock issued for services rendered in conjunction
with
obtaining our October, 2005 debtor-in-possession and March, 2006
Bridge
Notes financing;
·
150,000
shares of common stock underlying warrants issued for services rendered
in
conjunction with obtaining our March, 2006 Bridge Notes
financings;
22
·
191,466
shares of common stock underlying warrants issued in May, 2006 for
legal
services rendered;
·
220,000
shares of common stock underlying warrants issued in November, 2006
in
lieu of cash interest on notes
payable;
·
300,000
shares of common stock underlying warrants issued in July, 2001 for
services rendered in 2001;
·
227,523
shares of common stock issued in November, 2006 for sales and research
related consulting services; and
·
467,000
shares of common stock underlying warrants issued in September, 2004
for
management consulting services rendered in
2004.
We
are
registering the shares of common stock in order to permit the selling
shareholders to offer the shares for resale from time to time. The selling
shareholders have not had any material relationship with us within the past
three years, other than the ownership of the securities registered hereby and
unless otherwise indicated by footnote.
Capstone
Investments assisted us with the February 2007 private placement. Lane Capital
Markets assisted us in the March 3, 2006 private placement, the January 30,2006
settlement, the October, 2005 Debtor in Possession private placement, and our
August, 2004 Debenture offering as our exclusive placement agent and financial
advisor.
The
table
below lists the selling shareholders and other information regarding the
beneficial ownership of the shares of common stock by each of the selling
shareholders. We have obtained this information from the selling shareholders.
The second column lists the number of shares of common stock beneficially owned
by each selling shareholder. In the case of selling shareholders that own
convertible notes and warrants, the column assumes conversion of all convertible
notes and exercise of the warrants held by the selling shareholder on that
date,
without regard to any limitations on conversions or exercise.
The
third
column lists the shares of common stock being offered by this prospectus by
the
selling shareholders.
In
accordance with the terms of a registration rights agreement with the selling
shareholders that received securities in the February 2007 private placement,
this prospectus covers the resale of at least 50% of the number of shares of
common stock issuable upon conversion of the convertible notes as of the trading
day immediately preceding the date the registration statement is initially
filed
with the SEC. Because the conversion price of the convertible notes and the
exercise price of the warrants may be adjusted, and because the entire principal
of the notes may not be converted and because not all warrants may be exercised,
the number of shares that will actually be issued may be more or less than
the
number of shares being offered by this prospectus.
The
fourth column assumes the sale of all of the shares offered by the selling
shareholders pursuant to this prospectus.
23
Under
the
terms of the convertible notes and the warrants issued in the February 2007
private placement, a selling shareholder may not convert the convertible notes
or exercise the warrants to the extent such conversion or exercise would cause
such selling shareholder, together with its affiliates, to beneficially own
a
number of shares of common stock which would exceed 4.99% of our then
outstanding shares of common stock following such conversion or exercise,
excluding for purposes of such determination shares of common stock issuable
upon conversion of the convertible notes which have not been converted and
upon
exercise of the warrants which have not been exercised. The number of shares
in
the second column does not reflect these limitations.
The
selling shareholders may sell all, some or none of their shares in this
offering. See “Plan of Distribution.”
Includes
up to 480,770 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 961,539 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Leonard
Brecken.
(2)
Includes
up to 513,462 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 1,026,923 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is John H.
Bocock.
(3)
Includes
up to 2,371,154 shares of common stock to be issued upon exercise
of a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 4,742,308 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is John H.
Bocock.
(4)
Includes
up to 1,442,308 shares of common stock to be issued upon exercise
of a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 2,884,616 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural persons with voting
and
investment powers for this stockholder are Donald J. Liebentritt,
Bert
Cohen, Kellie Zell Harper, Leah Zell Wanger, JoAnn Zell Gillis, Matthew
Zell, and Robert M. Levin.
(5)
Includes
up to 1,128,726 shares of common stock to be issued upon exercise
of a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 2,257,452 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Daniel
German.
(6)
Includes
up to 73,198 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 146,395 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Daniel
German.
27
(7)
Includes
up to 168,270 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 336,539 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Peter
Castellanos.
(8)
Includes
up to 2,403,847 shares of common stock to be issued upon exercise
of a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 4,807,693 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Israel A.
Englander.
(9)
Includes
up to 72,116 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 144,231 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Jon D.
Gruber.
(10)
Includes
up to 79,087 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 158,174 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural persons with voting
and
investment powers for this stockholder are Jon D. Gruber and J. Patterson
McBaine.
(11)
Includes
up to 1,201,923 shares of common stock to be issued upon exercise
of a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 2,403,847 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. Heartland Advisors, Inc., a
registered investment advisor, has voting and investment powers for
this
stockholder.
