Filed Pursuant to Rule 424(b)(5)
Registration No. 333-202702
PROSPECTUS SUPPLEMENT
To Prospectus dated March 19,
2015
293,604 Shares of Common Stock
1,294.595255 Shares of Series C Convertible Preferred Stock
(419,812 Shares of Common Stock Underlying the Series C Convertible Preferred Stock)
Pursuant to this prospectus supplement and the accompanying prospectus, we are offering up to 293,604 shares of our common stock. We are
also offering to those purchasers, if any, whose purchase of our common stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding
common stock immediately following the consummation of this offering, the opportunity, in lieu of purchasing additional shares of our common stock, to purchase up to 1,294.595255 shares of our Series C Convertible Preferred Stock, or the Series C
Preferred. The Series C Preferred have a stated value of $1,000 and are convertible into shares of our common stock at $3.08375 per share, the public offering price of the shares of our common stock. The Series C Preferred do not generally have any
voting rights but, subject to beneficial ownership limitations, are convertible into shares of our common stock. Holders of Series C Preferred shall not be entitled to convert the Series C Preferred into shares of our common stock at any time that,
after giving effect to such conversion, the holder (together with their affiliates) would hold more than 4.99% of the number of shares of our Common Stock outstanding, which limitation, subject to increase or decrease upon at least 60 days’
notice by a holder, cannot be increased above 9.99%.
In a concurrent private placement, we are selling to the purchasers of shares of our
common stock and Series C Preferred offered under this prospectus supplement warrants to purchase 0.75 of a share of our common stock for each share of common stock (or common stock equivalent underlying the Series C Preferred) purchased in this
offering (the “Warrants”). The Warrants and the shares of our common stock issuable upon the exercise of the Warrants are not being registered under the Securities Act of 1933, as amended, (the “Securities Act”), are not being
offered pursuant to this prospectus supplement and the accompanying prospectus and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506 promulgated thereunder.
Our common stock is traded on the NASDAQ Capital Market under the symbol “SCON.” Neither the Series C Preferred nor the Warrants being
issued in the concurrent private placement are listed on any securities exchange and we do not expect to list the Series C Preferred offered under this prospectus supplement or the Warrants offered in the concurrent private placement on any
securities exchange. On July 27, 2016, the closing bid price of our common stock as reported on the NASDAQ Capital Market was $2.99 per share.
On June 9, 2016, the aggregate market value of our common stock held by non-affiliates as of such date was $7.716 million, based on
2,783,214 shares of outstanding common stock, of which 1,978,437 shares are held by non-affiliates. In no event will we sell securities in a public primary offering in reliance on General Instruction I.B.6 of Form S-3 with a value exceeding more
than one-third of our public float in any 12-month period so long as our public float remains below $75.0 million. We have not offered any securities pursuant to General Instruction I.B.6 of Form S-3 during the 12 calendar months prior to and
including the date of this prospectus supplement.
Investing in our common stock involves a high degree of risk. Please read “
Risk Factors
” beginning on page S-7 of this prospectus supplement and the documents incorporated by reference into this prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus is truthful and complete. Any representation to the contrary is a criminal offense.
We have retained Rodman & Renshaw, a unit of H.C. Wainwright & Co., LLC to act as our exclusive placement agent (the
“Placement Agent”) in connection with the shares of common stock and Series C Preferred offered by this prospectus supplement. The Placement Agent has agreed to use its reasonable best efforts to arrange for the sale of the securities
offered by this prospectus supplement. The Placement Agent is not purchasing or selling any of the securities we are offering and the Placement Agent is not required to arrange the purchase or sale of any specific number of shares or dollar amount.
We have agreed to pay to the Placement Agent the placement agent fees set forth in the table below, which assumes that we sell all of the common stock and Series C Preferred we are offering.
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Per Share of
Common
Stock
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Per Share
of Series C
Preferred
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Total
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Public offering price
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$
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3.0837500
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1,000
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$
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2,199,996.60
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Placement Agent’s fees (1)
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$
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0.2158625
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70
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$
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153,999.72
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Proceeds, before expenses, to us
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$
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2.8678875
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930
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$
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2,045,996.88
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(1)
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We have agreed to reimburse the Placement Agent $50,000 for its legal fees and expenses and to issue to the Placement Agent warrants to purchase a number of shares of common stock equal to 7% of the aggregate number of
shares of common stock (including underlying the Series C Preferred) sold in this offering as described under “Plan of Distribution” on page S-32 of this prospectus supplement.
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Delivery of the shares of common stock and Series C Preferred is expected to be made on or about August 2, 2016, subject to customary
closing conditions.
Rodman & Renshaw
a unit of H.C. Wainwright & Co.
Prospectus Supplement dated July 27, 2016.
TABLE OF CONTENTS
No dealer, salesperson or other person is authorized to give any information or to represent anything not
contained in this prospectus supplement or the accompanying prospectus. You must not rely on any unauthorized information or representations. This prospectus supplement and the accompanying prospectus are an offer to sell only the securities offered
hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus supplement and the accompanying prospectus is current only as of their respective dates.
S-i
ABOUT THIS PROSPECTUS SUPPLEMENT
Unless the context otherwise requires, all references in this prospectus supplement to “STI,” “the Company,”
“we,” “us” or “our” refer to Superconductor Technologies, Inc., a Delaware corporation, and its consolidated subsidiaries.
This prospectus supplement is part of a registration statement that we have filed with the Securities and Exchange Commission, or the SEC,
utilizing a continuous registration process. Under this continuous registration process, we are offering to sell our common stock using this prospectus supplement and the accompanying prospectus. Both this prospectus supplement and the accompanying
prospectus include important information about us, our securities being offered and other information you should know before investing. This prospectus supplement also adds, updates and changes information contained in the accompanying prospectus.
You should rely only on the information contained in or incorporated by reference into this prospectus supplement, the accompanying
prospectus and any free writing prospectus authorized by us. To the extent the information contained in this prospectus supplement differs or varies from the information contained in the accompanying prospectus or any document filed prior to the
date of this prospectus supplement and incorporated by reference, the information in this prospectus supplement will control. We have not authorized any other person to provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. The information in this prospectus supplement and the accompanying prospectus is accurate only as of the date it is presented. You should read this prospectus supplement, the accompanying
prospectus, the documents incorporated by reference described in the section entitled “Incorporation of Certain Documents by Reference” into this prospectus supplement and the accompanying prospectus, and any free writing prospectus that
we have authorized for use in connection with this offering, in their entirety before investing in our securities.
We are offering to
sell, and seeking offers to buy, the securities offered by this prospectus supplement only in jurisdictions where offers and sales are permitted. The distribution of this prospectus supplement and the accompanying prospectus and the offering of the
securities offered by this prospectus supplement in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus supplement and the accompanying prospectus must inform themselves
about, and observe any restrictions relating to, the offering of the common stock and warrants and the distribution of this prospectus supplement and the accompanying prospectus outside the United States. This prospectus supplement and the
accompanying prospectus do not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any securities offered by this prospectus supplement and the accompanying prospectus by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
S-ii
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information contained elsewhere in this prospectus supplement and the accompanying prospectus or
incorporated by reference herein and therein and does not contain all of the information that you need to consider in making your investment decision. You should carefully read this entire prospectus supplement, the accompanying prospectus and the
information incorporated by reference herein and therein, including the financial statements and the risks discussed under the heading “Risk Factors,” before deciding to purchase shares in this offering.
Business Overview
We are a leading
company in developing and commercializing high temperature superconductor (“HTS”) materials and related technologies. Superconductivity is the unique ability to conduct electricity with little or no resistance when cooled to
“critical” temperatures. HTS materials are a family of elements that demonstrate superconducting properties at temperatures significantly warmer than previous superconducting materials. Electric currents that flow through conventional
conductors encounter resistance that requires power to overcome and generates heat. HTS materials can substantially improve the performance characteristics of electrical systems, reduce power loss, and lowering heat generation providing extremely
high current carrying density and zero resistance to direct current.
We were established in 1987 shortly after the discovery of HTS
materials. Our stated objective was to develop products based on these materials for the commercial marketplace.
After analyzing the
market opportunities available, we decided to develop products for the utility and telecommunications industries.
Our initial product was
completed in 1998 and we began delivery to a number of wireless network providers. In the following 13 years, we continued to refine and improve the platform, with the primary focus on improving reliability, increasing performance and runtime, and
most importantly, removing cost from the manufacturing process of the required subsystems. Our cost reducing efforts led to the invention of our proprietary, high-yield and high throughput HTS material deposition manufacturing process.
In late 2010, we transitioned our research and development efforts to adapting our proprietary HTS material deposition techniques to the
production of our HTS Conductus
®
wire for next generation power applications, which is our primary opportunity to grow our future revenues. We continue to generate revenue from our legacy
wireless communications products. This revenue has been declining and we expect this trend to continue until we completely abandon these products.
Our
Proprietary Technology
Our development efforts over the last 28 years have yielded an extensive patent portfolio as well as critical
trade secrets, unpatented technology and proprietary knowledge. We have an extensive patent portfolio in addition to critical trade secrets, unpatented technology and proprietary knowledge. Our current patents expire at various dates from 2016 to
2031. We enter into confidentiality and non-disclosure agreements with our employees, suppliers and consultants to protect our proprietary information.
Our strategic plan is to utilize our core proprietary technology in superconductivity and leverage our proprietary manufacturing processes to
build Conductus wire for use in electrical power devices. We are adapting our unique HTS material deposition techniques to produce our energy efficient, cost-effective and high performance Conductus wire technology for next generation power
applications. We have identified several large
S-1
initial target markets for superconducting wire including energy (wind turbines, cables, fault current limiters), medical (NMR (nuclear magnetic resonance) and MRI (magnetic resonance imaging)),
science (high performance magnets) and industrial (motors, generators) applications. We are working with leading industry device manufactures to complete qualification and acceptance testing of Conductus wire. We expect significant commercial
production of Conductus wire in the last half of 2016.
Our development efforts (including those described under “Our Future
Business” below) can take a significant number of years to commercialize, and we must overcome significant technical barriers and deal with other significant risks, some of which are set out in our public filings, including in particular the
“Risk Factors” beginning on page S-7 of this prospectus supplement.
Our Future Business
We have created several unique capabilities and HTS manufacturing systems related to our Conductus wire platform that we are seeking to produce
by leveraging our leadership in superconducting technologies, extensive intellectual property and HTS manufacturing expertise.
HTS Wire Platform
Our Conductus wire product development is focused on large markets where the advantages of HTS wire are recognized by the
industry. Our initial product roadmap targets three important applications: superconducting high power transmission cable, superconducting fault current limiters (SFCL) and high field magnets.
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Superconducting High Power Transmission Cable
: Superconducting high power transmission and distribution cable transmit 5 to 10 times the electrical current of traditional copper or aluminum cables with
significantly improved efficiency. HTS power cable systems consist of the cable, which is comprised of 100’s of strands of HTS wire wrapped around a copper core, and the cryogenic cooling system to maintain proper operating conditions. HTS
power cables are particularly suited to high load areas such as the dense urban business districts of large cities, where purchases of easements and construction costs for traditional low capacity cables may be cost prohibitive. The primary
application for HTS cables is medium voltage feeds to load pockets in dense urban areas. In these high demand zones the grid is often saturated with aging infrastructure. HTS technology brings a considerable amount of power to new locations where
the construction of additional transmission to distribution substations, with major transformer assets, is not feasible. Another potential use of HTS power cable is to improve grid power transmission by connecting two existing substations. In dense
urban environments many substations often reach capacity limits and require redundant transformer capacity to improve reliability HTS cables can tie these existing stations together, avoiding very costly transformer upgrades and construction costs.
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Superconducting Fault Current Limiter (SFCL)
: With power demand on the rise and new power generation
sources being added, the grid has become overcrowded and vulnerable to catastrophic faults. Faults are abnormal flows of electrical current like a short circuit. As the grid is stressed, faults and power blackouts increase in frequency and severity.
SFCLs act like powerful surge protectors, preventing harmful faults from taking down substation equipment by reducing the fault current to a safer level (20 – 50% reduction) so that the existing switchgear can still protect the grid. Currently,
electrical-utilities use massive 80kA circuit breakers, oversized transformers and fuses to prevent faults from damaging their equipment and protecting against surges. However, once a fault has occurred, standard circuit breakers suffer destructive
failure and need to be replaced before service can be restored. In addition, Smart Grid and embedded alternative energy generation enhancements will increase the need for SFCLs. Grid operators face a major challenge in moving power safely and
efficiently, from generators to consumers, through several stages of voltage transformation step downs
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and step ups. At each stage, valuable energy is lost in the form of waste heat. Moreover, while demands are continually rising, space for transformers and substations—especially in dense
urban areas—is severely limited. Conventional oil-cooled transformers pose a fire and environmental hazard. Compact, efficient superconducting transformers, by contrast, are cooled by safe, abundant and environmentally benign liquid nitrogen.
As an additional benefit, these actively-cooled devices will offer the capability of operating in overload, to twice the nameplate rating, without any loss of life to meet occasional utility peak load demands.
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Superconducting High Field Magnets
: There are a variety of applications that utilize superconducting magnets in order to capitalize on their unique ability to create extremely high magnetic fields. The NMR
and MRI machines of today utilize such superconducting magnets for this very reason. Currently, high-field superconducting magnets are manufactured using commercially available superconducting wire such as niobium-titanium (NbTi) or niobium-tin
(Nb3Sn). NMR and MRI device manufacturers look towards advances in superconducting technologies to improve the overall performance of their systems by dramatically increasing the magnetic fields while reducing size. High demand for a robust, high
performance and low cost superconducting wire has spurred rapid development of a next generation alternative. In the last 10 years, new second generation (2G) Rare Earth, Barium, Copper Oxide (ReBCO) superconducting materials have been proven
to drastically increase magnetic field strengths, especially at low temperatures. These advanced ReBCO based superconductors now provide an excellent alternative to NbTi and Nb3Sn based materials.
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Our Corporate Information
Our facilities
and principal executive offices are located at 9101 Wall Street, Suite 1300, Austin, Texas 78754. Our telephone number is (512) 334-8900. We were incorporated in Delaware on May 11, 1987. Additional information about us is available
on our website at www.suptech.com. The information contained on or that may be obtained from our website is not, and shall not be deemed to be, a part of this prospectus. Our common stock is currently traded on the NASDAQ Capital Market under the
symbol “SCON.”
Recent Events
On July 18, 2016, we effected a 1-for-15 reverse stock split of our common stock, or the Reverse Stock Split. As a result of the Reverse
Stock Split, every fifteen shares of our pre-Reverse Stock Split common stock were combined and reclassified into one share of our common stock. The Reverse Stock Split did not change the authorized number of shares or the par value of our common
stock. Certain of the information contained in the documents incorporated by reference in this prospectus present information on our common stock on a pre-Reverse Stock Split basis.
S-3
THE OFFERING
The following summary contains basic information about our common stock and the offering and is not intended to be complete. It does not
contain all the information that may be important to you. For a more complete understanding of our common stock, you should read the section of the accompanying prospectus entitled “Description of Common Stock.”
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Issuer
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Superconductor Technologies, Inc.
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Common stock offered by us
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293,604 shares of our common stock, par value $0.001 per share
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Common stock outstanding immediately after this offering
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3,176,818 shares (1)(2)(3)
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Series C Preferred offered by us
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We are also offering to those purchasers, if any, whose purchase of shares of common stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of
our outstanding common stock immediately following the consummation of this offering, the opportunity, in lieu of purchasing some or all of their investment in the form of common stock, to purchase up to 1,294.595255 shares of our Series C
Convertible Preferred Stock, or the Series C Preferred, with a stated value of $1,000 and convertible into shares of our common stock at $3.08375 per share.
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Assuming we sell all 1,294.595255 shares of Series C Preferred offered hereby, such Series C Preferred will, subject to prohibitions on conversion, be convertible into an aggregate of 419,812 shares of our common stock.
