<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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BOLDER TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
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<C> <C> <C>
DELAWARE 3692 84-1166231
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
5181 WARD ROAD
WHEAT RIDGE, COLORADO 80033
(303) 422-8200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------
DANIEL S. LANKFORD
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BOLDER TECHNOLOGIES CORPORATION
5181 WARD ROAD
WHEAT RIDGE, COLORADO 80033
(303) 422-8200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
JAMES C. T. LINFIELD, ESQ. STEPHEN A. RIDDICK, ESQ.
CARRIE L. SCHIFF, ESQ. PIPER & MARBURY L.L.P.
KERRY J. HOUGHTON, ESQ. 36 SOUTH CHARLES STREET
COOLEY GODWARD LLP BALTIMORE, MARYLAND 21201
2595 CANYON BOULEVARD, SUITE 250 (410) 539-2530
BOULDER, COLORADO 80302 6737
(303) 546-4000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS PROPOSED PROPOSED MAXIMUM
OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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Common Stock, $.001 par value........ 2,990,000 $14.50 $43,355,000 $13,138
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</TABLE>
(1) Includes 390,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION
FEBRUARY 13, 1997
2,600,000 SHARES
[BOLDER TECHNOLOGIES LOGO]
COMMON STOCK
------------------
Of the 2,600,000 shares of Common Stock offered hereby, 2,000,000 are being
sold by BOLDER Technologies Corporation ("Bolder" or the "Company") and 600,000
are being sold by certain stockholders (the "Selling Stockholders"). See
"Principal and Selling Stockholders." The Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders. The Common Stock
of the Company is quoted on the Nasdaq Stock Market (National Market) under the
symbol "BOLD." On February , 1997, the last reported sale price of the Common
Stock was $
per share. See "Price Range of Common Stock."
------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS(1)
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Per Share....................... $ $ $ $
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Total(2)........................ $ $ $ $
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</TABLE>
(1) Before deducting expenses of the offering estimated at $375,000 payable by
the Company on behalf of itself and the Selling Stockholders.
(2) The Company and the Selling Stockholders have granted the Underwriters a
30-day option to purchase up to 390,000 additional shares of Common Stock
solely to cover over-allotments, if any. To the extent that the option is
exercised, the Underwriters will offer the additional shares at the Price to
Public shown above. If the option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Stockholders will be $ , $ ,
$ , and $ respectively. See "Underwriting."
-----------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.
ALEX. BROWN & SONS DAIN BOSWORTH
INCORPORATED INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3
[Photograph of a Bolder sub-C cell
with caption "Thin Metal Film
(TMF(TM)) batteries deliver higher
sustained power than any
commercially available battery
technology."]
[Photograph of a 1-pound Bolder
battery beside a 35-pound
conventional truck engine battery
with caption "A prototype 1-pound
BOLDER battery can repeatedly start
a 3-liter truck engine normally
started by this 35-pound
conventional battery."]
[Photographs of portable power tools
from SKIL and portable emergency
starting unit from BOOSTER PAC with
caption "TMF batteries may provide
significant advantages to makers of
existing high power products such as
these portable power tools from SKIL
or this portable emergency starting
unit from BOOSTER PAC."]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET (NATIONAL
MARKET), IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ STOCK MARKET (NATIONAL MARKET) IN ACCORDANCE WITH RULE 10b-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes appearing elsewhere in this
Prospectus. Except as otherwise specified, all information in this Prospectus
assumes no exercise of the Underwriters' over-allotment option. 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 sections entitled "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
THE COMPANY
BOLDER Technologies Corporation ("Bolder" or the "Company") is an energy
technology company that is developing and commercializing advanced, high power,
rechargeable battery systems based on its patented thin metal film ("TMF(TM)")
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 the high power
and other performance characteristics of TMF batteries offer a number of
advantages over commercially available batteries in a broad range of current and
future applications.
The world market for rechargeable batteries was estimated to be between $14
and $16 billion in 1995. Demand for rechargeable batteries is being driven by
the growing use of existing applications such as portable tools and appliances,
standby power systems, automotive and small engine starting, electronics, and
military and aerospace, as well as the development of new and emerging
applications such as hybrid electric vehicles and very small batteries for
engine starting. Past advances in battery technology have enabled new
applications, and the Company believes that its breakthrough TMF technology will
create opportunities for new battery-powered products.
The Company believes that the combination of the following characteristics
of its prototype TMF battery systems offers advantages over commercially
available rechargeable batteries:
High Power. TMF batteries deliver higher sustained power than any other
commercially available battery technology.
Cost Effective. TMF batteries use inexpensive raw materials and a
straightforward manufacturing process.
No Memory Effect. TMF batteries have no memory effect, a negative
characteristic of nickel cadmium ("NiCd") batteries.
Small Size. High power density allows smaller TMF batteries to do the same
amount of work as larger conventional batteries in high rate applications.
More Useful Work. TMF batteries can do more useful work between recharges
in high rate applications than a conventional battery of similar size.
Faster Recharge. TMF batteries can be recharged in less than five minutes
with an appropriate charger.
Stable Discharge Voltage. TMF batteries provide consistent voltage
throughout their discharge cycle.
Cool Operation. TMF batteries have low impedance and, therefore, generate
little heat, even in high rate applications.
3
<PAGE> 5
Multiple Form Factors. TMF batteries may be manufactured in a number of
form factors for a wide variety of applications.
Easy to Recycle. TMF batteries can be recycled using the existing recycling
process for lead acid batteries.
Bolder's objective is to become a major supplier of innovative rechargeable
batteries based on proven technologies. To date, more than 75 companies have
tested the Company's prototype TMF batteries. Currently, many high power
applications are served by NiCd and traditional lead acid batteries. The Company
believes that its TMF batteries, when manufactured in commercial quantities, can
substantially replace NiCd batteries in many of these high power applications
and that its TMF batteries will become the battery of choice for certain
applications currently powered by traditional lead acid batteries, particularly
applications which require high power in a small package.
An integral part of the Company's strategy is to work with original
equipment manufacturer ("OEM") customers and strategic partners to develop
market opportunities and leverage its resources. The Company has agreements with
value-added distributors ("VADs") for marketing and distribution of the
Company's products throughout North America and has a strategic relationship
with Johnson Controls Battery Group, Inc. ("Johnson Controls"), one of the
world's leading suppliers of automotive batteries.
The Company has focused its initial product development efforts on its
sub-C cell, which is competitive with a widely used NiCd form factor, and is
currently engaged in product development efforts for new form factors such as a
1/16 inch thick prismatic, or flat, cell and the 5 Ah spiral wound cell. 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, in Golden, Colorado. This production facility has been
designed to accommodate five high volume, fully-automated production lines and
two research and development lines. The first of the fully-automated production
lines is currently being tested and qualified and is expected to begin
commercial production in 1997.
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. "BOLDER" and "TMF" are trademarks of Bolder Technologies
Corporation. This Prospectus contains trademarks of other companies.
RECENT EVENTS
Since its initial public offering in May 1996, the Company has achieved the
following key accomplishments:
Manufacturing Facility Under Construction. The Company began
construction in September 1996 of its new 120,000 square foot build-to-suit
leased manufacturing facility in Golden, Colorado. This facility has been
designed to accommodate five high volume fully-automated production lines
and two research and development lines for TMF batteries, as well as all
other Company operations. The Company anticipates that the facility will be
completed and the Company expects to move its operations into the facility
in mid-1997.
4
<PAGE> 6
Fully-Automated Production Line in Testing and Qualification. The
Company, in collaboration with Wright Industries, completed the design and
fabrication of the Company's first fully-automated high volume production
line in December 1996. Wright Industries and Bolder are currently testing
and qualifying the production line in preparation for installation in the
Company's new manufacturing facility. The Company expects to begin
commercial production of sub-C cells using this line in 1997. The Company
has ordered certain equipment for a second fully-automated production line
which it intends to implement in 1998.
Commercial Purchase Orders Received. As of January 1997, the Company
had received purchase orders for over 50% of the Company's planned 1997
manufacturing capacity. The purchase orders are subject to a number of
contingencies which must be satisfied by the Company in a timely manner,
including completion of the manufacturing facility, successful
implementation of the first fully-automated production line, completion of
necessary work to manufacture commercial quantities of Bolder's sub-C cell,
satisfaction of customers' product acceptance criteria and timely
manufacture of the products.
Expanded Strategic Relationships. As of February 1997, Bolder has
entered into agreements with six VADs pursuant to which the VADs will
market and distribute the Company's products throughout North America. The
VADs will also provide value-added services for OEM battery customers such
as cell testing, matching and pack assembly, assembly of battery packs into
custom housing, and packaging with an appropriate charger.
In February 1997, Bolder and Johnson Controls announced a new
strategic partnership, which replaces the joint venture they established in
June 1995 primarily to develop high volume manufacturing technology. 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.
Increased Prototype Production and Shipments. The Company has produced
more than 45,000 cells on its semi-automated pilot production line, of
which an aggregate of approximately 4,500 cells have been shipped to 75
customers, primarily for evaluation and testing, with the remainder used
for product and process development purposes.
Continued Product Development. As part of the Company's ongoing
product development program, the Company has produced prototype sub-C cells
with significantly enhanced performance characteristics and has improved
its process technology to increase its production yield performance. The
Company believes that these technological advances have expanded its market
opportunities. In addition, the Company has received research and
development funding from both commercial and governmental sources for
development of additional products, including a number of new form factors
such as the prismatic, or flat, cell and the 5 Ah spiral wound cell.
Expanded Technical Staff. The Company has added ten senior scientists
and engineers to its product and process development teams, including
personnel with expertise in electrochemistry, product engineering and
automated process engineering.
5
<PAGE> 7
THE OFFERING
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Common Stock offered by the Company......................... 2,000,000 shares
Common Stock offered by the Selling Stockholders............ 600,000 shares
Common Stock to be outstanding after the offering........... 11,422,328 shares (1)
Use of proceeds............................................. For construction of commercial
manufacturing facilities and
associated capital expenditures,
research and development, working
capital and other general corporate
purposes. See "Use of Proceeds."
Nasdaq Stock Market (National Market) Symbol................ BOLD
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1992 1993 1994 1995 1996
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<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.................................................. $ -- $ -- $ 43 $ 106 $ 476
Cost of revenues.......................................... -- -- 21 50 172
----- ------- ------- ------- ---------
-- -- 22 56 304
----- ------- ------- ------- ---------
Operating expenses:
Research and development................................ 604 1,378 2,213 2,352 2,344
Loss from operations of Joint Venture................... -- -- -- 164 669
General and administrative.............................. 18 671 1,124 772 1,870
Selling and marketing................................... -- -- -- 164 326
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Total operating expenses............................ 622 2,049 3,337 3,452 5,209
----- ------- ------- ------- ---------
Income (loss) from operations............................. (622) (2,049) (3,315) (3,396) (4,905)
Other income (expense):
Interest income......................................... 2 55 31 127 799
Interest expense........................................ (18) (6) (32) (73) (54)
----- ------- ------- ------- ---------
Net income (loss)......................................... $(638) $(2,000) $(3,316) $(3,342) $ (4,160)
===== ======= ======= ======= =========
Unaudited, pro forma net income (loss) per share(2)....... $ (0.48)
=========
Shares used in computing unaudited, pro forma net income
(loss) per share(2)..................................... 8,696,632
=========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
(UNAUDITED)
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BALANCE SHEET DATA:
Cash, cash equivalents and available-for-sale
securities.............................................. $16,071 $42,956
Working capital........................................... 12,403 39,288
Total assets.............................................. 27,146 54,031
Notes and capital lease payable........................... 487 487
Total stockholders' equity................................ 23,071 49,956
</TABLE>
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(1) Excludes 900,916 shares of Common Stock issuable upon exercise of
outstanding stock options at an average exercise price of $6.69 per share,
19,125 shares of Common Stock issuable upon exercise of warrants at an
average exercise price of $4.35 per share, and 10,085 shares of Common Stock
issuable under the Company's Employee Stock Purchase Plan at an average
price of $8.93, all outstanding as of January 31, 1997. Warrants for the
purchase of 6,039 shares of Common Stock will be exercised immediately prior
to the closing of this offering.
