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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-28060
BOLDER TECHNOLOGIES CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 84-1166231
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5181 WARD ROAD
WHEAT RIDGE, CO 80033
(Address of principal executive offices) (Zip Code)
</TABLE>
(303) 422-8200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The Registrant's revenues for its most recent fiscal year were: $475,904.
The aggregate market value of the Common Stock held by non-affiliates of
the Registrant, based upon the closing price of the Common Stock reported on the
Nasdaq Stock Market (National Market) on February 28, 1997 was $82,588,127.
The number of shares of Common Stock outstanding as of February 28, 1997
was 9,463,005.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's definitive proxy statement to be filed
not later than 120 days after December 31, 1996, in connection with the
Registrant's 1997 Annual Meeting of Stockholders is incorporated by reference
into Part III of this Form 10-KSB.
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PART I
ITEM 1. BUSINESS
Except for the historical information contained herein, the discussion in
this Prospectus contains forward looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," as well as those discussed in this section and in the sections
entitled "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Registration Statement on
form SB-2 filed on February 13, 1997 (the "Registration Statement").
INTRODUCTION
Bolder is an energy technology company that is developing and
commercializing advanced, high power, rechargeable battery systems based on its
patented TMF technology. The Company's TMF battery uses proven lead acid
electrochemistry in a proprietary configuration that has higher power density
than any other commercially available battery system. The Company believes that
its TMF batteries, when manufactured in commercial quantities, can substantially
replace NiCd batteries in many high power applications and can become the
battery of choice for certain applications currently powered by traditional lead
acid batteries. The Company believes that the combination of the following
characteristics of its prototype TMF battery systems offers advantages over
commercially available rechargeable batteries in a broad range of current and
future applications:
High Power. The Company believes its TMF batteries can deliver higher
sustained power density than any other commercially available battery
technology. This is important in existing applications such as power tools
and standby power, and may enable new applications ranging from high
performance hybrid electric vehicles to an automotive starting battery that
weighs approximately 90 percent less than conventional automotive starting
batteries.
Cost Effective. TMF batteries are manufactured using inexpensive,
readily available raw materials. In addition, the Company believes the high
volume manufacturing process under development will be cost effective when
fully operational.
No Memory Effect. TMF batteries do not suffer from the memory effect
that reduces the capacity of NiCd batteries if they are partially
discharged and recharged repeatedly.
Small Size. In high power applications, such as power tools,
automotive starting and standby power, TMF batteries can do the same amount
of work as much larger conventional rechargeable batteries. Since the
battery system typically accounts for a significant part of the physical
volume and weight of these products, TMF technology can make such products
easier to use and/or less expensive to manufacture by enabling reductions
in product size.
More Useful Work. In high power applications, a TMF battery can do
more useful work (for example, drill more holes with a portable power
drill) between recharges than a conventional rechargeable battery of
similar size.
Faster Recharge. TMF batteries can be recharged to full capacity in
less than five minutes with an appropriate charger, allowing the device to
be back to work quickly, thus increasing the "up time" of the device.
Stable Discharge Voltage. In some applications, notably standby power,
electronic circuits must be used to compensate for the voltage drop during
discharge of other types of rechargeable batteries. TMF batteries have very
stable voltage during high rate discharge, and thus provide more consistent
performance and potentially reduce the need for and cost of voltage
regulation.
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Cool Operation. High power operation of batteries typically generates
significant heat that must be accommodated in the design of products such
as standby power systems or HEVs. The low impedance of TMF batteries
greatly reduces the amount of heat generated by the battery, thus
simplifying product design.
Multiple Form Factors. TMF batteries may be built in a number of form
factors, including spiral wound and prismatic, or flat, cells that can be
used in a wide range of applications. For example, the Company has
manufactured prototype 1/16-inch prismatic cells that may be useful for
small format electronic devices and prototype multi-cell modules that
contain six spiral wound cells in a single enclosure that may be useful for
power tools.
Easy to Recycle. Environmental concerns have made recycling of
batteries increasingly important. Unlike many existing and emerging battery
technologies, TMF batteries are readily handled by the well-developed
recycling process that is currently used to recycle approximately 95
percent of the lead acid batteries in the United States.
The Company has focused its initial product development efforts on its
sub-C cell, which is compatible with a widely used NiCd form factor, and is
currently engaged in product development efforts for new form factors such as
the prismatic, or flat, cell and the 5 Ah spiral wound cell. These efforts are
primarily being funded by both commercial and governmental sources. The Company
has produced over 45,000 prototype TMF batteries in its semi-automated pilot
production facility and is completing construction of a high volume production
facility, located in Golden, Colorado. This production facility has been
designed to accommodate five production lines and two research and development
lines, as well as all of the Company's other operations. The Company has
contracted with Wright Industries to manufacture the first line, which will
produce sub-C cells. This line is currently being tested and qualified and is
expected to begin commercial production in 1997. The Company has also ordered
certain equipment for the second production line and continues to sell batteries
manufactured in its semi-automated pilot production facility. As of January 31,
1997, the Company had purchase orders for more than 50 percent of its planned
1997 production capacity. In March 1997, several large customers shifted
delivery dates for orders from 1997 into mainly the first half of 1998. The
result is that two-thirds of the previously announced orders that were scheduled
to ship in 1997 are now scheduled to ship in 1998.
An integral part of the Company's strategy is to work with OEM customers
and strategic partners to develop market opportunities and leverage its
resources. For example, Bolder intends to channel a significant portion of its
sales through VADs, and the Company has established agreements with six VADs to
market TMF batteries throughout North America. The Company believes that VAD
sales will provide attractive margins for the Company and will help the Company
develop new applications and market segments. In addition, the Company has a
broad strategic relationship with Johnson Controls, one of the world's leading
suppliers of automotive batteries.
Bolder Technologies Corporation was incorporated in Colorado in 1991 and
reincorporated in Delaware in 1993. The Company's executive offices are located
at 5181 Ward Road, Wheat Ridge, Colorado 80033, and its telephone number is
(303) 422-8200.
MARKET OVERVIEW
Industry sources estimate that the world market for rechargeable batteries
in 1995 was between $14 and $16 billion. Demand for rechargeable batteries is
being driven by the growing use of portable power tools and appliances, portable
electronics such as cellular telephones and lap top computers, the increasing
importance of standby power for critical systems, and the increasing demands of
the automotive industry.
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The following table illustrates some of the existing applications for
rechargeable batteries. The Company believes that many of these applications
could benefit from the high power capability or other features of the Company's
TMF battery system. Major suppliers in each of these segments are currently
evaluating the Company's battery systems.
EXISTING APPLICATIONS FOR RECHARGEABLE BATTERIES
<TABLE>
<S> <C> <C>
PORTABLE TOOLS AND APPLIANCES STANDBY POWER ENGINE STARTING
- ----------------------------- ------------------------ ---------------------
Portable Power Drills Computer Uninterruptible Automotive Starting
Portable Electric Saws Power Supplies Gasoline Powered Lawn
Electric Powered Lawn Mowers Point of Sale Terminals Mowers
Weed Whackers ATM Terminals Power Boats
Grass Trimmers Telecommunications Jet Skis
Other Power Tools Equipment Snowmobiles
Razors Very Small Standby Power Snowblowers
Toothbrushes Systems Motorcycles
Small Engine Starting
Portable Generator Sets
Tractors
Emergency and Auxiliary
Starting Equipment
MILITARY AND AEROSPACE ELECTRONICS OTHER APPLICATIONS
- ----------------------------- ------------------------ ---------------------
Airplane Starting Portable Audio/Visual Photographic Equipment
Weapons Equipment Toys
Transport Systems Portable Computers
Cellular Phones
Portable Patient Monitoring
Equipment
</TABLE>
In addition, the Company believes that its TMF battery system will enable
the development of new products and continue to expand the market opportunity
for rechargeable batteries. The following table illustrates some new and
emerging applications for TMF batteries.
NEW AND EMERGING APPLICATIONS FOR TMF BATTERIES
-----------------------------------------------
Small Automotive Starting Battery for Dual Battery Systems
Very Small Batteries for Non Automotive Engine Starting
Hybrid Electric Vehicles and Electric Vehicles
STRATEGY
The Company's objective is to become a major supplier of innovative
rechargeable batteries based on proven technologies. The Company's strategies
for achieving this objective include the following:
Accelerate Production Ramp-Up. The Company is seeking to rapidly ramp up
commercial manufacturing capacity to meet anticipated demand for TMF batteries.
The Company's production ramp-up efforts include the planned implementation of
its first fully-automated production line in 1997 and the recruitment of
additional technical staff on its production and engineering teams that have
experience in the implementation of highly automated production processes. The
Company is also planning the aggressive implementation of its future production
lines and, in that regard, has recently ordered certain equipment for its second
high volume production line.
Manage Target Markets and Channels to Optimize Margins and Market
Penetration. During the first years of commercial production, the Company
believes it will have limited production
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capacity relative to the ultimate potential demand for its products. The Company
is initially entering those markets where TMF products offer the greatest
performance advantage over competitive battery technologies (primarily based on
very high power density), and therefore can command attractive margins. Initial
target markets include professional portable power tools, emergency and
auxiliary starting systems, portable generator starting and very small standby
power systems. The Company intends to subsequently expand its focus to include
other applications such as electronics, medical systems and general portable
power tools and appliances where other attributes of the Company's TMF
technology such as multiple form factors, fast recharge, lack of memory effect
or low cost provide performance advantages over competitive battery
technologies.
In addition, while OEMs are a key target market, the Company intends to
channel a significant portion of its initial production of TMF batteries through
a network of VADs. The Company believes that sales to VADs can provide
significantly higher margins than direct sales to OEMs and can help the Company
develop new applications and market segments.
Partner with Key OEMs to Define, Test and Introduce Products. The Company
is seeking to maximize the development potential and shorten the sales cycle for
its TMF batteries by working with a limited number of OEMs in targeted market
segments. These OEM customers have helped and will continue to help to derive
the specifications for some of the Company's initial products by providing
useful feedback throughout the development process. The Company hopes to
continue to capitalize on this early interaction with customers to design
additional battery products which it believes will replace competitive battery
technologies and satisfy the OEMs' rigorous performance criteria. The Company
has entered into agreements with customers for the development of specific
products.
Use Precision Process Control and Advanced Analytical Tools to Drive
Improvements. The Company is committed to improving process efficiency,
enhancing product quality and performance and reducing manufacturing costs
through the use of advanced process controls and analytical tools. The Company
uses sophisticated process controls to capture over 100 data points throughout
the manufacturing process. The Company uses these data points to evaluate,
control and improve the manufacturing process in real time, to optimize and
improve product performance and to reduce product cost.
Aggressively Grow and Protect the Technology Base. The Company considers
its product and process technology to be one of its most valuable assets. The
Company aggressively protects and intends to grow its technology base through
its established program for intellectual property documentation and protection.
The Company has four issued and ten pending patents. In addition, the Company
holds significant trade secrets in the area of product and process technology.
Use Strategic Relationships to Leverage Company Resources. The Company is
using, and plans to continue to use, strategic relationships to access funding,
research and development, marketing and other resources and to develop specific
markets. For example, the Company has agreements with six VADs that provide for,
among other things, marketing and distribution of the products throughout North
America. In addition, the Company has a strategic relationship with Johnson
Controls, one of the world's leading suppliers of automotive batteries. The
Company expects to access certain markets for TMF batteries through license
rights it has granted to Johnson Controls. The Company is currently exploring
other strategic relationships as a means of entering foreign markets or
specialized markets such as military and aerospace.
The Company's ability to achieve these strategic objectives depends upon a
number of factors. See the section entitled "Risk Factors" in the Registration
Statement for a discussion of certain of the risks associated with the Company's
ability to achieve these strategic objectives.
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TMF MARKET APPLICATIONS
The Company believes that its TMF battery systems have the following
advantages relative to both of its primary competitors, NiCd and traditional
lead acid batteries: higher power density resulting in smaller/lighter batteries
for high power applications, or greater power from the same size battery; faster
recharging with an appropriate charger; and flatter discharge profile under high
loads. In addition, the Company believes that its TMF batteries have certain
other advantages over NiCd batteries, including the lack of memory effect; lower
manufacturing costs in high volumes because of lower raw material costs; a
simpler manufacturing process; and fewer environmental issues. Compared with
traditional lead acid batteries, the Company believes that its TMF batteries
retain more of their capacity at low temperatures.
EXISTING APPLICATIONS. The following are market applications for the
Company's TMF batteries:
Portable Tools and Appliances. Battery powered tools, portable household
appliances and lawn and garden equipment require batteries with high power
density to drive electric motors. For example, battery powered electric drills
can draw up to 70 amps of electricity while drilling a hole. According to an
industry survey, it was estimated that $147 million worth of NiCd and lead acid
batteries would be used in the United States in power tools and appliances in
1996, and the demand is expected to increase to $167 million by 2000. These
applications are currently predominantly powered by NiCd batteries with
traditional lead acid batteries being used on a more limited basis.
The Company believes that its TMF batteries are particularly applicable to
this market segment. The high power density of TMF batteries means that a
product powered by the Company's batteries can do more work at high discharge
rates with the same size battery (for example, drill more holes with a power
drill), or the same amount of work with a smaller battery, than other
rechargeable battery systems. In addition, the rapid recharge capability of TMF
batteries means that products can be back to work more quickly with an
appropriate high rate charger. The stable discharge voltage of TMF batteries
means that products perform more consistently (for example, the drill turns at a
more consistent speed). Finally, unlike NiCd batteries, TMF batteries do not
suffer from a memory effect. Suppliers of portable tools and appliances include
the following companies: Black & Decker (US) Inc., S-B Power Tool Company,
Poulan/Weed Eater, Greenlee Textron, Inc., Bausch & Lomb and Royal Appliance
Manufacturing Company. Several of these companies are evaluating the Company's
battery systems.
Standby Power. Standby power systems, also known as uninterruptible power
supplies ("UPS"), provide assured sources of power for critical systems such as
computers, point of sale terminals, telecommunications equipment and medical
equipment by seamlessly switching to battery power when commercial power fails.
Some very large systems use batteries to carry the load for a short period of
time while a diesel or turbine powered generator comes up to speed. Given the
increased dependence on critical electronic systems, the market for standby
power is growing. According to an industry survey, it was estimated that the
United States market for batteries used in standby power would be $215 million
in 1996, and is expected to grow to approximately $293 million by 2000. The
standby power market is exclusively powered by traditional lead acid batteries.
Batteries are typically the largest single component by volume and weight
of any standby power system. Because of the ability of TMF batteries to deliver
very high power relative to their size, they can substantially reduce the volume
and weight of a standby power system. Also, because TMF batteries have very
stable discharge voltage, they can reduce the cost of the voltage stabilization
circuitry that is required in certain standby power systems that utilize
traditional lead acid batteries. Suppliers of standby power systems include Best
Power Technology, Inc., American Power Conversion, Inc., Exide Electronics and
Groupe Schneider, some of which are evaluating the Company's products. The
Company has granted Johnson Controls a non-exclusive license to make and sell
its TMF batteries for standby power applications.
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Engine Starting. According to an industry survey, it was estimated that
approximately 93.6 million engine starting batteries would be sold in the United
States in 1996, which, based upon current prices, indicates that the market size
is approximately $3 billion. Engine starting applications include: car and truck
starting, motorcycles, gasoline powered lawn mowers, power boats, jet skis,
snowmobiles, snowblowers, small engine starting and portable generator sets.
Traditional lead acid batteries are used to power these applications.
The Company believes that the high power density, fast recharge, superior
cold weather performance and stable discharge voltage profile of its TMF
batteries make them suitable as direct replacements for the traditional lead
acid batteries used to power some of these applications. The Company is
accessing the car and truck engine primary starting markets through its
strategic partnership with Johnson Controls. Johnson Controls has a limited
exclusive license with respect to these markets until 2001, at which time the
Company may enter such markets. In addition, Johnson Controls has a
non-exclusive license to make TMF batteries for motorcycle starting and a sole
license (exclusive except as to Bolder which has the right to sell into the
market) for lawn and garden equipment starting applications.
Emergency and Auxiliary Starting Systems. This segment includes batteries
for all types of external starting systems used for emergency starting of cars
and trucks, ramp starting of aircraft, and starting engines for a variety of
military equipment. Traditional lead acid batteries are currently used to power
these applications. The Company believes that the compact, high power capability
of TMF batteries may make them an attractive alternative for applications in
this market segment.
Military and Aerospace. This market includes a wide range of systems
requiring high power density such as aircraft starting, weapons systems and
transportation systems. Both traditional lead acid and NiCd batteries are used
for these applications. The Company believes that there may be a significant
opportunity to apply the TMF technology to applications in the military and
aerospace markets, particularly in the aircraft market, where the weight and
volume of the starting battery are major issues. The United States Army Research
Lab has conducted a preliminary evaluation of the TMF technology for military
applications. The Company plans to address the military and aerospace markets
primarily through strategic relationships.
Electronics. This segment includes batteries for all types of portable
electronic and medical equipment, such as cellular phones, laptop computers, and
portable patient monitoring equipment. According to an industry source, the
market for NiCd and lead acid batteries used in electronics and medical systems
was estimated at $455 million in 1996 in the United States, and is expected to
grow to $542 million in 2000. Applications in the electronics market are
currently powered by a variety of rechargeable batteries, including traditional
lead acid, NiCd, NiMH and lithium batteries.
The Company believes that the fast recharge potential, lack of memory
effect and ease of recycling may make TMF battery systems an attractive
alternative to NiCd batteries in certain electronics applications. In addition,
the ability of TMF batteries to respond quickly to power demands, and to deliver
high power pulse discharges with good energy density may make them attractive
for certain pulse power applications such as digital radio products. The Company
has engaged in customer funded product development activities in the electronics
market segment.
Other Applications. Examples of applications in this category include
photographic equipment and toys. There are a variety of rechargeable battery
systems which are used to power these applications, including traditional lead
acid, NiCd and NiMH batteries.
NEW AND EMERGING APPLICATIONS. The Company believes that new and emerging
applications requiring very high power output from a small volume will emerge as
the Company's TMF battery systems become commercially available.
Small Automotive Starting Batteries for Dual Battery Systems. United States
automotive manufacturers are currently focused on resolving several issues
related to automotive starting batteries, including reducing space available
under the hood, increasing under-hood temperatures, which can
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cause premature battery failure, and growing loads on the battery from
accessories that continue to operate even when the engine is off. Currently, all
automakers use traditional lead acid batteries for automotive starting. Several
major automakers are considering a dual battery system that would include a
dedicated starting battery and a separate "hotel load" battery to provide power
for accessories. The Company believes that the high power-to-size/weight ratio
and low temperature performance of its TMF battery system are well suited for
use in a small format automotive starting battery. The Company has granted
Johnson Controls a limited exclusive license to sell TMF batteries for car and
truck engine primary starting applications until 2001, when Bolder has the right
to sell into these markets.
Very Small Batteries for Non-Automotive Engine Starting. TMF batteries may
be useful to provide push button starting for small internal combustion engines
contained in products such as generators and lawnmowers. These products
currently require pull starting because existing battery systems would be too
large and heavy. The Company has granted Johnson Controls a sole license
(exclusive except as to Bolder which also has the right to enter this market) to
make and sell TMF batteries for starting small engines in lawn and garden
equipment only.
Electric Vehicles and Hybrid Electric Vehicles. In response to growing
concerns about pollution and the availability of fossil fuels, the automobile
industry is in the process of developing Electric Vehicles ("EVs") and Hybrid
Electric Vehicles ("HEVs"). EVs would be powered exclusively by a battery
system.
HEVs would use a small fossil fuel powered engine (typically a diesel or
turbine engine) as a base power source combined with a power storage system
(such as a battery or flywheel) for power boosts to accelerate and climb hills.
In addition, HEVs use "regenerative braking" to capture and to store the energy
generated by the automobile when braking. The objective of HEV design is to
provide car performance similar to current car models, significant reductions in
pollution and large increases in gas mileage. The Company believes that its TMF
batteries are particularly well suited for HEV applications because their low
impedance enables them to capture and store the large amounts of power generated
by braking and quickly deliver large amounts of power to supplement the power of
the internal combustion engine needed for acceleration and hill climbing. The
Company believes that its TMF technology has the potential to provide a viable
power storage solution for HEVs. Chrysler Corporation successfully demonstrated
a prototype HEV powered by Bolder's TMF batteries, the Dodge Intrepid ESX HEV,
at the 1996 North American Auto Show. Johnson Controls has a non-exclusive
license for HEV applications. In addition, the Company continues to supply TMF
batteries directly to Chrysler Corporation in support of their HEV development
program. The Company is also engaged in a government-funded SBIR program to
develop an enhanced HEV battery.
There can be no assurances that the Company will be able to compete
successfully against NiCd batteries or traditional lead acid batteries in any of
the targeted applications. In addition, there can be no assurance that one or
more new, higher power battery technologies will not be introduced which could
be directly competitive with or be superior to the Company's TMF technology.
TECHNOLOGY AND PRODUCTS
The Company believes that its TMF technology represents a significant
advance over existing rechargeable battery technologies for applications that
require high power in a small package. TMF rechargeable batteries employ a
proprietary configuration of traditional lead acid electrochemistry -- the same
electrochemistry that has been used in battery systems for over a century and
that is currently used in batteries for cars and many electronic applications.
A variety of combinations of chemical and metallurgical materials can be
used to form a rechargeable battery system. For example, rechargeable lead acid
batteries that are used in automobiles include a negative and positive plate
made of lead and lead oxide compounds and an electrolyte of sulfuric acid. A
rechargeable NiCd battery incorporates a positive and negative plate
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made of nickel and cadmium compounds with a potassium hydroxide electrolyte. TMF
batteries use the same components as traditional lead acid batteries. This
provides a cost advantage over NiCd batteries because the raw materials for lead
acid batteries are less expensive than those used in NiCds.
The primary structural innovations of the Company's TMF batteries are an
increased plate surface area within the battery, a short path through the active
material to the negative or positive plates, and patented end cap connectors. As
in a traditional lead acid battery, the TMF battery cell has a negative and
positive plate. However, the TMF plates are unique because they are comprised of
very thin lead foil substrates that are coated with a very thin, uniform layer
of active material (lead oxide paste) (See figure 1). The negative and positive
plates of the TMF battery are interleaved with a fiberglass separator. In the
spiral wound form factor of the TMF battery, the combination of the negative and
positive plates and the fiberglass separator are wound so that the negative and
positive plates are slightly offset at opposite ends of the cell. A connector is
cast on to each end of the cell (See figure 2). The Company designed its
patented connector to cap the ends of the spiral wound TMF battery so that it is
in continuous contact with the exposed edge of both the negative and positive
plates.
FIGURE 1 FIGURE 2
[Photographs of negative and positive plates and connector of a TMF battery.]
The use of thin lead foil substrates significantly increases the surface
area of the lead, thus lowering the impedance of the cell and greatly increasing
the rate at which the cell can be charged and discharged. In addition, the use
of the thin lead foil substrates in combination with the fiberglass separator
provides for a short path through the active material to the negative or
positive plates, allowing for more rapid delivery of the current, increasing the
responsiveness of the cell. The patented end cap provides a continuous, uniform
and dispersed connection between the negative and positive plates and the device
being powered. TMF batteries have been made in sizes ranging from 0.5 inch
diameter (0.4 Ah) cells up to approximately 3 inch diameter (12 Ah) cells.
