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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 13, 1998
REGISTRATION NO. 333-_________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BOREALIS TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 88-0238203
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
9790 GATEWAY DRIVE, SUITE 200
RENO, NEVADA 89511
(702) 856-7600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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PATRICK GRADY
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
BOREALIS TECHNOLOGY CORPORATION
9790 GATEWAY DRIVE, SUITE 200
RENO, NEVADA 89511
(702) 856-7600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPY TO:
STEVEN E. BOCHNER
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE PROPOSED PROPOSED MAXIMUM AMOUNT OF
REGISTERED REGISTERED(1) MAXIMUM PRICE AGGREGATE REGISTRATION
PER SHARE(2) OFFERING PRICE(2) FEE(3)
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Common Stock, $0.001 par value................ 18,575,490 shares $0.3907 $7,257,443.94 $2,017.56
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(1) Includes 15,664,990 shares issuable upon conversion of Series A-1
Preferred Stock of the Company and 117,500 shares issuable upon exercise
of warrants, all of which shares of Common Stock may be offered pursuant
to this Registration Statement. For purposes of estimating the number of
shares of Common Stock to be included in this Registration Statement,
the Company calculated 200% of the number of shares of Common Stock that
would be issuable upon conversion of the Company's Series A-1 Preferred
Stock if such Preferred Stock was converted on November 12, 1998 (based
on a conversion price equal to 80% of the average of the closing prices
for the Company's Common Stock on the previous five trading days). In
addition to the shares set forth in the table, pursuant to Rule 416
under the Securities Act of 1933, as amended, this Registration
Statement also covers an indeterminate number of additional shares of
Common Stock as may become issuable upon conversion of or in respect of
the Company's Series A-1 Preferred Stock, as such number may be adjusted
as a result of stock splits, stock dividends and antidilution provisions
(including floating rate conversion prices).
(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c), based on the average of the high and low sales
prices of the Registrant's Common Stock on November 11, 1998, as
reported by the NASD OTC Bulletin Board.
(3) No sales of securities will be conducted by Registrant. Registrant will,
however, pay expenses of the offering, which are expected to total
approximately $13,517.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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18,575,490 SHARES
BOREALIS TECHNOLOGY CORPORATION
COMMON STOCK
This Prospectus relates to 18,575,490 shares of common stock (plus an
indeterminate number of additional shares of common stock relating to certain
antidilution rights of preferred stock) of Borealis Technology Corporation.
These shares are all being offered by stockholders of Borealis, not by Borealis
directly. These stockholders of Borealis may offer these shares from time to
time in transactions on the NASD OTC Bulletin Board (or any other exchange or
automated quotation system in which our common stock may then be listed) or in
privately negotiated transactions. These sales may take place at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at other negotiated prices. 15,664,990 of the shares may be issuable
upon conversion of 2,350 shares of Series A-1 convertible preferred stock and
117,500 of the shares are issuable upon exercise of warrants. The Shares were
issued or will be issued in private placement transactions exempt from the
registration requirements of the Securities Act of 1933, as amended, under
Section 4(2) of that act. See "Selling Stockholders" beginning on page 9 and
"Plan of Distribution" beginning on page 10.
We will not receive any of the proceeds from the sale of the shares by
the selling stockholders. We will, however, pay all expenses incurred in
registering the shares, but each selling stockholder will be responsible for all
selling and other expenses incurred by him or her. Borealis and the selling
stockholders have each agreed to indemnify each other against certain
liabilities, including certain liabilities under the Securities Act.
Our common stock is quoted on the NASD OTC Bulletin Board under the
symbol "BRLS." On November 11, 1998, the closing price of the common stock on
the NASD OTC Bulletin Board was $0.3438.
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INVESTING IN BOREALIS COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
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The selling stockholders and any broker executing selling orders on
behalf of the selling stockholders may be deemed to be underwriters within the
meaning of the Securities Act. Commissions received by any such broker may be
deemed to be underwriting commissions under the Securities Act.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR
THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT A SOLICITATION OF AN OFFER TO BUY THESES SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN
THIS PROSPECTUS MAY BE CHANGED AND MAY NOT BE CORRECT AT ANY TIME AFTER NOVEMBER
13, 1998.
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WHERE YOU CAN FIND MORE INFORMATION
Borealis Technology Corporation ("Borealis") files annual, quarterly
and special reports, proxy statements and other information with the Securities
and Exchange Commission (the "Commission"). You can inspect and copy the
Registration Statement on Form S-3 of which this Prospectus is a part, as well
as reports, proxy statements and other information filed by Borealis, at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the following regional offices of the
Commission: Seven World Trade Center, Suite 1300, New York, New York, 10048, and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of the prescribed
fees. Please call the Commission at 1-800-SEC-0330 for further information
regarding the operations of its public reference rooms. The Commission also
maintains a World Wide Web site at http:\\www.sec.gov that contains reports,
proxy and information statements, and other information regarding registrants
(like Borealis) that file electronically with the Commission.