(2) Calculated on the basis described in Note 2 of Notes to Financial
Statements.
(3) Unaudited, as adjusted December 31, 1996 amounts reflect the sale of
2,000,000 shares of Common Stock by the Company as contemplated by this
Prospectus at an assumed offering price of $14.50 per share, net of
$2,115,000 of offering expenses and underwriting discounts and commissions,
and the application of the net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
6
<PAGE> 8
GLOSSARY OF TECHNICAL TERMS
Ampere or Amps The basic unit of measurement of the flow of electrical
current. One ampere of current delivered for one hour is equal
to one ampere hour (Ah).
Capacitor A device which permits the storage of energy as a result of
electric displacement when opposing surfaces of the device are
oppositely charged.
Capacity The number of ampere hours that can be removed from a cell if
discharged at a specified rate.
Cell Voltage The voltage of a single cell of a battery system under open
circuit conditions. In general, the higher the voltage of the
cell, the fewer the number of cells required to power a
particular application. The voltage of the cell is a function
of the type of electrochemistry used in the battery system.
Current The flow of an electrical charge through a circuit such as a
battery system, measured in amperes.
Cycle The discharge and subsequent or preceding charge of a battery
system.
Cycle Life The maximum number of times a battery system can be discharged
at a given rate to a given depth and then recharged while
maintaining a designated minimum percentage of its original
charge capacity (usually 80% or 50%). The cycle life of a
given battery system can vary widely depending on the duty
cycle.
Discharge Profile The fluctuations of a battery system's voltage as it
discharges (or is used), generally expressed as "flat" or
"sloping." A flat discharge profile shows a minimal drop from
the initial voltage over the course of the discharge. By
contrast, a sloping discharge profile reflects the decay of
voltage over the discharge cycle. A flat discharge cycle
results in more consistent performance of the product being
powered, and can reduce the cost of the product by reducing
the need to compensate for voltage variations.
Duty Cycle The sequence, timing and magnitude of discharges and charges
that occur in a battery during normal use in an application.
Energy Density The amount of energy the battery system can deliver, generally
measured as watt hours per unit of weight or volume at a given
discharge rate (expressed as watt hours per liter or watt
hours per kilogram). The higher a battery system's energy
density, the greater the amount of work at a given rate the
battery system can deliver relative to its size and weight.
For example, a battery with a high energy density should be
able to power a lap top computer for a longer period of time
than a comparably sized battery with a lower energy density.
Form Factor The physical configuration of a product. In batteries, the
dimensions of the cells and the configuration and dimensions
of a cell pack.
Hybrid Electric
Vehicle (HEV) A motor vehicle that uses a conventional internal combustion
engine as its primary power source and a stored energy source,
typically batteries, to provide supplemental power for
acceleration and hill climbing.
Impedance The internal opposition, or resistance, of a cell or battery
to current flow.
Memory Effect A phenomenon in which a battery, operated in successive cycles
to the same, but less than full, depth of discharge
experiences a loss of capacity.
Self Discharge Rate
The rate at which a charged battery loses capacity when it is
not in use.
Service Life The period, usually measured in time or cycles, over which a
battery, under specified conditions, will maintain usable
capacity.
Shelf Life The period of time that a fully charged battery can be left
unused and still be recharged to provide useable capacity.
Sub-C Cell A common diameter for NiCd batteries defined as equal to
22.4mm or .88 inch.
Sustained Power
Density The power available in a battery system to be delivered over a
useable time period measured in watts per unit of weight or
volume (expressed as watts per liter or watts per kilogram).
The higher the battery system's sustained power density, the
greater the amount of high rate work the battery system can
deliver relative to its size and weight. For example, a
battery with a high sustained power density should be able to
drill more holes with a power drill than a comparably sized
battery with a lower power density.
Voltage (v) The basic unit of measurement of electrical potential or
force.
Watt (w) The basic unit of measurement of electrical power, calculated
as voltage (in volts) times current (in amps).
Watt Hour (wh) The basic unit of measurement of electrical energy, calculated
as the power (in watts) delivered times the period (in hours)
over which it is delivered.
7
<PAGE> 9
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus.
Development Stage Company; History of Operating Losses. Bolder was founded
in 1991 and has principally been engaged in research and development activities.
The Company's revenues to date have been derived solely from license fees,
federal Small Business Innovation Research ("SBIR") research and development
agreements, customer-funded research and development agreements and limited
sales of prototype batteries for evaluation purposes only. The Company has
incurred operating losses since inception and as of December 31, 1996 had an
accumulated development stage deficit of $13,650,374. The Company expects to
incur significant losses in the future as it continues its product development
efforts and seeks to establish its manufacturing, sales and marketing
capabilities. There can be no assurance that the Company will achieve or sustain
significant revenues or profitability in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Early Stage of Manufacturing; Manufacturing Risks; Potential Capacity
Constraints and Risks of Proposed Expansion. To date, the Company has not
manufactured its TMF batteries on a commercial scale. The Company's TMF
batteries are currently manufactured on its pilot manufacturing line, which is
able to produce prototype cells in quantities sufficient to enable customer
sampling and testing and product development. In 1997, the Company plans to open
a new high volume manufacturing facility containing the Company's first
fully-automated production line. The implementation of the new manufacturing
facility, including the fabrication and installation of customized manufacturing
equipment, will continue to require substantial engineering work and expenses
and is subject to significant risks, including risks of cost overruns and
significant delays. In addition, in order to rapidly scale up the Company's
manufacturing capacity, Bolder will need to begin fabrication of its second
automated production line before completing the first line. In automating its
manufacturing processes, the Company will be dependent on Wright Industries,
which has only limited experience in producing equipment for the manufacture of
batteries. A key determinant of the Company's current and future production
capacity and profitability is the production yield of its manufacturing process.
Any failure by the Company to achieve acceptable yields of commercial quality
batteries in commercial quantities, and thereby to reduce its unit manufacturing
costs, could have a material adverse effect on the Company's business, results
of operations and financial condition.
The establishment of the Company's new manufacturing facility and the
development and implementation of automated production lines will entail
significant risks and will require a substantial investment of the Company's
capital, including a significant portion of the net proceeds of this offering.
As part of its manufacturing ramp up, the Company will need to hire and train a
substantial number of new manufacturing workers. The availability of skilled and
unskilled workers in the Denver metropolitan area, the site of the Company's new
manufacturing facility, is limited due to a relatively low unemployment rate.
There can be no assurance that the Company will successfully develop improved
processes, design required production equipment, enter into acceptable contracts
for the fabrication of such equipment, obtain timely delivery of such equipment,
implement multiple production lines or successfully operate the new facility.
There can be no assurance that the Company will be able to successfully complete
construction of its new manufacturing facility or automate its production on a
timely basis or at all, or that such automation will result in greater
manufacturing capacity or lower manufacturing costs than the Company's pilot
production line. Failure to open its new manufacturing facility and commence
volume manufacturing on a timely basis could damage customer relationships,
cause lost opportunities and have a material adverse effect on the Company's
business, results of operations and financial condition. See "Use of Proceeds"
and "Business -- Manufacturing and Facilities."
8
<PAGE> 10
Development Stage Product. Bolder has produced prototype products that the
Company believes have performance characteristics that are suitable for a broad
market. However, additional development will be required to enable the Company
to consistently produce battery systems with these characteristics. In addition,
to achieve broad commercialization of its products, the Company will need to
reduce manufacturing costs of its battery systems. There can be no assurance
that the Company's TMF batteries can be manufactured in commercial quantities to
the performance specifications demanded by customers. In addition, the Company's
success will depend significantly on its ability to meet OEM customer
requirements by developing and introducing on a timely basis new products and
enhanced or modified versions of its existing products. OEMs often require
unique configurations or custom designs for battery systems which must be
developed and integrated in the OEM's product well before the product is
launched by the OEM. Thus, there is often substantial lead time between the
commencement of design efforts for a customized battery system and the
commencement of volume shipments of the battery system to the OEM (referred to
as the "design-in time"). If the Company is unable to design, develop and
introduce products that meet OEMs' and other customers' exacting requirements on
a timely basis, its business, results of operations and financial condition
could be materially adversely affected. See "Business -- Technology and
Products," "-- Manufacturing and Facilities" and "-- Research and Development."
Uncertainty of Market Acceptance. To achieve market acceptance, the
Company's TMF batteries must offer significant price and/or performance
advantages over other current and potential alternative battery technologies in
a broad range of applications. There can be no assurance that the Company's
rechargeable TMF batteries will achieve or sustain any such advantages. Even if
the Company's rechargeable TMF batteries provide meaningful price or performance
advantages, there can be no assurance that they will achieve or maintain market
acceptance in any potential market application. The success of the Company's
products also will depend upon the level of market acceptance of OEMs' and other
customers' end products which incorporate the Company's TMF batteries, over
which the Company has no control. If the Company's rechargeable TMF batteries do
not achieve and maintain significant price and/or performance advantages over
other technologies and achieve significant and sustained market acceptance, or
if customers' applications which incorporate the Company's products do not
achieve lasting market acceptance, the Company's business, results of operations
and financial condition could be materially adversely affected. See
"Business -- Strategy" and "-- TMF Market Applications."
Rapid Evolution of Battery Technologies. The battery industry has
experienced, and is expected to continue to experience, rapid technological
change. There can be no assurance that the Company's products will be able to
compete effectively in any of its targeted market segments. Various companies
are seeking to enhance traditional battery technologies, such as lead acid and
NiCd, and other companies have recently introduced or are developing
rechargeable batteries based on nickel metal hydride ("NiMH"), lithium and other
emerging and potential technologies. There can be no assurance that competing
technologies that outperform the Company's batteries will not be developed and
successfully introduced. See "Business -- Other Battery Technologies" and
"-- Competition."
Future Capital Needs; Uncertainty of Additional Funding. The Company will
require substantial funds to establish and operate commercial manufacturing
facilities, to market its products and to conduct the necessary research and
development and testing of its products. The Company may have to obtain
additional funding through other financing; however, it expects that the net
proceeds of this offering, together with existing sources of liquidity and
projected cash generated from operations, will be sufficient to fund its
activities for approximately the next 24 months. There can be no assurance that
additional financing will be available when needed or on terms acceptable to the
Company. If additional funds are raised by issuing equity securities,
stockholders will incur dilution. If adequate funds are not available, the
Company may be required to delay, scale back or eliminate one or more of its
development programs or otherwise curtail or discontinue the
9
<PAGE> 11
development, manufacture or sale of its TMF battery systems. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Dependence on Strategic Relationships. The Company expects to rely on a
limited number of strategic relationships to accelerate the commercialization of
the Company's products by assisting in the design and development of products
for certain applications, as well as to providing manufacturing and marketing
expertise. The Company currently has strategic relationships with Johnson
Controls and six VADs located throughout North America. There can be no
assurance that the Company will be able to enter into any other such
partnerships. 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, the
skills and experience of its employees responsible for 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. See
"Business -- Strategy" and "-- Strategic Relationships."
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. is developing and marketing a lead acid
battery which has higher power density than traditional lead acid batteries.
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.
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 Energy (USA)
Corporation ("SANYO"), Panasonic Industrial Company, a division of Matsushita
Electric Corporation of America ("Panasonic"), Energizer Power Systems, a
division of Eveready Battery Company ("Energizer") and SAFT America, Inc.
("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 manufacturers of 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, Inc. ("Yuasa"), Exide Corporation, Matsushita
Electric Corporation of America ("Matsushita"), Hawker Energy Products, Inc.