Any conversion of the Series C Preferred into our common stock is subject to the related holder satisfying the beneficial ownership limitation. This limitation provides that a holder of Series C Preferred shall not be entitled to convert the Series
C Preferred into shares of our common stock at any time that, after giving effect to such conversion, the holder (together with their affiliates and certain related parties) would hold more than 4.99% of the number of shares of our Common Stock
outstanding, which limitation, subject to increase or decrease upon at least 60 days’ notice by a holder, cannot be increased above 9.99%.
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Use of proceeds
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We estimate that our net proceeds from this offering will be approximately $1.9 million, after deducting placement agent fees and estimated offering expenses payable by us. We plan to use the net proceeds of this offering for working capital and
general corporate purposes. General corporate purposes may include capital expenditures.
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Risk factors
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You should carefully read and consider the information beginning on page S-7 of this prospectus supplement and page 5 of the accompanying
prospectus set forth under the headings “Risk Factors” and all other information set forth in this prospectus supplement, the
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S-4
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accompanying prospectus, and the documents incorporated herein and therein by reference before deciding to invest in our common stock.
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Trading Market
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Our common stock is traded on the NASDAQ Capital Market under the symbol “SCON.”
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Concurrent Private Placement
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In a concurrent private placement, we are selling to the purchasers of shares of our common stock and Series C Preferred in this offering warrants to purchase 0.75 of a share of our common stock for each share of common stock (or common stock
underlying the Series C Preferred) purchased in this offering, or up to 535,062 warrants. We will receive gross proceeds from the concurrent private placement transaction solely to the extent such warrants are exercised for cash. The warrants will
be exercisable at an exercise price of $3.00 per share during the period following the six month anniversary of the date of issuance of the warrants until the five and a half year anniversary of the date of issuance. The warrants and the shares of
our common stock issuable upon the exercise of the warrants are not being offered pursuant to this prospectus supplement and the accompanying prospectus and are being offered pursuant to the exemption provided in Section 4(a)(2) under the
Securities Act and Rule 506 promulgated thereunder. See “Private Placement Transaction.”
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No Market for the Series C Preferred or Warrants
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There is no established public trading market for the Series C Preferred offered under this prospectus supplement or the warrants being offered in the concurrent private placement, and we do not expect a market to develop. In addition, we do not
intend to apply to list the Series C Preferred or the warrants offered in the concurrent private placement on any national securities exchange or other nationally recognized trading system, including the NASDAQ Capital Market. Without an active
market, the liquidity of Series C Preferred and the warrants will be limited.
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(1)
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Assumes no exercise of the Warrants being offered in the concurrent private placement. Unless otherwise stated, all information in this prospectus supplement is based on 2,883,214 shares of common stock outstanding as
of July 26, 2016, and does not include the following:
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535,062 shares of common stock issuable upon the exercise of the Warrants to be issued in the concurrent private placement. See “Private Placement Transaction”;
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18,273 shares of our common stock issuable upon conversion of the 328,925 shares of outstanding Series A Convertible Preferred Stock;
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228,333 shares of our common stock issuable upon conversion of the 1198.75 shares of outstanding Series B Convertible Preferred Stock;
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131,204 shares of our common stock issuable upon exercise of stock options under our stock plans at a weighted average exercise price of $36.15 per share; and
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2,023,232 shares of our common stock issuable upon exercise of warrants at a weighted average exercise price of
$11.06 per share. Of such warrants, an aggregate of 407,825 warrants originally
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S-5
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issued in our August 2013 financing include a price adjustment mechanism whereby the exercise price of such warrants will be automatically reduced, subject to limitations, to the extent we issue
shares of our common stock, or equivalents, at a price lower than the then applicable exercise price of such warrants which is currently $5.25. As a result of this offering, the exercise price of such warrants will be adjusted to be $3.00.
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This number of common stock outstanding immediately after this offering excludes all 419,812 shares of our common stock convertible under the Series C Preferred issued in this offering as a result of the
beneficial ownership limitation. This limitation provides that a holder of Series C Preferred shall not be entitled to convert the Series C Preferred into shares of our common stock at any time that, after giving effect to such conversion, the
holder (together with their affiliates) would hold more than 4.99% of the number of shares of our Common Stock outstanding, which limitation, subject to increase or decrease upon at least 60 days’ notice by a holder, cannot be increased above
9.99%.
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(3)
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Also excludes up to 49,939 shares of common stock issuable upon exercise of warrants issued to the placement agent in this offering (see Plan of Distribution on page S-32).
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S-6
RISK FACTORS
Investing in our common stock involves risk. Before deciding whether to invest in our common stock, in addition to the other information in
this prospectus supplement and accompanying prospectus, you should carefully consider the risks and uncertainties described under the heading “Risk Factors” in our most recent annual report on Form 10-K, which is on file with the SEC and
is incorporated herein by reference, and which may be amended, supplemented or superseded from time to time by other reports we file with the SEC in the future. There may be other unknown or unpredictable economic, business, competitive, regulatory
or other factors that could have material adverse effects on our future results. If any of these risks actually occurs, our business, business prospects, financial condition or results of operations could be seriously harmed. This could cause the
trading price of our common stock to decline, resulting in a loss of all or part of your investment. Please also read carefully the section in this prospectus supplement titled “Special Note Regarding Forward-Looking Statements.”
Risks Related to Our Business
We have a history of
losses and may never become profitable.
For the three-month period ended April 2, 2016, we incurred a net loss of $2.6
million and had negative cash flows from operations of $1.9 million. In each of our last five years, we have experienced significant net losses and negative cash flows from operations. In 2015, we incurred a net loss of $8.6 million and had negative
cash flows from operations of $8.5 million. In 2014, we incurred a net loss of $8.3 million and had negative cash flows from operations of $10 million. Our independent registered public accounting firm has included in its audit reports an
explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. If we fail to increase our revenues, we may not achieve and may not maintain profitability, we may not realize our investment in infrastructure, and
may not meet our expectations or the expectations of financial analysts who report on our stock.
We need to raise additional capital. If we are
unable to raise capital our ability to implement our current business plan and ultimately our viability as a company could be adversely affected.
At April 2, 2016 and December 31, 2015, we had $5.6 million and $7.5 million, respectively, in cash and cash equivalents. Our current
forecast prior to this offering is that our cash resources will not be sufficient to fund our business for the next 12-months. Therefore, unless we can materially grow our revenues from commercial operations prior to our cash reserves being depleted
(which reserves, prior to this offering, are currently expected to be sufficient into the fourth quarter of 2016) and generally over the next 12-months to implement our current business plan and maintain our viability, we will need to raise
additional capital during the next 12-months to implement our current business plan and maintain our viability. Therefore, depending on the amount of capital we can raise in this offering and whether we can materially grow our revenues from
commercial operations, we likely need to raise additional capital to implement our current business plan and maintain the viability of the Company.
We believe the key factors to our future liquidity will be our ability to successfully use our expertise and our technology to generate
revenues in various ways, including commercial operations, joint ventures and licenses. Because of the expected timing and uncertainty of these factors, we will need to raise funds to meet our working capital needs.
Additional financing may not be available on acceptable terms or at all. If we issue additional equity securities to raise funds, the
ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of common stock and could also require that we issue warrants in connection with sales
of our stock. If we cannot raise any needed funds to grow our commercial resources, we might be forced to make changes to, or delay aspects of, our business plan which
S-7
could adversely affect our ability to implement our current business plan and ultimately our viability as a company.
Our strategic initiative to develop a new wire platform may not prove to be successful.
We have spent a considerable amount of resources in developing a new wire platform for power applications. Substantial technical and business
challenges remain before we can have a commercially successful product introduction. We may not be able to overcome these challenges in a timely or cost effective manner, if at all. Such a failure could adversely impact our prospects,
liquidity, stock price and carrying value of our fixed assets.
There are numerous technological challenges that must be overcome in order for our
Conductus wire to become commercially successful and our ability to address such technological challenges may adversely affect our ability to gain customers.
We expect to begin commercial Conductus wire production in 2016. Conductus
®
wire
is uniquely positioned to address three key technical challenges in the market: high performance, improved economics and commercial-scale capacity. To date, we, along with existing HTS wire manufacturers, have not overcome these challenges to allow
for broad commercialization of HTS wire. Customers cannot purchase long-length wire with any reasonable confidence or guaranteed volume; and electric utilities lack confidence in product availability which leads to delays in their deployment
roadmap. HTS wire performance is currently below what many customers require. Many power applications require high performance wire with high current carrying capacity, mechanical durability, electrical integrity with low AC losses and minimal
splices. Producing high performance HTS wire has proven difficult, especially at volumes required for large scale deployment. The high demand for high performance wire available in very low volume results in a high wire price that narrows the market
and limits commercial viability. We are currently focused on improving our mechanical stress specifications to meet customer requirements for our target applications. We have made significant progress in this area, and our focus is now on using this
new template stack to manufacture wire that delivers our customary power handling performance. Such delays and other delays in our Conductus wire development, as a result of technological challenges or other factors, may result in the introduction
or commercial acceptance of our Conductus wire products later than expected.
The commercial uses of superconducting wire and superconducting wire
related products are limited today, and a broad commercial market may not develop.
Even if the technological hurdles are overcome,
there is no certainty that a robust commercial market for unproven HTS wire products will come to fruition. To date, commercial use of HTS wire has been limited to small feasibility demonstrations, and these projects are largely subsidized by
government authorities. While customer demand is high and market forecasts project large revenue opportunity for superconducting wire in power applications, the market may not develop and superconducting wire might never achieve long term, broad
commercialization. In such an event, we would not be able to commercialize our Conductus wire initiative and our business could be adversely impacted.
We have limited experience marketing and selling superconducting wire products, and our failure to effectively market and sell our superconducting wire
solutions would lower our revenue and cash flow.
We have limited experience marketing and selling our Conductus wire. Once our
Conductus wire is ready for commercial use, we will have to hire and develop a marketing and sales team to effectively demonstrate the advantages of our product over both more traditional products and competing superconducting products or other
adjacent technologies. We may not be successful in our efforts to market this new technology.
S-8
We expect continued customer pressures to reduce our product pricing which may adversely affect our ability
to operate on a commercially viable basis.
We expect to face pressure to reduce prices and accordingly, the average selling price
of our Conductus wire. We anticipate customer pressure on our product pricing will continue for the foreseeable future. HTS wire is currently being sold at $250/kiloampere-meter (kA-m). At this price, HTS wire represents more than half the cost of
the end device. A price reduction is required for long term commercialization. Cryogenic systems, including cryocoolers and cryostats, have been developed but will also need to be cost optimized as HTS wire becomes available in volume. We have plans
to further reduce the manufacturing cost of our products, but there is no assurance that our future cost reduction efforts will keep pace with price erosion. We will need to further reduce our manufacturing costs through engineering improvements and
economies of scale in production and purchasing in order to achieve adequate gross margins. We may not be able to achieve the required product cost savings at a rate needed to keep pace with competitive pricing pressure. Additionally, we may be
forced to discount future orders or may never reach commercial viability. If we fail to reach our cost saving objectives or we are required to offer future discounts, our business may be harmed.
We face competition with respect to various aspects of our technology and product development.
Our current wireless products compete on the basis of performance, functionality, reliability, pricing, quality, and compliance with industry
standards. With respect to our Conductus wire materials, we compete with American Superconductor (AMSC), SuperPower (Furukawa), SuNam, Fujikura, Sumitomo and THEVA, among others. In addition, we currently supply components and license technology to
several companies that may eventually decide to manufacture or design their own HTS components, rather than purchasing or licensing our technology. If we are unable to compete successfully against our current or future competitors, then our business
and results of operations will be adversely affected.
We may not be able to compete effectively against alternative technologies.
Our products also compete with a number of alternative approaches and technologies. Some of these alternatives may be more cost effective or
offer better performance than our products and we may not succeed in competing against these alternatives.
We currently rely on specific
technologies and may not successfully adapt to the rapidly changing market environments.
We must overcome technical challenges to
commercialize our Conductus wire. If we are able to do so, we will need to attain customer acceptance of our Conductus wire, and we cannot ensure that such acceptance will occur. We will have to continue to develop and integrate advances to our core
technologies. We will also need to continue to develop and integrate advances in complementary technologies. We cannot guarantee that our development efforts will not be rendered obsolete by research efforts and technological advances made by
others. Our business success depends upon our ability to keep pace with advancing technology, including materials, processes and industry standards.
We may experience significant fluctuations in sales and operating results from quarter to quarter.
Our quarterly results may fluctuate due to a number of factors, including:
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the lack of any contractual obligation by our customers to purchase their forecasted demand for our products;
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variations in the timing, cancellation, or rescheduling of customer orders and shipments; and
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high fixed expenses that may disproportionately impact operating expenses, especially during a quarter with a sales shortfall.
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Order deferrals and cancellations by our customers, declining average sales prices, changes in
the mix of products sold, increases in inventory and finished goods, delays in the introduction of new products and longer than anticipated sales cycles for our products have, in the past, adversely affected our results of operations. If our
customers desire to purchase products in excess of the forecasted amounts or in a different product mix, there may not be enough inventory or manufacturing capacity to fill their orders.
Due to these and other factors, our past results have limited predictive value as to our Conductus wire initiative. Future revenues and
operating results may not meet the expectations of stock analysts and investors. In either case, the price of our common stock could be materially adversely affected.
Worldwide economic uncertainty may adversely affect our business, operating results and financial condition.
The United States and global economies continue to experience a period of economic and financial uncertainty, which could result in economic
volatility having direct and indirect adverse effects on our business, operating results and financial condition in a number of ways. For example, current or potential customers may delay or decrease spending with us, may delay paying us for
previously purchased products, or may not pay us at all. In addition, this recent downturn has had, and may continue to have, an unprecedented negative impact on the global credit markets. If we are required to obtain financing in the near term to
meet our working capital or other business needs, we may not be able to obtain that financing. Further, even if we are able to obtain the financing we need, it may be on terms that are not favorable to us, with increased financing costs and
restrictive covenants.
Our reliance on a limited number of suppliers and the long lead time of components for our products could impair our ability
to manufacture and deliver our systems on a timely basis.
A number of components used in our products are available from a limited
number of outside suppliers due to unique designs as well as certain quality and performance requirements. Our reliance on sole or limited source suppliers involves certain risks and uncertainties, many of which are beyond our
control. These include the possibility of a shortage or the discontinuation of certain key components. Any reduced availability of these parts or components when required could impair our ability to manufacture and deliver our systems on a
timely basis and result in the delay or cancellation of orders, which could harm our business.
In addition, the purchase of some of our
key components involves long lead times and, in the event of unanticipated increases in demand for our solutions, we may be unable to obtain these components in sufficient quantities to meet our customers’ requirements. We do not have
guaranteed supply arrangements with any of these suppliers, do not maintain an extensive inventory of parts or components and customarily purchase sole or limited source parts and components pursuant to purchase orders. Business disruptions, quality
issues, production shortfalls or financial difficulties of a sole or limited source supplier could materially and adversely affect us by increasing product costs, or eliminating or delaying the availability of such parts or components. In such
events, our inability to develop alternative sources of supply quickly and on a cost-effective basis could impair our ability to manufacture and deliver our systems on a timely basis and could harm our business.
Our reliance on a limited number of suppliers exposes us to quality control issues.
Our reliance on certain single-source and limited-source components exposes us to quality control issues if these suppliers experience a
failure in their production process or otherwise fail to meet our quality requirements. A failure in single-source or limited-source components or products could force us to repair or replace a product utilizing replacement components. If we
cannot obtain comparable replacements or effectively return or redesign our products, we could lose customer orders or incur additional costs, which could have a material adverse effect on our gross margins and results of operations.
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Our ability to protect our patents and other proprietary rights is uncertain, exposing us to possible
losses of competitive advantage.