Borealis has filed with the Commission a Registration Statement (which
term shall include all amendments, exhibits and schedules thereto) on Form S-3
under the Securities Act of 1933, as amended (the "Securities Act"), which this
Prospectus is a part. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any document referred to are not necessarily complete. With respect to each
such document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows this Prospectus to "incorporate by reference"
certain other information that Borealis files with them, which means that we can
disclose important information to you by referring to those documents. The
information incorporated by reference is an important part of this Prospectus,
and information that we file later with the Commission will automatically update
and replace this information. We incorporate by reference the documents listed
below and any future filings made by us with the Commission under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act until we have sold all of the
securities that we have registered.
(1) Our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.
(2) Our Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998.
(3) Our Current Reports on Form 8-K filed on September 29, 1998.
(4) The description of our common stock offered hereby contained in
the Company's Registration Statement on Form 8-A dated June 11,
1996.
If you make a request for such information in writing or by telephone,
we will provide you without charge, a copy of any or all of the information
incorporated by reference in the registration statement of which this Prospectus
is a part. Requests for such information should be in writing to 9790 Gateway
Drive, Suite 200, Reno, Nevada 89511, Attn: Chief Financial Officer or by
telephone at (702) 856-7600.
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FORWARD-LOOKING STATEMENTS
We have made-forward-looking statements in this Prospectus (and in the
documents that are incorporated by reference) that are subject to risks and
uncertainties. Forward-looking statements include information concerning
possible or assumed future results of our operations. Also, when we use such
words as "believes," "expects," "anticipates" or similar expressions, we are
making forward-looking statements. You should note that an investment in our
securities involves certain risks and uncertainties that could affect our future
financial results. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in "Risk Factors" and elsewhere in this Prospectus.
BOREALIS
Businesses more and more have realized that collecting, retaining,
analyzing and disseminating customer information quickly and efficiently
throughout their organizations is important to attracting new and retaining
existing customers. At most companies, the closest point of contact between the
customer and the vendor is through field personnel--mobile employees--who
historically have been the least connected to the flow of customer information.
We provide a software solution, called "Arsenal", that allows businesses to
receive critical customer information from various contact points, including
field personnel, and to disseminate that critical customer information across
the business enterprise to all users. Using our Arsenal software, field
personnel can input critical customer information they gather into laptop
computers and "synchronize" the new data with a central information system for
distribution to other users. Corporate users in turn can distribute new customer
information to the field with Arsenal to provide field personnel with up-to-date
customer information. Arsenal allows any change in information to be quickly
synchronized and distributed across the business enterprise, allowing businesses
to better leverage their customer relationships.
Borealis was incorporated in the State of Nevada in June 1988 and
reincorporated in the State of Delaware prior to the completion of its initial
public offering in June 1996. Our headquarters are located at 9790 Gateway
Drive, Suite 200, Reno, Nevada 89511, and our phone number is (702) 856-7600.
Our common stock is quoted on the NASD OTC Bulletin Board under
the symbol BRLS.
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RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline, and you may lose
all or part of your investment.
This prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
GOING CONCERN ASSUMPTION; UNCERTAIN FUTURE CAPITAL NEEDS; NO ASSURANCE OF FUTURE
FINANCING
Our cash and short-term investments totaled approximately $450,000 as
of November 10, 1998. We will likely be forced to cease operations if we do not
obtain additional funding in the very near future. Without additional funding,
we expect that we will be able to continue operations at our current level only
for the next few weeks.
Our future capital requirements depend on numerous factors, including
the amount of revenues we generate from operations, the cost of our sales and
marketing activities and the progress of our research and development
activities. None of these factors can be predicted with certainty. We are
currently seeking funding, and will most likely seek additional funding within
the next twelve months. We cannot assure you that funding will be available on
acceptable terms, or at all, when it is required. If additional funding is not
available when needed, we could be forced to reduce or suspend our operations,
seek an acquisition partner or sell securities on terms that may be highly
dilutive or otherwise disadvantageous to investors. We have experienced in the
past, and may continue to experience, operational difficulties and delays in our
product development due to working capital constraints. Any such difficulties
may materially adversely affect our business, financial condition and results of
operations.