("Hawker"), CSB Battery of America Corp., and GS Battery USA, Inc., a division
of Japan Storage Battery Co., Limited ("GS Battery"). The primary suppliers of
automotive batteries are Johnson Controls, Inc., Exide Corporation, GNB Inc. and
Delphi Energy & Engine Management Systems (formerly Delco) -- a Division of
General Motors Corporation ("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
10
<PAGE> 12
new strategic partnership with Johnson Controls, the Company has granted Johnson
Controls certain 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 manufacturers of traditional lead acid batteries in
any of the targeted applications or to compete successfully with Johnson
Controls in the markets where Johnson Controls has a royalty-bearing license
from the Company. See "Business -- Other Battery Technologies" and
"-- Competition."
Management of Growth. The Company's transition from a development stage
company to a high volume manufacturing company could place a significant strain
on the Company's resources. If the Company's products achieve market acceptance,
it will need to increase the number of its employees and enhance its operating
systems and practices. There can be no assurance that the Company will be able
to successfully manage its transition to being a high volume manufacturing
company, including the expansion of its operations and marketing of its
products, and its failure to do so could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Business -- Marketing and Sales," "-- Employees" and "Management."
Purchase Orders Subject to Numerous Contingencies and Uncertainties.
Although the Company has received purchase orders for over 50% of its planned
1997 production capacity, 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 new 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, and satisfaction of customers' product acceptance
criteria. There can be no assurance that the Company will be able to satisfy all
of these contingencies in a timely manner, or at all. 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. See
"Business -- Marketing and Sales."
Dependence on Value-Added Distributor Network. 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. The Company currently has a VAD network of six distributors
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 do not require minimum purchase commitments.
VADs may sell competitive products. Although the Company has established
multiple sources for VAD services for its products, any disruption of operations
at any of the Company's value-added distributors could materially adversely
affect the Company's business, results of operations and financial condition.
See "Business -- Marketing and Sales."
Customer Concentration. The purchase orders that the Company has received
to date have come primarily from a limited number of large customers. If any of
these customers were to cancel or reschedule its orders, the Company's business,
results of operations and financial condition could be materially adversely
affected. The timing of orders from large customers, and shipments against those
orders, can also result in significant quarter to quarter variations in the
Company's revenues and profit. In addition, there can be no assurance that the
Company will continue to secure the business of a significant number of new
customers or that demand for the Company's products will be sufficient to ensure
a broad customer base and sustainable source of revenue. The occurrence of any
of these events could have a material adverse effect on the Company's business,
results of operations and financial condition.
11
<PAGE> 13
Fluctuations in Quarterly Results. The Company's quarterly operating
results can be expected to fluctuate in the future. These fluctuations may be
caused by many factors, including, among others: the size and timing of
individual purchase orders; the long sales cycle in the OEM markets for the
Company's products; market acceptance of new products; completion of the
Company's new manufacturing facility; the time required to successfully commence
commercial manufacturing using the Company's new fully-automated production
line; implementation of additional automated production lines; manufacturing
yields and efficiency; changes in the Company's operating expenses; the mix of
sales to OEMs and VADs; product development programs; and general industry and
economic conditions. As a result of these and other factors, the Company
believes that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance. It is possible that the Company's future quarterly operating
results from time to time will not meet the expectations of market analysts or
investors, which would likely have an adverse effect on the market price of the
Company's Common Stock. In addition, there can be no assurance that the Company
will achieve or sustain profitability on a quarterly or annual basis. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Dependence on Suppliers. The Company is dependent on sole or limited source
suppliers for certain key raw materials used in its products, particularly thin
lead foil and lead oxide. The Company generally purchases sole or limited source
raw materials pursuant to purchase orders placed from time to time and has no
long term contracts or other guaranteed supply arrangements with its sole or
limited source suppliers. There can be no assurance that the Company's suppliers
will be able to meet the Company's requirements relative to specifications and
volumes for key raw materials or that the Company will be able to locate
alternative sources of supply. There can be no assurance that the Company will
be able to purchase raw materials at an acceptable cost. In addition, the raw
materials which the Company utilizes must be of a very high quality. The Company
at times in the past has experienced delays in product development due to the
delivery of nonconforming raw materials from its suppliers. See
"Business -- Manufacturing and Facilities."
Patents and Proprietary Rights. The Company's ability to compete
effectively will depend in part on its ability to maintain the proprietary
nature of its technology and manufacturing processes through a combination of
patent and trade secret protection, and non disclosure agreements. The Company
holds four issued United States patents which expire beginning in 2009 and
ending in 2011. In addition, the Company has four United States 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 which 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 patents issued to the Company will not
be infringed upon or designed around by others or that others will not obtain
patents that the Company would need to license or design around. 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
12
<PAGE> 14
infringing third party patents, there can be no assurance that any necessary
licenses would be available on reasonable terms, if at all.
The Company could incur substantial costs in defending itself, its
licensees, distributors or customers in litigation brought by others or
prosecuting infringement claims against third parties. If the outcome of any
such litigation were unfavorable to the Company, the Company's business,
financial condition and results of operations could be materially adversely
affected. To determine the priority of inventions, the Company may have to
participate in interference proceedings declared by the United States Patent and
Trademark 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. However, third parties may independently develop substantially
equivalent proprietary information and techniques, or otherwise gain access to
the Company's trade secrets or disclose such technology, which could have a
materially adverse effect on the Company's business, results of operations and
financial condition. There can be no assurance that the Company's efforts to
vigorously protect its rights will be successful. See "Business -- Patents,
Trade Secrets and Trademarks."
Dependence on Key Employees; Need to Attract and Retain Employees. The
Company is highly dependent on its corporate officers and other principal
members of its management staff, the loss of any of whose services might
significantly delay or prevent the achievement of critical development,
manufacturing, marketing or other business objectives. In addition, the Company
relies on consultants and advisors to assist the Company in formulating its
research and development strategy. The Company has key person life insurance on
its Chief Executive Officer, Daniel S. Lankford, and its Senior Vice President,
Operations, Sandra D. Schreiber. The Company has employment contracts with Mr.
Lankford and Joseph F. Fojtasek, its Chief Financial Officer. Retaining and
attracting qualified personnel is critical to the Company's success. In order to
continue to pursue its product development and marketing plans, the Company will
be required to hire additional qualified scientific personnel to perform
research and development, manufacturing and marketing. These requirements are
also expected to demand the addition of management personnel and the development
of additional expertise by existing management personnel. There can be no
assurance that the Company will be able to attract and retain such individuals
on acceptable terms, if at all, and the failure to do so could have a material
adverse effect on the Company, including its ability to conclude collaborations
with additional corporate partners. See "Business -- Employees," "Management"
and "Certain Transactions."
Environmental and Safety Risks. 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 its new manufacturing facility will
include, an enclosed area specifically designed 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 equipment such as
gloves, protective clothing, and respirators and are required under Occupational
Safety and Health Administration ("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 the Comprehen-
13
<PAGE> 15
sive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA")
as amended including the 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. 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 regulations will not require the Company to
incur substantial capital or operating costs to achieve or 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, 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 which, 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, or that such insurance will be
available at an acceptable cost in the future. See "Business -- Safety and
Environmental Issues."
Control by Existing Stockholders. Upon completion of this offering, the
Company's officers, directors and their affiliates as a group will beneficially
own approximately 23.1% of the Company's outstanding Common Stock. As a result,
these stockholders will be able to exercise significant control over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. See "Management" and "Principal and
Selling Stockholders."
Effect of Anti-takeover Provisions. The Company's Board of Directors has
the authority to issue up to 5,000,000 shares of Preferred Stock and to
determine the price, rights, preferences and privileges of those shares without
any further vote or action by the stockholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. While the
Company has no present intention to issue shares of Preferred Stock, such
issuance, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which
prohibits the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. The application of
Section 203 also could have the effect of delaying or preventing a change of
control of the Company. Furthermore, the Company's classified Board of Directors
and certain other provisions of the Company's Certificate of Incorporation may
have the effect of delaying or preventing changes in control or management of
the Company, which could adversely affect the market price of the Company's
Common Stock. See "Management -- Classified Board of Directors" and "Description
of Capital Stock."
Volatility of Stock Price; No Dividends. The market price of the shares of
Common Stock, has been and is likely to be highly volatile. Factors such as the
fluctuation in the Company's operating results, announcements of technological
innovations or new commercial products by the Company or its competitors,
governmental regulation, developments in patent or other proprietary rights of
the Company or its competitors, including litigation, developments in the
Company's relationships with current or future collaborative partners, and
general market conditions may have a significant
14
<PAGE> 16
effect on the market price of the Common Stock. The Company has never paid any
cash dividends and does not anticipate paying cash dividends in the foreseeable
future. See "Dividend Policy."
Shares Eligible for Future Sale; Registration Rights. Sales of substantial
amounts of the Common Stock in the public market after this offering could
adversely affect the market price of the Common Stock. 5,015,748 of the
11,422,328 shares of Common Stock outstanding upon completion of this offering
(including the 2,600,000 shares of Common Stock offered hereby) will be freely
tradeable unless acquired by affiliates of the Company. The remaining shares of
Common Stock are "restricted securities" (the "Restricted Shares") under the
Securities Act of 1933, as amended (the "Securities Act"). As of the date of
this Prospectus, approximately Restricted Shares are eligible for sale
without limitation in the public market pursuant to Rule 144(k) under the
Securities Act, and approximately Restricted Shares are eligible for
sale, subject to certain limitations, in the public market pursuant to Rule 144
and Rule 701 under the Securities Act. The officers, directors and certain
stockholders of the Company, who together hold approximately of the
Restricted Shares, have agreed not to sell their shares without the consent of
Alex. Brown & Sons Incorporated for a period of 120 days from the date of this
Prospectus. Holders of approximately 5,134,091 shares of the Company's Common
Stock and 13,086 shares of Common Stock issuable upon the exercise of warrants
to purchase Common Stock are entitled to certain rights with respect to
registration of such shares for offer or sale to the public. See "Shares
Eligible for Future Sale" and "Description of Capital Stock -- Registration
Rights."
Dilution. The public offering price will be substantially higher than the
book value per share of Common Stock. Investors purchasing shares of Common
Stock in this offering will therefore incur immediate and substantial dilution
of $10.14 per share at an assumed offering price of $14.50 per share.
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby are estimated to be $26,885,000
($30,974,000 if the Underwriters' over-allotment option is exercised in full) at
an assumed offering price of $14.50 per share, after deducting the underwriting
discounts and commissions and estimated offering expenses payable by the
Company. The Company will not receive any proceeds from the sale of the 600,000
shares of Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders."
Of the net proceeds of this offering to the Company, approximately $19.0
million will be used over the next 24 months for construction of additional high
volume fully-automated production lines and associated capital expenditures, and
approximately $8.0 million will be used for product development, working capital
and other general corporate purposes. The Company will seek debt financing to
offset a portion of the costs of the construction of the additional production
lines, and to the extent the Company is successful in obtaining such debt
financing, a corresponding portion of the offering proceeds would be available
for other purposes. The amounts actually expended for each use may vary
significantly depending upon a number of factors, including: the timing and cost
of constructing and implementing high volume, fully-automated production lines;
research and development costs, including the timing and amount of product
development funding received from commercial and governmental sources, if any;
the amount of cash used by the Company's operations; the progress of the
Company's product development efforts; technological advances; and the
availability of debt financing.
The Company has no present plans, commitments or understandings with
respect to opportunities for technical and/or business acquisitions, but may
take advantage of such opportunities, if any, that may arise in the future. The
Company intends to invest the net proceeds from this offering in short term,
investment grade, interest bearing securities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid cash dividends and currently intends
to retain any future earnings to finance the growth and development of its
business. Any future payment of dividends will depend upon the Company's results
of operations, financial condition, cash requirements and other factors deemed
relevant by the Board of Directors.
PRICE RANGE OF COMMON STOCK
The Common Stock (Nasdaq Stock Market (National Market) symbol "BOLD")
began trading publicly in the over-the-counter market on the National Market
effective May 1, 1996. Prior to that date, there was no public market for the
Common Stock. The following table presents quarterly information on the price
range of the Common Stock. This information indicates the high and low sale
prices per share reported by the Nasdaq Stock Market (National Market).