Our efforts to protect our proprietary rights may not succeed in preventing infringement by
others or ensure that these rights will provide us with a competitive advantage. Pending patent applications may not result in issued patents and the validity of issued patents may be subject to challenge. Third parties may also be able to
design around the patented aspects of the products. Additionally, certain of the issued patents and patent applications are owned jointly with third parties. Because any owner or co-owner of a patent can license its rights under jointly-owned
patents or applications, inventions made by us jointly with others are not subject to our exclusive control. Any of these possible events could result in losses of competitive advantage.
We depend on specific patents and licenses to technologies, and we will likely need additional technologies in the future that we may not be able to
obtain.
We utilize technologies under licenses of patents from others for our products. These patents may be subject to challenge,
which may result in significant litigation expense (which may or may not be recoverable against future royalty obligations). Additionally, we continually try to develop new products, and, in the course of doing so, we may be required to utilize
intellectual property rights owned by others and may seek licenses to do so. Such licenses may not be obtainable on commercially reasonable terms, or at all. It is also possible that we may inadvertently utilize intellectual property rights held by
others, which could result in substantial claims.
Intellectual property infringement claims against us could materially harm results of operations.
Our products incorporate a number of technologies, including high-temperature superconductor technology, technology related to
other materials, and electronics technologies. Our patent positions, and that of other companies using high- temperature superconductor technology, is uncertain and there is significant risk that others, including our competitors or potential
competitors, have obtained or will obtain patents relating to our products or technologies or products or technologies planned to be introduced by us.
We believe that patents may be or have been issued, or applications may be pending, claiming various compositions of matter used in our
products. We may need to secure one or more licenses of these patents. There can be no assurances that such licenses could be obtained on commercially reasonable terms, or at all. We may be required to expend significant resources to develop
alternatives that would not infringe such patents or to obtain licenses to the related technology. We may not be able to successfully design around these patents or obtain licenses to them and may have to defend ourselves at substantial cost against
allegations of infringement of third party patents or other rights to intellectual property. In those circumstances, we could face significant liabilities and also be forced to cease the use of key technology.
Other parties may have the right to utilize technology important to our business.
We utilize certain intellectual property rights under non-exclusive licenses or have granted to others the right to utilize certain
intellectual property rights licensed from a third party. Because we may not have the exclusive rights to utilize such intellectual property, other parties may be able to compete with us, which may harm our business.
Because competition for target employees is intense, we may be subject to claims of unfair hiring practices, trade secret misappropriation or other
related claims.
Companies in HTS wire industries whose employees accept positions with competitors frequently claim that
competitors have engaged in unfair hiring practices, trade secret misappropriation or other related claims. We may be subject to such claims in the future as we seek to hire qualified personnel, and such claims may result in material litigation. If
this should occur, we could incur substantial costs in defending against these claims, regardless of their merits.
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Our success depends on the attraction and retention of senior management and technical personnel with
relevant expertise.
As a competitor in a highly technical market, we depend heavily upon the efforts of our existing senior
management and technical teams. The loss of the services of one or more members of these teams could slow product development and commercialization objectives. Due to the specialized nature of our products, we also depend upon our ability to attract
and retain qualified technical personnel with substantial industry knowledge and expertise. Competition for qualified personnel is intense, and we may not be able to continue to attract and retain qualified personnel necessary for the development of
our business.
Regulatory changes could substantially harm our business.
Certain regulatory agencies in the United States and other countries set standards for operations within their territories. HTS wire is subject
to a regulatory regime, which may become more strictly regulated if the market grows. Any failure or delay in obtaining necessary approvals could harm our business.
We may acquire or make investments in companies or technologies that could cause loss of value to stockholders and disruption of business.
We may explore opportunities to acquire companies or technologies in the future. Other than the acquisition of Conductus, Inc. in 2002, we have
not made any such acquisitions or investments to date and, therefore, our ability as an organization to make acquisitions or investments is unproven. An acquisition entails many risks, any of which could adversely affect our business, including:
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failure to integrate operations, services and personnel;
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the price paid may exceed the value eventually realized;
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loss of share value to existing stockholders as a result of issuing equity securities to finance an acquisition;
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potential loss of key employees from either our then current business or any acquired business;
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entering into markets in which we have little or no prior experience;
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diversion of financial resources and management’s attention from other business concerns;
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assumption of unanticipated liabilities related to the acquired assets; and
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the business or technologies acquired or invested in may have limited operating histories and may be subjected to many of the same risks to which we are exposed.
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In addition, future acquisitions may result in potentially dilutive issuances of equity securities, or the incurrence of debt, contingent
liabilities or amortization expenses or charges related to goodwill or other intangible assets, any of which could harm our business. As a result, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects
may be seriously harmed.
If we are unable to implement appropriate controls and procedures to manage our potential growth, we may not be able to
successfully offer our products and implement our business plan.
Our ability to successfully offer our products and implement our
business plan in a rapidly evolving market requires an effective planning and management process. Growth in future operations would place a significant strain on management systems and resources. We expect that we would need to improve our financial
and managerial controls, reporting systems and procedures, and would need to expand, train and manage our work force worldwide. Furthermore, we expect that we would be required to manage multiple relationships with various customers and other third
parties.
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Compliance with environmental regulations could be especially costly due to the hazardous materials used in
the manufacturing process. In addition, we could incur expenditures related to hazardous material accidents.
We are subject to a
number of federal, state and local governmental regulations related to the use, storage, discharge and disposal of toxic, volatile or otherwise hazardous chemicals used in our business. Current or future laws and regulations could require
substantial expenditures for preventative or remedial action, reduction of chemical exposure, waste treatment or disposal. Any failure to comply with present or future regulations could result in the imposition of fines, suspension of production or
interruption of operations. In addition, these regulations could restrict our ability to expand or could require us to acquire costly equipment or incur other significant expense to comply with environmental regulations or to clean up prior
discharges.
In addition, although we believe that our safety procedures for the handling and disposing of hazardous materials comply with the standards
prescribed by state and federal regulations, there is always the risk of accidental contamination or injury from these materials. To date, we have not incurred substantial expenditures for preventive action with respect to hazardous materials or for
remedial action with respect to any hazardous materials accident, but the use and disposal of hazardous materials involves risk that we could incur substantial expenditures for such preventive or remedial actions. If such an accident were to occur,
we could be held liable for resulting damages. The liability in the event of an accident or the costs of such remedial actions could exceed our resources or otherwise have a material adverse effect on our financial condition, results of operations
or cash flows.
The reliability of market data included in our public filings is uncertain.
Since we operate in a rapidly changing market, we have in the past, and may from time to time in the future, include market data from industry
publications and our own internal estimates in some of the documents we file with the Securities and Exchange Commission. The reliability of this data cannot be assured. Industry publications generally state that the information contained in these
publications has been obtained from sources believed to be reliable, but that its accuracy and completeness is not guaranteed. Although we believe that the market data used in our filings with the Securities and Exchange Commission is and will be
reliable, it has not been independently verified. Similarly, internal company estimates, while believed by us to be reliable, have not been verified by any independent sources.
Our international operations expose us to certain risks.
In 2007, we formed a joint venture with BAOLI to manufacture and sell our SuperLink interference elimination solution in China. In
addition to facing many of the risks faced by our domestic business, if that joint venture or any other international operation we may have is to be successful, we (together with any joint venture partner) must recruit the necessary personnel and
develop the facilities needed to manufacture and sell the products involved, learn about the local market (which may be significantly different from our domestic market), build brand awareness among potential customers and compete successfully with
local organizations with greater market knowledge and potentially greater resources than we have. We must also obtain a number of critical governmental approvals from both the United States and the local country governments on a timely basis,
including those related to any transfers of our technology. We must establish sufficient controls on any foreign operations to ensure that those operations are operated in accordance with our interests, that our intellectual property is protected
and that our involvement does not inadvertently create potential competitors. There can be no assurance that these conditions will be met. Even if they are met, the process of building our international operations could divert financial resources
and management attention from other business concerns. Finally, our international operations will also be subject to the general risks of international operations, such as:
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changes in exchange rates;
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international political and economic conditions;
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changes in government regulation in various countries;
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adverse tax consequences; and
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costs associated with expansion into new territories.
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Risks Related to Our Common Stock
There is uncertainty regarding the application of the federal and state securities laws to our offering of common stock and warrants, and there is a
corresponding risk that we could be required to refund the purchase price of securities offered to purchasers who so elect.
We are
conducting a registered offering under a registration statement filed with the SEC and a concurrent private placement intended to comply with the requirements of Section 4(a)(2) under the Securities Act of 1933, as amended, and Rule 506
promulgated thereunder. See “Private Placement Transaction.” Shares of common stock and warrants are being offered and sold in combination. The shares of common stock are intended to be offered and sold in a transaction registered under
the Securities Act, while the warrants and shares of common stock issuable thereunder are intended to be offered and sold in a private placement exempt from the registration requirements of the Securities Act.
While we are aware of other transactions using a concurrent public/private offering approach, the SEC has not addressed whether concurrent
public and private offerings and sales to the same prospective investors would adversely impact the public offering or preclude the private offering from satisfying the requirements of Rule 506. If the securities offered in our concurrent private
placement do not satisfy the conditions of Rule 506, the offering would be a violation of Section 5 of the Securities Act and each purchaser would have the right to rescind its purchase of the securities, meaning that we would be required to
refund the purchase price of the securities to each purchaser electing rescission. If that were to occur, we would face severe financial demands and reputational harm that could adversely affect our business and operations. Additionally, if we did
not in fact qualify for the exemptions upon which it has relied, we may become subject to significant fines and penalties imposed by the SEC. It is also possible that additional remedies may be available to purchasers under applicable state law.
Our stock price is volatile.
The market price of our common stock has been, and is expected to be, subject to significant volatility. The value of our common stock may
decline regardless of our operating performance or prospects. Factors affecting our market price include:
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our perceived prospects and liquidity;
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progress or any lack of progress (or perceptions related to progress) in timely overcoming the remaining substantial technical and commercial challenges related to our Conductus wire initiative;
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variations in our operating results and whether we have achieved key business targets;
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changes in, or our failure to meet, earnings estimates;
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changes in securities analysts’ buy/sell recommendations;
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differences between our reported results and those expected by investors and securities analysts;
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announcements of new contracts by us or our competitors;
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market reaction to any acquisitions, joint ventures or strategic investments announced by us or our competitors; and
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general economic, political or stock market conditions.
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Recent events have caused stock prices for many companies, including ours, to fluctuate in ways unrelated or
disproportionate to their operating performance. The general economic, political and stock market conditions that may affect the market price of our common stock are beyond our control. The market price of our common stock at any particular time may
not remain the market price in the future.
If we fail to maintain the listing of our common stock with a U.S. national securities exchange, the
liquidity of our common stock could be adversely affected.
Our ability to publicly or privately sell equity securities and the
liquidity of our common stock could be adversely affected if we are delisted from the NASDAQ Capital Market or if we are unable to transfer our listing to another stock market.
Our common stock is listed for trading on the NASDAQ Capital Market. NASDAQ has adopted a number of continued listing standards that are
applicable to our common stock, including a requirement that the bid price of our common stock be at least $1.00 per share. Failure to maintain the minimum bid price can result in the delisting of our common stock from the NASDAQ Capital Market. We
have previously fallen out of compliance with the minimum bid price requirement. On July 18, 2016 we effected a one-for-fifteen reverse stock split in connection with regaining compliance with the minimum bid requirement following a notice from
the Listing Qualifications Department of the Nasdaq Stock Market on October 30, 2015 and expect to receive a notice of compliance from the Listing Qualifications Department of the Nasdaq Stock Market in early August, 2016.
If our common stock is delisted by NASDAQ, our common stock may be eligible to trade on the OTC Bulletin Board, OTC QB or another
over-the-counter market. Any such alternative would likely result in it being more difficult for us to raise additional capital through the public or private sale of equity securities and for investors to dispose of, or obtain accurate
quotations as to the market value of, our common stock. In addition, there can be no assurance that our common stock would be eligible for trading on any such alternative exchange or markets.
There is no public market for the Series C Convertible Preferred Stock or the warrants to purchase shares of our common stock being offered by us
in this offering.
There is no established public trading market for the Series C Convertible Preferred Stock or the warrants being
offered in the concurrent private placement, and we do not expect a market to develop. In addition, we do not intend to apply to list the Series C Convertible Preferred or the warrants offered in the concurrent private placement on any national
securities exchange or other nationally recognized trading system, including the NASDAQ Capital Market. Without an active market, the liquidity of Series C Preferred and the warrants will be limited.
Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.
We have not designated the amount of net proceeds from this offering to be used for any particular purpose. Accordingly, our management will
have broad discretion as to the application of the net proceeds from this offering and could use them for purposes other than those contemplated at the time of this offering. Our stockholders may not agree with the manner in which our management
chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that may not increase our profitability or market value.
We have a significant number of outstanding warrants and options, and future sales of the shares obtained upon exercise of these options or warrants
could adversely affect the market price of our common stock.
As of April 2, 2016 (as adjusted for the 1-15 reverse split of
our common stock that was effective on July 18, 2016), we had outstanding options exercisable for an aggregate of 131,204 shares of common stock at a
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weighted average exercise price of $36.15 per share and warrants to purchase up to 2,023,232 shares of our common stock at a weighted average exercise price of $11.06 per share. Of such warrants,
an aggregate of 407,825 warrants originally issued in our August 2013 financing include a price adjustment mechanism whereby the exercise price of such warrants will be automatically reduced, subject to limitations, to the extent we issue shares of
our common stock, or equivalents, at a price lower than the then applicable exercise price of such warrants which is currently $5.25. As a result of this offering, the exercise price of such warrants will be adjusted to be $3.00. We have registered
the issuance of all the shares issuable upon exercise of the options and warrants, and they will be freely tradable by the exercising party upon issuance. The holders may sell these shares in the public markets from time to time, without limitations
on the timing, amount or method of sale. As our stock price rises, the holders may exercise their warrants and options and sell a large number of shares. This could cause the market price of our common stock to decline.
Our corporate governance structure may prevent our acquisition by another company at a premium over the public trading price of our shares.
It is possible that the acquisition of a majority of our outstanding voting stock by another company could result in our stockholders receiving
a premium over the public trading price for our shares. Provisions of our restated certificate of incorporation and our amended and restated bylaws, each as amended, and of Delaware corporate law could delay or make more difficult an acquisition of
our company by merger, tender offer or proxy contest, even if it would create an immediate benefit to our stockholders. For example, our restated certificate of incorporation does not permit stockholders to act by written consent, and our amended
and restated bylaws generally require ninety days advance notice of any matters to be brought before the stockholders at an annual or special meeting.
In addition, our board of directors has the authority to issue up to 2,000,000 shares of preferred stock and to determine the terms, rights
and preferences of this preferred stock, including voting rights of those shares, without any further vote or action by the stockholders. At July 19, 2016, 1,383,727 shares of preferred stock remained unissued. The rights of the holders of
common stock may be subordinate to, and adversely affected by, the rights of holders of preferred stock that may be issued in the future. The issuance of preferred stock could also make it more difficult for a third party to acquire a majority of
our outstanding voting stock, even at a premium over our public trading price.
Further, our certificate of incorporation also provides
for a classified board of directors with directors divided into three classes serving staggered terms. These provisions may have the effect of delaying or preventing a change in control of us without action by our stockholders and, therefore, could
adversely affect the price of our stock or the possibility of sale of shares to an acquiring person.
We do not anticipate declaring any cash
dividends on our common stock.
We have never declared or paid cash dividends on our common stock and do not plan to pay any cash
dividends in the near future. Our current policy is to retain all funds and earnings for use in the operation and expansion of our business.
You
will experience immediate dilution in the book value per share of common stock as a result of this offering.