While the TMF technology can be deployed in different formats, the
Company's initial product is a sub-C format (cylindrically shaped, 0.90 inch in
diameter by 2.845 inches in length), which is compatible with the existing NiCd
battery form factor. This form factor is the one most commonly used by power
tool and portable appliance manufacturers and can be assembled into packs of
various sizes and configurations. Due to the higher voltage in the Company's TMF
cell (2.1 volts),
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only six cells are required to replace ten NiCd cells (1.2 volts) to make a 12
volt pack with similar overall performance characteristics. In addition,
multiple sub-C cells can be configured to increase power and voltage. For
example, the Company has built and delivered to Chrysler Corporation for use in
a prototype HEV two battery packs each consisting of 600 sub-C cells in a series
parallel matrix of four cells by 150 cells. In addition, the Company has
successfully fabricated very thin (approximately 1/16 inch) prismatic, or flat,
format TMF cells. These cells can be stacked to achieve various voltages in an
extremely compact format that is useful in products, such as small format
electronic devices, where space is at a premium.
OTHER BATTERY TECHNOLOGIES
Rechargeable battery systems utilize a number of different
electrochemistries, the most common of which include lead acid, nickel cadmium,
nickel metal hydride, and lithium ion. The performance characteristics of
battery systems are interdependent, and all battery systems involve trade-offs
among these performance characteristics and other attributes. For example,
battery systems that are designed to maximize energy density may not have good
power density. Figure 3 illustrates the relationship between energy density and
power density for existing battery systems.
FIGURE 3
[Chart depicting the relationship between energy density and power
density for TMF, lead acid, NiCd, NiMH and Li Lon battery systems.]
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Although there have been significant advances in the design of rechargeable
batteries over recent years, a primary focus of those efforts has been to
increase energy density. Increases in energy density allow longer periods of use
between recharges, but do not increase the sustained power that a battery system
can deliver. By contrast, the Company's TMF technology has been engineered to
optimize power density. Increases in power density allow more high rate work to
be done with a battery of a given size or weight. The following table describes
the performance characteristics of the Company's TMF battery system as compared
with four other rechargeable battery systems that are commercially available, as
well as a brief description of each technology.
SUMMARY COMPARISON OF RECHARGEABLE BATTERY TECHNOLOGIES
<TABLE>
<CAPTION>
TRADITIONAL
TMF LEAD ACID NICD NIMH LITHIUM ION
--- ----------- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Sustained Power Density (w/kg).... 900-1100(A) 35-300(B) 100-200(B) 140-200(B) 100(C)
Cell Voltage(v)................... 2.1(A) 2.0(D) 1.2(D) 1.2(D) 4.0(D)
Cycle life(E)..................... 300-1000(A) 250-500(D) 300-700(D) 300-600(D) 500-1000(D)
Fast Recharge Rate (Mins)(F)...... 5(A) 60(C) 15(G) 60(G) 120(G)
High-Rate Discharge Profile (at
60C rate)....................... Flat(A) Sloping(H) Sloping(D) Sloping(I) Sloping(J)
Energy Density (wh/kg)............ 30(A) 30(D) 30-35(D) 50(D) 90(D)
Raw Material Costs ($/wh)(K)...... $.014 $.014 $.11 Unavailable $.18
Memory Effect..................... No(A) No(A) Yes(D) Yes(D) No(A)
</TABLE>
- ---------------
Sources: (A) Based upon experiments conducted with the Company's current
prototypes. There can be no assurance that the Company's batteries, when
manufactured in commercial quantities, will achieve these performance results,
or that other competing technologies that outperform the Company's batteries
will not be developed and successfully introduced. See the section entitled
"Risk Factors" in the Registration Statement; (B) Battery Technology Overview by
New York State Energy Research and Development Authority as published in The
Battery Man, October 1995; (C) Based upon the Company's management estimates;
(D) Handbook of Batteries and Fuel Cells, David Linden, 1989, McGraw Hill; (E)
Depends on depth and rate of discharge; (F) Require specialized chargers; (G)
J.L. Colton "Choosing the Right Chemistry," published in the proceedings of the
3rd International Conference on Power Requirements for Mobile Computing and
Wireless Communications, October 1995; (H) Portable Energy Products Application
Note 9212, December 1992; (I) E. Shariv, "Nickel Metal Hydride Batteries,"
published in the proceedings of the 2nd International Conference on Power
Requirements for Mobile Computing and Wireless Communications, January 1996; (J)
C.K. Huang, et al. paper published in the proceedings of the 11th Annual Battery
Conference on Applications and Advances, January 1996; and (K) International
Lead Zinc Research Organization, Inc.
The data in the foregoing table was assembled from a variety of sources
that the Company believes to be reliable. The tests from which the data was
derived were not conducted under identical controlled conditions. However, the
Company believes that the table fairly presents the relative performance
characteristics of the rechargeable battery technologies referenced in the
table.
Traditional Lead Acid. Traditional lead acid batteries have been in
commercial production for over a century. Traditional lead acid batteries come
in two types: flooded and valve regulated. Flooded lead acid batteries are
typically used as automobile batteries or for large standby power systems. These
batteries use a liquid electrolyte and must be stored and used upright. Valve
regulated lead acid batteries are used in security, medical and electronics
applications, and can be used in any position. Lead acid batteries are generally
the least expensive of any battery system, provide moderate energy and power
density and have a nominal voltage of two volts per cell. There is a well
developed recycling process for lead acid batteries, and over 95 percent of lead
acid batteries (mainly car batteries) are recycled in the United States.
Nickel Cadmium. NiCd batteries were first introduced in the 1960s, and have
enabled a wide range of portable products, including electronics and portable
power tools. NiCd batteries cost more to produce than lead acid batteries, in
part because of the high cost of nickel and cadmium. While they deliver good
energy density and moderately good power density, NiCd batteries have relatively
low cell voltage (1.2 volts) and lose capacity if they are repeatedly partially
discharged and then recharged (referred to as the memory effect). In addition,
there are growing environmental concerns regarding NiCd batteries, including the
potential for harmful release of highly toxic
10
<PAGE> 12
cadmium. For example, regulatory agencies in Sweden and Switzerland have
proposed limits or bans on the use of NiCd batteries.
Nickel Metal Hydride. NiMH batteries, first introduced in the mid 1980s,
provide significantly higher energy density than NiCd batteries. NiMH batteries
are typically used in applications that require low to moderate power output and
long run times, such as camcorders and laptop computers. NiMH batteries are more
expensive than NiCd batteries, and are generally less suitable for high power
applications such as power tools.
Lithium. Both lithium ion batteries, which are now available commercially,
and lithium polymer batteries, which are in the development stage, can provide
substantially greater energy density than other available battery systems for
low rate applications, such as laptop computers. Existing lithium systems,
however, have low sustained power density and are generally unsuitable for
applications that require high power output. In addition, they are significantly
more expensive than other commercial batteries, require relatively complex
monitoring and charging circuitry and raise safety issues due to the volatility
of lithium metal.
STRATEGIC RELATIONSHIPS
Bolder uses strategic relationships as a means of accessing funding,
research and development, marketing and other resources and to develop specific
markets. For example, the Company has agreements with six VADs that market and
distribute the products throughout North America and provide value-added
services. In addition, the Company has a strategic relationship with Johnson
Controls that is currently focusing on commercialization of the TMF batteries
for specific market segments. See "-- Marketing and Sales" and "-- TMF Market
Applications."
Johnson Controls, Inc., with headquarters in Milwaukee, Wisconsin, is a
global market leader in automotive systems and building controls. Through its
Automotive Systems Group, it supplies seating systems, interior systems and
batteries to the automotive original equipment and replacement markets. The
Controls Group serves the nonresidential buildings market with control systems
and services, and integrated facility management. Founded in 1885, it operates
in more than 500 locations worldwide.
In June 1995, the Company and Johnson Controls established a joint venture
to develop high volume manufacturing technology for TMF batteries, to
manufacture TMF batteries for sale by both partners and to pursue HEV battery
development opportunities for TMF batteries. In February 1997, having
substantially completed its primary objective of developing the high volume
manufacturing technology, the Company and Johnson Controls announced a new
strategic partnership which replaces the Joint Venture effective as of July
1996. Under the terms of the new strategic partnership, each party will
separately implement TMF battery manufacturing facilities to best meet the
unique requirements of the markets addressed by each.
In connection with the agreement to discontinue the Joint Venture, Bolder
received a cash payment from Johnson Controls as well as all of the tangible
assets of the Joint Venture and, in return, granted Johnson Controls the
following licenses: (i) a limited exclusive license (except as to Bolder which
has the right to sell into the market beginning in 2001) to make and sell TMF
batteries for the car and truck engine primary starting market, (ii) a sole
license (exclusive except as to Bolder which has the right to sell into the
market) to make and sell TMF batteries in the lawn and garden starting market,
and (iii) non-exclusive licenses to make and sell TMF batteries in the
motorcycle starting, HEV and standby power markets. All of the licenses are
royalty-bearing and certain of the licenses are subject to minimum royalties and
minimum performance criteria. The Company has received notice from Johnson
Controls disputing the scope of Johnson Control's license for the car and truck
engine primary starting market. Bolder and Johnson Controls also entered into a
cross-supply agreement with commitments to supply the other party with minimum
quantities of TMF battery products for several years.
11
<PAGE> 13
There can be no assurance that the Company will be able to compete
successfully with Johnson Controls in the markets where Johnson Controls has a
royalty-bearing license from the Company.
In connection with the original agreement with Johnson Controls, Johnson
Controls purchased 250,000 shares of the Company's preferred stock, which
converted into 250,000 shares of Common Stock at the time of the Company's
initial public offering in May 1996. In addition, Johnson Controls exercised
warrants to purchase an additional 308,666 shares of preferred stock in April
1996. This preferred stock also converted to Common Stock at the time of the
Company's initial public offering. Johnson Controls currently owns approximately
5.6 percent of the outstanding Common Stock of the Company.
There can be no assurance that the Company will be able to enter into any
other partnerships such as the relationships it has with its VADs and Johnson
Controls. Even if the Company successfully initiates strategic partnerships,
there can be no assurance that the partnerships will achieve their goals. The
success of any strategic partnership is dependent upon the general business
condition of the partner, its commitment to the strategic partnership and the
partner's timely and satisfactory performance of its obligations under the
partnership. To the extent the Company enters into strategic partnerships, the
terms of the partnerships may require the Company and its partners to share
revenues and/or expenses from certain activities or for the Company to grant to
its partners licenses to manufacture, market and/or sell products based upon its
TMF technology, which could adversely affect the Company's profitability.
MANUFACTURING
Semi-automated equipment for key production processes was developed and
introduced into the Company's pilot production line nearly two years ago. The
pilot line is capable of producing up to 200 sub-C cells per day on
semi-automated equipment. The Company has produced more than 45,000 cells. An
aggregate of approximately 4,500 cells have been shipped to a total of 75
customers, primarily for evaluation, with the remainder used for product and
process development purposes.
The knowledge gained in using these semi-automated machines has been
incorporated into a high volume production line that was recently fabricated and
is currently being tested and qualified at Wright Industries in Nashville,
Tennessee. This production line will be disassembled and relocated to the new
facility in Golden, Colorado and high volume production is expected to commence
in 1997. In January 1997, the Company began placing orders for certain equipment
for its second high volume production line, scheduled to be implemented in 1998.
There can be no assurance that the Company will be able to successfully
implement its high volume manufacturing lines, including the completion of the
new manufacturing facility, successful implementation of the first
fully-automated production line, and completion of necessary work to manufacture
commercial quantities of the Company's sub-C cell. The failure to manage this
transition could have a material adverse effect on the Company's business,
results of operations, and financial condition.
The manufacturing process starts with the application of active material
(lead oxide paste) to very thin lead foil to form the positive and negative
plates of the cell. The plates, separated by a thin fiberglass separator, are
wound together using a process similar to that used to wind capacitors. Each end
of the wound cell is immersed in molten lead which forms the positive and
negative end connectors of the cell. The cell is assembled into a plastic case
and filled with liquid electrolyte. The cell undergoes a process known as
"formation," whereby a proprietary sequence of charges, discharges, and rests
are used to electrochemically make the negative and positive plates functional.
The completed cell is tested to verify that it meets the Company's
specifications.
The Company is committed to improving process efficiency, enhancing product
quality and performance and reducing manufacturing costs through the use of
advanced process controls and analytical tools. The Company uses sophisticated
process controls to capture over 100 data points
12
<PAGE> 14
throughout the manufacturing process which it uses to evaluate, control and
improve the manufacturing process in real time, to optimize and improve product
performance and to reduce product cost. In addition, the Company employs an
extensive validation program that measures performance criteria critical to
customer applications. Certain elements of the manufacturing process are
proprietary to the Company, and the Company owns the designs to certain
equipment used in the process.
The principal raw materials used to produce TMF batteries are lead foil and
lead oxide. While these materials are available from multiple sources, the TMF
manufacturing process requires levels of consistency and purity in excess of
those required for many other applications. The Company has developed a vendor
qualification and partnering program and an incoming material inspection system
to evaluate the quality of raw materials.
MARKETING AND SALES
In order to optimize margins, the Company is initially targeting sales to
customers with applications that benefit from the very high power density of TMF
batteries. These applications include professional portable power tools,
emergency and auxiliary starting systems, portable generator starting, and very
small standby power systems. The Company is working with a limited number of
OEMs in these targeted market segments. The Company's OEM "customer partners"
have helped to develop the specifications of the Company's initial products by
providing input early in the development process and by testing the Company's
products. Some of these customer partners are developing products based on TMF
batteries. In addition, the Company has engaged in a customer-funded custom
product development program targeted at the electronics market. There can be no
assurance, however, that this program will result in a commercial product.
The Company has a direct sales team that supports the Company's OEM
customers as well as the VAD network. The Company has signed exclusive
distribution agreements with the following VADs for the following territories:
<TABLE>
<CAPTION>
VALUE-ADDED DISTRIBUTORS TERRITORIES
------------------------ -----------
<S> <C>
AVT, Inc. Colorado, Wyoming, Utah, Nevada, Idaho,
Montana, South Dakota, North Dakota,
Nebraska and Kansas
Engineered Assemblies Corp. All states east of the Mississippi
EXCELL Battery Company Canada
House of Batteries California, Arizona and New Mexico
Micro Power Electronics Oregon, Washington, Missouri and Iowa
Southwest Electronic Energy Corp. Texas, Oklahoma, Arizona and Louisiana
</TABLE>
VADs typically provide value-added services such as cell testing, matching
and pack assembly, assembly of the battery pack into a custom housing, and
packaging with an appropriate charger for OEM battery users, as well as
marketing and distribution of the Company's products throughout North America.
The Company's VAD agreements have an initial term ranging from approximately ten
months to one year and are automatically renewable for additional two year
terms. The VAD agreements are subject to standard termination provisions and the
VAD agreements do not require any minimum purchase commitments by the VADs. VADs
may sell competitive products. In each of the VAD agreements, the Company has
reserved the right to deal with any OEM in North America directly and expects to
service larger OEMs through its direct sales force, rather than through the
VADs.
A substantial portion of the Company's outstanding purchase orders have
been placed by VADs, and the Company intends to continue to channel a
significant portion of its sales through VADs in the future. Although the
Company has established multiple sources for VAD services or its products,
13
<PAGE> 15
any disruption of operations at any of the Company's VADs could materially
adversely affect the Company's business, results of operations, and financial
condition.
As of January 31, 1997, the Company had purchase orders for more than 50
percent of its planned 1997 production capacity. In March 1997, several large
customers shifted delivery dates for orders from 1997 into mainly the first half
of 1998. The result is that two-thirds of the previously announced orders that
were scheduled to ship in 1997 are now scheduled to ship in 1998. Approximately
one-third of these orders are from the Company's VAD network and the remainder
are from OEMs.
The purchase orders are subject to a number of contingencies which must be
satisfied by the Company in a timely manner. These contingencies include the
Company's completion of its manufacturing facility, successful implementation of
the first fully-automated production line, completion of necessary work to
manufacture commercial quantities of the Company's sub-C cell, satisfaction of
product acceptance criteria which are to be determined by each customer in its
discretion, and the timely manufacture of the products. In addition, certain of
the Company's purchase orders are subject to cancellation or rescheduling by the
customer. Accordingly, there can be no assurance that any of the cells covered
by outstanding purchase orders will actually be shipped. If the Company does not
satisfy the purchase order contingencies in a timely manner, or if the purchase
orders are otherwise canceled or rescheduled, the Company's business, results of
operations and financial condition could be materially adversely affected.
RESEARCH AND DEVELOPMENT
The Company is directing its research and development efforts toward
continuously improving the sub-C cell and the manufacturing process. The Company
believes that the current product is acceptable for certain applications and
that additional improvements to the sub-C cell will increase the potential
number of applications for that product. The Company has a record of continuous
and substantial improvement in the performance of its sub-C cell. These ongoing
improvements are designed to continuously address the expanding market. The
Company has produced prototype products that the Company believes have
performance characteristics that make its sub-C cell attractive for a broad
range of current and future applications. Limited quantities of these products
have been produced in the Company's pilot production line; however, the Company
has not manufactured its batteries in commercial quantities. In addition, to
achieve broad commercialization of its product the Company will need to reduce
manufacturing costs. There can be no assurance that efforts to reduce costs and
improve yields will be successful so that a product with broad commercial
applicability will result.
The Company has developed and tested prototypes of various form factors,
including multi-cell modules (monoblocs), and very thin ( 1/16 inch) prismatic,
or flat, batteries. While the Company believes that each of these products may
have significant market opportunities, there can be no assurance that any of
these programs will result in a commercial product. In addition, the Company is
engaged in internal research programs to develop charging procedures and
chargers for its batteries and is working with battery charger suppliers to
address the availability of chargers for its batteries.
During the last half of 1996, the Company received customer funding to
conduct a feasibility study for a new product based on its existing patents, but
targeted at the electronics industry. In January 1997, the Company signed an
agreement with the same customer to develop a commercial product. There can be
no assurance that there will be future development funding from this customer,
or that this program will result in a commercial product.
The Company has an SBIR research and development agreement valued at up to
$750,000 to develop a large (5 Ah) cell and associated manufacturing process
technology for HEV applications. The Company previously completed a feasibility
study for the program for which it received $100,000.
14
<PAGE> 16
The Company's research and development expenses for the years ended
December 31, 1994, 1995 and 1996 were $2,212,977, $2,351,825 and $2,343,436,
respectively. Certain research and development activities were conducted on
behalf of the Company by the Joint Venture. Had research and development
performed by the Joint Venture been performed solely by the Company, research
and development for 1995 and 1996 would have been approximately $2,567,000 and
$3,063,000, respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
PATENTS, TRADE SECRETS, AND TRADEMARKS
The Company holds four issued United States patents that expire beginning
in 2009 and ending in 2011. The Company's issued patents cover a number of
inventions including thin nonperforated plates used in lead acid batteries, and
an end connector for establishing electrical continuity between thin plates and
a battery terminal. In addition, the Company has four United States applications
pending and ten foreign patents pending. Patent applications in the United
States are maintained in secrecy until patents issue, and since publication of
discoveries in the scientific or patent literature tends to lag behind actual
discoveries, the Company cannot be certain that it was the first creator of
inventions covered by pending patent applications or the first to file patent
applications on such inventions. There can be no assurance that the Company's
pending patent applications will result in issued patents or that any of its
issued patents will afford meaningful protection against a competitor. In
addition, patent applications filed in foreign countries are subject to laws,
rules and procedures that differ from those of the United States, and thus there
can be no assurance that foreign patent applications related to issued United
States patents will issue. Furthermore, if these patent applications issue, some
foreign countries provide significantly less patent protection than the United
States.
The status of patents involves complex legal and factual questions and the
breadth of claims issued is uncertain. Accordingly, there can be no assurance
that patent applications filed by the Company will result in patents being
issued or that its patents, and any patents that may be issued to it in the
future, will afford protection against competitors with similar technology. In
addition, no assurances can be given that others will not infringe or design
around patents issued to the Company or that the Company would need to license
or design around patents that others will obtain. If existing or future patents
containing broad claims are upheld by the courts, the holders of such patents
could require companies to obtain licenses. If the Company is found to be
infringing third party patents, there can be no assurance that licenses that
might be required for the Company's products would be available on reasonable
terms, if at all.
The Company could incur substantial costs in defending itself or its
licensees, distributors or customers in litigation brought by others or
prosecuting infringement claims against third parties. If the outcome of any
such litigation is unfavorable to the Company, the Company's business could be
adversely affected. To determine the priority of inventions, the Company may
have to participate in interference proceedings declared by the United States
Patent Office or comparable proceedings in foreign patent offices, which could
result in substantial cost to the Company and may result in an adverse decision
as to the priority of the Company's inventions.
In addition to patent protection, the Company relies on the law of unfair
competition and trade secrets to protect its proprietary rights. The Company
considers several elements of the TMF manufacturing process to be trade secrets.
The Company attempts to protect its trade secrets and other proprietary
information through agreements with customers and suppliers, proprietary
information agreements with employees and consultants and other security
measures. Although the Company intends to protect its rights vigorously, there
can be no assurance that these measures will be successful.
The Company has registered its trademark "BOLDER" as a trademark on the
principal federal trademark register, and registration is pending for its
trademark "TMF."
15
<PAGE> 17
COMPETITION
Competition in the battery industry is, and is expected to remain, intense.
The competitors range from development stage companies to major domestic and
international companies. Many of these companies have financial, technical,
marketing, sales, manufacturing, distribution, and other resources significantly
greater than those of the Company. In addition, many of these companies have
name recognition, established positions in the market, and long standing
relationships with OEMs and other customers. While there is significant
development work being done by these competitors on various battery systems
(including electrochemistries such as NiCd, NiMH and lithium), the Company
believes that much of this effort is focused on achieving higher energy
densities for low power applications such as portable electronics. The Company
is aware that Electrosource, Inc., a development stage company, has produced
batteries with higher sustained power density than traditional lead acid
batteries. The sustained power density of the Company's TMF batteries is
substantially higher than the published specifications of Electrosource, Inc.
There can be no assurance that one or more new, higher power battery
technologies will not be introduced which could be directly competitive with or
superior to the Company's TMF technology.
The Company believes that its primary competitors are existing suppliers of
NiCd and lead acid batteries. In applications such as portable tools and
appliances, and certain electronic and medical products, the Company's primary
competitors will be suppliers of NiCd batteries, including SANYO, Panasonic,
Energizer and SAFT. All of these companies are very large and have substantial
resources and market presence. The Company expects that it will compete against
NiCd batteries in the targeted application segments on the basis of performance,
cost and ease of recycling. There can be no assurance that the Company will be
able to compete successfully against NiCd batteries in any of the targeted
applications.