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
1996
Second Quarter (from May 1)................................. $15.375 $10.50
Third Quarter............................................... $ 14.38 $10.75
Fourth Quarter.............................................. $ 17.13 $13.13
1997
First Quarter (through February 12)......................... $ 16.63 $14.50
</TABLE>
As of January 31, 1997 there were approximately 96 holders of record of the
Common Stock. On February 12, 1997, the last sale price reported on the Nasdaq
Stock Market for the Common Stock was $14.50 per share.
16
<PAGE> 18
DILUTION
The net tangible book value of the Company as of December 31, 1996 was
approximately $22.9 million, or approximately $2.44 per share of Common Stock.
Net tangible book value per share represents the amount of the Company's
stockholders' equity, less intangible assets, divided by 9,414,289 shares of
Common Stock outstanding.
Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of the 2,600,000 shares of
Common Stock in the offering made hereunder and the pro forma net tangible book
value per share of Common Stock immediately after this offering. After giving
effect to the sale by the Company of 2,000,000 shares of Common Stock offered
hereby at an assumed offering price of $14.50 per share (after deduction of
underwriting discounts and commissions and estimated offering expenses), the pro
forma net tangible book value of the Company as of December 31, 1996 would have
been approximately $49.8 million, or $4.36 per share. This represents an
immediate increase in pro forma net tangible book value of $1.92 per share to
existing stockholders and an immediate dilution in pro forma net tangible book
value of $10.14 per share to purchasers of Common Stock in this offering. If the
Underwriters' over-allotment option is exercised in full, the adjusted net
tangible book value per share would be $4.60, resulting in immediate dilution in
net tangible book value to new investors of $9.90 per share.
<TABLE>
<S> <C> <C>
Offering price per share.................................... $14.50
------
Net tangible book value per share before offering......... $2.44
Increase per share attributable to new investors.......... 1.92
-----
Pro forma net tangible book value per share after
offering.................................................. 4.36
------
Net tangible book value dilution per share to new
investors................................................. $10.14
======
</TABLE>
The following table summarizes on a pro forma basis as of December 31,
1996, the difference between the number of shares of Common Stock purchased from
the Company, the total consideration paid and the average price paid per share
by the existing stockholders and by the investors purchasing shares of Common
Stock in the offering (before deduction of underwriting discounts and
commissions and estimated offering expenses payable by the Company) and does not
reflect the sales of Common Stock by the Selling Stockholders.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 9,414,289 82.5% $39,007,212 57.4% $ 4.14
New Investors....................... 2,000,000 17.5% 29,000,000 42.6% $14.50
---------- ----- ----------- -----
Total..................... 11,414,289 100.0% $68,007,212 100.0%
========== ===== =========== =====
</TABLE>
The foregoing tables and calculations exclude 887,750 shares of Common
Stock issuable upon exercise of outstanding stock options at December 31, 1996,
at an average exercise price of $6.07 per share, 19,125 shares of Common Stock
issuable upon exercise of warrants outstanding as of December 31, 1996, at an
average exercise price of $4.35 per share, and 10,085 shares issuable under the
Company's Employee Stock Purchase Plan at December 31, 1996, at an average price
of $8.93. To the extent that such options and warrants are exercised in the
future, there will be further dilution to new investors. See "Management -- 1996
Equity Incentive Plan."
17
<PAGE> 19
CAPITALIZATION
The following table sets forth at December 31, 1996 (i) the actual
capitalization of the Company excluding the current portion of long-term debt
and a capitalized lease obligation, and (ii) the capitalization of the Company
as adjusted to give effect to the sale of the 2,000,000 shares of Common Stock
being offered by the Company hereby, at an assumed offering price of $14.50 per
share and after deducting underwriting discounts and commissions and other
estimated offering expenses and the application of the proceeds therefrom;
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
ACTUAL AS ADJUSTED
--------- ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Current portion of notes and capital lease payable.......... $ 273 $ 273
======== ========
Long-term notes and capital lease payable, non current
portion................................................... $ 214 $ 214
-------- --------
Stockholders' equity (1):
Preferred Stock, $.001 par value; 5,000,000 shares
authorized and no shares outstanding................... -- --
Common stock, $.001 par value; 25,000,000 shares
authorized actual and as adjusted; 9,447,622
outstanding actual, and 11,447,622 shares outstanding
as adjusted............................................ 9 11
Treasury stock, $.001 par, 33,333 shares outstanding
actual and as adjusted................................. (50) (50)
Additional paid-in capital................................ 36,762 63,645
Accumulated deficit....................................... (13,650) (13,650)
-------- --------
Total stockholders' equity............................. $ 23,071 $ 49,956
-------- --------
Total capitalization................................. $ 23,285 $ 50,170
======== ========
</TABLE>
- ---------------
(1) Excludes 1,080,813 shares of Common Stock reserved for issuance under the
Equity Incentive Plan, under which options to purchase 887,750 shares were
outstanding as of December 31, 1996, and 10,085 shares of Common Stock
purchased by employees under the Company's Employee Stock Purchase Plan
after December 31, 1996. Also excludes 19,125 shares of Common Stock
issuable upon exercise of warrants outstanding as of December 31, 1996. See
"Management -- 1996 Equity Incentive Plan" and "-- Employee Stock Purchase
Plan."
18
<PAGE> 20
SELECTED FINANCIAL DATA
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 Prospectus.
<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.
19
<PAGE> 21
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 the section entitled "Risk
Factors" and "Business" as well as those discussed in this section and elsewhere
in this Prospectus. 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. See "Risk Factors."
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.
20
<PAGE> 22
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% share of the Joint Venture's research and development and operating
expenditures.
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.
21
<PAGE> 23
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% share of the TMF battery
manufacturing development program of the Joint Venture.
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.
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% of the first commercial high-volume production line and will pay 100%
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 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
22
<PAGE> 24
this 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 not require additional capital at a future date. 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. See "Use of Proceeds."
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.
23
<PAGE> 25
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 sections entitled "Risk
Factors" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as those discussed in this section and elsewhere
in this Prospectus.
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% 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.
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.
24
<PAGE> 26
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% 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 received
purchase orders for over 50% of the Company's planned 1997 capacity of the first
fully-automated production line, and has ordered certain equipment for the
second production line. The Company continues to sell batteries manufactured in
its semi-automated pilot production facility.
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.
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.
25
<PAGE> 27
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>
<CAPTION>
PORTABLE TOOLS AND APPLIANCES STANDBY POWER ENGINE STARTING
----------------------------- ------------- ---------------
<S> <C> <C>
Portable Power Drills Computer Uninterruptible Automotive Starting
Portable Electric Saws Power Supplies Gasoline Powered Lawn
Electric Powered Lawn Point of Sale Terminals Mowers
Mowers ATM Terminals Power Boats
Weed Whackers Telecommunications Jet Skis
Grass Trimmers Equipment Snowmobiles
Other Power Tools Very Small Standby Snowblowers
Razors Power Systems Motorcycles
Toothbrushes Small Engine Starting
Portable Generator Sets
Tractors
Emergency and Auxiliary
Starting Equipment
<CAPTION>
MILITARY AND AEROSPACE ELECTRONICS OTHER APPLICATIONS
- --------------------------------------- ---------------------------------- -------------------------------
<S> <C> <C>
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.
26
<PAGE> 28
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 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.
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
27
<PAGE> 29
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.
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,
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<PAGE> 30
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 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
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<PAGE> 31
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.
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 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.
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<PAGE> 32
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. (See the inside front cover of this Prospectus). 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),
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
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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 Ion battery systems.]
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
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<PAGE> 34
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 "Risk Factors"; (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% 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 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
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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 the 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. 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.
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 will own approximately 4.9%
of the outstanding Common Stock of the Company upon the closing of this
offering.
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MANUFACTURING AND FACILITIES
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.
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.
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.
A flowchart of the manufacturing process for the spiral wound TMF battery
is shown below.
TMF flowchart
[Flowchart of manufacturing process for the spiral wound TMF battery.]
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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 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
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<PAGE> 38
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.
As of January 31, 1997, the Company had purchase orders for more than 50%
of its planned 1997 production capacity. 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.
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.
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
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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. See "Risk
Factors -- Patents and Proprietary Rights."
The Company has registered its trademark "BOLDER" as a trademark on the
principal federal trademark register, and registration is pending for its
trademark "TMF."
38
<PAGE> 40
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. See "Risk Factors -- Competition."
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,
39
<PAGE> 41
and the winding of the cells. Employees operating in these areas are instructed
in the use of safety 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. See "Risk
Factors -- Environmental and Safety Risks."
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.
EMPLOYEES
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.
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
and financial condition. The Company is not a party to any other legal
proceedings.
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<PAGE> 42
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The executive officers, key employees and Directors of the Company are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- ---------------- --------
<S> <C> <C>
Executive Officers
Daniel S. Lankford........................ 51 Chief Executive Officer, President and Chairman of
the Board
Joseph F. Fojtasek........................ 56 Chief Financial Officer, Vice President, Finance
and Administration, Secretary and Treasurer
Sandra D. Schreiber....................... 48 Senior Vice President, Operations
Arnold C. Allen........................... 57 Vice President, Marketing and Sales
Key Employees
Dr. Ramesh C. Bhardwaj.................... 41 Principal Materials Scientist
Michael E. Cox............................ 46 Director of Product Engineering
Kevin C. Obenchain........................ 41 Controller
Dr. Hollis Pence.......................... 46 Director of Systems Development
Victor Rompa.............................. 36 Director of Quality and Applications
David T. Sell............................. 55 Director of Manufacturing
Steve M. Sherepita........................ 46 Director of Facilities and Pilot Operations
Directors
Wilmer R. Bottoms, Ph.D.(1)(2)............ 53 Director
Tristan E. Juergens....................... 52 Director
David L. Riegel(1)(2)..................... 59 Director
Carl S. Stutts(1)(2)...................... 50 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Daniel S. Lankford has served as Chief Executive Officer and President of
Bolder since July 1994 and as Chairman of the Board of Directors since October
1996. Prior to joining the Company, Mr. Lankford was Chief Executive Officer of
AT&T Microelectronics -- Europe from December 1989 to July 1994, and prior to
that, Mr. Lankford served as Vice President of Marketing for AT&T's worldwide
microelectronics unit. He received his M.S. in Management as a Sloan Fellow from
Stanford University and his B.S. from Johns Hopkins University.
Joseph F. Fojtasek joined Bolder as Chief Financial Officer, Vice
President, Finance and Administration, Secretary and Treasurer in February 1996.
From April 1992 to February 1996, Mr. Fojtasek served as Vice President and
Chief Financial Officer of CoCensys, Inc., a biopharmaceutical company. In 1990
and 1991, Mr. Fojtasek provided financial consulting services, in some cases
acting as Chief Financial Officer, to various early stage technology companies.
He received his M.B.A. and B.S. from the University of Texas.
Sandra D. Schreiber has served as the Company's Senior Vice President,
Operations since August 1995 and served as Vice President, Quality from March
1994 to February 1995, when she became Vice President, Operations. Prior to
joining Bolder in August 1993, Ms. Schreiber was Vice President, Technical
Operations at Ivion Corporation, a manufacturer of infusion pumps. Ms. Schreiber
received her B.S. from Montana State University.
Arnold C. Allen joined Bolder in October 1994 as Vice President, Marketing
and Sales. From April 1993 to October 1994, Mr. Allen was the Director of
Marketing and Sales for OPTIMA Battery Company, a manufacturer of batteries.
From 1991 to April 1993, Mr. Allen was an Environmental
41
<PAGE> 43
Clean Up Process Manager for Halliburton Corporation, an energy company. Mr.
Allen has a B.S. from The United States Naval Academy.