Investors in this
offering will experience immediate dilution in their net tangible book value per share to the extent of the difference between the public offering price per share of common stock and the “adjusted” net tangible book value per share after
giving effect to the offering. Our net tangible book value as of July 2, 2016 (as adjusted for the 1-15 reverse split of our common stock that was effective on July 18, 2016) was approximately $6.939 million, or $2.49316 per share of our
common stock based on 2,783,214 shares outstanding. After giving effect to the sale of 713,416 shares of our common stock (and shares of common stock
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underlying the Series C Preferred) at the public offering price of $3.08375 per share of common stock (or equivalent), and after deducting placement agents fees and estimated offering expenses
payable by us, our net tangible book value as of July 2, 2016, would have been approximately $8.839 million, or $2.52786 per share of our common stock. This calculation excludes the proceeds, if any, from the exercise of the warrants issued in
this offering. This amount represents an increase in net tangible book value of $0.03470 per share to our existing stockholders and an immediate dilution in net tangible book value of $0.55589 per share to investors in this offering. See the section
titled “Dilution” below.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus including the documents incorporated by reference, contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934 as amended, or the Exchange Act. These statements may be made directly in
this document or they may be made part of this document by reference to other documents filed with the SEC, which is known as “incorporation by reference.” You can find many (but not all) of these statements by looking for words such as
“approximates,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “would,” “could,” “may” or other similar expressions in this
prospectus supplement, the accompanying prospectus or the documents incorporated by reference.
We caution investors that any
forward-looking statements presented in this prospectus supplement, the accompanying prospectus or the documents incorporated by reference, or those which we may make orally or in writing from time to time, are based on our beliefs and assumptions,
as well as information currently available to us. The actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Our forward-looking statements are not guarantees
of future performance and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations from time to time, and those differences may be material. Accordingly, investors should use
caution in relying on forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends.
Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed
or implied by forward-looking statements include the following:
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our limited cash and a history of losses;
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our need to materially grow our revenues from commercial operations and/or to raise additional capital (which financing may not be available on acceptable terms or at all) prior to our cash reserves being depleted
(which reserves, prior to this offering, are currently expected to be sufficient into the fourth quarter of 2016) and generally over the next 12-months to implement our current business plan and maintain our viability;
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the performance and use of our equipment to produce wire in accordance with our timetable;
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overcoming technical challenges in attaining milestones to develop and manufacture commercial lengths of our high temperature superconducting (HTS) wire;
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the possibility of delays in customer evaluation and acceptance of our HTS wire;
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the limited number of potential customers and customer pressures on the selling prices of our products;
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the limited number of suppliers for some of our components and our HTS wire;
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there being no significant backlog from quarter to quarter;
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our market being characterized by rapidly advancing technology;
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the impact of competitive products, technologies and pricing;
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manufacturing capacity constraints and difficulties;
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the impact of any financing activity on the level of our stock price;
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the dilutive impact of any issuances of securities to raise capital;
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cost and uncertainty from compliance with environmental regulations;
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local, regional, and national and international economic conditions and events and the impact they may have on us and our customers; and
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if we fail to maintain the listing of our common stock with a U.S. national securities exchange, the liquidity of our common stock could be adversely affected.
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For more information on the uncertainty of forward-looking statements, see “Risk Factors” in this prospectus supplement and our
Annual Report on Form 10-K filed with the SEC.
This prospectus supplement, the accompanying prospectus, the documents incorporated by
reference and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not
undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the dates that such statements are made.
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USE OF PROCEEDS
We estimate that the net proceeds from the sale of the securities offered under this prospectus supplement, after deducting placement agent
fees and commissions and estimated offering expenses payable by us will be approximately $1.9 million. We will receive gross proceeds from the concurrent private placement transaction of warrants solely to the extent such warrants are exercised for
cash.
We anticipate that the net proceeds from the sale of the securities under this prospectus supplement will be used for general
corporate purposes. General corporate purposes may include repayment of debt, capital expenditures, and any other purposes that we may specify in any prospectus supplement. In addition, we may use a portion of any net proceeds to acquire
complementary products, technologies or businesses. We will have discretion in the use of any net proceeds. Investors will be relying on the judgment of our management regarding the application of the proceeds of any sale of the securities. We may
invest the net proceeds temporarily until we use them for their stated purpose.
Investors are cautioned that after giving effect to the
sale our common stock in this offering and our receipt of approximately $1.9 million in net proceeds, we currently forecast that our cash resources will still be insufficient to fund our business for the next twelve months. We will need to raise
additional funds to further continue operations. We expect that we will have to raise such additional funds through the sale of additional equity or equity back securities. Any future equity or equity linked financing that we may need may not be
able available on terms favorable to us or at all.
From time to time, we evaluate these and other factors and we anticipate continuing to
make such evaluations to determine if the existing allocation of resources, including the proceeds of this offering, is being optimized. Circumstances that may give rise to a change in the use of proceeds include:
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•
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a change in development plan or strategy;
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•
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the addition of new products or applications;
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•
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difficulty obtaining regulatory approval;
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•
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failure to achieve sales as anticipated; and
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•
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the availability of other sources of cash including cash flow from operations and new bank debt financing arrangements, if any.
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S-20
PRICE RANGE OF OUR COMMON STOCK
Our common stock is listed and traded on the NASDAQ Capital Market under the symbol “SCON.” The following table sets forth, for the
quarters shown, the range of high and low sales prices of our common stock on the NASDAQ Capital Market (as adjusted, for periods prior to July 18, 2016, for the reverse stock split we completed on such date).
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Quarter Ended
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High
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Low
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|
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2016
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|
|
|
|
|
|
|
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|
Quarter ended October 1, 2016 (through July 27, 2016)
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|
$
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3.75
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|
|
$
|
2.70
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|
|
Quarter ended July 2, 2016
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|
$
|
4.50
|
|
|
$
|
2.55
|
|
|
Quarter ended April 2, 2016
|
|
$
|
4.80
|
|
|
$
|
2.25
|
|
|
2015
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|
|
|
|
|
|
|
|
|
Quarter ended December 31, 2015
|
|
$
|
11.70
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|
|
$
|
2.25
|
|
|
Quarter ended September 26, 2015
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|
$
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21.45
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|
|
$
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11.40
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|
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Quarter ended June 27, 2015
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|
$
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21.60
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|
|
$
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12.30
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|
|
Quarter ended March 28, 2015
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|
$
|
43.50
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|
|
$
|
19.65
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|
|
2014
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|
|
|
|
|
|
|
|
|
Quarter ended December 31, 2014
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|
$
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46.50
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|
|
$
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38.10
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|
|
Quarter ended September 27, 2014
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|
$
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48.45
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|
|
$
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36.30
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|
|
Quarter ended June 28, 2014
|
|
$
|
48.45
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|
|
$
|
32.40
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|
|
Quarter ended March 29, 2014
|
|
$
|
57.30
|
|
|
$
|
32.25
|
|
As of July 26, 2016 (as adjusted for the 1-15 reverse split of our common stock that was effective on
July 18, 2016), we had 2,883,214 shares of common stock outstanding, held by approximately 10,000 stockholders, including stockholders of record and beneficial owners. On July 27, 2016, the closing bid price of our common stock as reported
on the NASDAQ Capital Market was $2.99 per share.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current
policy is to retain all funds and earnings for use in the operation and expansion of our business. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our
financial condition, operating results, current and anticipated cash needs and plans for expansion.
S-21
CAPITALIZATION
The following table sets forth our actual cash and cash equivalents and capitalization, each as of April 2, 2016 and as adjusted to give
effect to the sale of the securities offered hereby and the use of proceeds, as described in the section titled “Use of Proceeds.”
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As of April 2, 2016
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|
|
|
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Actual
|
|
|
As Adjusted (1)(2)(3)
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|
|
|
|
(Dollars in thousands,
except per share data)
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|
|
Cash and cash equivalents
|
|
$
|
5,574
|
|
|
$
|
7,474
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
1,111
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|
|
$
|
1,111
|
|
|
|
|
|
|
|
|
|
|
|
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Total stockholders’ equity
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|
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Preferred stock, authorized 2,000,000 shares, $0.001 par value per share; Series A
Preferred Stock 328,925 issued and outstanding, Series B Preferred Stock 1,549 issued and outstanding, Series C Preferred Stock 0, issued and outstanding shares, actual; 1,294.595255, issued and outstanding shares, as adjusted
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$
|
—
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|
|
$
|
—
|
|
|
Common stock, authorized 250,000,000 shares, $0.001 par value; issued and outstanding
2,716,547, actual; 3,010,151 issued and outstanding shares, as adjusted
|
|
|
3
|
|
|
|
3
|
|
|
Additional paid in capital
|
|
|
304,350
|
|
|
|
306,250
|
|
|
Retained earnings (accumulated deficit)
|
|
|
(293,600
|
)
|
|
|
(293,600
|
)
|
|
Total stockholders’ equity
|
|
$
|
10,753
|
|
|
$
|
12,653
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capitalization
|
|
$
|
11,864
|
|
|
$
|
13,764
|
|
|
(1)
|
Assumes we sell all 293,604 shares of common stock and 1,294.595255 shares of Series C Preferred being offered in this offering, for aggregate gross proceeds of $2.2 million, and that the net proceeds thereof are
approximately $1.9 million after deducting placement agent fees and our estimated expenses.
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(2)
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Does not include the up to 535,062 shares of common stock that may be issued under the warrants to be issued in the concurrent private placement and up to 419,812 shares of our common stock convertible, subject to
beneficial ownership limitations, under the Series C Preferred issued in this offering. In addition, this excludes up to 49,939 shares of common stock issuable upon exercise of warrants issued to the placement agent in this offering (see
Plan of Distribution on
page S-32).
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(3)
|
As of July 2, 2016, and as previously disclosed, our Total stockholders’ equity was $7,933,000. This calculation has not been reviewed by our independent auditors.
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S-22
DILUTION
If you invest in our common stock and Series C Preferred, your interest will be diluted to the extent of the difference between the price per
share you pay in this offering and the net tangible book value per share of our common stock immediately after this offering.
Our net
tangible book value of our common stock as of July 2, 2016 was approximately $6.939 million, or $2.49316 per share of our common stock. “Net tangible book value” is total assets minus the sum of liabilities and intangible assets.
“Net tangible book value per share” is net tangible book value divided by the total number of shares outstanding.
After giving
effect to the sale of 713,416 shares of our common stock (and shares of common stock underlying the Series C Preferred) at the public offering price of $3.08375 per share of common stock (or equivalent), and after deducting the placement agent fees
and estimated offering expenses payable by us, our net tangible book value as of July 2, 2016 would have been approximately $8.839 million, or approximately $2.52786 per share of common stock based on 3,496,631 shares of common stock
outstanding on a pro forma basis at that time. This represents an immediate increase in net tangible book value of $0.03470 per share to our existing stockholders and an immediate dilution of approximately $0.55589 per share to new investors
participating in this offering, as illustrated by the following table:
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|
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|
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Public offering price per share of common stock
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|
|
|
|
|
$
|
3.08375
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|
|
Net tangible book value per share of common stock as of July 2, 2016
|
|
$
|
2.49316
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|
|
|
|
|
|
Increase in net tangible book value per share of common stock attributable to the
offering
|
|
$
|
0.03470
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Pro forma net tangible book value per share of common stock as of July 2, 2016 after giving
effect to the offering and assuming all shares of Series C Preferred are converted into common stock
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|
|
|
|
|
$
|
2.52786
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|
|
|
|
|
|
|
|
|
|
|
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Pro forma dilution in net tangible book value per share of common stock to new investors in the
offering
|
|
|
|
|
|
$
|
0.55589
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|
|
|
|
|
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|
The information above is based on 2,783,214 shares outstanding as of July 2, 2016 (as adjusted for the
1-15 reverse split of our common stock that was effective on July 18, 2016) and excludes the shares of common stock that may be issued under the warrants to be issued in this offering and also the following:
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•
|
|
535,062 shares of common stock issuable upon the exercise of the Warrants to be issued in the concurrent private placement. See “Private Placement Transaction”;
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|
|
•
|
|
18,273 shares of our common stock issuable upon conversion of the 328,925 shares of outstanding Series A Convertible Preferred Stock;
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|
|
•
|
|
228,333 shares of our common stock issuable upon conversion of the 1,198.75 shares of outstanding Series B Convertible Preferred Stock;
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|
|
•
|
|
131,204 shares of our common stock issuable upon exercise of stock options under our stock plans at a weighted average exercise price of $36.15 per share; and
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|
|
•
|
|
2,023,232 shares of our common stock issuable upon exercise of warrants at a weighted average exercise price of $11.06 per share. Of such warrants, an aggregate of 407,825 warrants originally issued in our August 2013
financing include a price adjustment mechanism whereby the exercise price of such warrants will be automatically reduced, subject to limitations, to the extent we issue shares of our common stock, or equivalents, at a price lower than the then
applicable exercise price of such warrants which is currently $5.25. As a result of this offering, the exercise price of such warrants will be adjusted to be $3.00.
|
S-23
Because there is no minimum offering amount required as a condition to the closing of this
offering, the dilution per share to new investors may be more than that indicated above in the event that the actual number of shares sold, if any, is less than the maximum number of shares of our common stock we are offering. The foregoing includes
all shares of common stock offered in this offering and shares of common stock convertible under this Series C Preferred offered in this offering. Holders of Series C Preferred are not be entitled to convert their Series C Preferred into shares of
our common stock at any time that, after giving effect to such conversion, the holder (together with their affiliates) would hold more than 4.99% of the number of shares of our Common Stock outstanding, which limitation, subject to increase or
decrease upon at least 60 days’ notice by a holder, cannot be increased above 9.99%.
The above illustration of dilution per share to
investors participating in this offering assumes no exercise of outstanding options to purchase our common stock or outstanding warrants to purchase shares of our common stock. The exercise of outstanding options and warrants having an exercise
price less than the offering price will increase dilution to new investors.
S-24
DESCRIPTION OF CAPITAL STOCK
The following is a brief description of our capital stock. This summary does not purport to be complete in all respects. This description is
subject to and qualified entirely by the terms of our restated certificate of incorporation, as amended, or our certificate of incorporation, and our amended and restated bylaws, or our bylaws, copies of which have been filed with the SEC and are
also available upon request from us, and by the General Corporation Law of the State of Delaware.
Authorized Capitalization
We have 252,000,000 shares of capital stock authorized under our certificate of incorporation, consisting of 250,000,000 shares of
common stock and 2,000,000 shares of preferred stock, of which 706,829 have been designated as Series A Convertible Preferred Stock, par value $0.001 per share, or Series A Preferred Stock, and 10,000 have been designated as Series B
Convertible Preferred Stock, par value $0.001 per share, or Series B Preferred Stock (also see “Preferred Stock – Series C Convertible Preferred Stock” below). As of July 2, 2016 (as adjusted for the 1-15 reverse split of our
common stock that was effective on July 18, 2016), we had 2,783,214 shares of common stock, 330,124 shares of Series A Preferred Stock, and 1,198.75 shares of Series B Preferred Stock outstanding. Our authorized shares of common stock and
preferred stock are available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded.
If the approval of our stockholders is not so required, our board of directors may determine not to seek stockholder approval.
On
July 18, 2016, we effected a 1-for-15 reverse stock split of our common stock, or the Reverse Stock Split. As a result of the Reverse Stock Split, every fifteen shares of our pre-Reverse Stock Split common stock were combined and reclassified
into one share of our common stock. Previously, effective March 11, 2013, we effected a 1-for-12 reverse stock split of our common stock, or the March 2013 Reverse Stock Split. As a result of the March 2013 Reverse Stock Split, every twelve
shares of our pre-March 2013 Reverse Stock Split common stock were combined and reclassified into one share of our common stock.
Common Stock
Holders of our common stock are entitled to such dividends as may be declared by our board of directors out of funds legally available for such
purpose, subject to any preferential dividend rights of any then outstanding preferred stock. The shares of common stock are neither redeemable nor convertible. Holders of common stock have no preemptive or subscription rights to purchase any of our
securities.
Each holder of our common stock is entitled to one vote for each such share outstanding in the holder’s name. No holder
of common stock is entitled to cumulate votes in voting for directors.