In applications such as car starting, standby power, very small batteries
for engine starting, and a few medical and electronics applications, the Company
expects that its primary competition will be from lead acid batteries. The
primary suppliers of small lead acid batteries used in non automotive
applications are Yuasa, Exide Corporation, Matsushita, Hawker, CSB Battery of
America Corp., and GS Battery. The primary suppliers of automotive batteries are
Johnson Controls, Inc., Exide Corporation, GNB Inc. and Delphi. All of these
companies are very large and have substantial resources and market presence. The
Company expects that it will compete with lead acid batteries on the basis of
performance in the targeted application segments. In addition, under the terms
of its new strategic partnership with Johnson Controls, the Company has granted
Johnson Controls certain royalty-bearing license rights which will allow Johnson
Controls to compete with the Company in the lawn and garden, motorcycle
starting, HEV and standby power markets. There can be no assurance that the
Company will be able to compete successfully against traditional lead acid
batteries in any of the targeted applications.
The market for batteries, and the evolution of battery technology, are very
dynamic. Other companies are devoting significant resources to improving
existing battery technologies and developing new battery technologies. There can
be no assurance that the Company's products will be able to compete effectively
in any of its targeted market segments.
SAFETY AND ENVIRONMENTAL ISSUES
The Company's operations involve the storage, use and disposal of a number
of toxic and hazardous materials, including lead, lead oxide, sulfuric acid,
solvents and adhesives. As a result, the Company is required to maintain its
research and manufacturing operations in compliance with United States federal,
state, and local standards that govern the storage, use, and disposal of various
chemicals used in and waste materials produced by the manufacture of its TMF
batteries. The Company's pilot manufacturing facility includes, and the
Company's new manufacturing facility will include, an enclosed area specifically
for the mixing of lead oxide paste, the pasting of the lead foil, and the
winding of the cells. Employees operating in these areas are instructed in the
use of safety
16
<PAGE> 18
equipment such as gloves, protective clothing, and respirators and are required
under OSHA guidelines to submit to blood monitoring tests on a periodic basis.
The supervision and analysis of these tests are undertaken by an outside,
independent agency and the results thereof are communicated to the Company's
employees. The Company's activities are also subject to federal, state and local
environmental and safety laws and regulations, including but not limited to
CERCLA, regulations issued and laws enforced by the Colorado Labor and
Employment Department, the U.S. Department of Transportation, the U.S.
Department of Commerce, the U.S. Environmental Protection Agency and by state
and county health and safety agencies. United States and foreign agencies are
considering more stringent regulation of the disposal of all rechargeable
batteries. Although the Company believes that its activities conform to current
environmental and other regulations, there can be no assurance that the Company
will be able to operate in conformity with such laws and regulations in the
future, or that changes in such laws or regulations will not require the Company
to incur substantial capital or operating costs to achieve and maintain
compliance. Any failure by the Company to adequately control the discharge of
its hazardous materials and wastes could also subject it to future liabilities,
which could be significant.
Lead acid batteries, regardless of their configuration, are generally
considered to be safer than NiCd and lithium batteries. However, lead acid
batteries, including the Company's TMF battery, may develop significant internal
pressures during severe overcharge conditions due to the release of gases as a
byproduct of the chemical reaction occurring in the cell. In order to prevent
potential pressure build up, the Company's batteries incorporate a Bunsen
pressure relief valve that, under normal overcharge conditions, will allow the
venting of small amounts of gases, primarily hydrogen and oxygen. If the
batteries are subjected to abusive overcharge or overdischarge conditions,
larger amounts of these gases may be vented, which, when mixed with air, can
cause explosions. In addition, under such conditions, toxic gases and/or
sulfuric acid spray may be released. Sulfuric acid can cause burns. While the
Company maintains product liability insurance in amounts which it believes are
reasonable given the associated risks, there is no assurance that such insurance
will be adequate to cover any potential liability relating to one or more claims
of product liability. The Company has tested its batteries under a variety of
conditions and plans to continue to test its products for safety.
HUMAN RESOURCES
As of January 1, 1997, the Company had 61 full time employees. Of the
total, 15 employees were engaged in product research and development, 29 in
operations and 17 in general and administrative and marketing functions. The
Company's success will depend in large part on its ability to attract and retain
skilled and experienced employees. None of the Company's employees are covered
by a collective bargaining agreement, and the Company considers its relations
with its employees to be good.
ITEM 2. PROPERTIES
The Company currently occupies a 15,000 square foot leased facility in
Wheat Ridge, Colorado, 15 miles northwest of Denver. This facility includes all
of the Company's offices and laboratories, as well as a pilot production line.
The Company is currently completing construction of a 150,000 square foot
build-to-suit leased facility in Golden, Colorado (approximately three miles
from the current facility) to house all of its operations. The Company estimates
that construction of the facility will be completed and the Company expects to
move its operations into this facility in mid-1997. The Company has an eleven-
year lease for the new facility with two five-year renewal options for 120,000
square feet, with an option on the remaining 30,000 square feet. This facility
is designed to accommodate up to five high volume production lines, as well as
two research and development lines and all of the Company's other operations.
17
<PAGE> 19
ITEM 3. LEGAL PROCEEDINGS
The Company has been named in a personal injury action filed in Superior
Court in the County of Los Angeles on March 28, 1996 arising out of a motor
vehicle accident. Management believes that the resolution of this claim will not
have a material adverse effect on the Company's business, results of operations
or financial condition. The Company is not a party to any other legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996, there were no matters submitted to a
vote of stockholders.
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<PAGE> 20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
A) MARKET INFORMATION
The Company's Common Stock, par value $.001 per share, (Nasdaq Stock Market
(National Market) Symbol "BOLD") began trading publicly in the over-the-counter
market effective May 1, 1996. Prior to that date, there was no public market for
the Company's Common Stock. The following table presents quarterly information
on the price range of the Company's Common Stock. This information indicates the
high and low sale prices reported by the Nasdaq Stock Market (National Market).
<TABLE>
<CAPTION>
1996 HIGH LOW
---- ------ ------
<S> <C> <C>
Second Quarter (from May 1)................................. $15.38 $10.50
Third Quarter............................................... $14.38 $10.75
Fourth Quarter.............................................. $17.13 $13.13
</TABLE>
B) HOLDERS
As of January 31, 1997, there were approximately 96 holders of record of
the Common Stock.
C) DIVIDENDS
The Company has not paid any dividends since its inception and does not
intend to pay any dividends on its Common Stock in the foreseeable future.
19
<PAGE> 21
ITEM 6. SELECTED FINANCIAL DATA AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The selected financial data set forth below with respect to the Company's
statements of operations for the years ended December 31, 1992, 1993, 1994, 1995
and 1996, and balance sheets as of December 31, 1992, 1993, 1994, 1995 and 1996
are derived from audited financial statements of the Company. Such financial
statements were audited by Arthur Andersen LLP, independent public accountants,
whose report with respect to the years ended December 31, 1994, 1995, and 1996
and as of December 31, 1995 and 1996 appears elsewhere herein. The data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements and the Notes related thereto included elsewhere in this document.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1992 1993 1994 1995 1996
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.................................. $ -- $ -- $ 42,712 $ 105,673 $ 475,904
Cost of revenues.......................... -- -- 20,954 49,647 171,486
--------- ----------- ----------- ----------- -----------
-- -- 21,758 56,026 304,418
--------- ----------- ----------- ----------- -----------
Operating expenses:
Research and development................ 603,666 1,377,999 2,212,977 2,351,825 2,343,436
Loss from operations of Joint Venture... -- -- -- 164,136 669,025
General and administrative.............. 17,652 671,110 1,124,101 772,191 1,870,256
Selling and marketing................... -- -- -- 163,771 326,360
--------- ----------- ----------- ----------- -----------
Total operating expenses.......... 621,318 2,049,109 3,337,078 3,451,923 5,209,077
--------- ----------- ----------- ----------- -----------
Income (loss) from operations............. (621,318) (2,049,109) (3,315,320) (3,395,897) (4,904,659)
Other income (expense):
Interest income......................... 2,041 54,824 31,188 126,546 798,846
Interest expense........................ (18,456) (5,546) (32,092) (72,633) (54,277)
--------- ----------- ----------- ----------- -----------
Net income (loss)......................... $(637,733) $(1,999,831) $(3,316,224) $(3,341,984) $(4,160,090)
========= =========== =========== =========== ===========
Unaudited, pro forma net income (loss) per
share(1)................................ $ (0.48)
===========
Shares used in computing unaudited, pro
forma net income (loss) per share(1).... 8,696,632
===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------
1992 1993 1994 1995 1996
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
available-for-sale securities........... $ 344,900 $ 1,146,038 $ 881,609 $ 2,799,697 $16,070,677
Working capital (deficiency).............. (419,135) 1,002,473 568,959 2,532,911 12,403,356
Total assets.............................. 485,631 1,735,987 2,308,606 4,748,347 27,146,116
Notes and capital leases payable.......... 700,000 -- 288,495 558,687 486,537
Mandatorily Redeemable Preferred
Stock(2)................................ 530,000 4,391,004 7,893,800 13,433,482 --
Total stockholders' equity (deficit)...... (808,404) (2,830,949) (6,134,888) (9,538,565) 23,070,901
</TABLE>
- ---------------
(1) See Note 2 of Notes to Financial Statements for information concerning the
computation of net loss per share.
(2) Each share of the Company's Mandatorily Redeemable Preferred Stock
automatically converted into one share of the Common Stock on May 6, 1996
upon the closing of the Company's initial public offering.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section and in the
section entitled "Business," as well as those discussed in "Management's
Discussion and Analysis of Financial
20
<PAGE> 22
Condition and Results of Operations" in the Registration Statement on Form SB-2
filed by the Company on February 13, 1997. The following discussion and analysis
should be read in conjunction with the financial statements and notes thereto
appearing elsewhere in this document.
GENERAL
Since its inception in March 1991, Bolder Technologies Corporation (the
"Company") has been a development stage company, principally engaged in the
research and development of its Thin Metal Film ("TMF(TM)") battery technology,
and has devoted significant resources to the development of its technology and
processes to manufacture its TMF batteries. To date, the Company has produced
more than 45,000 prototype TMF batteries. An aggregate of approximately 4,500
cells have been shipped to a total of 75 customers, primarily for evaluation.
The Company is currently building commercial production facilities for the
manufacture of its TMF batteries, but has not yet manufactured cells in
commercially viable quantities. The Company expects to generate revenues
primarily from the sale of its TMF batteries.
In June 1995, the Company and Johnson Controls Battery Group, Inc.
("Johnson Controls") established a joint venture ("Joint Venture") to develop
high volume manufacturing technology for TMF batteries, to manufacture TMF
batteries for sale by both partners and to pursue HEV battery development
opportunities for TMF batteries. In January 1997, having substantially completed
its primary objective of developing the high volume manufacturing technology,
the Company and Johnson Controls announced a new strategic partnership which
replaced the Joint Venture effective as of July 1996. Under the terms of the new
agreement, each party will separately implement TMF battery manufacturing
facilities to best meet the unique requirements of the markets addressed by
each.
In connection with the new agreement, Bolder received a cash payment from
Johnson Controls. Bolder also received ownership of all of the tangible net
assets of the Joint Venture. In return, Bolder agreed to exchange certain
technical information with Johnson Controls and granted Johnson Controls
royalty-bearing licenses to allow Johnson Controls to sell TMF batteries in
specified markets. See "Business -- Strategic Relationships."
The Company believes that its results of operations to date may not be
indicative of results in future periods. Future operating results may be
affected by a wide range of factors and may fluctuate significantly from period
to period.
RESULTS OF OPERATIONS
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
During 1996, the Company received revenues from a customer-funded
development program, from the sale of batteries for testing and evaluation by
customers, and from an SBIR research and development agreement. Total revenues
increased to $475,904 in 1996 from $105,673 in 1995, primarily from a
customer-funded product development program. Product sales in 1996 and 1995 were
nominal and are expected to remain at nominal levels until the beginning of
high-volume production in 1997.
Cost of revenues increased to $171,486 in 1996 from $49,647 in 1995. The
increase was a result of increased costs directly related to commercial and
government funded product development programs.
Research and development expenses decreased to $2,343,436 in 1996 from
$2,351,825 in 1995, primarily due to increased levels of research and
development activity performed by the Joint Venture which are reflected in Loss
from Operations of Joint Venture. The Loss from Operations of Joint Venture
increased to $669,025 in 1996 from $164,136 in 1995, reflecting the Company's 50
percent share of the Joint Venture's research and development and operating
expenditures.
21
<PAGE> 23
Substantially, all of the Joint Venture's research and development and
general and administrative expenses represent charges from the Company and
Johnson Controls for services provided to the Joint Venture. For the years ended
December 31, 1996 and 1995, the Company charged $900,000 and $215,000,
respectively, of such costs to the Joint Venture. Of the 1996 amounts,
approximately $720,000 represent research and development charges and $180,000
represent general and administrative charges. Had research and development
performed by the Joint Venture been performed solely by the Company, research
and development for 1996 and 1995 would have been approximately $3,063,000 and
$2,567,000, respectively.
General and administrative expenses increased to $1,870,256 in 1996 from
$772,191 in 1995. The increase was due to recruiting and relocation expenses for
additional technical staffing to support research and development and Joint
Venture activities, additional administrative staffing and added expenses for
insurance and investor relations associated with becoming a public company.
Selling and marketing expenses increased to $326,360 in 1996 from $163,771
in 1995. The increase was primarily due to increased marketing and business
development activities related to the Company efforts to obtain purchase orders
for delivery of product upon completion in 1997 of the Company's first
high-volume production line.
Interest income increased to $798,846 in 1996 from $126,546 in 1995. The
increase resulted primarily from investment of the net proceeds from the
Company's initial public offering and from the exercise of warrants by
stockholders in April 1996.
Interest expense decreased to $54,277 in 1996 from $72,633 in 1995. The
decrease resulted primarily from the absence of debt service in 1996 on
convertible promissory notes issued to certain stockholders in March 1995 which
were converted into Common Stock in May 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
During 1995, the Company received revenues from the sale of batteries for
testing and evaluation by customers and from an SBIR research and development
agreement. Total revenues in 1995 increased to $105,673 from $42,712 in 1994.
This improvement was primarily due to higher 1995 revenues from completion of an
SBIR research and development agreement that begin in 1994 and from sales of two
experimental battery packs for HEV research to Chrysler Corporation.
Cost of revenues increased to $49,647 in 1995 from $20,954 in 1994,
primarily due to the cost of the HEV battery packs sold in 1995.
Research and development costs increased to $2,351,825 in 1995 from
$2,212,977 in 1994, primarily as a result of the Company's continued efforts to
commercialize its sub-C cell and develop its manufacturing process. General and
administrative expenses decreased to $772,191 in 1995 from $1,124,101 in 1994,
primarily due to lower expenses in 1995 for recruitment and relocation of
employees. Selling and marketing expenses were $163,771 in 1995, primarily
consisting of costs associated with business development activities. In addition
to the above expenses, the Company transferred $215,900 of research and
development and general and administrative costs to the Joint Venture during
1995. See Note 6 of the Notes to Financial Statements.
Interest income increased to $126,546 in 1995 from $31,188 in 1994,
primarily as a result of income generated from the investment of the proceeds
from the Company's issuance of Series D and Series E Preferred Stock in April
and June 1995, respectively.
Interest expense increased to $72,633 in 1995 from $32,092 in 1994,
primarily due to debt service on loans obtained in 1995 that were secured by a
portion of the Company's fixed assets.
The Company reported a loss from the operations of the Joint Venture of
$164,136 in 1995, representing the Company's 50 percent share of the TMF battery
manufacturing development program of the Joint Venture.
22
<PAGE> 24
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Total revenues in 1994 were $42,712, primarily consisting of revenues from
an SBIR research and development agreement which began in 1994. The Company had
no revenues in 1993.
Cost of revenues in 1994 were $20,954, consisting primarily of third party
direct costs related to an SBIR research and development agreement. The Company
had no cost of revenues in 1993.
Research and development costs increased to $2,212,977 in 1994 from
$1,377,999 in 1993, primarily due to the Company's accelerating efforts to
develop its technology. General and administrative expenses increased to
$1,124,101 in 1994 from $671,110 in 1993, representing an increase in
administrative staffing and related expenses needed to support the growing
research and development activities. The Company had insignificant selling and
marketing expenses in 1994 and no selling and marketing expenses in 1993.
Interest income decreased to $31,188 in 1994 from $54,824 in 1993, mainly
due to lower cash balances and lower interest rates in 1994.
Interest expense increased to $32,092 in 1994 from $5,546 in 1993,
primarily due to debt service on loans obtained in 1994. The Company had no
interest-bearing debt in 1993.
LIQUIDITY AND CAPITAL RESOURCES
From its inception through December 31, 1996, the Company has financed its
operations and met its capital requirements primarily through private and public
offerings of its equity securities, raising net proceeds of $36.7 million from
sales of these securities. At December 31, 1996, the Company's balances of cash,
cash equivalents, and available-for-sale securities totaled $16.1 million,
compared to $2.8 million at December 31, 1995. In May 1996, the Company received
approximately $20.9 million in net proceeds from the sale of 2.2 million shares
of Common Stock. In April 1996, several stockholders exercised warrants issuable
for an aggregate of 620,462 shares of Common Stock. The net proceeds to the
Company from exercise of the warrants was approximately $2.2 million.
On February 13, 1997, the Company filed a Registration Statement on Form
SB-2 to register for sale 2.6 million shares of Common Stock, of which 2 million
shares will be sold by the Company and 600,000 shares will be sold by certain
stockholders of the Company (the "Secondary Offering"). The Company anticipates
that the proceeds to the Company from this offering will be approximately $27
million, after deducting the underwriting discounts and commissions and
estimated offering expenses payable by the Company. The Company intends to use
$19 million of the proceeds of the Secondary Offering over the next 24 months
for construction of additional high volume fully-automated production lines and
associated capital expenditures, and approximately $8 million will be used for
product development, working capital and other general corporate purposes.
As of December 31, 1996, the Company had made progress payments of $6.8
million to fund the construction of its first high-volume production line and
had a liability for additional progress payments of $2.0 million for amounts
incurred in 1996. In addition to amounts paid or incurred in 1996, the Company
expects to incur approximately $850,000 of additional costs related to this line
in 1997. As a result of its new agreement with Johnson Controls, the Company
owns 100 percent of the first commercial high-volume production line and will
pay 100 percent of the costs associated with the fabrication and installation of
the line. The Company invested $1.0 million in 1996 in leasehold improvements,
machinery, equipment, and office furnishings to support its development,
production, sales, and administrative activities. The Company has financed
$191,000 of these 1996 capital additions through notes payable.
The Company has also committed to the construction of certain leasehold
improvements in its new facility which is scheduled to be completed in 1997.
Such leasehold improvements are expected to total approximately $4.5 million,
for which the Company has received financing
23
<PAGE> 25
commitments for up to $4.0 million. The Company has entered into an 11-year
lease agreement for this facility.
Except as noted above, the Company currently has no other significant
capital commitments other than its commitments under notes payable. The Company
believes that the net proceeds from the Secondary Offering, together with its
existing sources of liquidity and projected cash generated from operations, will
satisfy the Company's capital requirements for approximately the next 24 months.
There can be no assurance, however, that the Company will successfully complete
the Secondary Offering or that the Company will not require additional capital
at a future date. In the event that the Company does not successfully complete
the Secondary Offering and is unable to access other sources of capital or debt,
then the Company will delay the ramp-up of its second and subsequent
fully-automated production lines. There can be no assurance that the Company
will generate revenues and operating income sufficient to satisfy its working
capital and equipment expenditure needs in the future. In addition, the Company
is unable to predict the precise amount of future capital that it may require,
and there can be no assurance that any additional financing will be available to
the Company if that need arises or that financing will be in a form or on terms
acceptable to the Company. The inability to generate revenues and operating
income or obtain required financing on acceptable terms would have a material
adverse effect on the Company's business, financial condition, and results of
operations. Consequently, the Company could be required to significantly reduce
or suspend its operations, seek a merger partner or sell additional securities
on terms that could be dilutive to the Company's stockholders.
INCOME TAXES
Net operating loss carryforwards totaling approximately $13,400,000 are
available to reduce taxable income as of December 31, 1996. The net operating
loss carryforwards expire from 2005 through 2011. The Company has not paid
income taxes since its inception. The Tax Reform Act of 1986 and other income
tax regulations contain provisions which may limit the net operating loss
carryforwards available to be used in any given year, if certain events occur,
including changes in ownership interests. The Company has established a
valuation allowance for the entire amount of its deferred tax asset since
inception due to its history of operating losses.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data of the Company are provided
at the pages indicated in Item 13(a).
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has not been any change of accountants or any disagreements with the
Company's accountants on any matter of accounting practice or financial
disclosure during the reporting periods.
24
<PAGE> 26
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to executive officers and directors of the Company
appearing in the Proxy Statement under the captions "Election of Directors" is
incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
Information with respect to executive compensation appearing in the Proxy
Statement under the caption "Executive Compensation" is incorporated herein by
reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference
to the information in the Proxy Statement labeled "Security Ownership of Certain
Beneficial Owners and Management."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference
to the section in the Proxy Statement labeled "Certain Transactions."
25
<PAGE> 27
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A) FINANCIAL STATEMENTS
The financial statements required by this item are submitted in a separate
section beginning on Page F-1 of this report.
FINANCIAL STATEMENTS OF BOLDER TECHNOLOGIES CORPORATION
<TABLE>
<S> <C>
Report of Independent Public Accountants.................... F-1
Balance Sheets as of December 31, 1995 and 1996............. F-2
Statements of Operations for the three years ended December
31, 1994, 1995, and 1996; and the period from inception
(March 22, 1991) to December 31, 1996..................... F-4
Statements of Stockholders' Equity (Deficit) from inception
(March 22, 1991) to December 31, 1996..................... F-5
Statements of Cash Flows for the years ended December 31,
1994, 1995, 1996; and the period from inception (March 22,
1991) to December 31, 1996................................ F-9
Notes to Financial Statements............................... F-11
</TABLE>
B) REPORTS ON FORM 8-K
During the last quarter of its fiscal year ended December 31, 1996, the
Company filed one Report on Form 8-K, dated December 19, 1996, pursuant to
Item 5 of such form.
C) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3(i).1* -- Amended and Restated Certificate of Incorporation of the
Company.
3(ii).1* -- Amended and Restated Bylaws of the Company.
4.1 -- Reference is made to Exhibits 3(i).1 and 3(ii).1.
4.2* -- Specimen stock certificate.
10.1* -- Form of Indemnity Agreement between the Company and each
of its Directors and executive officers, with related
schedule.
10.2* -- 1996 Equity Incentive Plan of the Company (the "Option
Plan"), including forms of options granted to employees
and non-employee Directors under the Option Plan.
10.3** -- Amendments to the Option Plan, dated December 11, 1996.
10.4** -- Amendments to the Option Plan, dated January 30, 1997.
10.5* -- 1996 Employee Stock Purchase Plan of the Company.
10.6* -- Employment Agreement between the Company and Daniel S.
Lankford, dated July 11, 1994.
10.7* -- Employment Agreement between the Company and William E.
Younkes, dated April 1, 1993.
10.8* -- Employment Agreement Amendment between the Company and
William E. Younkes, dated October 1, 1995.
10.9* -- Letter Agreement between the Company and Joseph F.
Fojtasek, dated February 13, 1996.
10.10* -- Promissory Note executed by Tristan E. Juergens, dated
November 1, 1995.