Dr. Ramesh C. Bhardwaj joined Bolder in June 1996 as Principal Materials
Scientist. From May 1994 to June 1996, Dr. Bhardwaj was an Engineer V with
Rockwell International Company. From April 1993 to May 1994, Dr. Bhardwaj was
Principal Scientist with Lockheed Engineering and Sciences Company, in their
White Sands Test Facility, NASA-Johnson Space Center. From May 1988 to April
1993, Dr. Bhardwaj was Senior Scientist in the Department of Chemistry at Texas
A&M University. Dr. Bhardwaj holds an M.S. and Ph.D. in Electrochemistry and
Spectroscopy from the University of Jobhbur.
Michael E. Cox joined Bolder in May 1996 as Director of Product
Engineering. From 1995 to May 1996, Mr. Cox was a Manufacturing Consultant to
Commonwealth Sprague Capacitor, Inc., a manufacturer of capacitors and DC motor
drives. From 1994 to 1995, Mr. Cox served as Manager -- Special Projects for
Aerovox, Inc., a manufacturer of capacitors, and as a manufacturing consultant.
From 1988 to 1993, Mr. Cox served as Manager of Quality Control and Project
Manager for Aerovox, Inc. Mr. Cox received a M.B.A. from SUNY-Albany and his
B.S. from Regis College.
Kevin C. Obenchain, CPA, joined Bolder in November 1996 as Controller. From
November 1994 to May 1996, Mr. Obenchain was the Controller for Combyte, Inc., a
manufacturer of data storage products. From 1991 to October 1994, Mr. Obenchain
was a Division Accountant at Array Technology Corporation, a manufacturer of
disk arrays. Mr. Obenchain has an M.B.A. in Accounting from the University of
Colorado and a B.A. from Michigan State University.
Dr. Hollis Pence joined Bolder in October 1996 as Director of Systems
Development. Dr. Pence had been a technical consultant to Bolder since March
1995. From 1991 to October 1996, Dr. Pence served as President of the Technical
Network, Inc., a consulting firm in statistical and reliability engineering. Dr.
Pence received his Ph.D. and M.A. from the University of Northern Colorado and
his B.A. from the University of Colorado.
Victor Rompa joined Bolder in September 1994 and is the Director of Quality
and Applications. From April 1991 to September 1994, Mr. Rompa was Manager,
Product Assurance and Test for SAFT Aerospace Batteries, a battery manufacturer.
Mr. Rompa holds a B.S.E.E. from the University of Hartford.
David T. Sell joined Bolder in February 1997 as Director of Manufacturing.
From June 1991 to February 1997, Mr. Sell held various positions with Sharp
Microelectronics Technology, a manufacturer of semi-conductors, including
Director of Operations and Quality Assurance Manager. Mr. Sell holds an M.B.A.
from Regis University and a B.S. from San Jose State University.
Steven M. Sherepita joined Bolder in March 1993 and is the Director of
Facilities and Pilot Operations. From 1990 to March 1993, Mr. Sherepita served
as Plant Manager for Warvel Products, Inc., a furniture manufacturing company.
Wilmer R. Bottoms, Ph.D. has been a director at Bolder since 1993. From
1984 to July 1996, Dr. Bottoms was a Senior Vice President of Patricof & Co.
Ventures, Inc. Since July 1996, he has served as Chairman of the Board and Chief
Executive Officer of Credence Systems Corporation. Dr. Bottoms received a Ph.D.
from Tulane University and a B.S. from Huntington College.
Tristan E. Juergens is the Company's founder. He has served as a director
at Bolder since 1991. Mr. Juergens served as the Company's Chief Technical
Officer from May 1992 to March 1996. From March 1991 to May 1992, he served as
President of the Company. Mr. Juergens holds a B.S. from the University of
Wisconsin.
David L. Riegel has been a director at Bolder since 1992. From May 1992 to
October 1992 Mr. Riegel served as the Chief Executive Officer of the Company.
Mr. Riegel is the Executive Vice President and Chief Operating Officer of
Exabyte Corporation, a data storage company, a position he has held since
December 1994. From July 1993 to December 1994, Mr. Riegel was Senior Vice
42
<PAGE> 44
President of Operations at Exabyte. From November 1992 to July 1993, he was
Senior Vice President of 8 mm Operations at Exabyte. From July 1990 until
November 1992, Mr. Riegel served as President and Chief Executive Officer of
PrairieTek Corp., a disk drive manufacturer. PrairieTek filed for protection
under Chapter 11 of the Federal bankruptcy laws in August 1991. Mr. Riegel
received a B.S. from Purdue University.
Carl S. Stutts has been a director at Bolder since 1992. Mr. Stutts is a
general partner of Columbine Venture Management II, the general partner of
Columbine Venture Fund II, a position he has held since 1988. Mr. Stutts was a
director of Thesis, Inc., which filed a voluntary petition under Chapter 11 of
the Federal bankruptcy laws in July 1994. Mr. Stutts received an M.B.A. from the
University of Houston and a B.S. from North Carolina State University.
CLASSIFIED BOARD OF DIRECTORS
The Company's Certificate of Incorporation provides for a classified Board
of Directors consisting of three classes of Directors serving staggered
three-year terms. Messrs. Lankford and Riegel have been designated as Class I
Directors, with terms ending at the 1997 annual meeting of the Company's
stockholders. Dr. Bottoms and Mr. Stutts have been designated as Class II
Directors, with terms ending at the 1998 annual meeting of the Company's
stockholders. Mr. Juergens has been designated as a Class III director, with a
term ending at the 1999 annual meeting of the Company's stockholders. There is
currently a Class III vacancy on the Board of Directors.
COMMITTEES
The Audit Committee consists of Messrs. Bottoms, Riegel and Stutts. The
Audit Committee makes recommendations to the Board regarding the selection of
independent auditors, reviews the results and scope of the audit and other
services provided by the Company's independent auditors and reviews and
evaluates the Company's audit and control functions.
The Compensation Committee consists of Messrs. Bottoms, Riegel and Stutts.
The Compensation Committee reviews and recommends for Board approval awards
under the Company's Equity Incentive Plan, makes policy decisions concerning
salaries and incentive compensation for employees and consultants of the
Company, and reviews and recommends for Board approval compensation for
executive officers.
DIRECTORS' COMPENSATION
Bolder's Directors do not currently receive any compensation for service on
the Board of Directors or any committee thereof, other than grants of
nonstatutory stock options to non-employee Directors under the Equity Incentive
Plan. See "Management -- 1996 Equity Incentive Plan". Directors may be
reimbursed for certain expenses in connection with attendance at Board and
committee meetings.
EMPLOYMENT AGREEMENTS
On July 11, 1994, the Company entered into an Employment Agreement with
Daniel S. Lankford, which provided for Mr. Lankford's employment as the
President and Chief Executive Officer of the Company. Under the terms of the
agreement, the Company agreed to pay Mr. Lankford a base salary of $180,000 and
granted Mr. Lankford an option to purchase 282,000 shares of Common Stock at an
exercise price of $.375 per share, subject to vesting over four years from the
start of Mr. Lankford's employment with the Company. Mr. Lankford exercised this
option as to 133,333 shares early, subject to the Company's right to repurchase
a portion of such stock if Mr. Lankford leaves the Company prior to the
expiration of the vesting of the option. The Company also paid Mr. Lankford
$50,000 to cover his relocation expenses. In the event that the Company
terminates Mr. Lankford's employment other than for cause, the Company agreed to
pay Mr. Lankford an amount equal to six months of his base salary. Pursuant to
the Employment Agreement, in June 1995
43
<PAGE> 45
the Company granted Mr. Lankford an additional option to purchase 21,150 shares
of Common Stock at an exercise price of $1.50 per share, which options will vest
in ten years unless the Board of Directors accelerates the vesting of the
options based on Mr. Lankford's achievement of certain performance goals. In
February 1996, the Company accelerated the vesting of 3,176 shares of such
option based on an evaluation of Mr. Lankford's performance during 1995 and
granted Mr. Lankford an option to purchase 21,166 shares of Common Stock at an
exercise price of $6.00 per share, which options will vest in ten years unless
the Board of Directors accelerates the vesting of the options based on Mr.
Lankford's achievement of certain performance goals. In January 1997, the
Company accelerated the vesting of the remaining 17,974 shares of the June 1995
option based on an evaluation of Mr. Lankford's performance during 1996 and
granted Mr. Lankford an option to purchase 21,166 shares of Common Stock at an
exercise price of $15.25 per share, which options will vest in ten years unless
the Board of Directors accelerates the vesting of the options based on Mr.
Lankford's achievement of certain performance goals.
Pursuant to an Employment Agreement, dated April 1, 1993, between the
Company and William E. Younkes, at that time the President and Chief Executive
Officer of the Company, the Company granted Mr. Younkes an option to purchase
238,333 shares of Common Stock at an exercise price of $.15 per share. This
option was subject to vesting over four years from the start of Mr. Younkes'
employment with the Company. Such agreement provided that should Mr. Younkes
remain with the Company for a specified period of time, vested shares, if any,
could be exercised in exchange for services rendered. Mr. Younkes resigned as
President and Chief Executive Officer in July 1994 and remained as Chairman of
the Board. Pursuant to an Employment Agreement Amendment, dated October 1, 1995,
the Company agreed to retain the services of Mr. Younkes on an hourly basis
based upon his then current salary of $3,076 per week prorated to the actual
number of hours worked per week. The Company also agreed to extend Mr. Younkes'
original severance period of six months by one hour for every hour worked,
provided that the value of the severance benefit not exceed the amount specified
in the Employment Agreement. In addition, the Company reduced the number of
shares which vest on a monthly basis and extended the vesting period of the
unvested portion of Mr. Younkes' stock option, totaling 96,982 shares, to 87
months beginning October 1, 1995. In February and June 1996, Mr. Younkes
exercised 66,451 and 10,424 shares, respectively, relating to these options.
On February 13, 1996, the Company entered into a letter agreement with
Joseph F. Fojtasek, which provided for Mr. Fojtasek's employment with the
Company as Vice President, Finance and Administration, and Chief Financial
Officer. Under the terms of the letter agreement, the Company agreed to pay Mr.
Fojtasek a base salary of $130,000 per year, plus a bonus of up to $26,000 in
1996 based on the achievement of certain performance goals and Company
performance. The Company also agreed to grant Mr. Fojtasek an option to purchase
133,333 shares of Common Stock at an exercise price of $6.00 per share, subject
to vesting over six years from the start of Mr. Fojtasek's employment with the
Company. In addition, the Company has agreed to grant Mr. Fojtasek a bonus
payable at the rate of $1.50 for each share of Common Stock purchased by Mr.
Fojtasek pursuant to such stock option grant. In the event that the Company
terminates Mr. Fojtasek's employment, other than for cause, the Company agrees
to pay Mr. Fojtasek an amount equal to six months of his base salary. The
Company also paid Mr. Fojtasek $35,000 to cover his relocation expenses.
44
<PAGE> 46
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to its
Chief Executive Officer and four other executive officers whose total annual
salary and bonus exceeded $100,000 for services rendered to the Company during
the fiscal years ended December 31, 1995 and 1996 (collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ----------------------
NAME AND PRINCIPAL FISCAL SALARY BONUS OTHER ANNUAL AWARDS ALL OTHER
POSITION YEAR ($) ($) COMPENSATION($) OPTIONS COMPENSATION
------------------ ------ -------- ------- --------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Daniel S. Lankford....................... 1995 $180,000 $ 8,400 -- 21,150 --
Chief Executive Officer, President 1996 193,333 80,000 -- 121,166 --
and Chairman of the Board
Joseph F. Fojtasek....................... 1995 -- -- -- -- --
Chief Financial Officer 1996 102,917 25,040 -- 133,333 35,000(1)
Sandra D. Schreiber...................... 1995 116,731 7,839 -- 41,999 --
Senior Vice President, Operations 1996 145,000 26,440 -- 50,000 --
Robert F. Nelson......................... 1995 106,000 6,130 -- -- --
Vice President, Technology(2) 1996 106,000 4,950 -- -- --
Arnold C. Allen.......................... 1995 100,000 5,000 -- 26,666 --
Vice President, Marketing and Sales 1996 105,000 16,610 -- 16,668 --
</TABLE>
- ---------------
(1) Reimbursement of moving expenses.