In the event of our liquidation, dissolution or winding up, the
holders of our common stock are entitled to receive pro rata our assets that are legally available for distribution, after payments of all debts and other liabilities and subject to the prior rights of any holders of preferred stock then
outstanding. All of the outstanding shares of our common stock are fully paid and non-assessable. The shares of common stock offered by this prospectus and the shares of common stock underlying the warrants offered by this prospectus will be fully
paid and non-assessable.
Our common stock is listed on the NASDAQ Capital Stock Market under the symbol “SCON.” Computershare
is the transfer agent and registrar for our common stock. Its address is 250 Royall Street, Canton, MA 02021.
S-25
Preferred Stock
Our certificate of incorporation permits us to issue up to 2,000,000 shares of preferred stock in one or more series and with rights and
preferences that may be fixed or designated by our board of directors without any further action by our stockholders. Prior to this offering, 706,829 shares have been designated as Series A Preferred Stock and 10,000 have been designated as Series B
Convertible Preferred Stock (also see “—Series C Convertible Preferred Stock” below). As of July 2, 2016, 328,925 shares of Series A Preferred Stock and 1548.75 shares of Series B Preferred Stock were outstanding,
respectively.
Subject to the limitations prescribed in our certificate of incorporation and under Delaware law, our certificate of
incorporation authorizes the board of directors, from time to time by resolution and without further stockholder action, to provide for the issuance of shares of preferred stock, in one or more series, and to fix the designation, powers, preferences
and other rights of the shares and to fix the qualifications, limitations and restrictions thereof. The issuance of preferred stock could adversely affect the rights of holders of our common stock, including with respect to voting, dividends and
liquidation and, by issuing shares of preferred stock with certain voting, conversion and/or redemption rights. Such issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control.
Preferred stock could thus be issued quickly with terms calculated to delay or prevent a change in control of us or to make removal of
management more difficult. Additionally, the issuance of preferred stock may decrease the market price of our common stock. The number of authorized shares of preferred stock may be increased or decreased, but not decreased below the number of
shares then outstanding, by the affirmative vote of the holders of a majority of our common stock without a vote of the holders of preferred stock, or any series of preferred stock, unless a vote of any such holder is required pursuant to the terms
of such series of preferred stock.
Series A Convertible Preferred Stock
In October 2007, in connection with entering into an amended investment agreement with Hunchun BaoLi Communication Co. Ltd., or BAOLI, our
board of directors authorized the designation and issuance of 706,829 shares of Series A Preferred Stock. The terms of the investment agreement were subsequently amended and, in February 2008, we issued to BAOLI and two related purchasers
(collectively, BAOLI), a total of approximately 258,447 shares of our common stock and 611,523 shares of our Series A Preferred Stock (convertible under certain conditions into approximately 509,602 shares of our common stock).
Subject to the terms and conditions of our Series A Preferred Stock and to customary adjustments to the conversion rate, each share
of our Series A Preferred Stock is convertible into ten shares of our common stock so long as the number of shares of our common stock beneficially owned by BAOLI following such conversion does not exceed 9.9% of our outstanding common stock.
Except for a preference on liquidation of $0.01 per share, each share of Series A Preferred Stock is the economic equivalent of the ten shares of common stock into which it is convertible. Except as required by law, the Series A Preferred
Stock will not have any voting rights. For a complete description of the terms of the Series A Preferred Stock, please see the certificate of designations, which is incorporated by reference into the registration statement of which this
prospectus is a part.
Series B Convertible Preferred Stock
In October 2015, in connection with a registered direct offering, our board of directors authorized the designation and issuance of 10,000
shares and 4,750.0005 shares, respectively, of Series B Preferred Stock.
Subject to the terms and conditions of our Series B
Preferred Stock and to customary adjustments to the conversion rate, each share of our Series B Preferred Stock is convertible into shares of our common stock at a conversion price equal to 5.25 per share of common stock. Except as
required by law, the Series B Preferred Stock generally will not have any voting rights. For a complete description of the terms of the Series B Preferred Stock, please see the certificate of designations, which is incorporated by
reference into the registration statement of which this prospectus is a part.
S-26
Series C Convertible Preferred Stock
The following summary of certain terms and provisions of our Series C Convertible Preferred Stock, or Series C Preferred, offered in this
offering is subject to, and qualified in its entirety by reference to, the terms and provisions set forth in our certificate of designation of preferences, rights and limitations of Series C Preferred.
Designation.
Subject to the limitations prescribed by our certificate of incorporation and under Delaware law, our board of
directors is authorized to establish the number of shares constituting each series of preferred stock and to fix the designations, powers, preferences and rights of the shares of each of those series and the qualifications, limitations and
restrictions of each of those series, all without any further vote or action by our stockholders. Our board of directors has designated 1,500 of the 2,000,000 authorized shares of preferred stock as Series C Preferred Stock. When issued, the
shares of Series C Preferred Stock will be validly issued, fully paid and non-assessable.
Rank.
The Series C Convertible
Preferred Stock will rank on parity to our common stock.
Conversion; Beneficial Ownership Limitation Prohibiting
Conversion.
Each share of the Series C Preferred is convertible into shares of our common stock (subject to adjustment as provided in the related certificate of designation of preferences, rights and limitations) at any time at the option
of the holder at a conversion price equal to the stated value of the Series C Preferred of $1,000 divided by the public offering price of the common stock in this offering. Holders of Series C Preferred will be prohibited from converting
Series C Preferred into shares of our common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of our common stock then issued and outstanding. However,
any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to us.
Liquidation Preference.
In the event of our liquidation, dissolution or winding-up, holders of Series C Preferred will
receive the same amount that a holder of common stock would receive if the Series C Preferred were fully converted into shares of our common stock at the conversion price (disregarding for such purposes any conversion limitations) which amounts
shall be paid pari passu with all holders of common stock.
Voting Rights.
Shares of Series C Preferred will generally have no
voting rights, except as required by law and except that the affirmative vote of the holders of a majority of the then outstanding shares of Series C Preferred is required to, (a) alter or change adversely the powers, preferences or rights
given to the Series C Preferred, (b) amend our certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, or (c) increase the number of authorized shares of Series C
Preferred.
Dividends.
Shares of Series C Preferred will not be entitled to receive any dividends, unless and until
specifically declared by our board of directors. The holders of the Series C Preferred will participate, on an as-if-converted-to-common stock basis, in any dividends to the holders of common stock.
Redemption.
We are not obligated to redeem or repurchase any shares of Series C Preferred. Shares of Series C Preferred are not
otherwise entitled to any redemption rights or mandatory sinking fund or analogous fund provisions.
Exchange Listing.
We do
not plan on making an application to list the Series C Preferred on the NASDAQ Capital Market, any other national securities exchange or other nationally recognized trading system. Our common stock is listed the NASDAQ Capital Market under the
symbol “SCON.”
Restrictive Covenant.
We are restricted from selling additional equity securities for the 30 day
period following the closing, subject to certain exceptions.
S-27
Warrants to Purchase Common Stock
As of July 2, 2016, we have warrants outstanding representing the right to acquire 2,023,232 shares of our common stock at a weighted
average exercise price of $11.06 per share. Of such warrants, an aggregate of 407,825 warrants originally issued in our August 2013 financing include a price adjustment mechanism whereby the exercise price of such warrants will be automatically
reduced, subject to limitations, to the extent we issue shares of our common stock, or equivalents, at a price lower than the then applicable exercise price of such warrants. As a result of this offering, the exercise price of such warrants will be
adjusted to be $3.00.
Anti-Takeover Effects of Certain Provisions of Delaware Law and Our Charter Documents
The following is a summary of certain provisions of Delaware law, our certificate of incorporation and our bylaws. This summary does not
purport to be complete and is qualified in its entirety by reference to the corporate law of Delaware and our certificate of incorporation and bylaws.
Effect of Delaware Anti-Takeover Statute.
We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested
stockholder, unless:
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|
•
|
|
prior to that date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
|
|
|
•
|
|
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of shares of voting stock outstanding (but not the voting stock owned by the interested stockholder) those shares owned by persons who are directors and officers and by
excluding employee stock plans in which employee participants do not have the right to determine whether shares held subject to the plan will be tendered in a tender or exchange offer; or
|
|
|
•
|
|
on or subsequent to that date, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66
2
⁄
3
% of the outstanding voting stock that is not owned by the interested stockholder.
|
Section 203 defines “business combination” to include the following:
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|
•
|
|
any merger or consolidation involving the corporation and the interested stockholder;
|
|
|
•
|
|
any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
|
|
|
•
|
|
subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
|
|
|
•
|
|
any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or
|
|
|
•
|
|
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
|
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding
voting stock of the corporation, or who beneficially owns 15% or more of the outstanding voting stock of the corporation at any time within a three-year period immediately prior to the date of determining whether such person is an interested
stockholder, and any entity or person affiliated with or controlling or controlled by any of these entities or persons.
S-28
Our Charter Documents.
Our charter documents include provisions that may have the
effect of discouraging, delaying or preventing a change in control or an unsolicited acquisition proposal that a stockholder might consider favorable, including a proposal that might result in the payment of a premium over the market price for the
shares held by our stockholders. Certain of these provisions are summarized in the following paragraphs.
Classified Board of
Directors.
Pursuant to our certificate of incorporation, the number of directors is fixed by our board of directors. Our directors are divided into three classes, each class to serve a three-year term and to consist as nearly as possible of
one-third of the total number of directors. Pursuant to our bylaws, directors elected by stockholders at an annual meeting of stockholders will be elected by a plurality of all votes cast.
No Stockholder Action by Written Consent
. Our bylaws provide that a special meeting of stockholders may be called only by the
chairman of the board, a majority of the entire board of directors or the president. Stockholders are not permitted to call, or to require that the board of directors call, a special meeting of stockholders. Moreover, the business permitted to be
conducted at any special meeting of stockholders is limited to the business brought before the meeting pursuant to the notice of the meeting given. In addition, our certificate of incorporation provides that any action taken by our stockholders must
be effected at an annual or special meeting of stockholders and may not be taken by written consent instead of a meeting. Our bylaws establish an advance notice procedure for stockholders to nominate candidates for election as directors or to bring
other business before meetings of our stockholders.
Change in Control Agreements.
A number of our executives have agreements
with us that entitle them to payments in certain circumstances following a change in control.
S-29
DESCRIPTION OF SECURITIES WE ARE OFFERING
We are offering up to 293,604 shares of our common stock. We are also offering to those purchasers, if any, whose purchase of our common
stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering,
the opportunity, in lieu of purchasing additional shares of our common stock, to purchase up to 1,294.595255 shares of our Series C Convertible Preferred Stock, or the Series C Preferred, with a stated value of $1,000 and convertible into shares of
our common stock at $3.08375 per share, the public offering price of the shares of our common stock. The Series C Preferred do not generally have any voting rights but are convertible into shares of our common stock. Holders of Series C
Preferred shall not be entitled to convert the Series C Preferred into shares of our common stock at any time that, after giving effect to such conversion, the holder (together with their affiliates) would hold more than 4.99% of the number of
shares of our Common Stock outstanding, which limitation, subject to increase or decrease upon at least 60 days’ notice by a holder, cannot be increased above 9.99%.
The material terms of our common stock, our Series C Preferred and our other capital stock are described in the section of this prospectus
titled “Description of Capital Stock” beginning on page S-25 of this prospectus supplement.
In a concurrent private placement,
we are selling to the purchasers of shares of our common stock and Series C Preferred offered under this prospectus supplement warrants to purchase 0.75 of a share of our common stock for each share of common stock (or common stock underlying
the Series C Preferred) purchased in this offering (the “Warrants”). The Warrants and the shares of our common stock issuable upon the exercise of the Warrants are not being registered under the Securities Act of 1933, as amended, (the
“Securities Act”), are not being offered pursuant to this prospectus supplement and the accompanying prospectus and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506
promulgated thereunder. See the section of this prospectus titled “Private Placement Transaction” beginning on page S-31 of this prospectus supplement.
We do not plan on applying to list the Series C Preferred or any of the warrants issued in the concurrent private placement on the NASDAQ
Capital Market, any other national securities exchange or any other nationally recognized trading system.
S-30
PRIVATE PLACEMENT TRANSACTION
In a concurrent private placement (the “Private Placement Transaction”), we are selling to purchasers of our common stock and Series
C Preferred in this offering warrants (the “Warrants”) to purchase up to 535,062 shares of our common stock (based upon selling a warrant equal to 0.75 of a share for each share of common stock purchased in this offering). We will receive
gross proceeds from the concurrent private placement transaction solely to the extent such warrants are exercised for cash.
The Warrants
and the shares of our common stock issuable upon the exercise of the Warrants are not being registered under the Securities Act, are not being offered pursuant to this prospectus supplement and the accompanying prospectus and are being offered
pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506 promulgated thereunder. Accordingly, purchasers may only sell shares of common stock issued upon exercise of the Warrants pursuant to an effective
registration statement under the Securities Act covering the resale of those shares, an exemption under Rule 144 under the Securities Act or another applicable exemption under the Securities Act.
A copy of the form of warrant will be attached as an exhibit to our Current Report on Form 8-K being filed with the SEC in connection with the
Private Placement Transaction. See this Form 8-K for a complete description of the terms and conditions of the warrants.
Each Warrant
will be exercisable at an exercise price of $3.00 per share, subject to adjustment, during the period following the six month anniversary of the date of issuance of the warrants until the five and a half year anniversary of the date of issuance, but
not thereafter.
Beneficial Ownership Limitation Prohibiting Exercise.
A holder will not have the right to exercise any portion of
the Warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of shares of our stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in
accordance with the terms of the warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such
notice to us.
If a registration statement registering the issuance of the shares of common stock underlying the Warrants under the
Securities Act is not then effective or available, the holder may exercise the Warrant through a cashless exercise, in whole or in part, in which case the holder would receive upon such exercise the net number of shares of common stock determined
according to the formula set forth in the warrant.
No fractional shares of common stock will be issued in connection with the exercise of
a Warrant. In lieu of fractional shares, we will either pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole share. The exercise price is subject to appropriate adjustment in
the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock.
In the event of a fundamental transaction, as described in the Warrants and generally including any reorganization, recapitalization or
reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the holders of the Warrants will be entitled to receive
upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Warrants immediately prior to such fundamental transaction.
The shares of our common stock issuable upon the exercise of the Warrants also have certain piggyback registration rights for a period until
the earlier of (x) the 12-month anniversary of the closing date of this offering and (y) the first day as of which all shares issued and sold under the Warrants may be sold under Rule 144 of the Securities Act and the Company is then in
compliance with the current public information required under Rule 144.
Except as otherwise provided in the Warrants or by virtue of such
holder’s ownership of shares of our common stock, the holder of a Warrant will not have the rights or privileges of a holder of our common stock, including any voting rights, until the holder exercises the Warrant.
S-31
PLAN OF DISTRIBUTION
We engaged H.C. Wainwright & Co., LLC (“H.C. Wainwright” or the “Placement Agent”) to act as our exclusive
placement agent to solicit offers to purchase the securities offered by this prospectus supplement. H.C. Wainwright is not purchasing or selling any shares, nor are they required to arrange for the purchase and sale of any specific number or dollar
amount of shares, other than to use their “reasonable best efforts” to arrange for the sale of shares by us. Therefore, we may not sell the entire amount of shares being offered. We will enter into a securities purchase agreement directly
with investors who purchase our common stock in this offering. H.C. Wainwright may engage one or more sub-placement agents or selected dealers to assist with the offering.
Upon the closing of this offering, we will pay the Placement Agent a cash transaction fee equal to 7.0% of the gross proceeds to us from the
sale of the shares of our common stock (including underlying the Series C Preferred) in the offering and we will issue to the Placement Agent the Placement Agent Warrant as outlined below. We will also reimburse the Placement Agent $50,000 for its
legal fees and expenses.
The following table shows the per share and total placement agent fees we will pay in connection with the sale
of the securities in this offering, assuming the purchase of all of the securities we are offering.