(12)
Includes
up to 305,529 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 611,058 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural persons with voting
and
investment powers for this stockholder are Jon D. Gruber and J. Patterson
McBaine.
(13)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(14)
Includes
up to 144,231 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 288,462 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Lindsey A. Rosenwald,
M.D.
(15)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural persons with voting
and
investment powers for this stockholder are Peter J. Abeles and Jonnet
Abeles.
(16)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Timothy B.
Johnson.
(17)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural persons with voting
and
investment powers for this stockholder are Jean F. Bell and Max S.
Bell.
28
(18)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Ralph A. L. Bogan,
Jr.
(19)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural persons with voting
and
investment powers for this stockholder are Kent R. Bourquin and Mary
B.
Bourquin.
(20)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Rockney
Hudson.
(21)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Carol Clark
Coolidge
(22)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Dexter K.
Coolidge.
(23)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(24)
Includes
up to 36,058 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 72,116 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural persons with voting
and
investment powers for this stockholder are Katharine B. Dickson and
Mark
A. Dickson
(25)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is William G.
Escamilla.
(26)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(27)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(28)
Includes
up to 36,058 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 72,116 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Leonard M.
Herman.
(29)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this
offering.
29
(30)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(31)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Timothy B.
Johnson.
(32)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural persons with voting
and
investment powers for this stockholder are T. Michael Johnson and
Patricia
Johnson.
(33)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Deborah W.
Patterson.
(34)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(35)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Susan W.
McMillan.
(36)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(37)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(38)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Seth L.
Pierrepont.
(39)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(40)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Marvin J.
Pollack.
(41)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(42)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is M. Edward Sellers and Suzan
D.
Boyd.
30
(43)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(44)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(45)
Includes
up to 12,020 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 24,039 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering.
(46)
Includes
up to 24,039 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.13 per share of common stock and
expiring on February 27, 2010, and up to 48,077 shares of common
stock
issuable upon conversion of certain senior convertible debentures
that
will be registered in this offering. The natural person with voting
and
investment powers for this stockholder is Henry J.
Underwood.
(47)
Includes
up to 191,466 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $2.00 per share of common stock and
expiring on May 24, 2009. The natural person with voting and investment
powers for this stockholder is Nimish Patel and Erick E. Richardson.
Richardson & Patel LLP is our legal counsel.
(48)
Includes
up to 25,000 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.10 per share of common stock and
expiring on November 6, 2009. The natural person with voting and
investment powers for this stockholder is Susan E.
Rick.
(49)
Includes
up to 100,000 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.10 per share of common stock and
expiring on November 6, 2009. The natural person with voting and
investment powers for this stockholder is Glenn A.
Little.
(50)
Includes
up to 25,000 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.10 per share of common stock and
expiring on November 6, 2009. The natural person with voting and
investment powers for this stockholder is Kendall J.
Blanding.
(51)
Includes
up to 20,000 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.10 per share of common stock and
expiring on November 6, 2009. The natural person with voting and
investment powers for this stockholder is Tonya Sutton
Johnson.
(52)
Includes
up to 50,000 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.10 per share of common stock and
expiring on November 6, 2009. The natural person with voting and
investment powers for this stockholder is Sarah E. Little. Ms. Little
was
our employee from February 2005 to July 2006.
(53)
The
natural person with voting and investment powers for this stockholder
is
Francois Bergasse. Electricite de France provides research and development
consulting services for the Company.
(54)
The
natural person with voting and investment powers for this stockholder
is
J. Michael Johnson. Rhino Capital, Inc. provides marketing consulting
services for the Company.
(55)
Includes
up to 17,000 shares of common stock issuable upon exercise of Series
S
warrants with an exercise price of $1.00 per share of common stock
and
expiring on July 17, 2007. These warrants were granted to Mr. Nolan
for
public relations services provided to the Company.
(56)
Includes
up to 450,000 shares of common stock issuable upon exercise of Series
S
warrants with an exercise price of $1.00 per share of common stock
and
expiring on July 17, 2007. These warrants were granted to Mr. Devone
for
business development and marketing services provided to the
Company.
(57)
The
natural person with voting and investment powers for this stockholder
is
Gary L. Shapiro.
(58)
Includes
up to 479,053 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.04 per share of common stock and
expiring on March 1, 2009, of which 157,624 shares will be registered
pursuant to this registration statement and of which 321,429 shares
already have been registered and will not be registered pursuant
to this
registration statement; and 875,143 shares of common stock to be
issued
upon exercise of a warrant at an exercise price of $2.00 per share
of
common stock and expiring on March 1, 2009 and which will not be
registered pursuant to this registration statement. The natural persons
with voting and investment powers for this stockholder are Sander
Gerber,
Yoav Roth, and John Doscas.