Our independent auditors' reports on our financial statements at
December 31, 1997 and for the years ended December 31, 1996 and 1997 contain an
explanatory paragraph indicating that the we had recurring operating losses that
raise substantial doubt about our ability to continue as a going concern. In
addition, we had an accumulated deficit of $20,911,856 at September 30, 1998. We
will likely require substantial additional funding in the future, and our
independent auditors' report on our future financial statements may include a
similar explanatory paragraph if we are unable to raise sufficient funds or
generate sufficient cash from operations to cover our cost of operations. This
explanatory paragraph may materially adversely affect our relationships with
prospective customers, third-party integrators and suppliers, and therefore may
materially adversely affect our business, financial condition and results of
operations.
ILLIQUIDITY OF TRADING MARKET; PENNY STOCK
Shares of our common stock are quoted on the NASD OTC Bulletin Board
system. This over-the-counter market on an electronic bulletin board generally
supports quotations for securities of companies that do not meet the Nasdaq
SmallCap Market listing requirements. As a result, investors may find it more
difficult to dispose of, or to obtain accurate price quotations of, our common
stock than they would if our common stock were quoted on the Nasdaq SmallCap
Market. In addition, quotation on the NASD OTC Bulletin Board depends on the
willingness of broker-dealers to make a market in our common stock. We cannot
assure you that our common stock will continue to be so quoted or that there
will continue to be a market for buying and selling of our common stock.
Furthermore, if our net tangible assets fall below $2 million in our next
audited financial
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statements, or we otherwise fail to meet certain criteria of the Commission, our
common stock will become subject to so-called "penny stock" rules that impose
additional sales practice and market making requirements on broker-dealers who
sell and/or make a market in such securities. Such rules may discourage the
ability or willingness of broker-dealers to sell and/or make a market in our
common stock.
COMPLETE DEPENDENCE ON RECENT PRODUCT INTRODUCTION
We derive substantially all of our revenues from the sale of licenses
and maintenance contracts for Arsenal. Consequently, we are entirely dependent
on the market acceptance of Arsenal. Unless and until Arsenal receives market
acceptance, we will have no material source of revenue. We cannot assure you
that Arsenal will achieve market acceptance, and if it does not, our business,
financial condition and results of operations will be materially adversely
affected. Arsenal's market acceptance and sales are substantially dependent on a
number of factors, including the success of our sales and marketing efforts and
the hiring and training of additional personnel. We cannot assure you that we
will successfully hire and retain key personnel in a timely manner. Our failure
to do so will materially adversely affect our business, financial condition and
results of operations.
RISK OF DILUTION BY HOLDERS OF PREFERRED STOCK
In September 1998, we issued and sold 2,350 shares of Series A-1
Preferred stock in a private placement financing. Each of these shares of
preferred stock is convertible into such number of shares of common stock as is
determined by dividing $1000.00 by the "Conversion Price" at the time of
conversion. The Conversion Price is equal to 80% of the lesser of (i) the
average of the closing prices for our common stock on the previous five trading
days prior to conversion and (ii) $2.50. For example, if the average of the
closing prices of our common stock for the previous five days was $1.00, then
one share of preferred stock would convert into 1,250 shares of common stock
($1000 divided by ($1.00 times .80)). Because of this "anti-dilution" conversion
feature, the holders of preferred stock may have the ability to substantially
dilute the ownership of the holders of common stock, particularly if the market
price of the common stock decreases significantly due to sales of common stock,
including sales of common stock that was obtained upon conversion of preferred
stock.
RECENT HIRES OF KEY EXECUTIVES; NEED TO FILL KEY EXECUTIVE POSITION; DEPENDENCE
ON LIMITED NUMBER OF KEY PERSONNEL
Our Chairman of the Board assumed the positions of President and Chief
Executive Officer following the resignation of our then President and Chief
Executive Officer in March 1998. Our future success substantially depends on the
efforts of certain of its officers and key technical and other employees, many
of whom have only recently joined us. In particular, our Vice President of
Engineering joined us in February 1998. Additionally, we are currently seeking
to hire a Vice President of Marketing. We have not entered into any employment
agreements nor do we have key man life insurance. We believe that our success
depends on our ability to recruit, retain and motivate additional key skilled
personnel, who are in great demand, including additional sales and marketing
personnel. We cannot assure you that we will be successful in doing so.