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Per share of Common Stock placement agent cash fees
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$
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0.2158625
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Per share of Series C Preferred placement agent cash fees
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$
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70
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Total
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$
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153,999.72
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We estimate the total expenses of this offering, which will be payable by us, excluding the placement agent
fees, will be approximately $150,000. After deducting the fees due to the placement agent and our estimated offering expenses, we expect the net proceeds from this offering to be approximately $1.9 million.
In addition, we agreed to grant compensation warrants to the Placement Agent (the “Placement Agent Warrant”) to purchase a number of
shares of our common stock equal to 7% of the aggregate number of shares of common stock (including underlying the Series C Preferred) sold to the investors in this offering. The compensation warrants will have an exercise price of $3.855 (125% of
the public offering price per share of common stock) and will terminate on the five year anniversary of the effective date of the offering. Pursuant to FINRA Rule 5110(g), the compensation warrants and any shares issued upon exercise of the
compensation warrants shall not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by
any person for a period of 180 days immediately following the date of effectiveness or commencement of sales of this offering, except the transfer of any security:
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by operation of law or by reason of reorganization of our company;
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to any FINRA member firm participating in the offering and the officers or partners thereof, if all securities so transferred remain subject to the lock-up restriction set forth above for the remainder of the time
period;
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if the aggregate amount of securities of our company held by the holder of the compensation warrants or related persons do not exceed 1% of the securities being offered;
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that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise directs investments by the fund, and participating members in the
aggregate do not own more than 10% of the equity in the fund; or
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the exercise or conversion of any security, if all securities received remain subject to the lock-up restriction set forth above for the remainder of the time period.
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S-32
In addition, we have granted a right of first refusal to H.C. Wainwright pursuant to which H.C.
Wainwright has the right to act as the exclusive advisor, manager or underwriter or agent, as applicable, if the Company or its subsidiaries sell or acquire a business, finance any indebtedness using an agent, or raise capital through a public or
private offering of equity or debt securities for a period until, in most cases, the one year anniversary of the date of this prospectus supplement.
The Placement Agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act and any commissions
received by it and any profit realized on the sale of the securities by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. The placement agent will be required to comply with the
requirements of the Securities Act and the Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of
purchases and sales of our securities by the Placement Agent. Under these rules and regulations, the Placement Agent may not (i) engage in any stabilization activity in connection with our securities; and (ii) bid for or purchase any of
our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until they have completed their participation in the distribution.
We have agreed to indemnify the Placement Agent and the purchasers against certain liabilities relating to or arising out of the offer. We
have also agreed to contribute to payments Placement Agent may be required to make in respect of such liabilities.
S-33
LEGAL MATTERS
Certain legal matters relating to the validity of the shares of our common stock offered by this prospectus supplement and the accompanying
prospectus will be passed upon for us by Manatt, Phelps & Phillips, LLP, Los Angeles, California. Ellenoff Grossman & Schole LLP, New York, New York, is acting as counsel for the Placement Agent in connection with the securities
offered hereby. Certain partners of Manatt, Phelps & Phillips, LLP or their affiliates own shares of our common shares representing less than 0.5% of our outstanding common stock as of the date of this prospectus supplement.
EXPERTS
The consolidated financial statements of Superconductor Technologies Inc., as of December 31, 2015 and 2014, and for each of the three
years in the period ended December 31, 2015, incorporated in this prospectus supplement by reference to the Annual Report on Form 10-K of Superconductor Technologies Inc. for the year ended December 31, 2015 have been so incorporated in
reliance on the report (which contains an explanatory paragraph related to the company’s ability to continue as a going concern) of Marcum, LLP, Independent Registered Public Accounting Firm, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file
with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The SEC also maintains a web site that
contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC at http://www.sec.gov. In addition, we maintain a web site that contains information about us at
http://www.suptech.com. The information contained on or that may be obtained from our website is not, and shall not be deemed to be, a part of this prospectus supplement.
We have filed with the SEC a registration statement on Form S-3, of which this prospectus supplement is a part, including exhibits, schedules
and amendments filed with, or incorporated by reference in, such registration statement, under the Securities Act, with respect to the securities registered thereby. This prospectus supplement does not contain all of the information set forth in the
registration statement and exhibits and schedules to the registration statement. For further information with respect to our company and the securities registered thereby, reference is made to the registration statement, including the exhibits to
the registration statement. Statements contained in this prospectus supplement as to the contents of any contract or other document referred to in, or incorporated by reference in, this prospectus supplement are not necessarily complete and, where
that contract is an exhibit to the registration statement, each statement is qualified in all respects by the exhibit to which the reference relates. Copies of the registration statement, including the exhibits and schedules to the registration
statement, may be examined and copied (upon payment of applicable fees) at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the
Public Reference Room. The registration statement is also available to you on the SEC’s web site, http://www.sec.gov.
S-34
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” information from other documents that we file with it, which means that we can
disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus supplement and the accompanying prospectus and information we file later with the SEC
will automatically update and supersede this information as of the date of filing of such information. We incorporate by reference any future filings made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering. We incorporate by reference into this prospectus supplement or the accompanying prospectus and the registration statement of which this prospectus supplement is a part the information or documents listed below that we
have filed with the SEC (Commission File No. 001-33609):
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Our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 30, 2016, as amended by Amendment No. 1 to our Annual Report on Form 10-K filed with the SEC on
July 22, 2016;
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Our Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2016, as filed with the SEC on May 13, 2016;
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Our Definitive Proxy Statement on Schedule 14A, filed with the SEC on May 16, 2016;
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Our Current Reports on Form 8-K filed with the SEC on April 29, 2016, June 24, 2016, July 18, 2016 and July 27, 2016; and
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The description of our shares of common stock contained in our registration statement on Form 8-A, filed with the SEC on January 4, 1993.
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Certain Current Reports on Form 8-K dated both prior to and after the date of this prospectus supplement re or will be furnished to the SEC
and shall not be deemed “filed” with the SEC and will not be incorporated by reference into this prospectus supplement or the accompanying prospectus. However, all other reports and documents filed by us after the date of this prospectus
supplement under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the termination of the offering of the securities covered by this prospectus supplement will also be deemed incorporated by reference in this prospectus supplement and
considered to be part of this prospectus supplement from the date those documents are filed. If you make a request, orally or in writing, for any information that has been incorporated by reference into this prospectus supplement but not delivered
with this prospectus supplement, we will provide you, without charge, a copy of any or all of that information. Requests for this information should be submitted in writing to our Secretary, at our principal executive offices at Superconductor
Technologies Inc., 9101 Wall Street, Suite 1300 Austin, Texas 78754 or by telephone at (512) 334-8900.
This prospectus supplement or
the accompanying prospectus may contain information that updates, modifies or is contrary to information in the document incorporated by reference herein or therein. To the extent that any statements contained in a document incorporated by reference
are modified or superseded by any statements contained in this prospectus supplement or the accompanying prospectus, such statements shall not be deemed incorporated in this prospectus supplement or the accompanying prospectus except as so modified
or superseded. Reports we file with the SEC after the date of this prospectus supplement may also contain information that updates, modifies or is contrary to information in this prospectus supplement, the accompanying prospectus or in a document
incorporated by reference. Investors should review these reports as they may disclose a change in our business, prospects, financial condition or other affairs after the date of this prospectus supplement. Certain of the documents summarized in this
prospectus supplement or incorporated by reference into this prospectus supplement contain representations and warranties which statements are not for the benefit of any party other than the parties to such agreement and are not intended as a
document for investors (to the extent they are not a party to such agreement) or the public generally to obtain factual information about us.
S-35
PROSPECTUS
$50,000,000
Common Stock
Preferred Stock
Warrants
Units
We may
offer, from time to time, separately or together in any combination, common stock, preferred stock, warrants or units consisting of all of some of such securities having an aggregate offering price of up to $50,000,000.
We may offer the securities in one or more series, in amounts, at prices and on terms determined at the time of offering. We will provide the
specific terms of any securities we actually offer for sale in supplements to this prospectus.
We may sell these securities directly,
through agents, dealers or underwriters as designated from time to time, or through a combination of these methods. We reserve the sole right to accept, and together with our agents, from time to time, to reject in whole or in part any proposed
purchase of securities to be made directly or through agents. If our agents or any dealers or underwriters are involved in the sale of securities, the applicable prospectus supplement will set forth the names of the agents, dealers or underwriters
and any applicable commissions or discounts.
You should read carefully this prospectus, each prospectus supplement and the documents
incorporated by reference into this prospectus and any prospectus supplement before you invest in any of our securities. This prospectus may not be used to sell securities unless accompanied by a prospectus supplement.
Our common stock is traded on the NASDAQ Capital Market under the symbol “SCON.” On March 10, 2015, the closing sale price of
our common stock on the NASDAQ Capital Market was $1.83 per share and the aggregate market value of the common stock held by non-affiliates as of such date was $21.7 million, based on 15,180,899 shares of outstanding common stock, of which
11,869,844 shares are held by non-affiliates. We have not sold any securities pursuant to General Instruction I.B.6 of Form S-3 during the 12 calendar months prior to and including the date hereof.
Investing in our Securities involves risks. You should carefully consider the risk factors included under the heading “
Risk
Factors
” in the applicable prospectus supplement and under that heading or similar headings in the other documents incorporated by reference in this prospectus or any prospectus supplement before making a decision to purchase our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities
described in this prospectus or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is March 19, 2015.
TABLE OF CONTENTS
(i)
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we filed with the Securities and Exchange Commission, or the SEC, using a
“shelf” registration process. Under the shelf registration process, using this prospectus, together with a prospectus supplement, we may sell, from time to time, in one or more offerings, any combination of the securities described in this
prospectus in a dollar amount that does not exceed $50,000,000 in the aggregate. This prospectus provides you with a general description of the securities we may offer. Each time we offer securities, a prospectus supplement will be provided that
will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. To the extent that any statement we make in a prospectus supplement is
inconsistent with statements made in this prospectus, the statements made in this prospectus will be deemed modified or superseded by those made in the prospectus supplement.
You should read this prospectus, the applicable prospectus supplement and the information incorporated by reference in this prospectus or any
prospectus supplement before making an investment in our securities. See “Documents Incorporated by Reference” and “Where You Can Find More Information” for more information. You should rely only on the information contained in
or incorporated by reference in this prospectus or a prospectus supplement. We have not authorized anyone to provide you with different information. This document may be used only in jurisdictions where offers and sales of these securities are
permitted. You should not assume that information contained in this prospectus, in any supplement to this prospectus, or in any document incorporated by reference is accurate as of any date other than the date on the front page of the document that
contains the information, regardless of when this prospectus or a prospectus supplement is delivered or when any sale of our securities occurs.
(ii)
SUMMARY
This summary highlights information contained elsewhere or incorporated by reference into this prospectus. This summary does not contain
all of the information that you should consider before deciding to invest in our securities. You should read this entire prospectus carefully, including the “Risk Factors” section contained in this prospectus, and our consolidated
financial statements and the related notes and the other documents incorporated by reference into this prospectus
.
Our Company
We are a leading company in developing and commercializing high temperature superconductor (“HTS”) materials and related
technologies. Superconductivity is the unique ability to conduct electricity with little or no resistance when cooled to “critical” temperatures. HTS materials are a family of elements that demonstrate superconducting properties at
temperatures significantly warmer than previous superconducting materials. Electric currents that flow through conventional conductors encounter resistance that requires power to overcome and generates heat. HTS materials can substantially improve
the performance characteristics of electrical systems, reduce power loss, and lowering heat generation providing extremely high current carrying density and zero resistance to direct current.
We were established in 1987 shortly after the discovery of HTS materials. Our stated objective was to develop products based on these
materials for the commercial marketplace.
After analyzing the market opportunities available, we decided to develop products for the
utility and telecommunications industries.
Our initial product was completed in 1998 and we began delivery to a number of wireless
network providers. In the following 13 years, we continued to refine and improve the platform, with the primary focus on improving reliability, increasing performance and runtime, and most importantly, removing cost from the manufacturing process of
the required subsystems. Our cost reducing efforts led to the invention of our proprietary, high-yield and high throughput HTS material deposition manufacturing process.
In late 2010, we transitioned our research and development efforts to adapting our proprietary HTS material deposition techniques to the
production of our HTS Conductus
®
wire for next generation power applications, which is our primary opportunity to grow our future revenues. We continue to generate revenue from our legacy
wireless communications products. This revenue has been declining and we expect this trend to continue until we completely abandon these products.
Our Proprietary Technology
Our development efforts over the last 27 years have yielded an extensive patent portfolio as well as critical trade secrets, unpatented
technology and proprietary knowledge. We have an extensive patent portfolio in addition to critical trade secrets, unpatented technology and proprietary knowledge. Our current patents expire at various dates from 2015 to 2031. We enter into
confidentiality and non-disclosure agreements with our employees, suppliers and consultants to protect our proprietary information.
Our
strategic plan is to utilize our core proprietary technology in superconductivity and leverage our proprietary manufacturing processes to build Conductus wire for use in electrical power devices. As discussed above, we are adapting our unique HTS
material deposition techniques to produce our energy efficient, cost-effective and high performance Conductus wire technology for next generation power applications. We have identified several large initial target markets for superconducting wire
including energy (wind turbines, cables,
1
fault current limiters), medical (NMR and MRI), science (high performance magnets) and industrial (motors, generators) applications. We are working with leading industry device manufactures to
complete qualification and acceptance testing of Conductus wire. We expect to begin commercial production of Conductus wire in late 2015.
Our Future Business
We
have created several unique capabilities and HTS manufacturing systems related to our Conductus wire platform that we are seeking to produce by leveraging our leadership in superconducting technologies, extensive intellectual property and HTS
manufacturing expertise.
HTS Wire Platform
Our Conductus wire product development is focused on large markets where the advantages of HTS wire are recognized by the industry. Our initial
product roadmap targets three important applications: superconducting high power transmission cable, superconducting fault current limiters (SFCL) and superconducting rotating machines such as motors and generators.
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Superconducting High Power Transmission Cable
: Superconducting high power transmission and distribution cable transmit 5 to 10 times the electrical current of traditional copper or aluminum cables with
significantly improved efficiency. HTS power cable systems consist of the cable, which is comprised of 100’s of strands of HTS wire wrapped around a copper core, and the cryogenic cooling system to maintain proper operating conditions. HTS
power cables are particularly suited to high load areas such as the dense urban business districts of large cities, where purchases of easements and construction costs for traditional low capacity cables may be cost prohibitive. The primary
application for HTS cables is medium voltage feeds to load pockets in dense urban areas. In these high demand zones the grid is often saturated with aging infrastructure. HTS technology brings a considerable amount of power to new locations where
the construction of additional transmission to distribution substations, with major transformer assets, is not feasible. Another potential use of HTS power cable is to improve grid power transmission by connecting two existing substations. In dense
urban environments many substations often reach capacity limits and require redundant transformer capacity to improve reliability HTS cables can tie these existing stations together, avoiding very costly transformer upgrades and construction costs.
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Superconducting Fault Current Limiter (SFCL)
: With power demand on the rise and new power generation
sources being added, the grid has become overcrowded and vulnerable to catastrophic faults. Faults are abnormal flows of electrical current like a short circuit. As the grid is stressed, faults and power blackouts increase in frequency and severity.
SFCLs act like powerful surge protectors, preventing harmful faults from taking down substation equipment by reducing the fault current to a safer level (20 – 50% reduction) so that the existing switchgear can still protect the grid. Currently,
electrical-utilities use massive 80kA circuit breakers, oversized transformers and fuses to prevent faults from damaging their equipment and protecting against surges. However, once a fault has occurred, standard circuit breakers suffer destructive
failure and need to be replaced before service can be restored. In addition, Smart Grid and embedded alternative energy generation enhancements will increase the need for SCFLs. Grid operators face a major challenge in moving power safely and
efficiently, from generators to consumers, through several stages of voltage transformation step downs and step ups. At each stage, valuable energy is lost in the form of waste heat. Moreover, while demands are continually rising, space for
transformers and substations - especially in dense urban areas - is severely limited. Conventional oil-cooled transformers pose a fire and environmental hazard. Compact, efficient superconducting transformers, by contrast, are cooled by safe,
abundant and environmentally
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benign liquid nitrogen. As an additional benefit, these actively-cooled devices will offer the capability of operating in overload, to twice the nameplate rating, without any loss of life to meet
occasional utility peak load demands.