(59)
Includes
up to 112,956 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.22 per share of common stock and
expiring on October 13, 2008; up to 113,873 shares of common stock
to be
issued upon exercise of a warrant at an exercise price of $1.32 per
share
of common stock and expiring on October 13, 2008; and up to 417,143
shares
of common stock to be issued upon exercise of a warrant at an exercise
price of $2.00 and expiring on March 1, 2009, all of which already
have
been registered and will not be registered pursuant to this registration
statement. Also includes up to 233,140 shares of common stock to
be issued
upon exercise of a warrant at an exercise price of $1.04 per share
of
common stock and expiring on March 1, 2009, of which 76,711 shares
are
being registered pursuant to this registration statement and of which
156,429 shares already have been registered and will not be registered
pursuant to this registration statement. The natural person with
voting
and investment powers for this shareholder is Mitch
Levine.
31
(60)
Includes
up to 28,240 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.22 per share of common stock and
expiring on October 13, 2008; up to 28,446 shares of common stock
to be
issued upon exercise of a warrant at an exercise price of $1.32 per
share
of common stock and expiring on October 13, 2008; and up to 68,571
shares
of common stock to be issued upon exercise of a warrant at an exercise
price of $2.00 per share of common stock and expiring on March 1,2009,
all of which already have been registered and will not be registered
pursuant to this registration statement. Also includes up to 38,324
shares
of common stock to be issued upon exercise of a warrant at an exercise
price of $1.04 per share of common stock and expiring on March 1,2009, of
which 12,610 shares are being registered pursuant to this registration
statement and of which 25,714 shares already have been registered
and will
not be registered pursuant to this registration statement. The natural
person with voting and investment powers for this shareholder is
Mitch
Levine.
(61)
Includes
up to 47,906 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.04 per share of common stock and
expiring on March 1, 2009, of which 15,763 shares will be registered
pursuant to this registration statement and of which 32,143 shares
already
have been registered and will not be registered pursuant to this
registration statement; and up to 85,714 shares of common stock to
be
issued upon exercise of a warrant at an exercise price of $2.00 per
share
of common stock and expiring on March 1, 2009, all of which already
have
been registered and will not be registered pursuant to this registration
statement. The natural person with voting and investment powers for
this
shareholder is Mitch Levine.
(62)
Includes
up to 255,496 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.04 per share of common stock and
expiring on March 1, 2009, of which 84,067 shares will be registered
and
of which 171,429 shares have already been registered and will not
be
registered pursuant to this registration statement; and up to 457,143
shares of common stock to be issued upon exercise of a warrant at
an
exercise price of $2.00 and expiring on March 1, 2009, all of which
have
already been registered and will not be registered pursuant to this
registration statement. The natural person with voting and investment
powers for this stockholder is Martin Kobinger.
(63)
Includes
up to 63,874 shares of common stock to be issued upon exercise of
a
warrant at an exercise price of $1.04 per share of common stock and
expiring on March 1, 2009, of which 21,017 shares will be registered
pursuant to this registration statement and of which 42,857 shares
have
already been registered and will not be registered pursuant to this
registration statement; up to 150,000 shares of common stock to be
issued
upon exercise of a warrant at an exercise price of $1.55 per share
of
common stock and expiring on March 1, 2009, all of which will be
registered pursuant to this registration statement; and up to 114,286
shares of common stock to be issued upon exercise of a warrant at
an
exercise price of $2.00 per share of common stock and expiring on
March 1,2009, all of which have already been registered and will not be registered
pursuant to this registration statement. The natural person with
voting
and investment powers for this shareholder is Ryan M. Lane. Lane
Capital
Markets is a broker-dealer. The security holder acquired the securities
in
the ordinary course of business and at the time of the acquisition
of the
securities, the holder had no agreements or understandings, directly
or
indirectly, with any person to distribute the securities or any underlying
warrant shares.
(65)
Mr.
Bircher is currently our Vice President of Business
Development.
(66)
The
natural person with voting and investment powers for this stockholder
is
Robert G. Clinton.
(67)
The
natural person with voting and investment powers for this stockholder
is
Bobby Clinton.
(68)
The
natural person with voting and investment powers for this stockholder
is
David Bainbridge.
(69)
Mr.
Jackson is currently the Group Finance Director of Dewind, Inc.,
a
subsidiary of the Company.
(70)
The
natural person with voting and investment powers for this shareholder
is
James McDonald.