(2) Mr. Nelson resigned as Vice President, Technology effective January 1997.
1996 EQUITY INCENTIVE PLAN
In March 1996, the Company adopted the 1996 Equity Incentive Plan, which
was subsequently amended in December 1996 and January 1997 (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.
The Company has reserved 1,078,813 shares of its Common Stock for future
issuance under the Equity Incentive Plan.
The Equity Incentive Plan is administered by the Board of Directors, unless
the Board delegates administration to a committee. The Board determines
recipients and types of awards to be granted, including the exercise price,
number of shares subject to the award and the exercisability thereof, provided
that the terms of options granted to non-employee Directors are specified in the
Equity Incentive Plan.
Non-employee Directors are eligible only for nonstatutory option grants.
Each person who becomes a non-employee director will automatically be granted an
option to purchase 10,000 shares of Common Stock on the date of his or her
election to the Board. On the date of each annual meeting of stockholders and
the Company, starting with the first annual meeting to be held in 1997, each
non-employee director who has continuously served as a non-employee director
since the last annual meeting will be granted an option to purchase 1,000 shares
of Common Stock, and each other person who is then a non-employee director will
be granted an option to purchase a prorated number of shares of Common Stock
based on the number of days such person has continuously served as a
non-employee director since the last annual meeting.
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<PAGE> 47
Initial options granted to non-employee Directors vest in five equal annual
increments following the date of grant, and annual options granted to
non-employee Directors vest in three equal annual increments following the date
of grant. Options granted to employees and consultants will vest as determined
by the Board, and an option agreement may permit employees to exercise unvested
options. The Board has the authority to accelerate the vesting of options
granted to employees and consultants.
The exercise price of options granted under the Equity Incentive Plan is
determined by the Board of Directors; provided, however, that the exercise price
of a nonstatutory stock option cannot be less than 85% of the fair market value
of the Common Stock on the date of the option grant, the exercise price of an
incentive stock option cannot be less than 100% of the fair market value of the
Common Stock on the date of grant, and the exercise price of an option granted
to a non-employee director will be equal to 100% of the fair market value on the
date of grant.
Upon any merger or consolidation in which the Company is acquired, all
outstanding options may either be assumed or substituted by the surviving
entity. If the surviving entity determines not to assume or substitute such
options, the options terminate as of the closing of the merger or consolidation.
The Board of Directors has the authority to amend or terminate the Equity
Incentive Plan, subject to stockholder approval when necessary under the
requirements of the Internal Revenue Code, provided that no such action shall
impair rights under outstanding awards. The Equity Incentive Plan will terminate
in March 2006, unless terminated sooner by the Board of Directors.
The following table sets forth each grant of stock options made during the
year ended December 31, 1996 to each of the Named Executive Officers:
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
% OF TOTAL
OPTIONS
GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE($/SH) DATE(1)
---- ------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Daniel S. Lankford........................ 21,166(2) 4.3 $ 6.00 02/06/06
100,000(3) 20.2 $12.00 07/17/06
Joseph F. Fojtasek........................ 133,333(4) 27.0 $ 6.00 02/12/06
Sandra D. Schreiber....................... 50,000(5) 10.1 $12.88 06/01/06
Robert F. Nelson.......................... -- -- -- --
Arnold C. Allen........................... 16,668(6) 3.4 $12.25 08/29/06
</TABLE>
- ---------------
(1) Any of the options that are exercisable on the date of termination of
employment may be exercised until the earlier of three months after such
termination and the expiration date unless termination was a result of total
and permanent disability, in which case, until the earlier of one year after
such termination and the expiration date.
(2) Exercisable on the expiration date, unless the Board of Directors
accelerates the vesting of the options based on the achievement of certain
performance goals.
(3) Exercisable in 60 equal monthly installments, beginning August 18, 1997.
(4) One-sixth of the options becomes exercisable one year following the date of
grant. One-seventy-second of the options becomes exercisable monthly
thereafter.
(5) 20,000 of the options are exercisable in accordance with the vesting
schedule set forth in the following note. 30,000 of the options are
exercisable in accordance with the vesting schedule set forth in note 2
above.
(6) One-fifth of the options becomes exercisable one year following the date of
grant. One-sixtieth of the options becomes exercisable monthly thereafter.
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<PAGE> 48
The following table sets forth information with respect to (i) the exercise
of stock options by the Named Executive Officers during the fiscal year ended
December 31, 1996, (ii) the number of unexercised options held by the Named
Executive Officers as of December 31, 1996 and (iii) the value of unexercised
in-the-money options (i.e., options for which the fair market value of the
Common Stock ($16.44) at December 31, 1996 exceeds the exercise price) as of
December 31, 1996:
OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DEC. 31, AT DEC. 31, 1996
SHARES ACQUIRED VALUE 1996 EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED UNEXERCISABLE UNEXERCISABLE
---- ---------------- ---------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Daniel S. Lankford.......... -- -- 151,843/139,140 $2,435,041/$933,505
Joseph F. Fojtasek.......... -- -- -- /133,333 -- /$1,391,997
Sandra D. Schreiber......... -- -- 43,897/92,768 $700,710/$836,364
Robert F. Nelson............ -- -- 24,166/25,834 $393,664/$420,836
Arnold C. Allen............. -- -- 10,887/39,113 $165,886/$409,399
</TABLE>
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 per week and are employed by the Company or a subsidiary of the Company
designated by the Board for at least five months 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 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.
Upon any merger or consolidation in which the Company is acquired, the
Board of Directors has discretion to provide that each right to purchase Common
Stock will be assumed or an equivalent right substituted by the successor
corporation, if any, or the Board may shorten the offering period and provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to such transaction.
The Board has the authority to amend or terminate the Purchase Plan,
subject to stockholder approval when necessary to meet the requirements of the
Code, provided that no such action may adversely affect any outstanding rights
to purchase Common Stock.
The first offering under the Purchase Plan concluded on February 3, 1997.
To date, an aggregate of 10,085 shares of Common stock have been issued under
the Purchase Plan.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its Directors
and executive officers and may indemnify its other officers, employees and
agents to the fullest extent permitted by
47
<PAGE> 49
Delaware law. The Company is also empowered under its Bylaws to enter into
indemnification agreements with its Directors and officers and to purchase
insurance on behalf of any person it is required or permitted to indemnify.
In addition, the Company's Certificate of Incorporation provides that, to
the fullest extent permitted by Delaware law, the Company's Directors will not
be liable for monetary damages for breach of the Directors' fiduciary duty of
care to the Company and its stockholders. This provision of the Certificate of
Incorporation does not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as an injunction or other forms of
non-monetary relief would remain available under Delaware law. Each director
will continue to be subject to liability for breach of the director's duty of
loyalty to the Company, for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of law, for any transaction from
which the director derived an improper personal benefit, for improper
transactions between the director and the Company and for improper distributions
to stockholders and loans to Directors and officers. This provision also does
not affect a director's responsibilities under any other laws, such as the
federal securities laws or state or federal environmental laws.
The Company has entered into indemnification agreements with each of its
Directors and executive officers under which the Company has indemnified each of
them against expenses and losses incurred for claims brought against them by
reason of their being a director or executive officer of the Company, and the
Company maintains Directors' and officers' liability insurance.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
48
<PAGE> 50
CERTAIN TRANSACTIONS
The Company issued an aggregate of 13,979 shares of Series C Preferred
Stock at $3.00 per share and 666,284 shares of Series D Preferred Stock ("Series
D Stock") at $6.00 per share in a closing occurring in April 1995 and sold
16,666 shares of Series D Stock at $6.00 per share in a second closing occurring
in January 1996. In consideration for these shares, the stockholders, which
include certain Directors of the Company and their affiliates, paid an aggregate
of $4,139,637 in cash and cancellation of indebtedness. In addition, in
connection with Johnson Controls' commitment to finance the Joint Venture in
June 1995, the Company issued to Johnson Controls: (i) 250,000 shares of Series
E Preferred Stock (the "Series E Stock") at $6.00 per share in cash; and (ii)
warrants to purchase 308,666 shares of Series E Stock, at an exercise price of
$6.00 per share, in consideration of $463 in cash.
The following table sets forth the number of shares of the Company's
Preferred Stock purchased by each of the Company's Directors, executive officers
and 5% stockholders and their respective affiliates:
<TABLE>
<CAPTION>
INVESTOR SERIES C STOCK SERIES D STOCK SERIES E STOCK
-------- -------------- -------------- --------------
<S> <C> <C> <C>
Columbine Venture Fund II, L.P.(1).............. 303,348 79,148 --
Patricof & Co. Ventures, Inc.................... 315,925 124,527 --
David L. Riegel................................. 8,359 578 --
Johnson Controls Battery Group, Inc............. -- -- 558,666
</TABLE>
- ---------------
(1) Carl S. Stutts, a director of the Company, is a general partner of Columbine
Venture Management II, the general partner of Columbine Venture Fund II,
L.P.
In April 1994, the Company issued convertible promissory notes to certain
stockholders in the aggregate principal amount of $1,000,000. In connection with
this financing, the Company issued (i) notes in the amount of $433,308 to
Columbine Venture Fund II, L.P. ("Columbine") in exchange for cash, and (ii)
notes in the amount of $448,433 to Patricof & Co. Ventures, Inc. ("Patricof") in
exchange for cash.
In March 1995, the Company issued convertible promissory notes to certain
stockholders in the aggregate principal amount of $1,797,750 and warrants to
purchase 149,998 shares of Common Stock for an aggregate consideration of
$2,250. In connection with such financing, the Company issued: (i) a $474,893
note and a warrant to purchase 39,624 shares of Common Stock to Columbine in
exchange for $475,487 in cash; (ii) notes in the amount of $747,175 and warrants
to purchase 62,342 shares of Common Stock to Patricof in exchange for $748,110
in cash; and (iii) a $3,474 note and a warrant to purchase 290 shares of Common
Stock to David L. Riegel, a director of the Company, for $3,478 in cash. The
principal amounts of the notes were converted into Series D Preferred Stock and
the interest accrued on the notes was converted into Series C Preferred Stock in
May 1995.
In August 1995, the Company loaned Tristan E. Juergens, at that time the
Chief Technical Officer and a director of the Company, $50,000 to assist him in
defraying certain medical expenses. The loan was made pursuant to a promissory
note executed by Mr. Juergens on August 29, 1995 bearing interest at the rate of
6.04% per year. In addition, the Company repurchased 33,333 shares of Common
Stock held by Mr. Juergens at $1.50 per share, pursuant to a Stock Repurchase
Agreement between the Company and Mr. Juergens dated August 29, 1995. In
November 1995, the Company loaned Mr. Juergens an additional sum of $100,000
pursuant to a Promissory Note executed by Mr. Juergens on November 7, 1995
bearing interest at the rate of 6.04% per year. Each of these notes has been
repaid in full.
In August 1995, the Company issued a cash bonus to certain officers and
employees of the Company, a portion of the proceeds of which were used by such
officers and employees to purchase an aggregate of 22,443 shares of Common Stock
at $1.50 per share. In connection with this bonus,
49
<PAGE> 51
the Company issued: (i) 2,914 shares to Arnold C. Allen; (ii) 2,196 shares to
Tristan E. Juergens; (iii) 3,088 shares to Robert F. Nelson; (iv) 3,933 shares
to Sandra D. Schreiber; and (v) an aggregate of 10,312 shares to other employees
of the Company.
In April and May 1996, certain stockholders of the Company exercised
warrants to purchase Common Stock in the following amounts and at the following
exercise prices: (i) 308,606 shares at an exercise price of $6.00 per share;
(ii) 166,666 shares at an exercise price of $1.50 per share; (iii) 145,128
shares at an exercise price of $0.75 per share (including 63,270 shares issued
to certain stockholders pursuant to cashless exercises of warrants to purchase
68,138 shares). In connection with such warrant exercises, the Company issued
(i) 39,624 shares of Common Stock to Columbine for $29,718; (ii) 20,701 shares
of Common Stock to funds managed by Advent International for $15,526; (iii) 290
shares of Common Stock to David L. Riegel for $217; (iv) 308,666 shares to
Johnson Controls for $1,851,996; and (v) 57,888 shares to Patricof for $43,416.