DEPENDENCE ON THIRD PARTY INTEGRATORS
Software products that address the customer relationship management
needs of medium-to large-size businesses are typically highly complex and
require significant customization that often results in an extensive
implementation process. Our strategy for implementing Arsenal depends on the use
of third-party integrators to install, customize and service it. Consequently,
third-party integrators must undergo substantial amounts of training to be able
to apply our products to the varied needs of our current and prospective
customers. We cannot assure you that we will be able to attract and retain the
personnel necessary to train such integrators. In addition, we cannot assure you
that our training will be sufficient or that such integrators will be able to
provide the level or quality of service required to meet the needs of our
current and prospective customers. We will likely depend
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on third-party integrators to complete certain post-delivery obligations prior
to our recognition of revenue. If such integrators fail to complete such
obligations, we may be prevented from recognizing revenue, which could
materially adversely affect our business, financial condition and results of
operations. If we are unable to maintain effective, long-term relationships with
these integrators, or if such integrators fail to meet the needs of our current
and prospective customers in a timely fashion, we could experience a loss of, or
delay in, market acceptance of our products, an increase in product support
costs and an injury to our reputation, any of which could materially adversely
affect our business, financial condition and results of operations.
We do not, and do not plan to, enter into or maintain exclusive
relationships with third-party integrators. Consequently, such integrators may
have existing relationships with, or may undertake new relationships with, our
direct competitors. Such integrators may not promote Arsenal effectively, or at
all. If we fail to provide sufficient incentive for such integrators, sales of
Arsenal could be adversely affected, which could materially adversely affect our
business, financial condition and results of operations.
RECENT LOSSES; QUARTERLY FLUCTUATIONS IN PERFORMANCE
We have experienced significant operating losses in each of the years
beginning with 1994 and expect to incur significant operating losses for the
foreseeable future. We derive substantially all of our revenues from the sales
of licenses and maintenance contracts for Arsenal, our sole product. Arsenal may
never achieve significant market acceptance and we may never achieve
profitability.
Our operating and other expenses are relatively fixed in the short
term. As a result, variation in the timing of revenues will cause significant
variations in quarterly operating results. Notwithstanding the difficulty in
forecasting future sales, we must undertake our development, sales and marketing
activities and other commitments months in advance. Accordingly, any shortfall
in revenues in a given quarter may materially adversely affect our business,
financial condition and results of operations due to the inability to adjust our
expenses during the quarter to match the level of revenues for the quarter. Once
commitments for such expenditures are undertaken, we may be unable to reduce
them quickly if revenue is less than expected. In addition, our sales
expectations are based entirely on our internal estimates of future demand. Due
to these and other factors, we believes that quarter-to-quarter comparisons of
our results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance.
Our operating results may fluctuate as a result of many factors,
including, without limitation:
- volume and timing of orders received;
- the extent to which we are required to establish and support a
third-party integrator channel or hire additional sales
personnel to supplement such channel;
- announcements by us and our competitors;
- the timing of commercial introduction of enhancements to
Arsenal, if any;
- the timing of commercial introduction of competitive products;
- the impact of price competition on our average selling prices;
and
- the level of research and development required to complete any
future product enhancements.
Many of these factors are beyond our control. In addition, due to the
short product life cycles that characterize the customer relationship management
software market, our failure to introduce any Arsenal enhancements in a timely
manner could materially adversely affect our business, financial condition and
results of operations.
RAPID TECHNOLOGICAL CHANGE; RISK OF PRODUCT DELAYS OR DEFECTS
The customer relationship management software market is characterized
by ongoing technological developments, frequent new product announcements and
introductions, evolving industry standards and changing
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customer requirements. The introduction of products embodying new technologies
and the emergence of new industry standards and practices can render existing
products obsolete and unmarketable. Our success depends in large part upon our
ability to obtain market acceptance of Arsenal, develop enhancements to Arsenal
to address the changing requirements of our customers, educate third-party
integrators regarding Arsenal and anticipate or respond to technological
advances, competitive products and emerging industry standards in a timely,
cost-effective manner. We may not be successful in marketing and supporting
Arsenal or enhancements to Arsenal, if any, and we may experience difficulties
that could delay or prevent the successful marketing and support of these
products. Arsenal and any such product enhancements may not adequately meet the
requirements of the marketplace nor achieve any significant degree of commercial
acceptance. We have experienced delays in the past in product development,
including significant delays in the development of Arsenal. Delays in
enhancements to Arsenal, if any, may result in customer dissatisfaction and
delay or loss of product and maintenance revenues. In addition, Arsenal or other
future enhancements may not meet the requirements of the marketplace or conform
to industry standards and requirements. Any delays in the development or
introduction of enhancements to Arsenal or failure to respond to market
requirements could materially adversely affect our business, financial condition
and results of operations.
Software products such as Arsenal often contain errors, or "bugs," that
can adversely affect the performance of the product or damage a user's data.
Despite testing by our technical staff and by potential customers, errors may be
found in Arsenal, or any new versions of Arsenal, which could result in (i) a
loss of, or delay in, market acceptance and sales, (ii) diversion of development
resources, (iii) injury to our reputation or (iv) increased service and warranty
costs. Any of the foregoing could materially adversely affect our business,
financial condition and results of operations.