(71)
The
natural person with voting and investment powers for this stockholder
is
Michael Porter.
(72)
Mr.
Krebs is currently the Purchasing Director of Dewind,
Inc.
(73)
Mr.
Kubitza is currently the Director of Group Operations at DeWind,
Inc., a
subsidiary of the Company.
(74)
Mr.
Lilly is currently the Chief Technology Officer at the
Company.
(75)
Mr.
Lockhart is currently the Company's Vice President of
Marketing.
(76)
The
natural person with voting and investment powers for this stockholder
is
Paul Wellstead.
(77)
Mr.
Smith is a former sales consultant for the Company whose services
were
terminated in February 2007.
(78)
Mr.
Spencer is a former sales consultant for the Company whose services
were
terminated in February 2007.
(79)
The
natural person with voting and investment powers for this shareholder
is
Richard Blencowe.
We
are
registering shares of Common Stock held by selling shareholders, including
the
shares of Common Stock issuable upon conversion of the convertible notes and
upon exercise of the warrants to permit the resale of these shares of Common
Stock by the holders of the convertible notes and warrants from time to time
after the date of this prospectus. We will not receive any of the proceeds
from
the sale by the selling shareholders of the shares of Common Stock. We will
bear
all fees and expenses incident to our obligation to register the shares of
Common Stock.
The
selling shareholders may sell all or a portion of the shares of Common Stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
Common Stock are sold through underwriters or broker-dealers, the selling
shareholders will be responsible for underwriting discounts or commissions
or
agent's commissions. The shares of Common Stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
32
·
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
·
in
the over-the-counter market;
·
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
·
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
·
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
·
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
·
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
·
an
exchange distribution in accordance with the rules of the applicable
exchange;
·
privately
negotiated transactions;
·
short
sales;
·
sales
pursuant to Rule 144;
·
broker-dealers
may agree with the selling securityholders to sell a specified number
of
such shares at a stipulated price per
share;
·
a
combination of any such methods of sale;
and
·
any
other method permitted pursuant to applicable
law.
If
the
selling shareholders effect such transactions by selling shares of Common Stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling shareholders or commissions from
purchasers of the shares of Common Stock for whom they may act as agent or
to
whom they may sell as principal (which discounts, concessions or commissions
as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales
of
the shares of Common Stock or otherwise, the selling shareholders may enter
into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of Common Stock in the course of hedging in positions they
assume. The selling shareholders may also sell shares of Common Stock short
and
deliver shares of Common Stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short sales.
The
selling shareholders may also loan or pledge shares of Common Stock to
broker-dealers that in turn may sell such shares.
33
The
selling shareholders may pledge or grant a security interest in some or all
of
the convertible notes or warrants or shares of Common Stock owned by them and,
if they default in the performance of their secured obligations, the pledgees
or
secured parties may offer and sell the shares of Common Stock from time to
time
pursuant to this prospectus or any amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling shareholders to include
the
pledgee, transferee or other successors in interest as selling shareholders
under this prospectus. The selling shareholders also may transfer and donate
the
shares of Common Stock in other circumstances in which case the transferees,
donees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.
The
selling shareholders and any broker-dealer participating in the distribution
of
the shares of Common Stock may be deemed to be "underwriters" within the meaning
of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of
the
shares of Common Stock is made, a prospectus supplement, if required, will
be
distributed which will set forth the aggregate amount of shares of Common Stock
being offered and the terms of the offering, including the name or names of
any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.
Under
the
securities laws of some states, the shares of Common Stock may be sold in such
states only through registered or licensed brokers or dealers. In addition,
in
some states the shares of Common Stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There
can
be no assurance that any selling shareholder will sell any or all of the shares
of Common Stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
The
selling shareholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of
1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of Common Stock by the selling
shareholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of Common
Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.
34
We
will
pay all expenses of the registration of the shares of Common Stock pursuant
to
the registration rights agreement, estimated to be $37,848 in total, including,
without limitation, Securities and Exchange Commission filing fees and expenses
of compliance with state securities or "blue sky" laws; provided, however,
that
a selling shareholder will pay all underwriting discounts and selling
commissions, if any. We will indemnify the selling shareholders against
liabilities, including some liabilities under the Securities Act, in accordance
with the registration rights agreements, or the selling shareholders will be
entitled to contribution. We may be indemnified by the selling shareholders
against civil liabilities, including liabilities under the Securities Act,
that
may arise from any written information furnished to us by the selling
shareholder specifically for use in this prospectus, in accordance with the
related registration rights agreements, or we may be entitled to
contribution.
Once
sold
under the shelf registration statement, of which this prospectus forms a part,
the shares of Common Stock will be freely tradable in the hands of persons
other
than our affiliates.