Each share of Preferred Stock converted automatically into Common Stock
immediately prior to the closing of the Company's initial public offering.
The Company believes that the foregoing transactions were in its best
interests. As a matter of policy, these transactions were, and all future
transactions between the Company and any of its officers, Directors or principal
stockholders will be, approved by a majority of the independent and
disinterested members of the Board of Directors, will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
and will be in connection with bona fide business purposes of the Company.
50
<PAGE> 52
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of January 31, 1997, and
as adjusted to reflect the sale of the Common Stock being offered hereby
(assuming no exercise of the Underwriters' over-allotment option) by (i) each
person (or group of affiliated persons) who is known by the Company to own
beneficially more than 5% of the Common Stock, (ii) each of the Company's
Directors, (iii) each of the Named Executive Officers, (iv) all Directors and
executive officers of the Company as a group, and (v) the Selling Stockholders.
Except as otherwise noted, the persons or entities in this table have sole
voting and investing power with respect to all the shares of Common Stock owned
by them.
<TABLE>
<CAPTION>
SHARES TO BE
SHARES BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO THIS OFFERING AFTER THIS OFFERING
--------------------------------------- -------------------
BENEFICIAL OWNERS NUMBER(1) PERCENT(2) OFFERED HEREBY NUMBER PERCENT
----------------- --------- ---------- -------------- --------- -------
<S> <C> <C> <C> <C> <C>
Patricof & Co. Ventures, Inc.(3)......... 1,991,126 21.1% 400,000 1,591,126 13.9%
2100 Geng Road
Palo Alto, CA 94303
Columbine Venture Fund II, L.P.(4)....... 1,864,561 19.8% -- 1,864,561 16.3%
6312 South Fiddler's Green Circle,
Suite 260
Englewood, CO 80111
Johnson Controls Battery Group, Inc...... 558,666 5.9% -- 558,666 4.9%
5757 North Green Bay Avenue
P.O. Box 591
Milwaukee, WI 53201
Advent International Group(5)............ 254,735 2.7% 80,430 174,305 1.5%
101 Federal Street
Boston, MA 02110
Wells Fargo Small Business............... 231,056 2.5% 72,954 158,102 1.4%
Investment Company, Inc.
One Montgomery Street
West Tower, Suite 2530
San Francisco, CA 94104
Technology Funding Venture Partners V,... 33,499 * 10,577 22,922 *
an Aggressive Growth Fund, L.P.
2000 Alameda de las Pulgas
San Mateo, CA 94403
Phoenix Leasing Incorporated(6).......... 19,125 * 6,039 13,086 *
2401 Kerner Boulevard
San Rafael, CA 94901
Daniel S. Lankford(7).................... 303,150 3.2% -- 303,150 2.6%
Joseph F. Fojtasek(8).................... 24,074 * -- 24,074 *
Sandra D. Schreiber(9)................... 52,519 * -- 52,519 *
Robert F. Nelson(10)..................... 31,755 * -- 31,755 *
Arnold C. Allen(11)...................... 15,468 * -- 15,468 *
Wilmer R. Bottoms, Ph.D.................. -- -- -- -- --
Tristan E. Juergens...................... 395,474 4.2% 30,000 365,474 3.2%
David L. Riegel(12)...................... 82,561 * -- 82,561 *
Carl S. Stutts(4)........................ 1,864,561 19.8% -- 1,864,561 16.3%
All Directors and executive officers as a
group (8 persons)(13).................. 2,737,807 28.2% 30,000 2,707,807 23.1%
</TABLE>
51
<PAGE> 53
- ---------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options, warrants and convertible notes currently exercisable or
convertible, or exercisable or convertible within sixty (60) days of
January 31, 1997, are deemed outstanding for computing the percentage of
the person or entity holding such securities but are not outstanding for
computing the percentage of any other person or entity. Except as indicated
by footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
(2) Percentage of ownership is based on 9,416,289 shares of Common Stock
outstanding before the offering and 11,422,328 shares of Common Stock
outstanding after the offering.
(3) Consists of shares held by funds managed by Patricof & Co. Ventures, Inc.,
including 1,389,811 shares held by APA Excelsior III, L.P., 529,638 shares
held by Coutts & Co. (Jersey) Ltd., Custodian for APA Excelsior
III/Offshore, L.P. and 71,677 shares held by CIN Venture Nominees Limited.
(4) Mr. Stutts is a general partner of Columbine Venture Management II, the
general partner of Columbine Venture Fund II, L.P. ("Columbine"). Mr.
Stutts disclaims beneficial ownership of the shares held by Columbine
except to the extent of his pecuniary interest arising from his general
partnership interest therein.
(5) Consists of 4,397 shares held by Advent International Investors II Limited
Partnership, 125,169 shares held by Advent Performance Materials Limited
Partnership, and 125,169 shares held by Adtel Limited Partnership.
(6) Consists solely of shares issuable upon exercise of warrants.
(7) Includes 105,750 shares which are subject to repurchase by the Company
prior to becoming vested (such vesting occurring at the rate of 5,875
shares per month) and 169,817 shares subject to stock options that are
exercisable within 60 days of January 31, 1997.
(8) Consists solely of shares subject to stock options that are exercisable
within 60 days of January 31, 1997.
(9) Includes 48,586 shares subject to stock options that are exercisable within
60 days of January 31, 1997.
(10) Includes 25,000 shares subject to stock options that are exercisable within
60 days of January 31, 1997.
(11) Includes 12,554 shares subject to stock options that are exercisable within
60 days of January 31, 1997.
(12) Includes 27,500 shares subject to stock options that are exercisable within
60 days of January 31, 1997.
(13) See notes 7, 8, 9, 11 and 12 above.
52
<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Certificate of Incorporation and Bylaws is a summary
and is qualified in its entirety by the provisions of the Certificate of
Incorporation and Bylaws, which have been filed as exhibits to the Company's
Registration Statement, of which this Prospectus is a part.
The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, $0.001 par value per share, and 5,000,000 shares of Preferred
Stock, $0.001 par value per share. As of January 31, 1997 there were
approximately 96 record holders of the Company's Common Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. The holders of
Common Stock are not entitled to cumulative voting rights with respect to the
election of Directors, and as a consequence, minority stockholders will not be
able to elect Directors on the basis of their votes alone. Subject to
preferences that may be applicable to any then outstanding shares of Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of the Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preference of any then outstanding Preferred Stock. Holders of Common Stock have
no preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and all shares of
Common Stock to be outstanding upon completion of this offering will be, fully
paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by stockholders. The issuance of Preferred Stock could adversely
affect the voting power of holders of Common Stock and the likelihood that such
holders will receive dividend payments and payments upon liquidation and could
have the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plan to issue any shares of Preferred Stock.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and certain of its
stockholders, the holders (or their permitted transferees) of approximately
5,134,091 shares of Common Stock and 13,086 shares of Common Stock issuable upon
the exercise of warrants to purchase Common Stock (the "Holders") are entitled
to certain rights with respect to the registration of such shares under the
Securities Act. If the Company proposes to register any of its securities under
the Securities Act, either for its own account or for the account of other
security holders, the Holders are entitled to notice of the registration and are
entitled to include, at the Company's expense, such shares therein, provided,
among other conditions, that the underwriters have the right to limit the number
of such shares included in the registration. In addition, certain of the Holders
may require the Company, on not more than two occasions, to file a registration
statement under the Securities Act, at the Company's expense, with respect to
their shares of Common Stock, and the Company is required to use its best
efforts to effect the registration, subject to certain conditions and
limitations. However, the Holders may not require the Company to file any such
registration statement within 90 days of
53
<PAGE> 55
the effective date of any prior registration statement covering the Company's
Common Stock, and the Company may defer the filing of such registration
statement for up to 120 days. Further, certain of the Holders may require the
Company, at its expense, to register their shares of Common Stock on a Form S-3
when such form becomes available to the Company, subject to certain conditions
and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Delaware Law"), an anti-takeover law. In general,
the statute prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
For purposes of Section 203, a "business combination" includes a merger, asset
sale or other transaction resulting in a financial benefit to the interested
stockholder, and an "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years prior, did own) 15% or
more of the corporation's voting stock.
The Company's Certificate of Incorporation also requires that any action
required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of the stockholders and may
not be effected by a consent in writing. Special meetings of the stockholders of
the Company may be called only by the Board of Directors, the Chairman of the
Board or the Chief Executive Officer. The Company's Certificate of Incorporation
also provides that the authorized number of Directors may be changed only by
resolution of the Board of Directors, and that Directors can only be removed for
cause by a majority vote of the stockholders. In addition, the Company's
Certificate of Incorporation provides for the classification of the Board of
Directors into three classes, only one of which shall be elected at any given
annual meeting. These provisions may have the effect of delaying, deterring or
preventing a change in control of the Company, depressing the market price of
Common Stock or discouraging hostile takeover bids in which stockholders of the
Company could receive a premium for their shares of Common Stock.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company is the transfer agent and registrar
for the Company's Common Stock.
54
<PAGE> 56
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 11,422,328 shares
of Common Stock outstanding. 5,015,748 of these shares (including the 2,600,000
shares sold in this offering) will be freely tradable without restriction or
further registration under the Securities Act, unless purchased by "affiliates"
of the Company as defined under the Securities Act.
The remaining 6,406,580 shares of Common Stock are "Restricted Shares" and
are subject to restrictions under the Securities Act and lock-up agreements
under which the holders have agreed not to sell or otherwise dispose of any of
their shares for a period of 120 days after the date of this Prospectus without
the prior written consent of Alex. Brown & Sons Incorporated. As of the date of
this Prospectus, approximately Restricted Shares are eligible for sale
in the public market pursuant to Rule 144(k) under the Securities Act, and
approximately Restricted Shares are eligible for sale in the public
market pursuant to Rule 144 and Rule 701 under the Securities Act. Beginning 120
days after the date of this Prospectus, approximately additional
Restricted Shares will become available for sale in the public market subject to
the volume and other limitations of Rule 144.
In general, under Rule 144, a person (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least two years,
including a person who may be deemed an affiliate of the Company, is entitled to
sell within any three-month period a number of shares of Common Stock that does
not exceed the greater of 1% of the then-outstanding shares of Common Stock
(approximately 114,223 shares after giving effect to this offering) or the
average weekly trading volume of the Common Stock on the Nasdaq Stock Market
during the four calendar weeks preceding such sale. Sales under Rule 144 are
subject to certain restrictions relating to manner of sale, notice and the
availability of current public information about the Company. A person who has
not been an affiliate of the Company at any time during the 90 days preceding a
sale, and who has beneficially owned shares for at least three years, would be
entitled to sell such shares without regard to the volume limitations, manner of
sale provisions and other requirements of Rule 144.
55
<PAGE> 57
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), have severally agreed to purchase
from the Company the following respective numbers of shares of Common Stock at
the public offering price less the underwriting discounts and commissions set
forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.............................
Dain Bosworth Incorporated..................................
---------
Total....................................................... 2,600,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of the Common Stock offered hereby
if any are purchased.
The Company and the Selling Stockholders have been advised by the
Underwriters that they propose to offer the shares of Common Stock to the public
at the public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other dealers. After commencement of
the offering, the offering price and other selling terms may be changed by the
Underwriters.
The Company and the Selling Stockholders have granted to the Underwriters
an option, exercisable not later than 30 days after the date of this Prospectus,
to purchase up to 390,000 additional shares of Common Stock at the public
offering price less the underwriting discounts and commission set forth on the
cover page of this Prospectus. To the extent that the Underwriters exercise such
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof that the number of shares of Common
Stock to be purchased by it shown in the above table bears to 2,600,000 and the
Company and the Selling Stockholders will be obligated, pursuant to the option,
to sell such shares to the Underwriters. The Underwriters may exercise such
option only to cover over-allotments made in connection with the sale of Common
Stock offered hereby. If purchased, the Underwriters will offer such additional
shares on the same terms as those on which the 2,600,000 shares are being
offered.