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Superconducting Rotating Machines - Motors and Generators
: Superconducting motors, generators, turbines and other rotating machines are expected to generate large future demand for our Conductus wire. Coils
utilizing Conductus wire will enable electric motors and generators to operate at much higher power densities. When compared to a copper wire based electric machine with equivalent output power, future superconducting motors and generators will
enable a significant size reductions for the motors with higher efficiency. One potential application for high-powered superconducting generators is expected to be 10+ megawatt offshore wind turbines. Offshore superconducting wind turbines promise
to capture clean energy at a lower cost than competing renewables, while delivering power directly to growing coastal cities. Superconducting wind turbines are expected to play a unique role offshore since conventional technology cannot achieve the
“power per tower” requirement.
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Superconducting High Field Magnets
: There are a variety of applications that utilize superconducting magnets in order to capitalize on their unique ability to create extremely high magnetic fields. The NMR
(Nuclear Magnetic Resonance) and MRI (Magnetic Resonance Imaging) machines of today utilize such superconducting magnets for this very reason. Currently, high-field superconducting magnets are manufactured using commercially available
superconducting wire such as niobium-titanium (NbTi) or niobium-tin (Nb3Sn). NMR and MRI device manufacturers look towards advances in superconducting technologies to improve the overall performance of their systems by dramatically increasing the
magnetic fields while reducing size. High demand for a robust, high performance and low cost superconducting wire has spurred rapid development of a next generation alternative. In the last 10 years, new second generation (2G) Rare Earth,
Barium, Copper Oxide (ReBCO) superconducting materials have been proven to drastically increase magnetic field strengths, especially at low temperatures. These advanced ReBCO based superconductors now provide an excellent alternative to NbTi and
Nb3Sn based materials.
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Corporate Information
Our facilities and principal executive offices are located at 9101 Wall Street, Suite 1300, Austin, Texas 78754. Our telephone number is
(512) 334-8900. We were incorporated in Delaware on May 11, 1987. Additional information about us is available on our website at www.suptech.com. The information contained on or that may be obtained from our website is not, and shall not
be deemed to be, a part of this prospectus. Our common stock is currently traded on the NASDAQ Capital Market under the symbol “SCON.”
The Securities We May Offer
With this prospectus, we may offer common stock, preferred stock, warrants and units consisting of some or all of such securities, separately
or together in any combination of the foregoing. The aggregate initial offering price of all securities we sell in the primary offerings under this prospectus will not exceed $50,000,000. Each time we offer securities with this prospectus, we will
provide offerees with a prospectus supplement that will contain the specific terms of the securities being offered. The following is a summary of the securities we may offer with this prospectus.
We may sell the securities to or through underwriters, dealers or agents or directly to purchasers. We, as well as any agents acting on our
behalf, reserve the sole right to accept and to reject in whole or in part any proposed purchase of securities. Each prospectus supplement will set forth the names of any underwriters, dealers or agents involved in the sale of securities described
in that prospectus supplement and any applicable fee, commission or discount arrangements with them.
3
Common Stock
We may offer shares of our common stock, par value $0.001 per share, either alone or underlying other registered securities convertible into or
exchangeable for our common stock. Holders of our common stock are entitled to such dividends as our board of directors may declare from time to time out of legally available funds, subject to the preferential rights of the holders of any shares of
our preferred stock that are outstanding or that we may issue in the future. Currently, we do not pay any dividends. Each holder of our common stock is entitled to one vote per share. Holders of our common stock have no preemptive rights. In this
prospectus, we provide a general description of, among other things, our dividend policy and the transfer and voting restrictions that apply to holders of our common stock.
Preferred Stock
We may issue
shares of preferred stock in one or more classes or series. Our board of directors or a committee designated by our board of directors will determine the dividend, voting and conversion rights and other provisions at the time of sale. The particular
terms of each class or series of preferred stock, including redemption privileges, liquidation preferences, voting rights, dividend rights and/or conversion rights, will be more fully described in the applicable prospectus supplement relating to the
preferred stock offered thereby.
Warrants
We may offer warrants for the purchase of shares of preferred or common stock. We may issue the warrants by themselves or together with
preferred stock or common stock and the warrants may be attached to or separate from any offered securities. Each series of warrants may be issued under a separate warrant agreement to be entered into between us and a warrant agent. Our board of
directors or a committee designated by our board of directors will determine the terms of the warrants at the time of sale. This prospectus contains only general terms and provisions of the warrants. The applicable prospectus supplement will
describe the particular terms of the warrants being offered thereby.
Units
We may offer units consisting of some or all of our preferred stock, common stock and warrants. The units may be issued in the form of a unit
agreement and/or unit certificate. This prospectus contains only general terms and provisions of the units. The applicable prospectus supplement will describe the particular terms of the warrants being offered thereby.
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RISK FACTORS
We have included discussions of cautionary factors describing risks relating to our business and an investment in our securities in our Annual
Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference into this prospectus. See “Where You Can Find More Information” for an explanation of how to get a copy of this report. Additional risks
related to our securities may also be described in a prospectus supplement. Before purchasing our securities, you should carefully consider the risk factors we describe in any prospectus supplement or in any report incorporated by reference into
this prospectus or such prospectus supplement, including our Annual Report on Form 10-K for the year ended December 31, 2014, or any Annual Report on Form 10-K or Quarterly Report on Form 10-Q that is incorporated by reference into this
prospectus or such prospectus supplement after the date of this prospectus. Although we discuss key risks in those risk factor descriptions, additional risks not currently known to us or that we currently deem immaterial also may impair our
business. Our subsequent filings with the SEC may contain amended and updated discussions of significant risks. We cannot predict future risks or estimate the extent to which they may affect our financial performance.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains, and may incorporate by reference, forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995 for these forward looking
statements. Our forward-looking statements relate to future events or our future performance and include, but are not limited to, statements concerning our business strategy, future commercial revenues, market growth, capital requirements, new
product introductions, expansion plans and the adequacy of our funding. Other statements contained in this prospectus and in any applicable prospectus supplement that are not historical facts are also forward-looking statements. We have tried,
wherever possible, to identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expects,” “anticipates,” “intends,” “plans,”
“believes,” “seeks,” “estimates” and other comparable terminology.
We caution investors that any
forward-looking statements presented in this prospectus or in any applicable prospectus supplement or the other documents incorporated by reference herein or therein, or that we may make orally or in writing from time to time, are based on the
beliefs of, assumptions made by, and information currently available to, us. Such statements are based on assumptions and the actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control
or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our
expectations, and those differences may be material. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or
trends.
Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from
those expressed or implied by forward-looking statements include the following:
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our limited cash and a history of losses;
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our need to materially grow our revenues from commercial operations and/or raise additional capital (which financing may not be available on acceptable terms or at all) in the very near future, before cash
reserves are deleted (which reserves are expected to be sufficient well into the second quarter of 2015), to implement our current business plan and maintain our viability;
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the performance and use of our equipment to produce wire in accordance with our timetable;
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our need to overcome additional technical challenges in attaining milestones to develop and manufacture commercial lengths of our HTS wire;
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the possibility of delays in customer evaluation and acceptance of our HTS wire;
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the limited number of potential customers;
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customer pressures on the decreases in average selling prices of our products;
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limited number of suppliers for some of our components;
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no significant backlog from quarter to quarter;
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our market being characterized by rapidly advancing technology;
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the impact of competitive products, technologies and pricing;
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manufacturing capacity constraints and difficulties;
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fluctuations in sales and product demand from quarter to quarter can be significant;
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our proprietary rights, while important to our business, are difficult and costly to protect;
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the cost and uncertainty from compliance with environmental regulations;
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the impact on our strategic wire initiative of any inability to raise additional capital;
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the impact of any financing activity on the level of our stock price, which may decline in connection with the sales under registered direct offerings or otherwise and the dilutive impact of any issuances of securities
to raise capital; and
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local, regional, national and international economic conditions and events and the impact they may have on us and our customers.
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We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995. We caution investors that any forward-looking
statements presented in this prospectus or any prospectus supplement or the documents incorporated by reference herein or therein, or those that we may make orally or in writing from time to time, are based upon management’s beliefs and
assumptions and are made based on information available to us as of the time made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference in this prospectus or any prospectus
supplement or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise, except to the extent required by federal securities laws.
Forward-looking statements may be contained in this prospectus or any prospectus supplement (and the documents incorporated by reference herein or therein) under “Risk Factors,” or may be contained in our Annual Report on Form 10-K or in
our Quarterly Reports on Form 10-Q under headings such as “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and “Business,” or in our Current Reports on Form 8-K, among other places.
Any investor in us should consider all risks and uncertainties disclosed in our filings with the SEC described below under the heading “Where You Can Find More Information,” all of which are accessible on the SEC’s website at
www.sec.gov
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USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, we anticipate that the net proceeds from the sale of the securities under
this prospectus will be used for general corporate purposes. General corporate purposes may include repayment of debt, capital expenditures, and any other purposes that we may specify in any prospectus supplement. In addition, we may use a portion
of any net proceeds to acquire complementary products, technologies or businesses. We will have significant discretion in the use of any net proceeds. Investors will be relying on the judgment of our management regarding the application of the
proceeds of any sale of the securities. We may invest the net proceeds temporarily until we use them for their stated purpose.
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DESCRIPTION OF CAPITAL STOCK
The following description of our common stock and preferred stock, together with the additional information we include in any applicable
prospectus supplement, summarizes the material terms and provisions of the common stock and the preferred stock that we may offer pursuant to this prospectus. While the terms we have summarized below will apply generally to any future common stock
or preferred stock that we may offer, we will describe the particular terms of any class or series of these securities in more detail in the applicable prospectus supplement. For the complete terms of our common stock and preferred stock, please
refer to our restated certificate of incorporation, as amended, or our certificate of incorporation, and our amended and restated bylaws, as amended, or our bylaws, which are exhibits to the registration statement of which this prospectus is a part.
The terms of these securities may also be affected by the General Corporation Law of the State of Delaware. The summary below and that contained in any prospectus supplement is qualified in its entirety by reference to our certificate of
incorporation and our bylaws, as either may be amended from time to time after the date of this prospectus, but before the date of any such prospectus supplement.
Authorized Capitalization
We have
252,000,000 shares of capital stock authorized under our certificate of incorporation, consisting of 250,000,000 shares of common stock and 2,000,000 shares of preferred stock, of which 706,829 have been designated as Series A Convertible
Preferred Stock, par value $0.001 per share, or Series A Preferred Stock. As of March 1, 2015, we had 15,180,899 shares of common stock outstanding and 328,925 shares of our Series A Preferred Stock outstanding. Our authorized shares
of common stock and preferred stock are available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may
be listed or traded. If the approval of our stockholders is not so required, our board of directors may determine not to seek stockholder approval.
Common Stock
Holders of our common stock
are entitled to such dividends as may be declared by our board of directors out of funds legally available for such purpose, subject to any preferential dividend rights of any then outstanding preferred stock. The shares of common stock are neither
redeemable nor convertible. Holders of common stock have no preemptive or subscription rights to purchase any of our securities.
Each
holder of our common stock is entitled to one vote for each such share outstanding in the holder’s name. No holder of common stock is entitled to cumulate votes in voting for directors.
In the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive pro rata our assets that
are legally available for distribution, after payments of all debts and other liabilities and subject to the prior rights of any holders of preferred stock then outstanding. All of the outstanding shares of our common stock are, and the shares of
common stock issued upon the conversion of any securities convertible into our common stock will be, fully paid and non-assessable. The shares of common stock offered by this prospectus or upon the conversion of any preferred stock or debt
securities or exercise of any warrants offered pursuant to this prospectus, when issued and paid for, will also be, fully paid and non-assessable.
Our common stock is listed on the NASDAQ Capital Market under the symbol “SCON.” Computershare is the transfer agent and registrar
for our common stock. Its address is 250 Royall Street, Canton, MA 02021].
Preferred Stock
Our certificate of incorporation permits us to issue up to 2,000,000 shares of preferred stock in one or more series and with rights and
preferences that may be fixed or designated by our board of directors without any
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further action by our stockholders. We currently have 706,829 shares of our Series A Preferred Stock designated, and as of March 1, 2015, we had 328,925 shares of our Series A
Preferred Stock outstanding.
Subject to the limitations prescribed in our certificate of incorporation and under Delaware law, our
certificate of incorporation authorizes the board of directors, from time to time by resolution and without further stockholder action, to provide for the issuance of shares of preferred stock, in one or more series, and to fix the designation,
powers, preferences and other rights of the shares and to fix the qualifications, limitations and restrictions thereof. The issuance of preferred stock could adversely affect the rights of holders of our common stock, including with respect to
voting, dividends and liquidation, by issuing shares of preferred stock with certain voting, conversion and/or redemption rights. Such issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control.
Preferred stock could thus be issued quickly with terms calculated to delay or prevent a change in control of our company or to make removal
of management more difficult. Additionally, the issuance of preferred stock may decrease the market price of our common stock. The number of authorized shares of preferred stock may be increased or decreased, but not decreased below the number of
shares then outstanding, by the affirmative vote of the holders of a majority of our common stock without a vote of the holders of preferred stock, or any series of preferred stock, unless a vote of any such holder is required pursuant to the terms
of such series of preferred stock.
The following description sets forth certain general terms and provisions of the preferred stock we
may issue. If we offer convertible preferred stock, such stock will be convertible into shares of our common stock. With respect to any convertible preferred stock or preferred stock (each referred to herein as preferred stock) we may choose to
offer, the specific designations and rights will be described in the prospectus supplement relating to the preferred stock offered, including the following terms. Each time that we issue a new series of preferred stock, we will file with the SEC a
definitive certificate of designations that will state the designation, powers, preferences, rights and qualifications, limitations and restrictions of that series of preferred stock. In addition, the prospectus supplement relating to that new
series of preferred stock will specify the particular amount, price and other terms of that new series. These terms will include:
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the designation of the series, which may be by distinguishing number, letter or title;
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the number of shares of the series, which number the board of directors may thereafter (except where otherwise provided in the preferred stock designation) increase or decrease (but not below the number of shares
thereof then outstanding);
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the price at which the preferred stock will be issued;
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the dividend rate, the dates on which the dividends will be payable, if any, whether dividends shall be cumulative or noncumulative and other terms relating to the payment of dividends on the preferred stock;
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whether the preferred stock is redeemable or subject to a sinking fund, and the terms and amount of such sinking fund provided for the purchase or redemption of shares of the series;
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the amounts payable on shares of the series, and the special or relative rights of such shares, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of our company;
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whether the shares of the series shall be convertible into shares of any other class or series, or any other security, of our company or any other corporation, and, if so, the specification of such other class or
series or such other security, the conversion price or prices or rate or rates, any adjustments thereof, the date or dates as of which such shares shall be convertible and all other terms and conditions upon which such conversion may be made;
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any listing of the preferred stock on any securities exchange;
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the relative ranking and preferences of the preferred stock as to dividend rights and rights upon liquidation and dissolution or winding up;
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restrictions on the issuance of shares of the same series or of any other class or series;
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the voting rights, if any, of the holders of shares of the series, provided that no share of preferred stock of any series will be entitled to more than one vote per share of preferred stock; and
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any additional rights, preferences, qualifications, limitations and restrictions of the preferred stock.
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Any prospectus supplement filed in connection with an offering of preferred stock will describe all material terms of such series of preferred
stock and all material terms of any common stock, if any, issuable upon conversion of such preferred stock. However, the description of the terms of the preferred stock to be set forth in an applicable prospectus supplement will not be complete and
will be subject to and qualified in its entirety by reference to the certificate of designations or the certificate of amendment to our certificate of incorporation relating to the applicable series of preferred stock, together with our bylaws. The
registration statement of which this prospectus forms a part currently does or will in the future include the certificate of designations or the certificate of amendment and our bylaws as exhibits or incorporate them by reference.