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.11* -- Promissory Note executed by Tristan E. Juergens, dated
August 29, 1995.
10.12* -- Stock Purchase Agreement between the Company and Tristan
E. Juergens, dated August 29, 1995.
10.13* -- Stock Award Agreement between the Company and Tristan E.
Juergens, dated August 31, 1995.
10.14* -- Stock Award Agreement between the Company and Robert F.
Nelson, dated August 31, 1995.
10.15* -- Stock Award Agreement between the Company and Sandra D.
Schreiber, dated August 31, 1995.
10.16* -- Stock Award Agreement between the Company and William E.
Younkes, dated August 31, 1995.
10.17* -- Note Purchase Agreement between the Company and certain
parties named therein, dated April 19, 1994.
10.18* -- Series C Preferred Stock Purchase Agreement, dated July
19, 1994.
10.19* -- Supplemental Agreement to Series C Preferred Stock
Purchase Agreement between the Company and certain
parties named therein, dated September 30, 1994.
10.20* -- Note and Warrant Purchase Agreement between the Company
and certain parties named therein, dated March 14, 1995,
including forms of Convertible Promissory Notes and Stock
Purchase Warrants issued to the parties.
10.21* -- Series D Preferred Stock Purchase Agreement between the
Company and certain parties named therein, dated May 24,
1995.
10.22* -- Guaranty Agreement between the Company and Steven Paul,
dated May 24, 1995.
10.23* -- Stock Purchase Warrant issued to Freedom Ventures
Incorporated, dated May 24, 1995.
10.24* -- Letter Agreement among the Company, Harold Scott and
certain parties named therein, dated January 18, 1996.
10.25* -- Series E Preferred Stock Purchase Agreement between the
Company and Johnson Controls Battery Group, Inc. and
certain other parties named therein, dated June 26, 1995.
10.26* -- Purchasers and Principal Stockholder Agreement among the
Company, Tristan E. Juergens and certain other parties
named therein, dated June 26, 1995.
10.27* -- Warrant to Purchase Shares of Series E Preferred Stock
issued to Johnson Controls Battery Group, Inc., dated
June 26, 1995.
10.28* -- Joint Venture Agreement between the Company and Johnson
Controls Battery Group, Inc., dated June 26, 1995.
10.29* -- Johnson Controls/Bolder LLC Operating Agreement between
the Company and Johnson Controls Battery Group, Inc.,
dated June 26, 1995.
10.30* -- BTC Johnson Controls License Agreement between the
Company and Johnson Controls Battery Group, Inc., dated
June 26, 1995.
10.31* -- Johnson Controls License Agreement between the Company
and Johnson Controls/Bolder LLC, dated June 26, 1995.
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.32* -- Johnson Controls JV Trade Name License Agreement among
the Company, Johnson Controls/Bolder LLC and Johnson
Controls Battery Group, Inc., dated June 26, 1995.
10.33* -- JV BTC/Johnson Controls License Agreement among the
Company, Johnson Controls Battery Group, Inc. and Johnson
Controls/Bolder LLC, dated June 26, 1995.
10.34* -- JV BTC/Johnson Controls Manufacturing and Supply
Agreement among the Company, Johnson Controls Battery
Group, Inc. and Johnson Controls/Bolder LLC, dated June
26, 1995.
10.35*** -- Agreement among the Company, Johnson Controls Battery
Group, Inc. and Johnson Controls/Bolder LLC, dated as of
July 31, 1996.
10.36*** -- Cross Supply Agreement between the Company and Johnson
Controls Battery Group, Inc., dated as of January 22,
1997.
10.37* -- Senior Loan and Security Agreement between the Company
and Phoenix Leasing Incorporated, dated July 29, 1994,
including forms of Warrants to Purchase Shares of Series
C Preferred Stock and Promissory Notes issued to Phoenix
Leasing Incorporated.
10.38* -- First Amendment to Purchase Agreement between the Company
and Phoenix Leasing Incorporated, dated July 29, 1994.
10.39* -- Amendment to Purchase Agreement between the Company,
certain stockholders of the Company and Phoenix Leasing
Incorporated, dated March 25, 1996.
10.40* -- Warrant issued to Phoenix Leasing Incorporated, dated
March 25, 1996.
10.41 -- Security Agreement between the Company and Transamerica
Business Credit Corporation, dated as of March 4, 1997,
including form of Promissory Notes issued to Transamerica
Business Credit Corporation.
10.42* -- Service Agreement between the Company and Chemical Waste
Management, Inc., dated October 19, 1993.
10.43* -- Lease Agreement between the Company and Jefferson Park
West, dated December 13, 1993.
10.44* -- Lease Agreement between the Company and Jefferson Park
West, dated November 14, 1994.
10.45* -- Agreement between the Company and Wright Industries,
dated March 5, 1996.
23.1 -- Consent of Arthur Andersen LLP, Independent Auditors.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed with the Commission as an exhibit to the Company's
Registration Statement on Form SB-2 (Registration No. 333-2500-D) and
incorporated herein by reference.
** Previously filed with the Commission as an exhibit to the Company's
Registration Statement on Form S-8 (Registration 33-20989) and incorporated
herein by reference.
*** Previously filed with the Commission as an exhibit to the Company's
February 5, 1997 Form 8-K (File No. 0-28060) and incorporated herein by
reference.
**** Previously filed with the Commission as an exhibit to the Company's
Registration Statement on Form SB-2 (Registration No. 333-21753) and
incorporated herein by reference.
28
<PAGE> 30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BOLDER TECHNOLOGIES CORPORATION
Date: March 28, 1997 By: /s/ DANIEL S. LANKFORD
----------------------------------
Daniel S. Lankford
Chief Executive Officer,
President,
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DANIEL S. LANKFORD Chief Executive Officer, March 28, 1997
- ----------------------------------------------------- President and Chairman of
(Daniel S. Lankford) the Board (Principal
Executive Officer)
/s/ JOSEPH F. FOJTASEK Chief Financial Officer Vice March 28, 1997
- ----------------------------------------------------- President of Finance and
(Joseph F. Fojtasek) Administration, Treasurer,
and Secretary (Principal
Financial and Accounting
Officer)
/s/ WILMER R. BOTTOMS Director March 28, 1997
- -----------------------------------------------------
(Wilmer R. Bottoms)
/s/ TRISTAN E. JUERGENS Director March 28, 1997
- -----------------------------------------------------
(Tristan E. Juergens)
/s/ DAVID L. RIEGEL Director March 28, 1997
- -----------------------------------------------------
(David L. Riegel)
/s/ CARL R. STUTTS Director March 28, 1997
- -----------------------------------------------------
(Carl R. Stutts)
</TABLE>
29
<PAGE> 31
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bolder Technologies Corporation:
We have audited the accompanying balance sheets of BOLDER TECHNOLOGIES
CORPORATION (a Delaware corporation in the development stage) as of December 31,
1995 and 1996, and the related statements of operations, stockholders' (deficit)
equity and cash flows for each year in the three-year period ended December 31,
1996, and for the period from inception (March 22, 1991) to December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bolder Technologies
Corporation (a development stage company) as of December 31, 1995 and 1996, and
the results of its operations and its cash flows for each year in the three-year
period ended December 31, 1996, and for the period from inception to December
31, 1996, in conformity with generally accepted accounting principles.
/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
February 4, 1997.
F-1
<PAGE> 32
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
ASSETS
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 664,219 $ 968,297
Available-for-sale securities............................. 2,135,478 15,102,380
Inventory................................................. 36,114 35,796
Trade accounts receivable................................. 14,470 91,716
Related party accounts receivable......................... 77,698 --
Prepaid expenses.......................................... 106,877 66,205
---------- -----------
Total current assets.............................. 3,034,856 16,264,394
---------- -----------
PROPERTY AND EQUIPMENT, at cost:
Furniture, fixtures and equipment......................... 1,319,222 1,738,570
Leasehold improvements.................................... 371,731 371,731
Construction in progress.................................. 177,239 9,517,047
---------- -----------
1,868,192 11,627,348
Less -- Accumulated depreciation and amortization......... (552,782) (947,809)
---------- -----------
Property and equipment, net....................... 1,315,410 10,679,539
NOTES RECEIVABLE FROM FOUNDER............................... 152,066 --
INVESTMENT IN JOINT VENTURE................................. 135,864 --
PATENTS, net of accumulated amortization of $7,249 and
$16,304 in 1995 and 1996, respectively.................... 98,291 150,998
OTHER ASSETS................................................ 11,860 51,185
---------- -----------
Total assets...................................... $4,748,347 $27,146,116
========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-2
<PAGE> 33
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable.......................................... $ 154,798 $ 244,893
Construction in progress payables......................... -- 2,043,294
Accrued compensation and other accrued liabilities (Note
10).................................................... 139,945 554,148
Deferred revenue (Note 6)................................. -- 746,343
Current portion of notes payable (Note 7)................. 200,674 270,541
Current portion of capital lease payable (Note 7)......... 6,528 1,819
----------- -----------
Total current liabilities......................... 501,945 3,861,038
----------- -----------
LONG-TERM LIABILITIES:
Notes payable (Note 7).................................... 349,075 214,177
Capital lease payable (Note 7)............................ 2,410 --
----------- -----------
Total long-term liabilities............................ 351,485 214,177
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 9)
MANDATORILY REDEEMABLE, CONVERTIBLE PREFERRED STOCK, $.001
par value, aggregate liquidation preference of $13,433,482
and $0 as of December 31, 1995 and 1996, respectively;
5,781,962 and none authorized as of December 31, 1995 and
1996, respectively; 5,243,425 and none issued and
outstanding as of December 31, 1995 and 1996, respectively
(Note 4).................................................. 13,433,482 --
----------- -----------
STOCKHOLDERS' (DEFICIT) EQUITY:
Preferred stock, $0.01 par value, none and 5,000,000
shares authorized as of December 31, 1995 and 1996,
respectively, and none issued and outstanding.......... -- --
Common stock, $.001 par value, 9,691,622 and 25,000,000
shares authorized as of December 31, 1995 and 1996,
respectively; 1,146,421 and 9,447,622 shares issued at
December 31, 1995 and 1996, respectively............... 1,146 9,448
Treasury stock, $.001 par common stock, 33,333 shares at
December 31, 1995 and 1996............................. (50,000) (50,000)
Additional paid-in capital................................ 573 36,761,827
Deficit accumulated during the development stage.......... (9,490,284) (13,650,374)
----------- -----------
Total stockholders' (deficit) equity.............. (9,538,565) 23,070,901
----------- -----------
Total liabilities and stockholders' (deficit)
equity....................................... $ 4,748,347 $27,146,116
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-3
<PAGE> 34
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD
FROM
INCEPTION
(MARCH 22,
FOR THE YEAR ENDED DECEMBER 31, 1991) TO
----------------------------------------- DECEMBER 31,
1994 1995 1996 1996
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUE (Note 13).................. $ 42,712 $ 105,673 $ 475,904 $ 624,289
COST OF REVENUE.................... 20,954 49,647 171,486 242,087
----------- ----------- ----------- ------------
21,758 56,026 304,418 382,202
----------- ----------- ----------- ------------
OPERATING EXPENSES:
Research and development......... 2,212,977 2,351,825 2,343,436 9,078,481
Loss from operations of joint
venture....................... -- 164,136 669,025 833,161
General and administrative....... 1,124,101 772,191 1,870,256 4,458,336
Selling and marketing............ -- 163,771 326,360 490,131
----------- ----------- ----------- ------------
Total operating
expenses............... 3,337,078 3,451,923 5,209,077 14,860,109
----------- ----------- ----------- ------------
LOSS FROM OPERATIONS............... (3,315,320) (3,395,897) (4,904,659) (14,477,907)
OTHER INCOME (EXPENSE):
Interest income.................. 31,188 126,546 798,846 1,014,113
Interest expense (including
$28,274, $41,950, $51,737,
$139,825 in 1994, 1995, 1996
and from inception,
respectively, to related
parties)...................... (32,092) (72,633) (54,277) (186,580)
----------- ----------- ----------- ------------
NET INCOME (LOSS).................. $(3,316,224) $(3,341,984) $(4,160,090) $(13,650,374)
=========== =========== =========== ============
Unaudited, pro forma net income
(loss) per common and common
equivalent share (Note 2)..... $ (.48)
===========
Shares used in computing
unaudited, pro forma net
income (loss) per common and
equivalent share (Note 2)..... 8,696,632
===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE> 35
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (MARCH 22, 1991) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
STOCKHOLDERS' DEFICIT
MANDATORILY -------------------------------------------------
REDEEMABLE
CONVERTIBLE OPTIONS AND
PREFERRED STOCK COMMON STOCK WARRANTS ADDITIONAL
------------------ ---------------- ----------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
------- -------- ------- ------ ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, INCEPTION (March 22,
1991).............................. -- $ -- -- $ -- -- $ -- $ --
Issuance of common stock to an
officer for contributed research
and development, stated at
historical carrying value of $0,
recorded at par, in March 1991... -- -- 550,000 550 -- -- 2,450
Issuance of common stock to an
officer for cash ($0.0165 per
share), recorded at estimated
fair market value ($0.15 per
share), in March 1991............ -- -- 9,167 9 -- -- 1,366
Issuance of common stock for cash
($0.36 per share), net of
offering costs of $7,650, in
April 1991....................... -- -- 137,500 138 -- -- 42,212
Issuance of common stock to lessor,
recorded at estimated fair market
value ($0.15 per share), in May
1991............................. -- -- 8,937 9 -- -- 1,332
Issuance of Series A preferred
stock for cash ($0.927 per
share), net of offering costs of
$31,100, in June, August and
November 1991.................... 337,550 313,000 -- -- -- -- (31,100)
Net income (loss).................. -- -- -- -- -- -- --
------- -------- ------- ---- ------- ------- --------
BALANCES, December 31, 1991.......... 337,550 313,000 705,604 706 -- -- 16,260
Issuance of Series A preferred
stock for cash ($0.927 per
share), in April 1992............ 234,014 217,000 -- -- -- -- --
Issuance of shares of common stock
to an officer for services,
recorded at estimated fair market
value ($0.15 per share), in
November 1992.................... -- -- 45,834 46 -- -- 6,829
Net income (loss).................. -- -- -- -- -- -- --
------- -------- ------- ---- ------- ------- --------
571,564 $530,000 751,438 $752 -- $ -- $ 23,089
======= ======== ======= ==== ======= ======= ========
<CAPTION>
STOCKHOLDERS' DEFICIT
-------------------------------
DEFICIT
ACCUMULATED
TREASURY STOCK DURING THE
----------------- DEVELOPMENT
SHARES AMOUNT STAGE
------- ------- -----------
<S> <C> <C> <C>
BALANCES, INCEPTION (March 22,
1991).............................. -- $ -- $ --
Issuance of common stock to an
officer for contributed research
and development, stated at
historical carrying value of $0,
recorded at par, in March 1991... -- -- --
Issuance of common stock to an
officer for cash ($0.0165 per
share), recorded at estimated
fair market value ($0.15 per
share), in March 1991............ -- -- --
Issuance of common stock for cash
($0.36 per share), net of
offering costs of $7,650, in
April 1991....................... -- -- --
Issuance of common stock to lessor,
recorded at estimated fair market
value ($0.15 per share), in May
1991............................. -- -- --
Issuance of Series A preferred
stock for cash ($0.927 per
share), net of offering costs of
$31,100, in June, August and
November 1991.................... -- -- --
Net income (loss).................. -- -- (194,512)
------- ------- ---------
BALANCES, December 31, 1991.......... -- -- (194,512)
Issuance of Series A preferred
stock for cash ($0.927 per
share), in April 1992............ -- -- --
Issuance of shares of common stock
to an officer for services,
recorded at estimated fair market
value ($0.15 per share), in
November 1992.................... -- -- --
Net income (loss).................. -- -- (637,733)
------- ------- ---------
-- $ -- $(832,245)
======= ======= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE> 36
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (MARCH 22, 1991) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
STOCKHOLDERS' DEFICIT
MANDATORILY --------------------------------------------------
REDEEMABLE,
CONVERTIBLE OPTIONS AND
PREFERRED STOCK COMMON STOCK WARRANTS ADDITIONAL
---------------------- ------------------ ---------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- ---------- --------- ------ ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1992........... 571,564 $ 530,000 751,438 $ 752 -- $ -- $23,089
Issuance of Series B preferred stock
($1.50 per share) in January 1993
for cash of $3,143,140 and
conversion of debt of $717,864,
net of offering costs of
$27,524........................... 2,574,003 3,861,004 -- -- -- -- (22,714)
Net income (loss)................... -- -- -- -- -- -- --
--------- ---------- --------- ------ ------ ------- -------
BALANCES, December 31, 1993........... 3,145,567 4,391,004 751,438 752 -- -- 375
Issuance of Series C preferred stock
($3.00 per share) in July and
September 1994 for cash of
$2,474,522 and conversion of debt
and accrued interest totaling
$1,028,274, net of offering costs
of $58,871........................ 1,167,595 3,502,796 -- -- -- -- (58,871)
Issuance of warrants to purchase
10,500 shares of Series C
preferred stock, in July 1994,
exercisable at $3.00 per share.... -- -- -- -- 10,500 -- --
Issuance of common stock to
employees for options exercised
($0.09 per share), in January and
July 1994......................... -- -- 19,226 19 -- -- 1,710
Issuance of common stock to an
officer for cash ($0.375 per
share), in July 1994.............. -- -- 133,333 133 -- -- 49,867
Issuance of common stock to an
officer, in exchange for services
in accordance with employment
agreement ($0.128 per share), in
August 1994....................... -- -- 124,705 125 -- -- 15,830
Issuance of common stock to
consultants for services ($0.375
per share), in August 1994........ -- -- 7,333 7 -- -- 2,744
Issuance of common stock to
employees for options exercised
($0.15 per share), in July and
November 1994..................... -- -- 4,805 5 -- -- 716
Net income (loss)................... -- -- -- -- -- -- --
--------- ---------- --------- ------ ------ ------- -------
4,313,162 $7,893,800 1,040,840 $1,041 10,500 $ -- $12,371
========= ========== ========= ====== ====== ======= =======
<CAPTION>
STOCKHOLDERS' DEFICIT
-------------------------------
DEFICIT
ACCUMULATED
TREASURY STOCK DURING THE
----------------- DEVELOPMENT
SHARES AMOUNT STAGE
------- ------- -----------
<S> <C> <C> <C>
BALANCES, December 31, 1992........... -- $ -- $ (832,245)
Issuance of Series B preferred stock
($1.50 per share) in January 1993
for cash of $3,143,140 and
conversion of debt of $717,864,
net of offering costs of
$27,524........................... -- -- --
Net income (loss)................... -- -- (1,999,831)
------- ------- -----------
BALANCES, December 31, 1993........... -- -- (2,832,076)
Issuance of Series C preferred stock
($3.00 per share) in July and
September 1994 for cash of
$2,474,522 and conversion of debt
and accrued interest totaling
$1,028,274, net of offering costs
of $58,871........................ -- -- --
Issuance of warrants to purchase
10,500 shares of Series C
preferred stock, in July 1994,
exercisable at $3.00 per share.... -- -- --
Issuance of common stock to
employees for options exercised
($0.09 per share), in January and
July 1994......................... -- -- --
Issuance of common stock to an
officer for cash ($0.375 per
share), in July 1994.............. -- -- --
Issuance of common stock to an
officer, in exchange for services
in accordance with employment
agreement ($0.128 per share), in
August 1994....................... -- -- --
Issuance of common stock to
consultants for services ($0.375
per share), in August 1994........ -- -- --
Issuance of common stock to
employees for options exercised
($0.15 per share), in July and
November 1994..................... -- -- --
Net income (loss)................... -- -- (3,316,224)
------- ------- -----------
-- $ -- $(6,148,300)
======= ======= ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE> 37
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (MARCH 22, 1991) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
STOCKHOLDERS' (DEFICIT) EQUITY
MANDATORILY -----------------------------------------------------
REDEEMABLE
CONVERTIBLE OPTIONS AND
PREFERRED STOCK COMMON STOCK WARRANTS ADDITIONAL
------------------------- ------------------ ------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ------------ --------- ------ -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, December 31, 1994............ 4,313,162 $ 7,893,800 1,040,840 $1,041 10,500 $ -- $ 12,371
Issuance of warrants in March 1995, to
purchase 149,998 shares of common
stock, exercisable at $0.75 per
share for five years, in connection
with the issuance of debt, for a
purchase price of $0.015 per
warrant............................. -- -- -- -- 149,998 2,250 --
Issuance of Series C preferred stock
($3.00 per share) in April 1995 in
conversion of accrued interest of
$41,950............................. 13,979 41,950 -- -- -- -- --
Issuance of Series D preferred stock
($6.00 per share) in April 1995 for
cash of $2,000,000 and conversion of
debt of $1,797,732, net of offering
costs of $28,819.................... 632,951 3,797,732 -- -- -- -- (28,819)
Issuance of warrants to purchase
166,666 shares of common stock,
exercisable at $1.50 per share for
five years, in connection with the
issuance of Series D preferred, in
April 1995, for a purchase price of
$.0015 per warrant.................. -- -- -- -- 166,666 250 --
Issuance of 90-day option to purchase
166,667 shares of Series D preferred
stock in April 1995, exercisable at
$6 per share, in connection with the
issuance of Series D preferred
stock............................... -- -- -- -- 166,667 -- --
Partial exercise of option ($6.00 per
share) in August 1995 for Series D
preferred stock..................... 33,333 200,000 -- -- (166,667) -- --
Issuance of Series E preferred stock
($6.00 per share) in June 1995 for
cash of $1,500,000, net of offering
costs of $28,963.................... 250,000 1,500,000 -- -- -- -- (28,963)--
Issuance of warrants to purchase
308,666 shares of Series E preferred
stock in June 1995, exercisable at
$6.00 per share for one year, in
connection with the issuance of
Series E preferred stock, for a
purchase price of $.0015 per
warrant............................. -- -- -- -- 308,666 463 --
Purchase of 33,333 shares of treasury
stock for $1.50 per share for cash
from a founder, in August 1995...... -- -- -- -- -- -- --
Issuance of common stock to employees
for options exercised ($.09 per
share) in August and December
1995................................ -- -- 49,817 50 -- -- 4,406
Issuance of common stock to employees
for options exercised ($.15 per
share) in February, April, September
and December 1995................... -- -- 33,321 33 -- -- 4,964
Issuance of common stock to employees
($1.50 per share) in August 1995 for
cash................................ -- -- 22,443 22 -- -- 33,651
Net income (loss)..................... -- -- -- -- -- -- --
---------- ------------ --------- ------ -------- ------- -----------
BALANCES, December 31, 1995............ 5,243,425 $ 13,433,482 1,146,421 $1,146 635,830 $ 2,963 $ (2,390)
========== ============ ========= ====== ======== ======= ===========
<CAPTION>
STOCKHOLDERS' (DEFICIT) EQUITY
---------------------------------
DEFICIT
ACCUMULATED
TREASURY STOCK DURING THE
------------------ DEVELOPMENT
SHARES AMOUNT STAGE
------- -------- ------------
<S> <C> <C> <C>
BALANCES, December 31, 1994............ -- $ -- $ (6,148,300)
Issuance of warrants in March 1995, to
purchase 149,998 shares of common
stock, exercisable at $0.75 per
share for five years, in connection
with the issuance of debt, for a
purchase price of $0.015 per
warrant............................. -- -- --
Issuance of Series C preferred stock
($3.00 per share) in April 1995 in
conversion of accrued interest of
$41,950............................. -- -- --
Issuance of Series D preferred stock
($6.00 per share) in April 1995 for
cash of $2,000,000 and conversion of
debt of $1,797,732, net of offering
costs of $28,819.................... -- -- --
Issuance of warrants to purchase
166,666 shares of common stock,
exercisable at $1.50 per share for
five years, in connection with the
issuance of Series D preferred, in
April 1995, for a purchase price of
$.0015 per warrant.................. -- -- --
Issuance of 90-day option to purchase
166,667 shares of Series D preferred
stock in April 1995, exercisable at
$6 per share, in connection with the
issuance of Series D preferred
stock............................... -- -- --
Partial exercise of option ($6.00 per
share) in August 1995 for Series D
preferred stock..................... -- -- --
Issuance of Series E preferred stock
($6.00 per share) in June 1995 for
cash of $1,500,000, net of offering
costs of $28,963.................... -- --
Issuance of warrants to purchase
308,666 shares of Series E preferred
stock in June 1995, exercisable at
$6.00 per share for one year, in
connection with the issuance of
Series E preferred stock, for a
purchase price of $.0015 per
warrant............................. -- -- --
Purchase of 33,333 shares of treasury
stock for $1.50 per share for cash
from a founder, in August 1995...... (33,333) (50,000) --
Issuance of common stock to employees
for options exercised ($.09 per
share) in August and December
1995................................ -- -- --
Issuance of common stock to employees
for options exercised ($.15 per
share) in February, April, September
and December 1995................... -- -- --
Issuance of common stock to employees
($1.50 per share) in August 1995 for