COMPETITION
The customer relationship management software market is
highly-competitive, highly-fragmented and characterized by rapid technology
change, frequent new product introductions, short product life cycles and
evolving industry standards. In the future, the market is expected to be
characterized by significant price erosion over the life of a product. Within
specific ranges of product functionality, we experience competition from many
sources, including: (i) companies that directly address the customer
relationship management market; (ii) third party integrators that design,
develop and implement custom customer relationship management solutions; (iii)
the internal information technology departments of potential customers that
develop proprietary applications; and (iv) pre-packaged products, including
Personal Information Managers. In addition, we may experience competition from
additional companies who may enter the market, such as "groupware" vendors,
LAN-based application development tools vendors, remote LANaccess communication
vendors and communications and systems management software vendors. Potential
competitors also include a number of large hardware and software companies that
may develop or acquire products that compete in our market.
Current and potential competitors have established and may continue to
establish cooperative relationships with third parties to increase the ability
of their products to address the needs of our current and prospective customers.
Accordingly, new competitors or alliances among competitors may emerge and
rapidly acquire significant market share. Many of our current and potential
competitors have significantly greater financial, technical, marketing, name
recognition and other resources than we do. As a result, they may be able to
respond more quickly to new or emerging technologies and to changes in customer
requirements, or to devote greater resources to the development, promotion and
sale of their products than can we. We may not be able to compete successfully
against current or future competitors, and competitive pressures may materially
adversely affect our business, financial condition and results of operations.
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IMPACT OF YEAR 2000
Many computer systems were not designed to handle any dates beyond the
year 1999, and therefore computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. Borealis has completed a
Year 2000 compliance review for all Arsenal products released through September
30, 1998. We do not anticipate that addressing the year 2000 problem for Arsenal
products will have a material impact on operations or financial results. To
date, costs incurred in remediating identified Year 2000 issues have not been
material.
Despite design review and ongoing testing, Arsenal products may
contain undetected errors or defects associated with Year 2000 date handling.
Known or unknown errors or defects in Arsenal products could result in: (i)
delay or loss of revenue; (ii) diversion of development resources; (iii) damage
to reputation; and (iv) increased service and warranty costs.
Year 2000 issues may also affect the computer systems used internally
by us to manage and operate our business. We have completed a Year 2000
compliance review of its internal systems and are not aware of any material
costs or operational issues associated with Year 2000 issues affecting internal
systems. To date we have not incurred and do not believe that we will incur
significant operating expenses or be required to invest heavily in computer
systems improvements to be Year 2000 compliant. However, we may experience
significant unanticipated problems and costs caused by undetected errors or
defects in internal systems. The worst-case scenario if such problems occur
would be the inability to ship products and record revenue.
We do not currently have any information concerning the Year 2000
compliance status of our customers or prospective customers. If current or
future customers fail to achieve Year 2000 compliance or if they divert
technology expenditures (especially technology expenditures that were reserved
for software and services) to address Year 2000 compliance issues, our business,
results of operations or financial condition could be materially adversely
affected.
We have funded our Year 2000 activities from available cash and have
not separately accounted for these costs in the past. To date, these costs have
not been material. We may incur additional costs for administrative, customer
support, internal IT and product engineering activities to address ongoing
internal and product-related Year 2000 issues. In addition, we may experience
problems and costs with Year 2000 compliance that could materially adversely
affect our business, results of operations, and financial condition. We have not
yet fully developed a contingency plan to address situations that may result if
we are unable to achieve Year 2000 readiness of critical operations. The cost of
developing and implementing such a plan may itself be material. Finally, we are
also subject to external forces that might generally affect industry and
commerce, such as utility or transportation company Year 2000 compliance
failures and related service interruptions.
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SELLING STOCKHOLDERS
The following table lists the Borealis stockholders selling pursuant to
this Prospectus (the "Selling Stockholders") and the number of shares of
Borealis's Common Stock that each owned or had the right to acquire as of
November 10, 1998. Because the Selling Stockholders may offer all or some of the
shares of Borealis Common Stock to be sold pursuant to this Prospectus (the
"Shares") which they hold, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the Shares, no
estimate can be given as to the amount of Shares that will be held by Selling
Stockholders after completion of this offering. The Shares are being registered
to permit secondary trading of the Shares, and the Selling Stockholders may
offer Shares for resale from time to time. See "Plan of Distribution."