The preferred stock will, if and when issued, be fully paid and non-assessable. The holders of the preferred stock will not have preemptive
rights.
Series A Convertible Preferred Stock
In October 2007, in connection with entering into an amended investment agreement with Hunchun BaoLi Communication Co. Ltd., or BAOLI, our
board of directors authorized the designation and issuance of 706,829 shares of our Series A Preferred Stock. On January 8, 2008, the terms of the investment agreement with BAOLI were amended, and we issued to BAOLI and two related
purchasers a total of 3,101,361 shares of common stock and 611,523 shares of Series A Preferred Stock. Subject to the terms and conditions of our Series A Preferred Stock and to customary adjustments to the conversion rate, each share of
our Series A Preferred Stock is convertible into ten twelfths of a share of our common stock so long as the number of shares of our common stock beneficially owned by BAOLI following such conversion does not exceed 9.9% of our outstanding
common stock. Except for a preference on liquidation of $0.01 per share, each share of Series A Preferred Stock is the economic equivalent of ten twelfths of a share of common stock into which it is convertible. Except as required by law, the
Series A Preferred Stock will not have any voting rights. For a complete description of the terms of the Series A Preferred Stock, please see the certificate of designations, filed with, and incorporated by reference into, this prospectus.
Anti-Takeover Effects of Certain Provisions of Delaware Law and Our Charter Documents
The following is a summary of certain provisions of Delaware law, our certificate of incorporation and our bylaws. This summary does not
purport to be complete and is qualified in its entirety by reference to the corporate law of Delaware and our certificate of incorporation and bylaws.
Effect of Delaware Anti-Takeover Statute
We are subject to Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a
Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years following the date that the stockholder became an interested stockholder, unless:
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prior to that date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
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upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the number of shares of voting stock outstanding (but not the voting stock owned by the interested stockholder) those shares owned by persons who are directors and officers and by
excluding employee stock plans in which employee participants do not have the right to determine whether shares held subject to the plan will be tendered in a tender or exchange offer; or
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on or subsequent to that date, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least 66-2/3% of the outstanding voting stock that is not owned by the interested stockholder.
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Section 203
defines “business combination” to include the following:
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any merger or consolidation involving the corporation and the interested stockholder;
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any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
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subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
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any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or
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the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
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In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding
voting stock of the corporation, or who beneficially owns 15% or more of the outstanding voting stock of the corporation at any time within a three year period immediately prior to the date of determining whether such person is an interested
stockholder, and any entity or person affiliated with or controlling or controlled by any of these entities or persons.
Our Charter Documents
Our charter documents include provisions that may have the effect of discouraging, delaying or preventing a change in control or
an unsolicited acquisition proposal that a stockholder might consider favorable, including a proposal that might result in the payment of a premium over the market price for the shares held by our stockholders. Certain of these provisions are
summarized in the following paragraphs.
Classified Board of Directors
Pursuant to our certificate of incorporation, the number of directors is fixed by our board of directors. Our directors are divided into three
classes, each class to serve a three-year term and to consist as nearly as possible of one third of the total number of directors. Pursuant to our bylaws, directors elected by stockholders at an annual meeting of stockholders will be elected by a
plurality of all votes cast.
No Stockholder Action by Written Consent
Our bylaws provide that a special meeting of stockholders may be called only by the chairman of the board, a majority of the entire board of
directors or the president. Stockholders are not permitted to call, or to require that the board of directors call, a special meeting of stockholders. Moreover, the business permitted to be conducted at any special meeting of stockholders is limited
to the business brought before the meeting pursuant
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to the notice of the meeting given. In addition, our certificate of incorporation provides that any action taken by our stockholders must be effected at an annual or special meeting of
stockholders and may not be taken by written consent instead of a meeting. Our bylaws establish an advance notice procedure for stockholders to nominate candidates for election as directors or to bring other business before meetings of our
stockholders.
Change in Control Agreements
A number of our executives have agreements with us that entitle them to payments in certain circumstances following a change in control.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of preferred stock or common stock. Warrants may be issued independently or together with preferred
stock, common stock or units and may be attached to or separate from any offered securities. Each series of warrants may be issued under a separate warrant agreement to be entered into between us and a warrant agent. The warrant agreement may
provide that, in certain circumstances, we and the warrant agent will be permitted to amend the warrant agreement without the consent of the holders of warrants. The warrant agent will act solely as our agent in connection with the warrants and will
not assume any obligation or relationship of agency or trust for or with any registered holders of warrants or beneficial owners of warrants. This summary of certain provisions of the warrants is not complete. You should refer to the warrant
agreement, including the forms of warrant certificate representing the warrants, relating to the specific warrants being offered for the complete terms of the warrant agreement and the warrants. The warrant agreement, together with the terms of
warrant certificate and warrants, will be filed with the SEC in connection with the offering of the specific warrants.
The particular
terms of any issue of warrants will be described in the prospectus supplement relating to the issue. Those terms may include:
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the title of such warrants;
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the aggregate number of such warrants;
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the price or prices at which such warrants will be issued;
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the currency or currencies (including composite currencies) in which the price of such warrants may be payable;
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the amount and terms of the securities purchasable upon exercise of such warrants and the procedures and conditions relating to the exercise of such warrants;
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the purchase price of each of the securities purchasable upon exercise of such warrants;
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the date on which the right to exercise such warrants will commence and the date on which such right shall expire;
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any provisions for adjustment of the number or amount of securities to be received upon exercise of the warrants or of the exercise price of the warrants;
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if applicable, the minimum or maximum amount of such warrants that may be exercised at any one time;
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if applicable, the designation and terms of the securities with which such warrants are issued and the number of such warrants issued with each such security;
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if applicable, the date on and after which such warrants and the related securities will be separately transferable;
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information with respect to book-entry procedures, if any; and
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any other terms of such warrants, including terms, procedures, conditions and limitations relating to the exercise of such warrants.
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The prospectus supplement relating to any warrants to purchase equity securities may also include, if applicable, a discussion of certain U.S.
federal income tax and ERISA considerations.
Warrants for the purchase of preferred stock and/or common stock will be offered and
exercisable for U.S. dollars only. Warrants will be issued in registered form only.
Each warrant will entitle its holder to purchase the
number of shares of preferred stock or common stock at the exercise price set forth in, or calculable as set forth in, the applicable prospectus supplement. The applicable prospectus supplement will also describe the circumstances pursuant to which
the exercise price and/or the number or amount of the securities to be issued upon exercise of the warrants would be adjusted and the method of making and notifying the holder of any such adjustment.
After the close of business on the applicable expiration date, unexercised warrants will become void. We will specify the place or places
where, and the manner in which, warrants may be exercised in the applicable prospectus supplement.
Upon receipt of payment and the
warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement, we will, as soon as practicable, issue and deliver the purchased
securities in the manner described in the applicable prospectus supplement. If less than all of the warrants represented by the warrant certificate are exercised, a new warrant certificate will be issued for the remaining unexpired warrants.
Prior to the exercise of any warrants to purchase preferred stock or common stock, holders of the warrants will not have any of the rights of
holders of the preferred stock or common stock purchasable upon exercise, including the right to vote or to receive any payments of dividends on the preferred stock or common stock purchasable upon exercise.
DESCRIPTION OF UNITS
We may issue units consisting of any combination of our common stock, preferred stock and warrants. We will issue each unit so that the holder
of the unit is also the holder of each security included in the unit. As a result, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the
securities included in the unit may not be held or transferred separately, at any time or at any time before a specified date. This summary of certain provisions of the units is not complete. You should refer to the unit agreement and/or unit
certificate, and depositary arrangements, relating to the specific units being offered for the complete terms of the units. The unit agreement and/or unit certificate, and depositary arrangements, as applicable, will be filed with the SEC in
connection with the offering of the specific units.
The particular terms of any issue of units will be described in the prospectus
supplement relating to the issue. Those terms may include:
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the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately;
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any provisions for the issuance, payment, settlement, transfer, or exchange of the units or of the securities composing the units;
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whether the units will be issued in fully registered or global form; and
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any other terms of the units.
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PLAN OF DISTRIBUTION
We may sell the securities being offered hereby in one or more of the following ways from time to time:
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through agents to the public or to investors;
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to underwriters for resale to the public or to investors;
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directly to investors; or
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through a combination of any of these methods of sale.
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We will set forth in a prospectus supplement
the terms of that particular offering of securities, including:
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the name or names of any agents or underwriters;
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the purchase price of the securities being offered and the proceeds we will receive from the sale;
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any over-allotment options under which underwriters may purchase additional securities from us;
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any agency fees or underwriting discounts and other items constituting agents’ or underwriters’ compensation;
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any initial public offering price;
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any discounts or concessions allowed or reallowed or paid to dealers; and
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any securities exchanges or markets on which such securities may be listed.
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Agents
We may designate agents who agree to use their reasonable efforts to solicit purchases of our securities for the period of their appointment or
to sell our securities on a continuing basis.
Underwriters
If we use underwriters for a sale of securities, the underwriters will acquire the securities for their own account. The underwriters may
resell the securities in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase the securities will be
subject to the conditions set forth in the applicable underwriting agreement. The underwriters will be obligated to purchase all the securities of the series offered if they purchase any of the securities of that series. We may change from time to
time any initial public offering price and any discounts or concessions the underwriters allow or reallow or pay to dealers.
Direct Sales
We may also sell securities directly to one or more purchasers without using underwriters or agents. Underwriters, dealers and agents that
participate in the distribution of the securities may be underwriters as defined in the Securities Act, and any discounts or commissions they receive from us and any profit on their resale of the securities may be treated as underwriting discounts
and commissions under the Securities Act. To the extent known to us, we will identify in the applicable prospectus supplement any underwriters, dealers or agents and will describe their compensation.
Derivative Securities
We may enter into
derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third
parties may sell securities covered by this prospectus and the
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applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by us or borrowed from us or others to settle those sales or to close out
any related open borrowings of stock, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and will be
identified in the applicable prospectus supplement (or a post-effective amendment).
Trading Markets and Listing of Securities
Unless otherwise specified in the applicable prospectus supplement, each class or series of securities will be a new issue with no established
trading market, other than our common stock, which is listed on the NASDAQ Capital Market. We may elect to list any other class or series of securities on any exchange or market, but we are not obligated to do so. It is possible that one or more
underwriters may make a market in a class or series of securities, but the underwriters will not be obligated to do so and may discontinue any market making at any time without notice. We cannot give any assurance as to the liquidity of the trading
market for any of the securities.
Stabilization Activities
Any underwriter may engage in overallotment, stabilizing transactions, short covering transactions and penalty bids in accordance with
Regulation M under the Exchange Act. Overallotment involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Short covering transactions involve purchases of the securities in the open market after the distribution is completed to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a
dealer when the securities originally sold by the dealer are purchased in a covering transaction to cover short positions. Those activities may cause the price of the securities to be higher than it would otherwise be. If commenced, the underwriters
may discontinue any of these activities at any time.
Passive Market Making
Any underwriters who are qualified market makers on the NASDAQ Capital Market may engage in passive market making transactions in the
securities on the NASDAQ Capital Market in accordance with Rule 103 of Regulation M, during the business day prior to the pricing of the offering, before the commencement of offers or sales of the securities. Passive market makers must
comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security. If all
independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded.
Material Relationships
We may use
underwriters, dealers and agents with whom we have a material relationship. To the extent required, we will describe the nature of any such relationship in any prospectus supplement naming any such underwriter, dealer or agent. Underwriters, dealers
and agents may engage in transactions with or perform services for us in the ordinary course of their businesses, and we will include in any prospectus supplement any required disclosure related to such transactions or services. We may have
agreements with the underwriters, dealers and agents to indemnify them against specified civil liabilities, including liabilities under the Securities Act.
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LEGAL MATTERS
Certain legal matters relating to the validity of the securities offered by this prospectus will be passed upon for us by Manatt,
Phelps & Phillips, LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements of Superconductor Technologies Inc., as of December 31, 2014 and 2013, and for each of the three
years in the period ended December 31, 2014, incorporated in this prospectus by reference to the Annual Report on Form 10-K of Superconductor Technologies Inc. for the year ended December 31, 2014 have been so incorporated in reliance on
the report (which contains an explanatory paragraph related to the company’s ability to continue as a going concern) of Marcum, LLP, Independent Registered Public Accounting Firm, given on the authority of said firm as experts in auditing and
accounting.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to “incorporate by reference” information that we file with them, which means that we can disclose important
information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and the information that we file later with the SEC will automatically update and supersede this information.
The following documents have been previously filed by us with the SEC pursuant to the Exchange Act and are hereby incorporated by reference in this prospectus and the registration statement of which this prospectus forms a part:
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our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC on March 12, 2015;
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our Current Report on Form 8-K filed with the SEC on February 17, 2015.
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the description of our common stock contained in our registration statement on Form 8-A filed with the SEC on January 4, 1993.
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Certain Current Reports on Form 8-K dated both prior to and after the date of this prospectus are or will be furnished to the SEC and shall
not be deemed “filed” with the SEC and will not be incorporated by reference into this prospectus. However, all other reports and documents filed by us after the date of this prospectus under Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act prior to the termination of the offering of the securities covered by this prospectus will also be deemed incorporated by reference in this prospectus and considered to be part of this prospectus from the date those documents are filed.
If you make a request, orally or in writing, for any information that has been incorporated by reference into this prospectus but not delivered with this prospectus, we will provide you, without charge, a copy of any or all of that information.
Requests for this information should be submitted in writing to our Secretary, at our principal executive offices at Superconductor Technologies Inc., 9101 Wall Street, Suite 1300 Austin, Texas 78754 or by telephone at (512) 334-8900.
This prospectus is part of a registration statement we have filed with the SEC. You should rely only on the information incorporated by
reference or provided in this prospectus, or any applicable prospectus supplement. No one else is authorized to provide you with different information. You should not rely on any other representations. We are not making an offer of these securities
in any state where the offer is not permitted. Our affairs may change after this prospectus or any prospectus supplement is distributed. You should not assume that the information in or incorporated by reference into this prospectus or any
prospectus supplement is accurate as of any date other than the date on the front of those documents. You should read all information supplementing or incorporated by reference into this prospectus or any prospectus supplement.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document we file
with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The SEC also maintains a web site that
contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC at http://www.sec.gov. In addition, we maintain a web site that contains information about us at
http://www.suptech.com. The information contained on or that may be obtained from our website is not, and shall not be deemed to be, a part of this prospectus.
We have filed with the SEC a registration statement on Form S-3, of which this prospectus is a part, including exhibits, schedules and
amendments filed with, or incorporated by reference in, this registration statement, under the Securities Act, with respect to the securities registered thereby. This prospectus does not contain all of the information set forth in the registration
statement and exhibits and schedules to the registration statement. For further information with respect to our company and the securities registered thereby, reference is made to the registration statement, including the exhibits to the
registration statement. Statements contained in this prospectus as to the contents of any contract or other document referred to in, or incorporated by reference in, this prospectus are not necessarily complete and, where that contract is an exhibit
to the registration statement, each statement is qualified in all respects by the exhibit to which the reference relates. Copies of the registration statement, including the exhibits and schedules to the registration statement, may be examined and
copied (upon payment of applicable fees) at the SEC’s Public Reference Room at 100 F Street, N.E., Washington D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. The
registration statement is also available to you on the SEC’s web site, http://www.sec.gov.
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293,604 Shares of Common Stock
1,294.595255 Shares of Series C Convertible Preferred Stock
(419,812 Shares of Common Stock Underlying the Series C Convertible Preferred Stock)
Superconductor Technologies Inc.
Prospectus
Rodman & Renshaw
a unit of H.C. Wainwright & Co.
July 27, 2016
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