cash................................ -- -- --
Net income (loss)..................... -- -- (3,341,984)
------- -------- ------------
BALANCES, December 31, 1995............ (33,333) $(50,000) $ (9,490,284)
======= ======== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-7
<PAGE> 38
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (MARCH 22, 1991) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
STOCKHOLDERS' (DEFICIT) EQUITY
MANDATORILY -----------------------------------------------------
REDEEMABLE
CONVERTIBLE OPTIONS AND
PREFERRED STOCK COMMON STOCK WARRANTS ADDITIONAL
------------------------- ------------------ ------------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
---------- ------------ --------- ------ -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances December 31, 1995............ 5,243,425 $ 13,433,482 1,146,421 $1,146 635,830 $ 2,963 $ (2,390)
Issuance of Series D Preferred Stock
($6.00 per share) for cash.......... 16,666 100,000 -- -- -- -- --
Issuance of common stock for options
exercised ($0.15 per share)......... -- -- 216,396 216 -- -- 32,243
Issuance of warrants to purchase 8,625
shares of Series C preferred stock,
in March 1996, exercisable at $6 per
share............................... -- -- -- -- 8,625 -- --
Issuance of common stock for warrants
exercised ($6.00 per share) in
April............................... -- -- 308,666 309 (308,666) (463) 1,852,150
Issuance of common stock for warrants
exercised ($1.50 per share) in
April............................... -- -- 166,666 167 (166,666) (250) 250,082
Issuance of common stock for warrants
exercised ($0.75 per share) in
April............................... -- -- 145,137 146 (149,998) (2,250) 63,627
Conversion of Mandatorily Redeemable
Preferred Stock into shares of
common stock in May................. (5,260,091) (13,533,482) 5,260,091 5,260 -- -- 13,528,222
Issuance of common stock upon an
Initial Public Offering, net of
offering costs of $2,060,483........ -- -- 2,200,000 2,200 -- -- 21,037,317
Issuance of common stock to employees
for options exercised ($0.53 per
share) in September 1996............ -- -- 69 -- -- -- 37
Issuance of common stock to employees
for options exercised ($0.38 per
share) in October and December
1996................................ -- -- 460 -- -- -- 175
Issuance of common stock to employees
for options exercised ($0.75 per
share) in October 1996.............. -- -- 50 -- -- -- 38
Issuance of common stock to employees
for options exercised ($0.09 per
share) in October 1996.............. -- -- 3,666 4 -- -- 326
Net income (loss)..................... -- -- -- -- -- -- --
---------- ------------ --------- ------ -------- ------- -----------
BALANCES, December 31, 1996............ -- $ -- 9,447,622 $9,448 19,125 $ -- $36,761,827
========== ============ ========= ====== ======== ======= ===========
<CAPTION>
STOCKHOLDERS' (DEFICIT) EQUITY
---------------------------------
DEFICIT
ACCUMULATED
TREASURY STOCK DURING THE
------------------ DEVELOPMENT
SHARES AMOUNT STAGE
------- -------- ------------
<S> <C> <C> <C>
Balances December 31, 1995............ (33,333) $(50,000) $ (9,490,284)
Issuance of Series D Preferred Stock
($6.00 per share) for cash.......... -- -- --
Issuance of common stock for options
exercised ($0.15 per share)......... -- -- --
Issuance of warrants to purchase 8,625
shares of Series C preferred stock,
in March 1996, exercisable at $6 per
share............................... -- -- --
Issuance of common stock for warrants
exercised ($6.00 per share) in
April............................... -- -- --
Issuance of common stock for warrants
exercised ($1.50 per share) in
April............................... -- -- --
Issuance of common stock for warrants
exercised ($0.75 per share) in
April............................... -- -- --
Conversion of Mandatorily Redeemable
Preferred Stock into shares of
common stock in May................. -- -- --
Issuance of common stock upon an
Initial Public Offering, net of
offering costs of $2,060,483........ -- -- --
Issuance of common stock to employees
for options exercised ($0.53 per
share) in September 1996............ -- -- --
Issuance of common stock to employees
for options exercised ($0.38 per
share) in October and December
1996................................ -- -- --
Issuance of common stock to employees
for options exercised ($0.75 per
share) in October 1996.............. -- -- --
Issuance of common stock to employees
for options exercised ($0.09 per
share) in October 1996.............. -- -- --
Net income (loss)..................... -- -- (4,160,090)
------- -------- ------------
BALANCES, December 31, 1996............ (33,333) $(50,000) $(13,650,374)
======= ======== ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-8
<PAGE> 39
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $(3,316,224) $(3,341,984) $(4,160,090)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization............... 165,311 324,140 404,082
Loss from operations of joint venture....... -- 164,136 669,025
Interest expense paid in preferred stock.... 28,274 41,950 --
Common stock issued for research and
development and general and administrative
expenses.................................. 18,706 -- --
Preferred stock offering costs charged to
expense................................... -- -- --
Changes in
Accounts receivable....................... (10,189) (81,979) 452
Inventory................................. 15,819 (28,937) 318
Prepaid expenses and other assets......... (17,519) (83,932) 1,347
Accounts payable.......................... (27,103) 54,318 90,095
Accrued liabilities....................... 112,370 (20,774) 414,203
Deferred revenue.......................... -- -- 746,343
---------- ---------- ----------
Net cash used in operating
activities........................... (3,030,555) (2,973,062) (1,834,225)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities...... (8,084,879) (8,326,912) (25,717,811)
Sale of available-for-sale securities.......... 8,181,218 6,985,778 12,750,909
Purchases of property and equipment............ (925,892) (305,829) (9,759,156)
Construction in progress payables.............. -- -- 2,043,294
Issuance of notes receivable from founder...... -- (152,066) --
Payment of note receivable from founder........ -- -- 152,066
Investment in joint venture.................... -- (300,000) (533,161)
Patent costs................................... (46,773) (57,186) (61,762)
---------- ---------- ----------
Net cash used in investing
activities........................... (876,326) (2,156,215) (21,125,621)
---------- ---------- ----------
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(MARCH 22, 1991)
TO DECEMBER 31,
1996
----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $ (13,650,374)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization............... 965,039
Loss from operations of joint venture....... 833,161
Interest expense paid in preferred stock.... 70,224
Common stock issued for research and
development and general and administrative
expenses.................................. 29,922
Preferred stock offering costs charged to
expense................................... 4,810
Changes in
Accounts receivable....................... (91,716)
Inventory................................. (35,796)
Prepaid expenses and other assets......... (118,316)
Accounts payable.......................... 244,893
Accrued liabilities....................... 572,012
Deferred revenue.......................... 746,343
----------------
Net cash used in operating
activities........................... (10,429,798)
----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities...... (45,852,742)
Sale of available-for-sale securities.......... 30,750,362
Purchases of property and equipment............ (11,609,543)
Construction in progress payables.............. 2,043,294
Issuance of notes receivable from founder...... (152,066)
Payment of note receivable from founder........ 152,066
Investment in joint venture.................... (833,161)
Patent costs................................... (167,302)
----------------
Net cash used in investing
activities........................... (25,669,092)
----------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-9
<PAGE> 40
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD
FROM
INCEPTION
(MARCH 22,
FOR THE YEAR ENDED DECEMBER 31, 1991) TO
------------------------------------- DECEMBER 31,
1994 1995 1996 1996
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock........... $2,474,522 $3,700,000 $ 100,000 $ 9,947,662
Proceeds from issuance of common stock.............. 52,450 43,126 25,296,557 25,443,508
Proceeds from issuance of convertible notes
payable.......................................... 1,000,000 1,797,732 -- 3,497,732
Proceeds from issuance of notes payable............. 287,552 384,434 190,929 862,915
Payments on notes payable........................... (13,587) (108,650) (255,960) (378,197)
Stock issuance costs................................ (58,871) (57,782) (2,060,483) (2,243,410)
Payments on capital lease........................... (3,275) (5,592) (7,119) (15,986)
Purchase of treasury stock from founder............. -- (50,000) -- (50,000)
Issuance of warrants to purchase common or preferred
stock............................................ -- 2,963 -- 2,963
---------- ---------- ----------- -----------
Net cash provided by financing activities... 3,738,791 5,706,231 23,263,924 37,067,187
---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................................... (168,090) 576,954 304,078 968,297
CASH AND CASH EQUIVALENTS, beginning of period........ 255,355 87,265 664,219 --
---------- ---------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period.............. $ 87,265 $ 664,219 $ 968,297 $ 968,297
========== ========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.............................. $ 3,915 $ 30,683 $ 52,672 $ 87,270
========== ========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of notes payable and related accrued
interest to preferred stock...................... $1,028,274 $1,839,682 $ -- $ 3,585,820
========== ========== =========== ===========
Property purchased under capital leases............. $ 17,805 $ -- $ -- $ 17,805
========== ========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-10
<PAGE> 41
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND DEVELOPMENT STAGE RISKS
Bolder Technologies Corporation (the "Company") is a development-stage
company that is currently involved in the design, development and marketing of
new lead acid-based batteries based on its Thin Metal Film ("TMF") technology.
The Company was incorporated in the state of Colorado on March 22, 1991
("Inception") as Bolder Battery, Inc., and reincorporated as a Delaware
corporation on November 19, 1993 and was subsequently renamed Bolder
Technologies Corporation. Its activities to date have been primarily related to
organization, raising capital, personnel recruitment, research and development,
construction of its initial production line and marketing. The Company is
located in Wheat Ridge, Colorado, and its customers to date are primarily United
States companies and the United States government. Revenue recorded in 1995 and
1996 relates primarily to Small Business Innovation Research research and
development agreements, a customer-funded research and development agreement and
to sales of demonstration and evaluation units of the Company's product. The
Company has not generated significant revenue from its battery product to date.
The Company has incurred losses since its inception, and has an accumulated
development stage deficit of $13,650,374 at December 31, 1996. The Company's
operations are subject to certain development stage risks and uncertainties,
some of which follow. The Company to date has not produced its battery in large
volumes. The Company is currently testing and qualifying its commercial-volume
production line; however such testing has not yet been completed. The Company
must be able to produce its product in commercial quantities, and commercial
acceptance of the Company's product will have to occur in the marketplace before
the Company can attain successful operations. Further, during the period
required to achieve successful operations, the Company may require additional
financing which may not be available to it. The Company expects to incur
significant losses in the future as it continues its research, product
development efforts, and product testing and seeks to establish its
manufacturing, sales and marketing capability. There can be no assurance that
the Company will achieve or sustain significant revenues or profitability in the
future.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventory
Inventories are stated at the lower of cost (first-in, first-out basis) or
market. Inventories consist of the following as of December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Raw materials............................................... $21,141 $35,796
Work-in-process............................................. 14,973 --
------- -------
$36,114 $35,796
======= =======
</TABLE>
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Property and Equipment
Property and equipment are stated at cost and depreciation is provided
using the straight-line method over the estimated useful lives of the respective
assets, which are three to seven years. Depreciation and amortization expense
for the years ended December 1994, 1995 and 1996 and since Inception was
$165,311, $318,061, $395,027 and $955,984, respectively. Maintenance and
F-11
<PAGE> 42
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
repairs are expensed as incurred and improvements are capitalized. Leasehold
improvements are capitalized and amortized over the shorter of the lease term or
their estimated useful life.
Patents
The Company capitalizes direct, external costs associated with patent
applications and filings. Costs associated with successful applications are
amortized over fourteen years beginning with the date of issue. Capitalized
costs are written off at such time as it becomes known that an application will
not be successful or when a particular patent is deemed to no longer be of
value.
Available-for-Sale Securities
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Under SFAS No. 115, debt and equity securities that
the Company has both the positive intent and ability to hold to maturity are
classified as held-to-maturity and are reported at amortized cost. Debt and
equity securities that are bought and held principally for the purpose of
selling them in the near term are classified as trading securities and reported
at fair value, with the unrealized gains and losses included in earnings. Debt
and equity securities not classified as either held-to-maturity securities or
trading securities are classified as available-for-sale securities and reported
at fair value, with unrealized gains or losses excluded from earnings and
reported in a separate component of stockholders' equity.
The Company's available-for-sale securities at December 31, 1995 and 1996,
consist of United States Treasury bills and debt securities of United States
government agencies and are classified as available-for-sale securities and
reported at fair value. The fair market value of these securities approximates
their amortized cost.
Unaudited, Pro Forma Loss Per Common Share and Equivalent
For the years ended December 31, 1994 and 1995, loss per share is not
considered relevant as it differed materially from loss per common share and
common equivalent share for the year ended December 31, 1996 as a result of the
changes in the capital structure of the Company which occurred on the completion
of its Initial Public Offering ("IPO") in May, 1996. Except as noted below, pro
forma loss per common share and equivalents is computed using the sum of the
weighted average number of shares of common stock (assuming conversion of the
preferred stock had occurred on January 1, 1996). Common stock equivalent shares
were not included as they are antidilutive, except as noted below. Pursuant to
Securities and Exchange Commission Staff Accounting Bulletin No. 83, common
stock and common stock equivalent shares issued by the Company at prices
significantly below the public offering price during the twelve month period
prior to the initial offering date (using the treasury stock method and the
initial offering price of $10.50 per share) have been included in the
calculation for periods prior to the IPO as if they were outstanding, regardless
of whether they are antidilutive.
Increase in Authorized Shares -- Reverse Stock Split
In March 1996, the Board of Directors authorized an amendment to the
Company's Restated Certificate of Incorporation that was effective May 3, 1996
(the "Effective Date"). The amendment increased the authorized shares of Common
Stock to 25,000,000 shares and authorized the issuance of up to 5,000,000 of
Preferred Stock, after canceling references to the series of Preferred Stock
that were converted into Common Stock on the Effective Date. The amendment also
authorized a 1.5 for
F-12
<PAGE> 43
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1 reverse stock split. Common stock amounts, equivalent share amounts and per
share amounts have been adjusted retroactively to give effect to the 1.5 for 1
reverse stock split.
Concentration of Credit Risk
The Company has no significant off-balance sheet concentrations of credit
risk such as foreign exchange contracts, options contracts or other foreign
hedging arrangements. The Company maintains the majority of its cash and
short-term investment balances with financial institutions in the form of demand
deposits and United States Treasury notes, Treasury bills, and debt securities
of agencies of the United States government.
The Company performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral. Its accounts receivable
balances are primarily domestic, and are due from agencies of the United States
government. The Company had two principal customers which accounted for
approximately 91% of its total revenue for the year ended December 31, 1996, and
79% of its trade accounts receivable at December 31, 1996.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
short-term trade receivables and payables and notes and capital lease payable.
The carrying values of cash and cash equivalents and short-term trade
receivables and payables approximate fair value. The fair value of notes and
capital lease payable is estimated based on current rates available for similar
debt with similar maturities and securities, and at December 31, 1996,
approximates the carrying value.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates may affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). SFAS No. 109 requires recognition of deferred income tax assets and
liabilities for the expected future income tax consequences, based on enacted
tax laws, of temporary differences between the financial reporting and tax bases
of assets, liabilities and carryforwards. SFAS No. 109 requires recognition of
deferred tax assets for the expected future effects of all deductible temporary
differences, loss carryforwards and tax credit carryforwards. Deferred tax
assets are then reduced, if deemed necessary, by a valuation allowance for the
amount of any tax benefits which, more likely than not based on current
circumstances, are not expected to be realized (see Note 12).
F-13
<PAGE> 44
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) AVAILABLE-FOR-SALE SECURITIES
The following is a summary of available-for-sale securities as of December
31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
U.S. government agency debt securities...................... $ -- $ 6,020,303
U.S. Treasury notes......................................... -- 9,082,077
U.S. Treasury bills......................................... 2,135,478 --
---------- -----------
$2,135,478 $15,102,380
========== ===========
</TABLE>
Unrealized gains and losses on available-for-sale securities were
immaterial as of December 31, 1995 and 1996.
The amortized cost of debt securities at December 31, 1996, by contractual
maturity, are shown below. Expected maturities will differ from contractual
maturities.
<TABLE>
<S> <C>
Less than 1 year.................................. $15,102,380
-----------
Total debt securities............................. $15,102,380
===========
</TABLE>
(4) MANDATORILY REDEEMABLE, CONVERTIBLE PREFERRED STOCK
The Company was authorized to issue 5,781,962 shares of mandatorily
redeemable, convertible preferred stock. All shares of redeemable preferred
stock were converted to common stock upon the IPO. Preferred stock issuances
from Inception through the Effective Date, can be summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1995 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Preferred stock, $.001 par value,
5,781,961 and 0 shares authorized,
respectively, stated at redemption value --
Series A convertible preferred stock,
571,571 shares authorized, entitled to
a preference in liquidation of
$530,000............................... 571,564 $ 530,000 -- --
Series B convertible preferred stock,
2,574,003 shares authorized, entitled
to a preference in liquidation of
$3,861,004............................. 2,574,003 3,861,004 -- --
Series C convertible preferred stock,
1,278,097 shares authorized, entitled
to a preference in liquidation of
$3,544,746............................. 1,181,574 3,544,746 -- --
Series D convertible preferred stock,
799,622 shares authorized, entitled to
a preference in liquidation of
$3,997,732............................. 666,284 3,997,732 -- --
Series E convertible preferred stock,
558,666 shares authorized, entitled to
a preference in liquidation of
$1,500,000............................. 250,000 1,500,000 -- --
--------- ----------- --------- -----------
5,243,425 $13,433,482 -- --
========= =========== ========= ===========
</TABLE>
Each share of Preferred Stock was convertible, at the option of the holder,
into one share of common stock. The conversion rate was subject to adjustment
based on a formula to prevent
F-14
<PAGE> 45
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
dilution. Each share of Preferred Stock was automatically converted into common
stock immediately prior to the closing of the IPO.
In October 1992, the Company borrowed $700,000 from existing stockholders
which was converted into 466,666 shares of Series B Preferred Stock in January
1993 for $1.50 per share.
In April 1994, the Company borrowed $1,000,000 from existing stockholders,
which was converted into 333,333 shares of Series C Preferred Stock in July
1994, for $3.00 per share.
In March 1995, the Company borrowed $1,797,750 from existing stockholders
(the "Notes"). The Notes and accrued interest were convertible into Series C
Preferred Stock of the Company at a conversion price of $3.00 per share and were
interest bearing at 12% per annum. If on or before the maturity date of the
Notes (September 1995), the Company sold a new series of Preferred Stock (Series
D), with proceeds greater than $1,500,000 without regard to the conversion of
the Notes, the principal of the Notes would be automatically converted into
Series D on the same terms and conditions that the Series D was purchased, and
the accrued interest would be converted into Series C. In connection with the
issuance of the Notes, the Company also issued warrants to purchase 149,998
shares of the Company's common stock, exercisable at a price of $0.75 per share,
at a purchase price of $.015 per warrant. The value of the warrants was
determined to be immaterial. In April 1995, this Note and accrued interest
thereon of $41,950 were converted to 299,618 shares of Series D and 13,979
shares of Series C, respectively.
In April 1995, the Company received cash proceeds of $2,000,250 in
connection with the issuance of 333,333 shares of Series D to an investor for
$6.00 per share and warrants to purchase 166,667 shares of the Company's common
stock, exercisable at $1.50 per share, at a purchase price of $.0015 per
warrant. The Company also granted an option to an investor which, for a 90-day
period, allowed the investor to purchase up to 166,667 additional shares of
Series D of the Company at an exercise price of $6.00 per share. In August 1995,
the investor exercised this option by purchasing 33,333 shares of the Company's
Series D at $6.00 per share. The unexercised portion of this option expired.
In August 1995, the Company repurchased from a founder of the Company
33,333 shares of the Company's common stock for $1.50 per share, its then fair
market value. Such stock has been reflected as treasury stock in the
accompanying balance sheet as of December 31, 1995.
In January 1996, the Company issued an additional 16,666 shares of the
Company's Series D Preferred Stock for $6.00 per share to an investor.
Effective May 12, 1996 the outstanding shares of Redeemable Preferred Stock
were converted into 5,260,091 shares of the Company's common stock in accordance
with their terms.
In connection with the original agreement with Johnson Controls Battery
Group, Inc. ("Johnson Controls") a Wisconsin corporation, on June 26, 1995,
Johnson Controls purchased 250,000 shares of the Company's Series E Preferred
stock, which were converted into 250,000 shares of common stock at the time of
the Company's initial public offering in May 1996. In addition Johnson Controls
exercised warrants to purchase an additional 308,666 shares of Series E of the
Company's preferred stock in April 1996 at an exercise price of $6.00 per share.
The Series E Preferred Stock also was converted to common stock at the time of
the Company's initial public offering.
(5) STOCKHOLDERS' EQUITY
On May 6, 1996, the Company successfully completed an initial public
offering of 2,200,000 shares of common stock at $10.50 per share. The Board of
Directors authorized an amendment to the
F-15
<PAGE> 46
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company's Restated Certificate which increased the authorized shares of common
stock to 25,000,000 shares and authorized issuance of up to 5,000,000 of
Preferred Stock. The amendment was filed on May 3, 1996.
Splits
In August 1991, the Company declared a 1.17648 to 1 split of Series A. The
Company also reduced the par value of its common stock and Series A from $0.01
per share to $0.0085 per share. Prior to November 1993, the Company was
incorporated as a Colorado corporation. In November 1993, the Company
reincorporated as a Delaware corporation. In connection therewith, each share of
Colorado corporation common and preferred stock was converted into 2.75 shares
of the corresponding Delaware corporation common and preferred stock. In
addition, outstanding options to purchase shares of common stock in the Colorado
corporation were adjusted to purchase 2.75 shares of common stock in the
Delaware corporation. The Company also reduced the par value of its common and
preferred stock to $0.001 per share.