The Shares being offered by the Selling Stockholders were acquired, or
were issued upon conversion of Series A-1 Preferred Stock or upon the exercise
of warrants acquired, from the Company in transactions exempt from the
registration requirements of the Securities Act provided by Section 4(2) thereof
pursuant to a Common Stock Purchase Agreement (the "Common Stock Purchase
Agreement"), a Series A-1 Preferred Stock Purchase Agreement (the "Preferred
Stock Purchase Agreement") or a Warrant by and between Borealis and the Selling
Stockholder (a "Warrant"). These transactions occurred between June 3, 1998 and
September 30, 1998. Each Selling Stockholder represented to the Company that,
and the Company had reasonable basis to believe that, such Selling Stockholder
was an accredited investor as defined under Regulation D promulgated under the
Securities Act in connection with the transactions.
Each Selling Stockholder that purchased Shares of the Company pursuant
to the Agreements further represented to the Company that it was acquiring the
Shares for investment and not with the present intention of distributing such
Shares. In lieu of granting the Selling Stockholders demand registration rights,
the Company has filed with the Commission, under the Act, a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Shares.
SHARES NUMBER OF
BENEFICIALLY OWNED SHARES
PRIOR TO OFFERING(1) BEING(2)
----------------------------- ------------------
STOCKHOLDERS NUMBER PERCENT OFFERED
------------ ------------ ------- ------------------
RBB Bank Aktiengesellschaft 6,448,722(3) 42.37% 6,448,722
John W. Webley 1,544,666(4) 17.60% 800,000
The Peter W.J. Stonebridge 1995 Revocable Trust U.A.D 1,156,666(5) 13.23% 750,000
10/17/95
Patrick W. Grady 1,121,854(6) 12.38% 680,000
The Mendez 1992 Trust, dated 10/14/92 633,654(7) 6.85% 633,654
Richard Timmins 452,436(8) 4.98% 322,436
Richard J. Povey 329,436(9) 3.62% 322,436
The Peter Pitsker Limited Partnership, dated 12/3/96 268,142(10) 3.06% 100,000
Trust A of the Sulzer Family Trust of 1995, dated 5/1/95, as 200,000 2.28% 200,000
amended
Storm Ventures Fund I, LLC 100,000 1.14% 100,000
Michael J. D'Eath 86,714(11) 0.99% 13,000
-9-
11
- ---------------
(1) Based on 8,770,305 shares of Common Stock issued and outstanding as of
November 10, 1998. Individual ownership numbers are based upon
representations made to the Company by each Selling Stockholder, unless
otherwise indicated. For the purpose of computing the percentage of
ownership of each individual Stockholder, the number of shares of Common
Stock includes the number of shares issuable upon (i) conversion of the
Preferred Stock (based on a conversion price equal to 80% of the average
of the closing prices for the Common Stock on the five consecutive
trading dates ending November 10, 1998), (ii) exercise of the warrants
to purchase shares of Common Stock, and (iii) exercise of the options
that are presently exercisable or exercisable within 60 days of November
10, 1998, but such shares are not treated as outstanding for the purpose
of computing the percentage of any other person.
(2) Assumes conversion of each selling stockholder's shares of preferred
stock, if any, into shares of common stock.
(3) Includes 100,000 shares issuable upon exercise of warrants; 6,348,722
shares issuable upon conversion of Preferred Stock. RBB Bank holds the
shares as an agent on behalf of more than 40 independent non-U.S.
accredited investors, each of whom beneficially owns less than 5.0% of
the outstanding shares of common stock of the Company.
(4) Includes 200,000 shares issuable upon exercise of warrants; 6,666 shares
issuable upon exercise of outstanding options which are presently
exercisable or will become exercisable within 60 days of November 10,
1998. Mr. Webley is a Director of the Company.
(5) Includes 100,000 shares issuable upon exercise of warrants; 6,666 shares
issuable upon exercise of outstanding options which are presently
exercisable or will become exercisable within 60 days of November 10,
1998. Mr. Stonebridge is a Director of the Company.
(6) Includes 117,410 shares issuable upon exercise of warrants; 324,444
shares issuable upon exercise of outstanding options which are presently
exercisable or will become exercisable within 60 days of November 10,
1998. Mr. Grady is the President, Chief Executive Officer and Chairman
of the Company.
(7) Includes 7,500 shares issuable upon exercise of warrants; 476,154 shares
issuable upon conversion of Preferred Stock.
(8) Includes 45,000 shares issuable upon exercise of warrants; 317,436
shares issuable upon conversion of Preferred Stock.
(9) Includes 5000 shares issuable upon exercise of warrants; 317,436 shares
issuable upon conversion of Preferred Stock.
(10) Consists of an aggregate of 251,142 shares, and 17,000 shares issuable
upon exercise of warrants, held by The Peter Pitsker Limited Partnership
and the Peter B. Pitsker and Polly D. Pitsker Revocable Living Trust
Dated September 11, 1985. Mr. Pitsker previously served as a Director
and as interim President of the Company.