The
consolidated financial statements of Composite Technology Corporation, a Nevada
corporation, incorporated by reference in the Company’s Annual Report (Form
10-K) for the year ended September 30, 2006, and our management’s assessment of
the effectiveness of internal control over financial reporting as of September30, 2006, incorporated by reference therein, have been audited by Singer Lewak
Greenbaum & Goldstein LLP, independent registered public accountants, as set
forth in their reports thereon, incorporated by reference therein and
incorporated herein by reference. Such financial statements and management’s
assessment have been incorporated herein by reference in reliance upon such
reports given on the authority of such firm as experts in accounting and
auditing.
The
validity of the issuance of our common shares to be sold by the selling
shareholders under this prospectus was passed upon for us by Richardson &
Patel LLP. Nimish Patel, a partner of Richardson & Patel LLP, holds 191,466
common shares and Richardson & Patel LLP holds warrants to purchase 191,466
common shares at an exercise price of $2.00 per share as of April 17,2007.
We
file
annual, quarterly and current reports, proxy statements and other information
with the Securities and Exchange Commission. You may read and copy materials
that we have filed with the SEC at the following SEC public reference
room:
100
F
Street, N.E.
Room
1024
Washington,
D.C. 20549
Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. The SEC maintains an internet site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC; our SEC filings are also available to that site:
http://www.sec.gov.
35
We
incorporate by reference into this prospectus the documents listed below and
any
future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of
the Securities Exchange Act of 1934, as amended (the Exchange Act), including
any filings after the date of this prospectus, until the offering is completed.
The information incorporated by reference is an important part of this
prospectus. Any statement in a document incorporated by reference into this
prospectus will be deemed to be modified or superseded to the extent a statement
contained in (1) this prospectus or (2) any other subsequently filed document
that is incorporated by reference into this prospectus modifies or supersedes
such statement.
·
Our
Annual Report on Form 10-K for our fiscal year ended September 30,2006.
·
Our
Quarterly Report on Form 10-Q for our fiscal quarter ended December31,2006.
The
description of our common stock, contained in our Registration Statement
on Form 10-SB12-G filed on June 9, 2000, under Section 12(g) of the
Exchange Act, and any further amendment or report filed hereafter
for the
purpose of updating any such
information.
In
addition, all documents subsequently filed by us pursuant to Section 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, prior
to
the filing of a post-effective amendment that indicates that all securities
offered have been sold or that deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference in this registration statement
and to be part hereof from the date of filing of such documents.
You
may
request a copy of these filings, at no cost, by writing to us at the following
address or calling us at Composite Technology Corporation, 2026 McGaw Avenue,
Irvine, California92614, (949) 428-8500.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our
Articles of Incorporation limit the liability of our directors to the fullest
extent permitted under Section 78.037 of the Nevada Corporation Law. As
permitted by Section 78.037 of the Nevada Corporation Law, our Bylaws and
Articles of Incorporation also include provisions that eliminate the personal
liability of each of its officers and directors for any obligations arising
out
of any acts or conduct of such officer or director performed for or on
behalf
of CTC. To the fullest extent allowed by Section 78.751 of the Nevada
Corporation Law, we will defend, indemnify and hold harmless its directors
or
officers from and against any and all claims, judgments and liabilities to
which
each director or officer becomes subject to in connection with the performance
of his or her duties and will reimburse each such director or officer for all
legal and other expenses reasonably incurred in connection with
any
such claim of liability. However, we will not indemnify any officer or director
against, or be reimburse for, any expense incurred in connection with any claim
or liability arising out of the officer's or director's own gross negligence
or
willful misconduct.
36
The
provisions of our Bylaws and Articles of Incorporation regarding indemnification
are not exclusive of any other right of CTC to indemnify or reimburse our
officers or directors in any proper case, even if not specifically provided
for
in our charter or Bylaws.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933,
as
amended, may be permitted to our directors, officers or controlling persons,
pursuant to the foregoing provisions, or otherwise, we have been advised that,
in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN
THIS PROSPECTUS OR A PROSPECTUS SUPPLEMENT TO MAKE YOUR INVESTMENT DECISION.
NO
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN GIVEN OR AUTHORIZED.
THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS OR
AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. YOU SHOULD NOT ASSUME THAT THE INFORMATION
IN
THIS PROSPECTUS OR THE PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE ON THE FRONT OF THE DOCUMENT, REGARDLESS OF THE TIME OF DELIVERY
OF PROSPECTUS OR ANY SALE OF THE SHARES.
Dates Referenced Herein and Documents Incorporated by Reference