In March 1996, the Company declared a 1.5 for 1 reverse split, which was
effective on May 3, 1996. All share and per share amounts listed in the
accompanying financial statements and notes for all periods presented have been
adjusted to reflect these stock splits.
1996 Equity Incentive Plan
In March 1996, the Company adopted the 1996 Equity Incentive Plan (the
"Equity Incentive Plan"). The Equity Incentive Plan is a successor to, and
restatement of, the Company's 1992 Incentive Stock Option Plan and its 1992
Non-Qualified Stock Option Plan (the "1992 Plans"). The Equity Incentive Plan
provides for the following types of stock-based awards: incentive stock options
for employees (including officers and employee directors); nonstatutory stock
options for employees (including officers and non-employee directors), directors
and consultants; and restricted stock purchase awards, stock bonuses and stock
appreciation rights to employees (including officers and employee directors) and
consultants. As of December 31, 1996, no grants of stock bonuses or stock
appreciation rights have been made.
The Company has reserved 1,080,836 shares of its Common Stock for future
issuance under the Equity Incentive Plan at December 31, 1996.
Employee Stock Purchase Plan
In March 1996, the Company adopted the Employee Stock Purchase Plan (the
"Purchase Plan") covering an aggregate of 40,000 shares of Common Stock. The
Purchase Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Internal Revenue Code. Under the Purchase
Plan, the Board of Directors may authorize participation by eligible employees,
including officers, in periodic offerings following the adoption of the Purchase
Plan. The offering period for any offering will be no more than 27 months.
Employees are eligible to participate if they are employed by the Company
or an affiliate of the Company designated by the Board of Directors for at least
20 hours of service per week and are employed by the Company or a subsidiary of
the Company designated by the Board for at least five months of service per
calendar year. Employees who participate in an offering can have up to 10% of
their earnings withheld pursuant to the Purchase Plan. The amount withheld will
then be used to purchase shares of Common Stock on specified dates determined by
the Board of Directors. The price of Common Stock purchased under the Purchase
Plan will be equal to 85% of the lower of the
F-16
<PAGE> 47
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
fair market value of the Common Stock on the commencement date of each offering
period or the relevant purchase date. Employees may end their participation in
the offering at any time during the offering period, and participation ends
automatically on termination of employment with the Company. Subsequent to
December 31, 1996, 10,085 shares of common stock were issued related to employee
participation in 1996.
Statement of Financial Accounting Standards No. 123 ("SFAS") 123
SFAS No. 123, "Accounting for Stock-Based Compensation," defines a fair
value based method of accounting for employee stock options or similar equity
instruments. However, SFAS 123 allows the continued measurement of compensation
cost for such plans using the intrinsic value based method prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), provided
that pro forma disclosures are made of net income or loss and net income or loss
per share, assuming the fair value based method of SFAS 123 had been applied.
The Company has elected to account for its stock-based compensation plans for
employees and directors under APB 25. The Company recorded no compensation
expense during 1995 and 1996 related to APB 25. Accordingly, for purposes of the
pro forma disclosures presented below, the Company has computed the fair values
of all options granted during 1995 and 1996, using the Black-Scholes pricing
model and the following weighted average assumptions:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Risk-free interest rate..................................... 6.3% 6.1%
Expected dividend yield..................................... 0.0% 0.0%
Expected lives outstanding.................................. 6.0 years 5.2 years
Expected volatility......................................... 51.71% 51.71%
</TABLE>
To estimate lives of options for this valuation, it was assumed options
will be exercised upon becoming fully vested and the Company had completed an
initial public offering of its common stock. All options are initially assumed
to vest. Cumulative compensation costs recognized in pro forma net income or
loss with respect to options that are forfeited prior to vesting is adjusted as
a reduction of pro forma compensation expense in the period of forfeiture. The
expected volatility was based on an approximation of the Company's volatility
since its initial public offering. Actual volatility of the Company's common
stock varies. Fair value computations are highly sensitive to the volatility
factor assumed; the greater the volatility, the higher the computed fair value
of options granted.
The total fair value of options granted was computed to be approximately
$8,000 and $276,000 for the years ended December 31, 1995 and 1996,
respectively. These amounts are amortized ratably over the vesting periods of
the options or recognized at date of grant if no vesting period is required. Pro
forma stock-based compensation, net of the effect of forfeitures, was $8,000 and
$253,000 for 1995 and 1996, respectively.
In addition to the options, there was approximately $29,000 of compensation
related to the Purchase Plan. The shares were valued assuming a 51.71%
volatility factor and a 5.0% risk free interest rate.
F-17
<PAGE> 48
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
If the Company had accounted for its stock-based compensation plans in
accordance with SFAS 123, the Company's net loss and pro forma net loss per
common share would have been reported as follows:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C> <C>
Net loss: As reported............................................. (3,341,984) (4,160,090)
========== ==========
Pro forma............................................... (3,349,984) (4,413,090)
========== ==========
EPS: As reported (Note 2).................................... $(.48)
==========
Pro forma (Note 2)...................................... $(.51)
==========
</TABLE>
Weighted average shares used to calculate pro forma net loss per share were
determined as described in Note 2, except in applying the treasury stock method
to outstanding options, net proceeds assumed received upon exercise were
increased by the amount of compensation cost attributable to future service
periods and not yet recognized as pro forma expense.
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
A summary of stock options from inception through December 31, 1996 is
presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
-------- --------
<S> <C> <C>
BALANCES, as of December 31, 1991........................... -- --
Granted................................................... 286,891 $ 0.12
--------
BALANCES, as of December 31, 1992........................... 286,891 $ 0.12
Granted................................................... 501,405 $ 0.15
Canceled.................................................. (66) $ 0.15
--------
BALANCES, as of December 31, 1993........................... 788,230 $ 0.14
Granted................................................... 392,553 $ 0.32
Canceled.................................................. (116,501) $ 0.15
Exercised................................................. (282,069) $ 0.25
--------
BALANCES, as of December 31, 1994........................... 782,213 $ 0.19
Granted................................................... 106,358 $ 1.41
Canceled.................................................. (80,701) $ 0.15
Exercised................................................. (83,138) $ 0.12
--------
BALANCES, as of December 31, 1995........................... 724,732 $ 0.38
Granted................................................... 494,399 $10.56
Canceled.................................................. (110,740) $ 0.63
Exercised................................................. (220,641) $ 0.15
--------
BALANCES, as of December 31, 1996........................... 887,750 $ 6.07
========
Weighted average fair value of options granted --
1995................................................... $ 0.79
======
1996................................................... $ 5.55
======
</TABLE>
F-18
<PAGE> 49
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about the options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICES AT 12/31/96 LIFE PRICE AT 12/31/96 PRICE
------------------------ ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$.09-$.15......................... 184,537 6.8 years $ .14 92,137 $ .13
$.38-$.75......................... 170,238 7.6 years .40 157,283 .39
$1.50............................. 93,344 8.5 years 1.50 24,087 1.50
$6.00............................. 105,295 9.2 years 6.00 -- --
$10.50-$14.88..................... 334,336 9.6 years 12.65 -- --
------- ------- -----
Total................... 887,750 9.0 years 6.07 273,507 $ .40
======= ======= =====
</TABLE>
As part of an employment agreement, during 1994 an executive purchased
133,333 shares of common stock at its fair market value of $0.375 per share.
Such stock is restricted stock, and may be repurchased by the Company in certain
circumstances.
(6) JOINT VENTURE AND LICENSE AGREEMENTS
In June 1995, the Company and Johnson Controls formed a joint venture,
Johnson Controls/Bolder LLC (the "Joint Venture"), to develop high volume
manufacturing technology for TMF batteries, to commercialize the TMF technology
and to promote the TMF technology in the hybrid electric vehicle market. In July
1996, having substantially completed its primary objective of developing the
high volume manufacturing technology, the Company and Johnson Controls agreed to
discontinue the Joint Venture and separately implement TMF battery manufacturing
facilities to best meet the unique requirements of the markets addressed by
each. This agreement to discontinue the Joint Venture was formalized on January
22, 1997, but made effective as of July 31, 1996. From inception until it was
terminated, the Joint Venture was primarily engaged in the research and
development of the manufacturing process for TMF batteries and did not generate
any significant revenues. Assets and liabilities of the Joint Venture at the
date of termination were considered to be the property of the Company, and the
net assets attributable to Johnson Controls' ownership interest were considered
to be advance payments on the technology transfer agreement entered into between
the Company and Johnson Controls.
From the inception of the Joint Venture, through the effective date of its
termination, July 31, 1996, the Company accounted for its investment in the
Joint Venture using the equity method, and recorded its share of the Joint
Venture's losses. For the year ended December 31, 1995 and 1996, respectively,
the Company recorded $164,136 and $669,025, of such losses ($833,161 from
Inception). Subsequent to July 31, 1996, the Company recorded all of the expense
related to the activities formerly conducted by the Joint Venture.
Substantially all of the Joint Venture's research and development and
general and administrative expenses represent charges from the Company and
Johnson Controls for services provided to the Joint Venture. For the years ended
December 31, 1995 and 1996, the Company charged $215,000 and $900,000,
respectively, of such costs to the Joint Venture. Of the 1996 amounts,
approximately $720,000 represent research and development charges and $180,000
represent general and administrative charges.
F-19
<PAGE> 50
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the termination of the Joint Venture and the
restructuring of the relationship between the Company and Johnson Controls, the
Company agreed to engage in technology transfer services which will allow
Johnson Controls to deploy TMF technology in specified markets in commercial
quantities. In exchange for services to be performed under the technology
transfer agreement, the Company received Johnson Controls' interest in the net
assets of the Joint Venture, and has recorded this amount as deferred revenue at
December 31, 1996. Johnson Controls has also made a cash payment to the Company
in 1997 in exchange for technology transfer services to be performed by the
Company.
In addition, the Company granted JCI a license to make and sell TMF
batteries in markets related to auto/truck primary starting, hybrid electric
vehicles, lawn and garden equipment starting, motorcycle starting and
uninterruptible power supply. The Company will receive royalties on all units
sold by Johnson Controls into these markets which incorporate the Company's TMF
technology, subject to certain minimum royalties payable each year. The Company
and Johnson Controls also entered into a cross supply agreement pursuant to
which they will supply each other with TMF battery products.
(7) NOTES AND CAPITAL LEASE PAYABLE
The Company has entered into a senior loan and security agreement (the
"Agreement") whereby the Company may borrow, in one or more borrowings, an
amount not to exceed $1,500,000 in the aggregate. At December 31, 1996,
cumulative borrowings under the Agreement totaled $862,915. The Company has
granted a first perfected security interest in certain of its equipment,
machinery and fixtures as collateral to these borrowings. At December 31, 1996,
the total remaining commitment under this Agreement is approximately $637,085.
The notes payable under the Agreement at December 31, 1995 and 1996, bear
interest at 10.01%, are due in varying dates through December 1998, and require
monthly payments of principal and interest totaling $27,673.
In connection with the Agreement, the Company issued warrants to the
lender. Under the terms of the warrants, the lender may acquire up to 10,500
shares and 8,625 shares of the Company's Common Stock for $3.00 and $6.00 per
share, respectively.
The aggregate maturities of the notes and capital lease payable are as
follows:
<TABLE>
<S> <C>
1997........................................................ $272,360
1998........................................................ 180,960
1999........................................................ 33,217
--------
$486,537
========
</TABLE>
(8) RELATED PARTY TRANSACTIONS
During 1995, the Company entered into various notes receivable agreements
totaling $150,000 with a founder of the Company. The notes bear interest at
6.04% per annum, the applicable Federal rate of interest at the date the note
was signed. This amount was paid in full in May 1996.
As discussed in Note 3, the Company has entered into various bridge loans
provided by stockholders, which have been converted into preferred stock.
F-20
<PAGE> 51
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(9) COMMITMENTS AND CONTINGENCIES
The Company leases its current office space under a month-to-month lease
agreement. The Company has also entered into an eleven-year lease with two
five-year renewal options for a new facility for its commercial-quantity battery
production line which is currently under construction. The Company also leases
certain office equipment under lease agreements which terminate in 1999. Future
minimum commitments under these leases are as follows:
<TABLE>
<S> <C>
1997........................................................ $ 422,428
1998........................................................ 605,494
1999........................................................ 601,592
2000........................................................ 586,342
2001........................................................ 553,896
Thereafter.................................................. 2,989,100
----------
$5,758,852
==========
</TABLE>
Monthly rental payments for the Company's office space are approximately
$13,000. Rent expense for the years ended December 31, 1994, 1995 and 1996 and
from inception was $99,879, $158,341, and $167,726 and $503,711, respectively.
The Company has entered into employment agreements with certain executives
that provide for specified severance payments should the Company terminate the
executive's employment with the Company, other than for cause. The amount to be
paid is subject to reduction in certain circumstances.
In February 1996, the JV committed to the construction of a commercial
volume battery production line. The Company was required to contribute 50% of
the capital required to fund such line. In July 1996, the Company assumed
responsibility for 100% of the capital required to complete the construction of
the production line. The estimated cost of construction of this line is
$9,750,000. In addition to amounts recorded at December 31, 1996, the Company is
committed to fund approximately $850,000 in 1997 related to this production
line.
The Company is subject to certain environmental and other regulations
primarily administered by the United States Environmental Protection Agency and
various state agencies. Management of the Company believes it has complied with
all material aspects associated with these regulations.
The Company is subject to various claims and business disputes in the
ordinary course of business. Management does not anticipate that the ultimate
outcome of these issues will have a material impact on the Company's financial
position or results of operations.
F-21
<PAGE> 52
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(10) ACCRUED COMPENSATION AND OTHER ACCRUED LIABILITIES
The components of accrued compensation and other accrued liabilities are as
follows:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Accrued vacation............................................ $ 63,775 $ 86,262
Executive salaries payable.................................. 19,328 --
Employee stock purchase plan payable........................ -- 90,157
Property taxes payable...................................... 18,000 33,674
Accrued commissions and bonuses............................. 14,018 264,000
Employee annuities payable.................................. 11,211 4,192
Wages payable............................................... 4,926 10,116
Other....................................................... 8,687 65,747
-------- --------
$139,945 $554,148
======== ========
</TABLE>
(11) EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan under which eligible employees may defer up
to 15% of their compensation. The Company may make matching contributions and
discretionary contributions if approved by the Board of Directors. For 1994,
1995, 1996 and since inception, no employer matching or discretionary
contributions were made to the Plan.
(12) INCOME TAXES
From its inception, the Company has generated losses for both financial
reporting and tax purposes. The Federal tax benefit of the net operating loss
carryforward is approximately $4,500,000 as of December 31, 1996. This deferred
tax asset related to this benefit has been fully offset by a valuation allowance
as it does not satisfy the realization criteria set forth in SFAS No. 109, due
to the Company's history of operating losses.
For income tax return reporting purposes, the Company may utilize
approximately $13,400,000 of net operating loss carryforwards which expire at
various dates through the year 2011. The Tax Reform Act of 1986 contains
provisions which may limit the net operating loss carryforwards available to be
used in any given year if certain events occur, including changes in ownership
interests. In addition, the Company has certain research and development credits
available to it.
(13) SIGNIFICANT CUSTOMERS
Below is a listing of major customers, each of which comprised more than
10% of revenue:
<TABLE>
<CAPTION>
1995 1996
----------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT
------- ------- -------- -------
<S> <C> <C> <C> <C>
United States Government SBIR Contract............... $66,667 63% $ 72,458 15%
Customer 2........................................... -- -- $360,000 76%
Customer 3........................................... 33,596 32% -- --
</TABLE>
F-22
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3(i).1* -- Amended and Restated Certificate of Incorporation of the
Company.
3(ii).1* -- Amended and Restated Bylaws of the Company.
4.1 -- Reference is made to Exhibits 3(i).1 and 3(ii).1.
4.2* -- Specimen stock certificate.
10.1* -- Form of Indemnity Agreement between the Company and each
of its Directors and executive officers, with related
schedule.
10.2* -- 1996 Equity Incentive Plan of the Company (the "Option
Plan"), including forms of options granted to employees
and non-employee Directors under the Option Plan.
10.3** -- Amendments to the Option Plan, dated December 11, 1996.
10.4** -- Amendments to the Option Plan, dated January 30, 1997.
10.5* -- 1996 Employee Stock Purchase Plan of the Company.
10.6* -- Employment Agreement between the Company and Daniel S.
Lankford, dated July 11, 1994.
10.7* -- Employment Agreement between the Company and William E.
Younkes, dated April 1, 1993.
10.8* -- Employment Agreement Amendment between the Company and
William E. Younkes, dated October 1, 1995.
10.9* -- Letter Agreement between the Company and Joseph F.
Fojtasek, dated February 13, 1996.
10.10* -- Promissory Note executed by Tristan E. Juergens, dated
November 1, 1995.
10.11* -- Promissory Note executed by Tristan E. Juergens, dated
August 29, 1995.
10.12* -- Stock Purchase Agreement between the Company and Tristan
E. Juergens, dated August 29, 1995.
10.13* -- Stock Award Agreement between the Company and Tristan E.
Juergens, dated August 31, 1995.
10.14* -- Stock Award Agreement between the Company and Robert F.
Nelson, dated August 31, 1995.
10.15* -- Stock Award Agreement between the Company and Sandra D.
Schreiber, dated August 31, 1995.
10.16* -- Stock Award Agreement between the Company and William E.
Younkes, dated August 31, 1995.
10.17* -- Note Purchase Agreement between the Company and certain
parties named therein, dated April 19, 1994.
10.18* -- Series C Preferred Stock Purchase Agreement, dated July
19, 1994.
10.19* -- Supplemental Agreement to Series C Preferred Stock
Purchase Agreement between the Company and certain
parties named therein, dated September 30, 1994.
10.20* -- Note and Warrant Purchase Agreement between the Company
and certain parties named therein, dated March 14, 1995,
including forms of Convertible Promissory Notes and Stock
Purchase Warrants issued to the parties.
10.21* -- Series D Preferred Stock Purchase Agreement between the
Company and certain parties named therein, dated May 24,
1995.
</TABLE>
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.22* -- Guaranty Agreement between the Company and Steven Paul,
dated May 24, 1995.
10.23* -- Stock Purchase Warrant issued to Freedom Ventures
Incorporated, dated May 24, 1995.
10.24* -- Letter Agreement among the Company, Harold Scott and
certain parties named therein, dated January 18, 1996.
10.25* -- Series E Preferred Stock Purchase Agreement between the
Company and Johnson Controls Battery Group, Inc. and
certain other parties named therein, dated June 26, 1995.
10.26* -- Purchasers and Principal Stockholder Agreement among the
Company, Tristan E. Juergens and certain other parties
named therein, dated June 26, 1995.
10.27* -- Warrant to Purchase Shares of Series E Preferred Stock
issued to Johnson Controls Battery Group, Inc., dated
June 26, 1995.
10.28* -- Joint Venture Agreement between the Company and Johnson
Controls Battery Group, Inc., dated June 26, 1995.
10.29* -- Johnson Controls/Bolder LLC Operating Agreement between
the Company and Johnson Controls Battery Group, Inc.,
dated June 26, 1995.
10.30* -- BTC Johnson Controls License Agreement between the
Company and Johnson Controls Battery Group, Inc., dated
June 26, 1995.
10.31* -- Johnson Controls License Agreement between the Company
and Johnson Controls/Bolder LLC, dated June 26, 1995.
10.32* -- Johnson Controls JV Trade Name License Agreement among
the Company, Johnson Controls/Bolder LLC and Johnson
Controls Battery Group, Inc., dated June 26, 1995.
10.33* -- JV BTC/Johnson Controls License Agreement among the
Company, Johnson Controls Battery Group, Inc. and Johnson
Controls/Bolder LLC, dated June 26, 1995.
10.34* -- JV BTC/Johnson Controls Manufacturing and Supply
Agreement among the Company, Johnson Controls Battery
Group, Inc. and Johnson Controls/Bolder LLC, dated June
26, 1995.
10.35*** -- Agreement among the Company, Johnson Controls Battery
Group, Inc. and Johnson Controls/Bolder LLC, dated as of
July 31, 1996.
10.36*** -- Cross Supply Agreement between the Company and Johnson
Controls Battery Group, Inc., dated as of January 22,
1997.
10.37* -- Senior Loan and Security Agreement between the Company
and Phoenix Leasing Incorporated, dated July 29, 1994,
including forms of Warrants to Purchase Shares of Series
C Preferred Stock and Promissory Notes issued to Phoenix
Leasing Incorporated.
10.38* -- First Amendment to Purchase Agreement between the Company
and Phoenix Leasing Incorporated, dated July 29, 1994.
10.39* -- Amendment to Purchase Agreement between the Company,
certain stockholders of the Company and Phoenix Leasing
Incorporated, dated March 25, 1996.
10.40* -- Warrant issued to Phoenix Leasing Incorporated, dated
March 25, 1996.
</TABLE>
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.41 -- Security Agreement between the Company and Transamerica
Business Credit Corporation, dated as of March 4, 1997,
including form of Promissory Notes issued to Transamerica
Business Credit Corporation.
10.42* -- Service Agreement between the Company and Chemical Waste
Management, Inc., dated October 19, 1993.
10.43* -- Lease Agreement between the Company and Jefferson Park
West, dated December 13, 1993.
10.44* -- Lease Agreement between the Company and Jefferson Park
West, dated November 14, 1994.
10.45* -- Agreement between the Company and Wright Industries,
dated March 5, 1996.
23.1 -- Consent of Arthur Andersen LLP, Independent Auditors.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed with the Commission as an exhibit to the Company's
Registration Statement on Form SB-2 (Registration No. 333-2500-D) and
incorporated herein by reference.
** Previously filed with the Commission as an exhibit to the Company's
Registration Statement on Form S-8 (Registration 33-20989) and incorporated
herein by reference.
*** Previously filed with the Commission as an exhibit to the Company's
February 5, 1997 Form 8-K (File No. 0-28060) and incorporated herein by
reference.
**** Previously filed with the Commission as an exhibit to the Company's
Registration Statement on Form SB-2 (Registration No. 333-21753) and
incorporated herein by reference.
<PAGE> 1
EXHIBIT 10.41
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of March 4, 1997, is made by Bolder
Technologies Corporation (the "Borrower"), a Delaware corporation having its
principal place of business and chief executive office at 5181 Ward Road, Wheat
Ridge, Colorado 80033, in favor of Transamerica Business Credit Corporation, a
Delaware corporation (the "Lender"), having its principal office at Riverway
II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018.
WHEREAS, the Borrower has requested that the Lender make Loans to it
from time to time; and
WHEREAS, the Lender has agreed to make such Loans on the terms and
conditions of this Security Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to extend credit, the Borrower hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings,
and shall be equally applicable to both the singular and plural forms of the
terms defined:
Applicable Law shall mean the laws of the State of Illinois (or any other
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday or public holiday
or the equivalent for banks in New York City.
Code shall have the meaning specified in Section 8(d).
Collateral shall have the meaning specified in Section 2.