(11) Includes 5,000 shares issuable upon exercise of warrants; 27,083 shares
issuable upon exercise of outstanding options which are presently
exercisable or will become exercisable within 60 days of November 10,
1998. Mr. D'Eath is the Vice President of Business Development and
Product Marketing of the Company.
PLAN OF DISTRIBUTION
The Company has been advised by each Selling Stockholder that it or its
donees or transferees intend to sell all or a portion of the Shares offered
hereby from time to time on the NASD OTC Bulletin Board (or any other exchange
or automated quotation system in which our Common Stock may then be listed), in
privately negotiated transactions or otherwise, and that sales will be made at
fixed prices that may be changed, at market prices prevailing at the times of
such sales, at prices related to such market prices or at negotiated prices.
Such Selling Stockholder or its donees or transferees may also make private
sales directly or through a broker or brokers, who may act as agent or as
principal. In connection with any sales, such Selling Stockholder or its donees
or transferees and any brokers participating in such sales may be deemed to be
underwriters within the meaning of the Securities Act.
Any broker-dealer participating in such transactions as agent may
receive commissions from a Selling Stockholder or its donees or transferees
(and, if they act as agent for the purchaser of such Shares, from such
purchaser). Brokerage fees may be paid by the Selling Stockholder or its donees
or transferees, which may be in excess of usual and customary brokerage fees.
Broker-dealers may agree with a Selling Stockholder or its donees or transferees
to sell a specified number of Shares at a stipulated price, and, to the extent
such a broker-dealer is unable to do so acting as agent for a Selling
Stockholder or its donees or transferees, to purchase as principal any unsold
Shares at the price required to fulfill the broker-dealer's commitment to such
Selling Stockholders or its donees or transferees. Broker-dealers who acquire
Shares as principal may thereafter resell such Shares from time to time in
transactions (which may involve crosses and block transactions and which may
involve sales to and through other broker-dealers, including transactions of the
nature described above) on the NASD OTC Bulletin Board, in negotiated
transactions or otherwise at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such Shares commissions computed as described above.
-10-
12
Any Shares covered by this Prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this Prospectus.
There can be no assurance that any Selling Stockholder will sell any or
all of the Shares offered by it hereunder.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Shareholders.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company's Certificate of Incorporation and Bylaws provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by Delaware law, including circumstances in which indemnification is
otherwise discretionary under Delaware law. The Company has entered into
indemnity agreements with certain directors and executive officers. These
agreements, among other things, indemnify the directors and executive officers
for certain expenses (including attorneys' fees), judgments, fines, and
settlement payments incurred by such persons in any action, including any action
by or in the right of the Registrant, in connection with the good faith
performance of their duties as a director or officer. The indemnification
agreements also provide for the advance payment by the Company of defense
expenses incurred by the director or officer; however, the affected director or
officer must undertake to repay such amounts advanced if it is ultimately
determined that such director or officer is not entitled to be indemnified.
In addition, the Company and each Selling Stockholder have agreed to
indemnify each other against certain liabilities, including certain liabilities
under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
EXPERTS
The financial statements of Borealis Technology Corporation appearing
in the Company's Annual Report (Form 10-KSB) for the year ended December 31,
1997 have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein (which contains an explanatory
paragraph describing conditions that raise substantial doubt about the Company's
ability to continue as a going concern as described in Note 1 to the financial
statements) and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Counsel for the Company, Wilson Sonsini Goodrich & Rosati, Professional
Corporation, 650 Page Mill Road, Palo Alto, California 94304-1050, has rendered
an opinion to the effect that the Common Stock offered hereby is duly and
validly issued, fully paid and nonassessable.
11
13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
SEC Registration Fee............................... $2,017.56
Accountant's Fees and Expenses..................... $3,500.00
Legal Fees and Expenses............................ $6,000.00
Miscellaneous...................................... $2,000.00
---------
Total.............................................. $13,517.56
==========
- -------------
* Represents expenses relating to the distribution by the Selling Stockholder
pursuant to the Prospectus prepared in accordance with the requirements of Form
S-3. These expenses will be borne by the Company on behalf of the Selling
Stockholder. All amounts are estimates except for the SEC Registration Fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court
to award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. The Registrant's Certificate of
Incorporation and Bylaws provide that the Registrant shall indemnify its
directors and officers to the fullest extent permitted by Delaware law,
including circumstances in which indemnification is otherwise discretionary
under Delaware law.
The Registrant currently carries indemnity insurance pursuant to which
its directors and officers are insured under certain circumstances against
certain liabilities or losses, including liabilities under the Securities Act.
The Registrant has entered into indemnity agreements with certain directors and
executive officers. These agreements, among other things, indemnify the
directors and executive officers for certain expenses (including attorneys'
fees), judgments, fines, and settlement payments incurred by such persons in any
action, including any action by or in the right of the Registrant, in connection
with the good faith performance of their duties as a director or officer. The
indemnification agreements also provide for the advance payment by the
Registrant of defense expenses incurred by the director or officer; however, the
affected director or officer must undertake to repay such amounts advanced if it
is ultimately determined that such director or officer is not entitled to be
indemnified.
At present, there is no pending litigation involving a director or
officer of the Registrant in which indemnification is required or permitted, and
the Registrant is not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
II-1
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ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1(1) Agreement and Plan of Merger between Borealis Corporation, a
Nevada corporation, and Borealis Technology Corporation, a
Delaware corporation, dated June 7, 1996
4.1 Certificate of Designation of Series A-1 Preferred Stock of
the Registrant
4.2(2) Form of Common Stock Purchase Agreement by and between
Registrant and certain investors for June-August private
placement
4.3 Form of Preferred Stock Purchase Agreement by and between
Registrant and certain investors for September 1998 private
placement
4.4 Form of Common Stock Warrant issued in September 1998 private
placement
4.5(1) Specimen Certificate of Registrant's Common Stock
4.6(1) Form of Warrant to Wilson Sonsini Goodrich & Rosati
4.7(1) Form of Warrant issued to H.J. Meyers & Co., Inc. in
connection with the Registrant's initial public offering
4.8(1) Registrant's Contingent Rights Plan
4.9(3) Form of Warrant issued to H.J. Meyers & Co., Inc. in
connection with the Registrant's July 1997 public offering
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
23.1 Consent of Independent Auditors
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-4)
-------------------
(1) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form SB-2 which became effective on June 20,
1996.
(2) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form 10-QSB filed August 13, 1998.
(3) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form SB-2 which became effective on July 21,
1997.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
II-2
15
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be an initial bona
fide offering thereof.
(c) Insofar, as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the California General Corporations Code, the
Certificate of Incorporation of the Registrant, the Bylaws of the Registrant,
Indemnification Agreements entered into between the Registrant and it officers
and directors, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by the
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of the such issue.
II-3
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirement for filing on Form S-3 and has duly caused the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Reno, State of Nevada, on this 13th day of November,
1998.
BOREALIS TECHNOLOGY CORPORATION
By: /s/ Patrick Grady
----------------------------------
Patrick Grady
President, Chief Executive Officer
and Chairman
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Patrick Grady and
Elizabeth Gasper, and each one of them, individually and without the other, his
or her attorney-in-fact, each with full power of substitution, for him or her in
any and all capacities, to sign any and all amendments to this Registration
Statement on From S-3, and to file the same, with the exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
SIGNATURE TITLE
--------- -----
/s/ Patrick Grady President, Chief Executive Officer and Chairman
- ---------------------------------
Patrick Grady
/s/ Elizabeth Gasper Chief Financial Officer (principal financial and accounting
- --------------------------------- officer)
Elizabeth Gasper
/s/ Ed Esber Director
- ---------------------------------
Ed Esber
/s/ Joseph Marengi Director
- ---------------------------------
Joseph Marengi
Director
- ---------------------------------
Peter Stonebridge
/s/ John Webley Director
- ---------------------------------
John Webley
/s/ Elizabeth Gasper Attorney-in-Fact
- ---------------------------------
Elizabeth Gasper
II-4
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1(1) Agreement and Plan of Merger between Borealis Corporation, a
Nevada corporation, and Borealis Technology Corporation, a
Delaware corporation, dated June 7, 1996
4.1 Certificate of Designation of Series A-1 Preferred Stock of
the Registrant
4.2(2) Form of Common Stock Purchase Agreement by and between
Registrant and certain investors for June-August private
placement
4.3 Form of Preferred Stock Purchase Agreement by and between
Registrant and certain investors for September 1998 private
placement
4.4 Form of Common Stock Warrant issued in September 1998 private
placement
4.5(1) Specimen Certificate of Registrant's Common Stock
4.6(1) Form of Warrant to Wilson Sonsini Goodrich & Rosati
4.7(1) Form of Warrant issued to H.J. Meyers & Co., Inc. in
connection with the Registrant's initial public offering
4.8(1) Registrant's Contingent Rights Plan
4.9(3) Form of Warrant issued to H.J. Meyers & Co., Inc. in
connection with the Registrant's July 1997 public offering
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
23.1 Consent of Independent Auditors
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1)
24.1 Power of Attorney (included on Page II-4)
- -------------------
(1) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form SB-2 which became effective on June 20,
1996.
(2) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form 10-QSB filed August 13, 1998.
(3) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form SB-2 which became effective on July 21,
1997.