Collateral Access Agreement shall mean any landlord waiver, mortgagee waiver,
bailee letter or similar acknowledgement of any warehouseman or processor in
possession of any Equipment, in each case substantially in the form of Exhibit
A.
Effective Date shall mean the date on which all of the conditions specified in
Section 3.3 shall have been satisfied.
Equipment shall have the meaning specified in Section 2.
<PAGE> 2
Event of Default shall mean any event specified in Section 7.
Financial Statements shall have the meaning specified in Section 6.1.
GAAP shall mean generally accepted accounting principles in the United States
of America, as in effect from time to time.
Loans shall mean the loans and financial accommodations made by the Lender to
the Borrower in accordance with the terms of this Security Agreement and the
Notes.
Loan Documents shall mean, collectively, this Security Agreement, the Notes and
all other documents, agreements, certificates, instruments and opinions
executed and delivered in connection herewith and therewith, as the same may be
modified, extended, restated or supplemented from time to time.
Material Adverse Change shall mean, with respect to any Person, a material
adverse change in the business, operations, results of operations, assets,
liabilities or financial condition of such Person taken as a whole, which the
Lender reasonably believes will materially impair the Borrower's ability to
perform its obligations under the Loan Documents or of the Lender to enforce
the Obligations or realize upon the Collateral.
Material Adverse Effect shall mean, with respect to any Person, a material
adverse effect on the business, operations, results of operations, assets,
liabilities or financial condition of such Person taken as a whole, which the
Lender reasonably believes will materially impair the Borrower's ability to
perform its obligations under the Loan Documents or of the Lender to enforce
the Obligations or realize upon the Collateral.
Note shall mean each Promissory Note made by the Borrower in favor of the
Lender, as amended, supplemented or otherwise modified from time to time, in
each case substantially in the form of Exhibit B.
Obligations shall mean all indebtedness, obligations and liabilities of the
Borrower under the Notes and under this Security Agreement, whether on account
of principal, interest, indemnities, fees (including, without limitation,
attorneys' fees, remarketing fees, origination fees, collection fees and all
other professionals' fees), costs, expenses, taxes or otherwise.
Permitted Liens shall mean such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been
commenced: (a) liens for taxes, assessments and other governmental charges or
levies or the claims or demands of landlords, carriers, warehousemen,
mechanics, laborers, materialmen and other like Persons arising by operation of
law in the ordinary course of business for sums
-2-
<PAGE> 3
which are not yet due and payable, or liens which are being contested in good
faith by appropriate proceedings diligently conducted and with respect to which
adequate reserves are maintained to the extent required by GAAP; (b) deposits
or pledges to secure the payment of workmen's compensation, unemployment
insurance or other social security benefits or obligations, public or statutory
obligations, surety or appeal bonds, bid or performance bonds, or other
obligations of a like nature incurred in the ordinary course of business; (c)
licenses, restrictions or covenants for or on the use of the Equipment which do
not materially impair either the use of the Equipment in the operation of the
business of the Borrower or the value of the Equipment; and (d) attachment or
judgment liens that do not constitute an Event of Default.
Person shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and the successors, heirs and assigns of each.
Schedule shall mean each Schedule in the form of Schedule A hereto delivered by
the Borrower to the Lender from time to time.
Security Agreement shall mean this Security Agreement together with all
schedules and exhibits hereto, as amended, supplemented or otherwise modified
from time to time.
Solvent means, with respect to any Person, that as of the date as to which such
Person's solvency is measured:
(a) it is solvent under any applicable state or federal statute
and if more than one statute is applicable then under the statute applied by
the Lender in its sole discretion; and
(b) it is able generally to meet its debts as they mature.
Taxes shall have the meaning specified in Section 5.5.
Tenant Improvement shall mean any item of Equipment designated as a tenant
improvement on Schedule A hereto or on any other Schedule delivered from time
to time under the terms of this Security Agreement.
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower
hereby assigns and grants to the Lender a continuing general, first priority
lien on and security interest in, all the Borrower's right, title and interest
in and to the collateral described in the next sentence (the "Collateral") to
secure the payment and performance of all the Obligations. The Collateral
consists of all equipment set forth on Schedule A hereto and on
-3-
<PAGE> 4
any other Schedule delivered by the Borrower from time to time under the terms
of this Security Agreement (the "Equipment"), together with all present and
future additions, parts, accessories, attachments, substitutions, repairs,
improvements and replacements thereof or thereto, and any and all proceeds
thereof, including, without limitation, proceeds of insurance and all manuals,
warranties and records in connection therewith, all rights against suppliers,
warrantors, manufacturers, sellers or others in connection therewith, and
together with all substitutes for any of the foregoing.
SECTION 3. THE CREDIT FACILITY.
SECTION 3.1. BORROWINGS. Each request for a Loan, other than
the initial Loan, shall be made on notice, given not later than three Business
Days prior to the date of the proposed borrowing and such notice shall specify
the requested date that the Loan be made, the aggregate amount of such Loan and
the account to which the proceeds of such Loan shall be transmitted. Each Loan
shall be in an amount not less than $100,000, and in no event shall the sum of
the aggregate Loans made exceed the amount of the Lender's written commitment
to the Borrower in effect from time to time. Notwithstanding anything herein
to the contrary, the Lender shall be obligated to make the initial Loan and
each other Loan only after the Lender, in its sole discretion, determines that
the applicable conditions for borrowing contained in Sections 3.3 and 3.4 are
satisfied, in which case such Loan shall be made on the proposed date set forth
in the notice described in this Section 3.1.
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall not
directly or indirectly use any proceeds of the Loans, or cause, assist, suffer
or permit the use of any proceeds of the Loans, for any purpose other than for
the purchase, acquisition, installation or upgrading of Equipment or the
reimbursement of the Borrower for its purchase, acquisition, installation or
upgrading of Equipment.
SECTION 3.3. CONDITIONS TO INITIAL LOAN.
(a) The obligation of the Lender to make the initial Loan
is subject to the Lender's receipt of the following, each dated the date of the
initial Loan or as of an earlier date acceptable to the Lender, in form and
substance satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11)
listing all effective Uniform Commercial Code financing
statements naming the Borrower as debtor and all tax lien, judgment and
litigation searches for the Borrower as the Lender shall deem necessary
or desirable;
-4-
<PAGE> 5
(ii) Uniform Commercial Code financing statements
(Form UCC-1) duly executed by the Borrower (naming the Lender
as secured party and the Borrower as debtor and in form acceptable for
filing in all jurisdictions that the Lender deems necessary or
desirable to perfect the security interests granted to it hereunder)
and, if applicable, termination statements or other releases duly filed
in all jurisdictions that the Lender deems necessary or desirable to
perfect and protect the priority of the security interests granted to
it hereunder in the Equipment related to such initial Loan;
(iii) a Note duly executed by the Borrower evidencing
the amount of such Loan;
(iv) a Collateral Access Agreement duly executed by
the lessor or mortgagee, as the case may be, of each premises where
the Equipment is located;
(v) certificates of insurance required under Section
5.4 of this Security Agreement together with loss payee
endorsements for all such policies naming the Lender as lender loss
payee and as an additional insured;
(vi) a copy of the resolutions of the Board of
Directors of the Borrower (or a unanimous consent of directors
in lieu thereof) authorizing the execution, delivery and performance
of this Security Agreement, the other Loan Documents, and the
transactions contemplated hereby and thereby, attached to which is a
certificate of the Secretary or an Assistant Secretary of the Borrower
certifying (A) that the copy of the resolutions is true, complete and
accurate, that such resolutions have not been amended or modified
since the date of such certification and are in full force and effect
and (B) the incumbency, names and true signatures of the officers of
the Borrower authorized to sign the Loan Documents to which it is a
party;
(vii) the opinion of counsel for the Borrower covering
such matters incident to the transactions contemplated by this
Security Agreement as the Lender may reasonably require; and
(viii) such other agreements and instruments as the
Lender deems necessary in its reasonable discretion
in connection with the transactions contemplated hereby.
-5-
<PAGE> 6
(b) There shall be no pending or, to the knowledge of the
Borrower after reasonable inquiry, threatened litigation, proceeding or other
action (i) seeking an injunction or other restraining order, damages or other
relief with respect to the transactions contemplated by this Security Agreement
or the other Loan Documents or thereby or (ii) which affects or could affect
the business, prospects, operations, assets, liabilities or condition
(financial or otherwise) of the Borrower, except, in the case of clause (ii),
where such litigation, proceeding or other action could not be expected to have
a Material Adverse Effect on the Borrower.
(c) The Borrower shall have paid all reasonable fees and
expenses required to be paid by it to the Lender.
(d) The security interests granted in favor of the Lender
under this Security Agreement in the Equipment related to the initial Loan
shall, upon the proper completion of all required filings of financing
statements, have been duly perfected and shall constitute first priority liens
(to the extent such security interests can be perfected by the filing of
Uniform Commercial Code financing statements (Form UCC-1)).
(e) Since October 31, 1996, there shall have been no
change, event, occurrence or development or event involving a prospective
change which has had or could reasonably be expected to have a Material Adverse
Effect, and that all information provided by or on behalf of the Borrower to
the Lender hereunder or in connection herewith is true and correct in all
respects.
SECTION 3.4. CONDITIONS PRECEDENT TO EACH LOAN. The
obligation of the Lender to make each Loan is subject to the satisfaction of
the following conditions precedent:
(a) the Lender shall have received the documents,
agreements and instruments set forth in Section 3.3(a)(i) through (iii) and (v)
applicable to such Loan, each in form and substance satisfactory to the Lender
and its counsel and each dated the date of such Loan or as of an earlier date
acceptable to the Lender;
(b) the Lender shall have received a Schedule of the
Equipment related to such Loan, in form and substance satisfactory to the
Lender and its counsel, and the security interests granted in favor of the
Lender under this Security Agreement in such Equipment shall, upon the proper
completion of all required filings of financing statements, have been duly
perfected and shall constitute first priority liens (to the extent that such
security interests can be perfected by the filing of Uniform Commercial Code
financing statements (Form UCC-1));
-6-
<PAGE> 7
(c) all representations and warranties contained in
Section 4 of this Security Agreement and all representations and warranties
contained in the other Loan Documents shall be true and correct on and as of
the date of such Loan as if then made, other than representations and
warranties that expressly relate solely to an earlier date, in which case they
shall have been true and correct as of such earlier date; and
(d) no Event of Default or event which with the giving of
notice or the passage of time, or both, would constitute an Event of Default
shall have occurred and be continuing or would result from the making of the
requested Loan as of the date of such request.
SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS. The
Borrower (a) is duly organized, validly existing and in good standing under the
laws of the State of its organization, (b) has the power and authority to own
its properties and assets and to transact the businesses in which it is
presently, or proposes to be, engaged and (c) is duly qualified and authorized
to do business and is in good standing in every jurisdiction in which the
failure to be so qualified could have a Material Adverse Effect on (i) the
Borrower, (ii) the Borrower's ability to perform its obligations under the Loan
Documents or (iii) the rights of the Lender hereunder.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery and
performance by the Borrower of each of the Loan Documents to which it is a
party are within the powers of the Borrower, do not contravene the
organizational documents, if any, of the Borrower, and do not (a) to the best
of the Borrower's knowledge after reasonable inquiry, violate any law or
regulation, or any order or decree of any court or governmental authority, (b)
conflict with or result in a breach of, or constitute a default under, any
material indenture, mortgage or deed of trust or any material lease, agreement
or other instrument binding on the Borrower or any of its properties, or (c) to
the best of the Borrower's knowledge after reasonable inquiry, require the
consent, authorization by or approval of or notice to or filing or registration
with any governmental authority or other Person. This Security Agreement is,
and each of the other Loan Documents to which the Borrower is or will be a
party, when delivered hereunder or thereunder, will be, the legal, valid and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally
and by general principles of equity.
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SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent and
will be Solvent upon the completion of all transactions contemplated to occur
hereunder (including, without limitation, the Loan to be made on the Effective
Date); the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral other than Permitted
Liens (to the extent that such security interests can be perfected by the
filing of Uniform Commercial Code financing statements (Form UCC-1)); and the
Borrower is, or will be at the time additional Collateral is acquired by it,
the absolute owner of the Collateral with full right to pledge, sell, consign,
transfer and create a security interest therein, free and clear of any and all
claims or liens in favor of any other Person other than Permitted Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are
outstanding against the Borrower nor is there now pending or, to the best of
the Borrower's knowledge after reasonable inquiry, threatened any litigation,
contested claim, or governmental proceeding by or against the Borrower except
judgments and pending or threatened litigation, contested claims and
governmental proceedings which would not, in the aggregate, have a Material
Adverse Effect on the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower is not in default or
has not received a notice of default under any material contract, lease, or
commitment to which it is a party or by which it is bound. The Borrower knows
of no dispute regarding any contract, lease, or commitment to which it is a
party or by which it is bound that could have a Material Adverse Effect on the
Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. On the date hereof, each
item of the Collateral is located at the place of business specified in the
applicable Schedule.
SECTION 4.7. NO EVENTS OF DEFAULT. No Event of Default has
occurred and is continuing nor has any event occurred which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
SECTION 4.8. NO LIMITATION ON LENDER'S RIGHTS. Except as
permitted herein, none of the Collateral is subject to contractual obligations
that may restrict or inhibit the Lender's rights or abilities to sell or
dispose of the Collateral or any part thereof after the occurrence of an Event
of Default.
SECTION 4.9. PERFECTION AND PRIORITY OF SECURITY INTEREST.
This Security Agreement creates a valid and, upon the proper completion of all
required filings of financing statements, perfected first priority and
exclusive security interest in the Collateral (to the extent that a security
interest in the Collateral can be perfected by the filing of
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Uniform Commercial Code financing statements (Form UCC-1)), securing the
payment of all the Obligations.
SECTION 4.10. MODEL AND SERIAL NUMBERS. To the extent a
model or serial number is applicable, the Schedules set forth the true and
correct model number and serial number of each item of Equipment that
constitutes Collateral.
SECTION 4.11. ACCURACY AND COMPLETENESS OF INFORMATION. All
data, reports and information heretofore, contemporaneously or hereafter
furnished by or on behalf of the Borrower in writing to the Lender or for
purposes of or in connection with this Security Agreement or any other Loan
Document, or any transaction contemplated hereby or thereby, are or will be
true and accurate in all material respects on the date as of which such data,
reports and information are dated or certified and not incomplete by omitting
to state any material fact necessary to make such data, reports and information
not misleading at such time. There are no facts now known to the Borrower
which individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect and which have not been specified herein, in the
Financial Statements, or in any certificate, opinion or other written statement
previously furnished by the Borrower to the Lender.
SECTION 5. COVENANTS OF THE BORROWER.
SECTION 5.1. EXISTENCE, ETC. The Borrower will maintain its
corporate existence, its current yearly accounting cycle, and shall maintain in
full force and effect all licenses, bonds, franchises, leases, trademarks,
patents, contracts and other rights necessary or desirable to the profitable
conduct of its business unless the failure to do so could not reasonably be
expected to have a Material Adverse Effect and shall comply with all applicable
laws and regulations of any federal, state or local governmental authority,
except for such laws and regulations the violations of which would not, in the
aggregate, have a Material Adverse Effect on the Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible, and
in any event within five days after the Borrower learns of the following, the
Borrower will give written notice to the Lender of (a) any proceeding
instituted or threatened to be instituted by or against the Borrower in any
federal, state, local or foreign court or before any commission or other
regulatory body (federal, state, local or foreign) involving a sum, together
with the sum involved in all other similar proceedings, in excess of $50,000 in
the aggregate, (b) any contract to which the Borrower is a party or by which it
is bound that is terminated or amended and which has had or could reasonably be
expected to have a Material Adverse Effect, (c) the occurrence of any Material
Adverse Change and (d) the occurrence of any Event of Default or event or
condition which, with notice
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or lapse of time or both, would constitute an Event of Default, together with a
statement of the action which the Borrower has taken or proposes to take with
respect thereto.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. The Borrower
will maintain books and records pertaining to the Collateral in accordance with
GAAP consistently applied. The Borrower agrees that the Lender or its agents
may enter upon the Borrower's premises at any time and from time to time during
normal business hours, and at any time upon the occurrence and continuance of
an Event of Default, for the purpose of inspecting the Collateral and any and
all records pertaining thereto.
SECTION 5.4. INSURANCE. The Borrower will maintain insurance
on the Collateral under such policies of insurance, with nationally reputable
insurers, in such amounts and covering such risks as are at all times
reasonably satisfactory to the Lender. All such policies shall be made payable
to the Lender, in case of loss, under a standard non-contributory "lender" or
"secured party" clause and are to contain such other provisions as the Lender
may reasonably require to protect the Lender's interests in the Collateral and
to any payments to be made under such policies. Certificates of insurance
policies are to be delivered to the Lender, premium prepaid, with the loss
payable endorsement in the Lender's favor, and shall provide for not less than
thirty days' prior written notice to the Lender, of any alteration or
cancellation of coverage. If the Borrower fails to maintain such insurance,
the Lender may arrange for (at the Borrower's expense and without any
responsibility on the Lender's part for) obtaining the insurance. Unless the
Lender shall otherwise agree with the Borrower in writing, the Lender shall
have the sole right, in the name of the Lender or the Borrower, to file claims
under any insurance policies, to receive and give acquittance for any payments
that may be payable thereunder, and to execute any endorsements, receipts,
releases, assignments, reassignments or other documents that may be necessary
to effect the collection, compromise or settlement of any claims under any such
insurance policies.
SECTION 5.5. TAXES. The Borrower will pay, when due, all
taxes, assessments, claims and other charges ("Taxes") lawfully levied or
assessed against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by
the Borrower in accordance with GAAP. If any Taxes remain unpaid after the
date fixed for the payment thereof, or if any lien shall be claimed therefor,
then, without notice to the Borrower, but on the Borrower's behalf, the Lender
may pay such Taxes, and the amount thereof shall be included in the
Obligations.
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SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS;
FEES ON COLLATERAL. The Borrower will defend the Collateral against all claims
and demands of all Persons at any time claiming the same or any interest
therein. The Borrower will not permit any notice creating or otherwise
relating to liens on the Collateral or any portion thereof to exist or be on
file in any public office other than Permitted Liens. The Borrower shall
promptly pay, when payable, all transportation, storage and warehousing charges
and license fees, registration fees, assessments, charges, permit fees and
taxes (municipal, state and federal) which may now or hereafter be imposed upon
the ownership, leasing, renting, possession, sale or use of the Collateral,
other than taxes on or measured by the Lender's income and fees, assessments,
charges and taxes which are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
are maintained to the extent required by GAAP.
SECTION 5.7. NO CHANGE OF LOCATION, STRUCTURE OR IDENTITY.
The Borrower will not (a) change the location of its chief executive office or
establish any place of business other than those specified herein or (b) move
or permit the movement of any item of Collateral from the location specified in
the applicable Schedule, except that the Borrower may change its chief
executive office and keep Collateral at other locations within the United
States provided that the Borrower has delivered to the Lender (i) prior written
notice thereof and (ii) duly executed financing statements and other agreements
and instruments, including, without limitation, Collateral Access Agreements,
(all in form and substance satisfactory to the Lender) necessary or, in the
opinion of the Lender, desirable to perfect and maintain in favor of the Lender
a first priority security interest in the Collateral. Notwithstanding anything
to the contrary in the immediately preceding sentence, the Borrower may keep
any Collateral consisting of motor vehicles or rolling stock at any location in
the United States provided that the Lender's security interest in any such
Collateral is conspicuously marked on the certificate of title thereof and the
Borrower has complied with the provisions of Section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The
Collateral shall be used by competent, qualified personnel in connection with
the Borrower's business purposes, for the purpose for which the Collateral was
designed and in accordance with applicable operating instructions, laws and
government regulations, and the Borrower shall use every reasonable precaution
to prevent loss or damage to the Collateral from fire and other hazards. The
Collateral shall not be used or operated for personal, family or household
purposes. The Borrower shall procure and maintain in effect all orders,
licenses, certificates, permits, approvals and consents required by federal,
state or local laws or by any governmental body, agency or authority in
connection with the delivery, installation, use
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and operation of the Collateral. The Borrower shall keep all of the Equipment
in a satisfactory state of repair and satisfactory operating condition in
accordance with industry standards, and will make all repairs and replacements
when and where necessary and practical. The Borrower will not waste or destroy
the Equipment or any part thereof, and will not be negligent in the care or use
thereof. Notwithstanding the preceding two sentences, the Borrower may, in the
ordinary course of its business, make alterations or modifications to its
premises that result in the destruction or waste of a Tenant Improvement if (i)
the Borrower gives the Lender prior written notice of such proposed alteration
or modification and (ii) such alteration or modification would not reasonably
be expected to have a material adverse effect on the aggregate value of the
Collateral or the amount which the Lender would be likely to receive in the
liquidation of the Collateral.
SECTION 5.9. FURTHER ASSURANCES. The Borrower will, promptly
upon request by the Lender, execute and deliver or use its reasonable efforts
to obtain any document required by the Lender (including, without limitation,
warehouseman or processor disclaimers, mortgagee waivers, landlord disclaimers,
or subordination agreements with respect to the Obligations and the
Collateral), give any notices, execute and file any financing statements,
mortgages or other documents (all in form and substance satisfactory to the
Lender), mark any chattel paper, deliver any chattel paper or instruments to
the Lender, and take any other actions that are necessary or, in the opinion of
the Lender, desirable to perfect or continue the perfection and the first
priority of the Lender's security interest in the Collateral, to protect the
Collateral against the rights, claims, or interests of any Persons, or to
effect the purposes of this Security Agreement. The Borrower hereby authorizes
the Lender to file one or more financing or continuation statements, and
amendments thereto, relating to all or any part of the Collateral without the
signature of the Borrower where permitted by law. A carbon, photographic or
other reproduction of this Security Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law. To the extent required under this Security
Agreement, the Borrower will pay all reasonable costs incurred in connection
with any of the foregoing.
SECTION 5.10. NO DISPOSITION OF COLLATERAL. The Borrower
will not in any way hypothecate or create or permit to exist any lien, security
interest, charge or encumbrance on or other interest in any of the Collateral,
except for the lien and security interest granted hereby and Permitted Liens
which are junior to the lien and security interest of the Lender and the
Borrower will not sell, transfer, assign, pledge, collaterally assign, exchange
or otherwise dispose of (other than in the case of Tenant Improvements as
provided in Section 5.8) any of the Collateral. In the event the Collateral,
or any part thereof, is
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sold, transferred, assigned, exchanged, or otherwise disposed of in violation
of these provisions, the security interest of the Lender shall continue in such
Collateral or part thereof notwithstanding such sale, transfer, assignment,
exchange or other disposition, and the Borrower will hold the proceeds thereof
in a separate account for the benefit of the Lender. Following such a sale,
the Borrower will transfer such proceeds to the Lender in kind.
SECTION 5.11. NO LIMITATION ON LENDER'S RIGHTS. The Borrower
will not enter into any contractual obligations which may restrict or inhibit
the Lender's rights or ability to sell or otherwise dispose of the Collateral
or any part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to the
Borrower (provided that if an Event of Default has occurred and is continuing
the Lender need not give any notice), the Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary
to protect its security interests in the Collateral, including, without
limitation, the rights to satisfy, purchase, contest or compromise any
encumbrance, charge or lien which, in the reasonable judgment of the Lender,
appears to be prior to or superior to the security interests granted hereunder,
and appear in and defend any action or proceeding purporting to affect its
security interests in, or the value of, any of the Collateral. The Borrower
hereby agrees to reimburse the Lender for all reasonable payments made and
expenses incurred under this Security Agreement including fees, expenses and
disbursements of attorneys and paralegals (including the allocated costs of
in-house counsel) acting for the Lender, including any of the foregoing
payments under, or acts taken to protect its security interests in, any of the
Collateral, which amounts shall be secured under this Security Agreement, and
agrees it shall be bound by any payment made or act taken by the Lender
hereunder absent the Lender's gross negligence or willful misconduct. The
Lender shall have no obligation to make any of the foregoing payments or
perform any of the foregoing acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will promptly
(but in no event later than three Business Days) after its receipt thereof,
deliver to the Lender any documents or certificates of title issued with
respect to any property included in the Collateral, and any promissory notes,
letters of credit or instruments related to or otherwise in connection with any
property included in the Collateral, which in any such case come into the
possession of the Borrower, or shall cause the issuer thereof to deliver any of
the same directly to the Lender, in each case with any necessary endorsements
in favor of the Lender.
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SECTION 5.14. SOLVENCY. The Borrower shall be and remain
Solvent at all times.
SECTION 5.15. FUNDAMENTAL CHANGES. The Borrower shall not
(a) amend or modify its name, unless the Borrower delivers to the Lender thirty
days prior to any such proposed amendment or modification written notice of
such amendment or modification and within ten days before such amendment or
modification delivers executed Uniform Commercial Code financing statements (in
form and substance satisfactory to the Lender), (b) merge or consolidate with
any other entity unless (i) after giving effect to such merger or consolidation
the Borrower, if it is the surviving entity, remains in compliance with the
terms and conditions of each Loan Document and if the survivor is not the
Borrower, then such surviving entity assumes all of the obligations of the
Borrower under each Loan Document, including, without limitation, all of the
Borrower's payment obligations, pursuant to assignment documentation acceptable
to the Lender in its sole discretion, (ii) the ability of such surviving entity
to perform the obligations under each Loan Document is no worse than that of
the Borrower immediately before such merger or consolidation and (iii) such
surviving entity delivers Uniform Commercial Code financing statements
(Form UCC-1) duly executed by the surviving entity (naming the Lender as
secured party and the surviving entity as debtor and in form acceptable for
filing in all jurisdictions that the Lender deems necessary or desirable to
perfect the security interests granted to it hereunder) and, if applicable,
termination statements or other releases duly filed in all jurisdictions that
the Lender deems necessary or desirable to perfect and protect the priority of
the security interests granted to the Borrower hereunder or (c) sell or dispose
of all or substantially all of its assets except as may be permitted pursuant
to subsection (b) of this Section 5.15 or of Section 5.8.
SECTION 5.16. ADDITIONAL REQUIREMENTS. The Borrower shall
take all such further actions and execute all such further documents and
instruments as the Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and satisfaction
in full of all Obligations, the Borrower shall deliver to the Lender the
following financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as
available, but not later than 120 days after the end of each fiscal year of the
Borrower and its consolidated subsidiaries, the consolidated balance sheet,
income statement and statements of cash flows and shareholders equity for the
Borrower and its consolidated subsidiaries (the "Financial
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Statements") for such year, reported on by independent certified public
accountants without an adverse qualification.
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as
available, but not later than 60 days after the end of each of the first three
fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with a
certification duly executed by a responsible officer of the Borrower that such
Financial Statements have been prepared in accordance with GAAP and are fairly
stated in all material respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within ten days of
when due any amount required to be paid by the Borrower under or in connection
with any Note and this Security Agreement;
(b) any representation or warranty made by the Borrower
under or in connection with any Loan Document or any Financial Statement shall
prove to have been false or incorrect in any material respect when made;
(c) the Borrower shall fail to perform or observe (i) any
of the terms, covenants or agreements contained in Section 5.4, 5.7, 5.10, 5.14
or 5.15 hereof or (ii) any other term, covenant or agreement contained in any
Loan Document (other than the other Events of Default specified in this Section
7) and such failure remains unremedied for the earlier of fifteen days from (A)
the date on which the Lender has given the Borrower written notice of such
failure and (B) the date on which the Borrower knew or should have known of
such failure, provided that, so long as such failure is capable of being cured
and the Borrower has promptly commenced and is diligently continuing with its
attempt to cure, such default shall not constitute an Event of Default for
sixty days after such notice;
(d) except through the action or inaction of the Lender,
any provision of any Loan Document to which the Borrower is a party shall for
any reason cease to be valid and binding on the Borrower, or the Borrower shall
so state;
(e) dissolution, liquidation, winding up or cessation of
the Borrower's business, or the failure of the Borrower generally to pay its
debts as they mature; or the admission in writing by the Borrower of its
inability generally to pay its debts as they mature;
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(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
forty-five days following the commencement thereof, or any action by the
Borrower is taken authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by
the Borrower, whether voluntary or involuntary, or the appointment of a
trustee, custodian, receiver or similar official for the Borrower or for any
substantial property of the Borrower; or any action by the Borrower authorizing
any such proceeding;
(h) the Borrower suffers or sustains a Material Adverse
Change;
(i) any tax lien, other than a Permitted Lien, is filed
of record against the Borrower and (i) adequate reserves for such lien are not
maintained to the extent required by GAAP or (ii) such lien is not discharged
within fifteen Business Days;
(j) any judgment which has had or could reasonably be
expected to have a Material Adverse Effect and such judgment shall not be
stayed, vacated, bonded or discharged within sixty days; or
(k) except through the action or inaction of the Lender,
any material covenant, agreement or obligation, as determined in the sole
discretion of the Lender, made by the Borrower and contained in or evidenced by
any of the Loan Documents shall cease to be enforceable, or shall be determined
to be unenforceable, in accordance with its terms, or the Borrower shall deny
or disaffirm the Obligations under any of the Loan Documents or any liens
granted in connection therewith; or any liens granted on any of the Collateral
in favor of the Lender shall be determined to be void, voidable or invalid, or
are not given the priority contemplated by this Security Agreement.
SECTION 8. REMEDIES. If any Event of Default shall have occurred and
be continuing:
(a) The Lender may, without prejudice to any of its other
rights under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration)
without presentment, representation, demand of payment or protest, which are
hereby expressly waived.
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(b) The Lender may take possession of the Collateral and,
for that purpose may enter, with the aid and assistance of any person or
persons, any premises where the Collateral or any part hereof is, or may be
placed, and remove the same.
(c) The obligation of the Lender, if any, to make
additional Loans or financial accommodations of any kind to the Borrower shall
immediately terminate.
(d) The Lender may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it, all the rights and remedies of a
secured party under the applicable Uniform Commercial Code (the "Code") whether
or not the Code applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense and
upon request of the Lender forthwith, assemble all or part of the Collateral
(other than Tenant Improvements) as directed by the Lender and make it
available to the Lender at a place to be designated by the Lender that is
reasonably convenient to both parties and (ii) without notice except as
specified below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Lender's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the Lender
may deem commercially reasonable. The Borrower agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to the
Borrower of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The
Lender shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and place to
which it was so adjourned.
(e) All cash proceeds received by the Lender in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part
by the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the
Lender and remaining after the full and final payment of all the Obligations
shall be paid over to the Borrower or to such other Person to which the Lender
may be required under applicable law, or directed by a court of competent
jurisdiction, to make payment of such surplus.
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SECTION 9. MISCELLANEOUS PROVISIONS.
SECTION 9.1. NOTICES. Except as otherwise provided herein,
all notices, approvals, consents, correspondence or other communications
required or desired to be given hereunder shall be given in writing and shall
be delivered by overnight courier, hand delivery or certified or registered
mail, postage prepaid, if to the Lender, then to Technology Finance Division,
76 Batterson Park Road, Farmington, Connecticut 06032, Attention: Assistant
Vice President, Lease Administration, with a copy to the Lender at Riverway II,
West Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018,
Attention: Legal Department or such other address as shall be designated by
the Lender to the Borrower in accordance herewith, and if to the Borrower, then
to 5181 Ward Road, Wheat Ridge, Colorado 80033, Attention: Chief Financial
Officer, or such other address as shall be designated by the Borrower to the
Lender in accordance herewith. All such notices and correspondence shall be
effective when received.
SECTION 9.2. HEADINGS. The headings in this Security
Agreement are for purposes of reference only and shall not affect the meaning
or construction of any provision of this Security Agreement.
SECTION 9.3. ASSIGNMENTS. The Borrower shall not have the
right to assign any Note or this Security Agreement unless the Lender shall
otherwise have given the Borrower prior written consent and the Borrower and
its assignee shall have delivered assignment documentation in form and
substance satisfactory to the Lender in its reasonable discretion or such
assignment is made pursuant to Section 5.15(b). Upon notice to the Borrower,
the Lender may assign its rights and delegate its obligations under any Note or
this Security Agreement, provided, however, that the Lender's failure to give
such notice shall not affect the validity or the enforceability of the
assignment.
SECTION 9.4. AMENDMENTS, WAIVERS AND CONSENTS. Any amendment
or waiver of any provision of this Security Agreement and any consent to any
departure by the Borrower from any provision of this Security Agreement shall
be effective only by a writing signed by the Lender and shall bind and benefit
the Borrower and the Lender and their respective successors and assigns,
subject, in the case of the Borrower, to the first sentence of Section 9.3.
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the
essence in each provision of this Security Agreement of which time is an
element. All terms not defined herein or in a Note shall have the meaning set
forth in the applicable Code, except where the context otherwise requires. To
the extent a term or provision of this Security Agreement conflicts with any
Note, or any term or provision thereof, and is not dealt with herein with more
specificity, this Security Agreement shall
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control with respect to the subject matter of such term or provision.
Acceptance of or acquiescence in a course of performance rendered under this
Security Agreement shall not be relevant in determining the meaning of this
Security Agreement even though the accepting or acquiescing party had knowledge
of the nature of the performance and opportunity for objection.
SECTION 9.6. CONTINUING SECURITY INTEREST. This Security
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the indefeasible payment in
full of the Obligations, (ii) be binding upon the Borrower and its successors
and assigns and (iii) inure, together with the rights and remedies of the
Lender hereunder, to the benefit of the Lender and its successors, transferees
and assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by law,
this Security Agreement and the rights and powers granted to the Lender
hereunder and under the Loan Documents shall continue to be effective or be
reinstated if at any time any amount received by the Lender in respect of the
Obligations is rescinded or must otherwise be restored or returned by the
Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or upon the appointment of any receiver,
intervenor, conservator, trustee or similar official for the Borrower or any
substantial part of its assets, or otherwise, all as though such payments had
not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations,
warranties and covenants of the Borrower contained herein shall survive the
execution and delivery of this Security Agreement, and shall terminate only
upon the full and final payment and performance by the Borrower of the
Obligations secured hereby.
SECTION 9.9. INDEMNIFICATION. The Borrower agrees to
indemnify and hold harmless the Lender and its directors, officers, agents,
employees and counsel from and against any and all costs, expenses, claims, or
liability incurred by the Lender or such Person hereunder and under any other
Loan Document or in connection herewith or therewith, unless such claim or
liability shall be due to willful misconduct or gross negligence on the part of
the Lender or such Person.
SECTION 9.10. COUNTERPARTS; TELECOPIED SIGNATURES. This
Security Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but both of which shall together
constitute one and the same instrument. This Security Agreement and each of
the other Loan Documents and any notices given in connection herewith or
therewith may be executed and delivered by telecopier or other
-19-
<PAGE> 20
facsimile transmission all with the same force and effect as of the same was a
fully executed and delivered original manual counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or
obligation under this Security Agreement or any Note or any other Loan Document
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay
or omission of the Lender to exercise any right or remedy hereunder, whether
before or after the happening of any Event of Default, shall impair any such
right or shall operate as a waiver thereof or as a waiver of any such Event of
Default. No single or partial exercise by the Lender of any right or remedy
shall preclude any other or further exercise thereof, or preclude any other
right or remedy.
SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the Lender
agree that this Security Agreement and the Schedule hereto are the complete and
exclusive statement and agreement between the parties with respect to the
subject matter hereof, superseding all proposals and prior agreements, oral or
written, and all other communications between the parties with respect to the
subject matter hereof.
SECTION 9.14. SETOFF. In addition to and not in limitation
of all rights of offset that the Lender may have under Applicable Law, and
whether or not the Lender has made any demand or the Obligations of the
Borrower have matured, the Lender shall have the right to appropriate and apply
to the payment of the Obligations of the Borrower all deposits and other
obligations then or thereafter owing by the Lender to or for the credit or the
account of the Borrower.
SECTION 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND THE
LENDER IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, ANY
OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.16. GOVERNING LAW. THE VALIDITY, INTERPRETATION
AND ENFORCEMENT OF THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF.
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<PAGE> 21
SECTION 9.17. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY,
OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND,
BY EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT, THE BORROWER HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY
IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING, (a) ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND (b) THE RIGHT TO INTERPOSE ANY NONCOMPULSORY SETOFF,
COUNTERCLAIM OR CROSS-CLAIM. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE BORROWER AT THE ADDRESS FOR IT SPECIFIED IN SECTION 9.1 HEREOF.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION, SUBJECT IN EACH
INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO RIGHTS AND REMEDIES.
IN WITNESS WHEREOF, the undersigned Borrower has caused this Security
Agreement to be duly executed and delivered by its proper and duly authorized
officer as of the date first set forth above.
BOLDER TECHNOLOGIES CORPORATION
By:/s/ DANIEL S. LANKFORD
-------------------------------------
Name: Daniel S. Lankford
Title: Chairman, President & CEO
Accepted as of the
19th day of March, 1997
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ GARY P. MORO
-------------------------------
Name: Gary P. Moro
Title: Vice President
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<PAGE> 22
SCHEDULE A
To: / x / Security Agreement
/ / UCC
Dated March 4, 1997
Between
TRANSAMERICA BUSINESS CREDIT CORPORATION and
Customer Name: Bolder Technologies Corporation
Equipment Location: 4403 Table Mountain Parkway
Golden, Colorado 80403
<TABLE>
<CAPTION>
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QTY. EQUIPMENT INVOICE SUPPLIER/ PURCHASE EQUIPMENT
DESCRIPTION NO. VENDOR DATE COST
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Transamerica Business Credit Bolder Technologies Corporation
Corporation
By: By:
------------------------------ -------------------------------
Title: Title:
--------------------------- ----------------------------
<PAGE> 23
EXHIBIT A
COLLATERAL ACCESS AGREEMENT
TRANSAMERICA BUSINESS CREDIT CORPORATION
TECHNOLOGY FINANCE DIVISION
76 Batterson Park
Farmington, Connecticut 06032
, 1997
---------- ---
- --------------------------
- --------------------------
- --------------------------
Re: Bolder Technologies Corporation
Ladies and Gentlemen:
We have been asked by Bolder Technologies Corporation (the "Company")
to finance certain equipment (the "Equipment"), which will be located at the
address identified on Schedule A (the "Premises"). The obligations of the
Company to us will be secured by, among other things, the Equipment. We
understand that the Company leases the Premises, from you pursuant to a lease
or is the owner of the Premises, which is subject to a lien in favor of you
pursuant to a mortgage (such lease or mortgage being referred to as the
"Agreement").
In connection with the extensions of credit to be made to the Company,
Transamerica Business Credit Corporation, ("Transamerica") will be making
customary Uniform Commercial Code filings on behalf of Transamerica with
respect to the Equipment. In addition, we request your acknowledgment and
cooperation for preserving and enforcing Transamerica's security interests. To
expedite the consummation of the proposed financing, we would appreciate your
execution of this letter.
To induce Transamerica to finance the Equipment, and for other good and
valuable consideration, you confirm and acknowledge the following matters to us:
1. You will allow us, or our auditors or other designees,
reasonable access to the Premises to inspect the Equipment from time to time. In
addition, upon our request, you will grant us and our designees access to the
Premises for 90 days at reasonable times to show the Equipment to potential
purchasers and to remove the Equipment from the Premises.
2. In the event that the Company defaults in its obligations under
the Agreement or you desire or elect to terminate or exercise remedies under
the Agreement for any
<PAGE> 24
reason, including a default by the Company under the Agreement, you will notify
us in writing of this fact prior to your terminating or exercising remedies
under the Agreement and retaking possession of the Premises. You hereby confirm
and acknowledge to us that you do not and will not have any claim to or lien on
any of the Equipment, whether such Equipment constitutes fixtures or personal
property.
We would appreciate your confirming to us your agreement to the
foregoing provisions of this letter by signing and returning to us this letter
at our address shown above.
Very truly yours,
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: ------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
By: --------------------------
Name:
Title:
Address: 4403 Table Mountain Parkway
Golden, Colorado 80403
-2-
<PAGE> 25
Schedule A
Location of Equipment
4403 Table Mountain Parkway
Golden, Colorado 80403
<PAGE> 26
EXHIBIT B
PROMISSORY NOTE
Date: ___________________, 199__
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
Transamerica Business Credit Corporation or its assigns (the "Payee") at its
office located at Riverway II, West Office Tower, 9399 West Higgins Road,
Rosemont, Illinois 60018, or at such other place as the Payee or the holder
hereof may designate in writing, the principal amount of $__________ Dollars
($___________) received by the undersigned, plus interest, in lawful money of
the United States and in immediately available funds. This Note shall be payable
commencing with a first installment of $ __________ Dollars ($_________) payable
on ____________ ___, 199__ and thereafter in ___ consecutive equal monthly
installments of $ __________ Dollars ($___________) commencing ________________
___ , 199__ and a final installment payable on ____________ ___, ____ of
$____________ Dollars ($_____________) together with the unpaid balance of the
Note. No amount of principal paid or prepaid hereunder may be reborrowed.
This Note is one of the Notes referred to in the Security Agreement
dated as of January __, 1997 (as amended, supplemented or otherwise modified
from time to time, the "Agreement"), between the undersigned and the Payee and
is subject and entitled to all provisions and benefits thereof. Capitalized
terms used but not defined herein shall have the meanings set forth in the
Agreement.
If any installment of this Note is not paid within five days after its
due date, the undersigned agrees to pay on demand, in addition to the amount of
such installment, an amount equal to 5% of such installment, but only to the
extent permitted by Applicable Law.
The undersigned shall have the right to prepay this Note, in whole or
in part, at any time on thirty days' prior written notice to the Payee. On the
date of any such prepayment, the undersigned shall pay the principal amount of
this Note being so prepaid, which amount shall be discounted at 6% simple
interest per annum if made on or after ________________________ , ___ (1),
together with all interest, fees and other amounts payable on the amount so
prepaid or in connection therewith to the date of such prepayment. Any
prepayments shall be applied to the installments hereof in the inverse order
of maturity.
- ------------------
(1) Insert the date that is one-third into the original stated term of the Loan.
<PAGE> 27
Upon the maturity of this Note or the acceleration of the maturity of
this Note in accordance with the terms of the Agreement, the entire unpaid
principal amount on this Note, together with all interest, fees and other
amounts payable hereon or in connection herewith, shall be immediately due and
payable without further notice or demand, with interest on all such amounts at
a rate not to exceed the lawful limit, from the date of such maturity or
acceleration, as the case may be, until all such amounts have been paid.
If any payment on this Note becomes payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day.
The undersigned hereby waives diligence, demand, presentment, protest
and notice of any kind, and assents to extensions of the time of payment,
release, surrender or substitution of security, or forbearance or other
indulgence, without notice. The undersigned agrees to pay all amounts under
this Note without offset, deduction, claim, counterclaim, defense or
recoupment, all of which are hereby waived.
The Payee, the undersigned and any other parties to the Loan Documents
intend to contract in strict compliance with applicable usury law from time to
time in effect. In furtherance thereof such Persons stipulate and agree that
none of the terms and provisions contained in the Loan Documents shall ever be
construed to create a contract to pay, for the use, forbearance or detention of
money, interest in excess of the maximum amount of interest permitted to be
charged by Applicable Law from time to time in effect. Neither the undersigned
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under Applicable Law from time
to time in effect, and the provisions of this paragraph shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith. The Payee expressly disavows any intention to charge or
collect excessive unearned interest or finance charges in the event the
maturity of any Obligation is accelerated. If (a) the maturity of any
Obligation is accelerated for any reason, (b) any Obligation is prepaid and as
a result any amounts held to constitute interest are determined to be in excess
of the legal maximum, or (c) the Payee or any other holder of any or all of the
Obligations shall otherwise collect amounts which are determined to constitute
interest which would otherwise increase the interest on any or all of the
Obligations to an amount in excess of that permitted to be charged by
Applicable Law then in effect, then all sums determined to constitute interest
in excess of such legal limit shall, without penalty, be promptly applied to
reduce the then
-2-
<PAGE> 28
outstanding principal of the related Obligations or, at the Payee's or such
holder's option, promptly returned to the undersigned upon such determination.
In determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under Applicable Law, the
Payee and the undersigned (and any other payors thereof) shall to the greatest
extent permitted under Applicable Law, (i) characterize any non-principal
payment as an expense, fee or premium rather than as interest, (ii) exclude
voluntary prepayments and the effects thereof, and (iii) amortize, prorate,
allocate, and spread the total amount of interest through the entire
contemplated term of this Note in accordance with the amount outstanding from
time to time thereunder and the maximum legal rate of interest from time to
time in effect under Applicable Law in order to lawfully charge the maximum
amount of interest permitted under Applicable Law.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the undersigned and the Payee or any
holder hereof.
The undersigned shall, upon demand, pay to the Payee all costs and
expenses incurred by the Payee (including the fees and disbursements of counsel
and other professionals) in connection with the preparation, execution and
delivery of this Note and all other Loan Documents, and in connection with the
administration, modification and amendment of the Loan Documents, and pay to
the Payee all costs and expenses (including the fees and disbursements of
counsel and other professionals) paid or incurred by the Payee in (A)
enforcing or defending its rights under or in respect of this Note or any of
the other Loan Documents, (B) collecting any of the liabilities by the
undersigned to the Payee or otherwise administering the Loan Documents, (C)
foreclosing or otherwise collecting upon any collateral and (D) obtaining any
legal, accounting or other advice in connection with any of the foregoing.
This Note shall be binding upon the successors and assigns of the
undersigned and inure to the benefit of the Payee and its successors, endorsees
and assigns. If any term or provision of this Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions hereof
shall in no way be affected thereby.
-3-
<PAGE> 29
EACH OF THE UNDERSIGNED AND, BY ITS ACCEPTANCE HEREOF, THE PAYEE HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OR ANY
DISPUTE ARISING UNDER OR RELATING TO THIS NOTE AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAW.
BOLDER TECHNOLOGIES CORPORATION
By:
------------------------------------
Name:
Title:
-4-
<PAGE> 1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-8 (File Number 333-20989) of
our report dated February 14, 1997, incorporated by reference in Bolder
Technologies Corporation's Form 10-KSB for the year ended December 31, 1996,
and to all references to our Firm included in such registration.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 27, 1997.