The Underwriting Agreement contains covenants of indemnity and contribution
among the Underwriters, the Company and the Selling Stockholders regarding
certain liabilities, including liabilities, under the Securities Act.
The Company has agreed not to sell or offer for sale any shares of Common
Stock or any options, rights or warrants with respect to any Common Stock
(except for shares issued in an acquisition of another business or pursuant to
the Equity Incentive Plan and the Purchase Plan) for a period of 120 days from
the date of this Prospectus without the prior written consent of Alex. Brown &
Sons Incorporated. The Selling Stockholders, all of the Company's officers and
Directors and certain stockholders have agreed not to sell, offer for sale or
otherwise dispose of any Common Stock for a period of 120 days from the date of
this Prospectus without the prior written consent of Alex. Brown & Sons
Incorporated.
The Representatives have advised the Company and the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
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<PAGE> 58
One or more of the Underwriters currently act as market makers for the
Class A Common Stock and may engage in "passive market making" in such
securities on the Nasdaq National Market in accordance with Rule 10b-6A under
the Exchange Act. Rule 10b-6A permits, upon the satisfaction of certain
condition, underwriters participating in a distribution that are also Nasdaq
market makers in the security being distributed to engage in limited market
making transactions during the period when Rule 10b-6 under the Exchange Act
would otherwise prohibit such activity. Rule 10b-6 prohibits underwriters
engaged in passive market making generally from entering a bid or effecting a
purchase at a price that exceeds the highest bid for those securities displayed
on the Nasdaq National Market by a market maker that is not participating in the
distribution. Under Rule 10b-6A, each underwriter engaged in passive market
making is subject to a daily net purchase limitation equal to 30% of such
entity's average daily trading volume during the two full consecutive calendar
months immediately preceding the date of the filing of the registration
statement under the Securities Act pertaining to the security to be distributed.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cooley Godward LLP, Boulder, Colorado. Certain legal
matters will be passed upon for the Underwriters by Piper & Marbury L.L.P.,
Baltimore, Maryland. Certain legal matters pertaining to the Company's patents
will be passed upon for the Company by Davis, Graham & Stubbs LLP, Denver,
Colorado.
EXPERTS
The financial statements and schedules of the Company as of December 31,
1996 and 1995 and for each of the years in the three-year period ended December
31, 1996, and from inception (March 22, 1991) to December 31, 1996, included in
this Prospectus and Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
57
<PAGE> 59
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities of the Commission located at 450 Fifth
Street, N.W., Washington, D.C., and at the Commission's regional offices located
at 75 Park Place, New York, New York 10007, and at 230 South Dearborn Street,
Chicago, Illinois 60604. Copies of such material can also be obtained at
prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto, certain parts of which have been omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement and the exhibits and schedules thereto. Copies of the
Registration Statement and the exhibits and schedules thereto may be inspected,
without charge, at the offices of the Commission, or obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 or through the Internet from the SEC's home page on
the World Wide Web at http://www.sec.gov.
58
<PAGE> 60
BOLDER TECHNOLOGIES CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Arthur Andersen LLP, Independent Public
Accountants............................................... F-3
Balance Sheets.............................................. F-4
Statements of Operations.................................... F-6
Statements of Stockholders' (Deficit) Equity................ F-7
Statements of Cash Flows.................................... F-11
Notes to Financial Statements............................... F-13
</TABLE>
F-1
<PAGE> 61
(This page intentionally left blank)
F-2
<PAGE> 62
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.
ARTHUR ANDERSEN LLP
Denver, Colorado,
February 4, 1997.
F-3
<PAGE> 63
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-4
<PAGE> 64
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-5
<PAGE> 65
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-6
<PAGE> 66
BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
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-7
<PAGE> 67
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-8
<PAGE> 68
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-9
<PAGE> 69
<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-10
<PAGE> 70
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-11
<PAGE> 71
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-12
<PAGE> 72
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-13
<PAGE> 73
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-14
<PAGE> 74
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-15
<PAGE> 75
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-16
<PAGE> 76
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 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-17
<PAGE> 77
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-18
<PAGE> 78
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-19
<PAGE> 79
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-20
<PAGE> 80
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, or 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-21
<PAGE> 81
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 the net assets of the Joint Venture,
which it has recorded 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-22
<PAGE> 82
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-23
<PAGE> 83
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-24
<PAGE> 84
[Photograph of push-button-start military field generator and rendering of
computer uninterruptible power supply with caption "TMF batteries may provide
significant advantages for new products such as this push-button-start military
field generator from Goodman-Ball or this unique computer uninterruptible power
supply from Silverline."]
[Graphic of hybrid electric vehicle with caption "In the future, BOLDER TMF
batteries may power a new generation of Hybrid Electric Vehicles. The Dodge
Intrepid ESX is powered by a prototype BOLDER TMF battery system."]
<PAGE> 85
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF COMMON
STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN
ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.....................
The Company............................
Risk Factors...........................
Use of Proceeds........................
Dividend Policy........................
Price Range of Common Stock............
Capitalization.........................
Dilution...............................
Selected Financial Data................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations...........................
Business...............................
Management.............................
Certain Transactions...................
Principal and Selling Stockholders.....
Description of Capital Stock...........
Shares Eligible for Future Sale........
Underwriting...........................
Legal Matters..........................
Experts................................
Additional Information.................
Index to Financial Statements.......... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,600,000 SHARES
BOLDER TECH LOGO
COMMON STOCK
----------------
PROSPECTUS
----------------
ALEX. BROWN & SONS
INCORPORATED
DAIN BOSWORTH
INCORPORATED
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 86
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its Directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
The Registrant's Restated Certificate of Incorporation provides for the
elimination of liability for monetary damages for breach of the Directors'
fiduciary duty of care to the Registrant and its stockholders. These provisions
do not eliminate the Directors' duty of care and, in appropriate circumstances,
equitable remedies such an injunctive or other forms of non monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
The Company has entered into indemnification agreements with each of its
Directors and executive officers under which the Company has indemnified each of
them against expenses and losses incurred for claims brought against them by
reason of their being a director or executive officer of the Company, and the
Company maintains Directors' and officers' liability insurance.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and Directors for certain liabilities arising under the Securities
Act or otherwise.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registration in connection with the
sale of the Common Stock being registered. All the amounts shown are estimates
except for the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee............................................ $ 13,138
NASD filing fee............................................. 4,836
Nasdaq application fee...................................... 17,500
Printing and engraving expenses............................. 75,000
Legal fees and expenses..................................... 150,000
Accounting fees and expenses................................ 100,000
Transfer agent and registrar fees........................... 5,000
Miscellaneous............................................... 9,526
--------
Total............................................. $375,000
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Since February 1, 1994, the Registrant has sold and issued the following
unregistered securities:
(1) During the period, the Registrant granted stock options to
employees, consultants, Directors, officers and affiliates of the
Registrant as provided below. From February 1, 1994 to December 31, 1994,
the Registrant granted stock options under the 1992 Stock Option Plan
covering an aggregate of 391,818 shares of Common Stock at an average
exercise price of $.32
II-1
<PAGE> 87
per share. In 1995, the Registrant granted stock options under the 1992
Stock Option Plan covering an aggregate of 106,358 shares of Common Stock
at an average exercise price of $1.41 per share. These options vest over a
period of time following their respective dates of grant. In August 1995,
the Company issued a cash bonus to certain officers and employees a portion
of the proceeds of which were used to purchase an aggregate of 22,443
shares of Common Stock pursuant to Stock Award Agreements dated August 31,
1995. In 1996, the Registrant granted stock options under the 1992 Stock
Option Plan, as amended and restated as the 1996 Equity Incentive Plan in
March 1996, covering an aggregate of 494,399 shares of Common Stock at an
average exercise price of $10.56 per share. Since January 1, 1997, the
Registrant has granted stock options under the 1996 Equity Incentive Plan
covering an aggregate of 48,166 shares of Common Stock at an average
exercise price of $15.50 per share. Each of these options vests over a
period of time following their respective dates of grant. See "Equity
Incentive Plans."
(2) During the period, the Registrant sold to employees, Directors and
affiliates of the Registrant: (i) 116,531 shares of Common Stock pursuant
to the exercise of stock options at an exercise price of $.09 per share for
cash in the aggregate amount of $6,373 and services valued at $4,125; (ii)
an aggregate of 330,045 shares of Common Stock pursuant to the exercise of
stock options at an exercise price of $.15 per share for cash in the
aggregate amount of $33,735, and services valued at $15,772; (iii) an
aggregate of 137,127 shares of Common Stock pursuant to the exercise of
stock options at an exercise price of $.375 per share for cash in the
aggregate amount of $51,423; (iv) an aggregate of 69 shares of Common Stock
pursuant to the exercise of stock options at an exercise price of $.53 per
share for cash in the aggregate amount of $36; and (v) an aggregate of 50
shares of Common Stock pursuant to the exercise of stock options at an
exercise price of $.75 per share for cash in the aggregate amount of $38.
(3) In July and September 1994, the Registrant sold to officers,
Directors, and present stockholders, 1,167,595 shares of Series C Preferred
Stock (convertible into the same number of shares of Common Stock) at $3.00
per share for consideration in the aggregate amount of $3,502,796, of which
$2,474,522 was cash and $1,028,274 was in the form of a cancellation of
indebtedness owed by the Registrant to certain of the Registrant's
stockholders pursuant to promissory notes dated April 19, 1994.
(4) In July 1994, the Registrant issued to Phoenix Leasing
Incorporated ("Phoenix") pursuant to a Senior Loan and Security Agreement
between the Registrant and Phoenix, dated as of July 29, 1994 ("Loan
Agreement"), warrants to purchase 10,500 shares of Series C Preferred Stock
(convertible into the same number of shares of Common Stock) at an exercise
price of $3.00 per share in consideration of certain loan commitments
pursuant to the Loan Agreement.
(5) In March 1995, the Registrant sold to officers, Directors, present
stockholders and two new investors, First Interstate Equity Corporation and
Technology Funding: (i) promissory notes in the aggregate principal amount
of $1,797,750 and (ii) warrants to purchase 150,000 shares of Common Stock
at an exercise price of $.75 per share for an aggregate consideration of
$2,250 in cash.
(6) In May 1995, the Registrant sold to officers, Directors, present
stockholders and a new investor, Freedom Ventures: (i) 13,979 shares of
Series C Preferred Stock (convertible into the same number of shares of
Common Stock) at $3.00 per share for consideration in the aggregate amount
of $41,950 in the form of a cancellation of accrued interest owed by the
Registrant to holders of its Series C Preferred Stock pursuant to
promissory notes dated March 14, 1995; (ii) 632,951 shares of Series D
Preferred Stock (convertible into the same number of shares of Common
Stock) at $6.00 per share for consideration in the aggregate amount of
$3,797,732, of which $1,000,000 was cash from Freedom Ventures and
$1,000,000 was in the form of a promissory note issued by Freedom Ventures
and $1,797,732 was in the form of cancellation of the principal amount of
indebtedness owed by the Registrant to holders of its Series C Preferred
Stock pursuant to promissory notes dated March 14, 1995; and (iii) a
warrant to Freedom
II-2
<PAGE> 88
Ventures to purchase 166,666 shares of Common Stock at $1.50 per share for
consideration in the aggregate amount of $250 in cash.
(7) In June 1995, the Registrant sold to Johnson Controls (i) 250,000
shares of Series E Preferred Stock (convertible into the same number of
shares of Common Stock) at $6.00 per share for consideration of $1,500,000
in cash; and (ii) warrants to purchase 308,666 shares of Series E Preferred
Stock (convertible into the same number of shares of Common Stock) at an
exercise price of $6.00 per share, in consideration of $463.
(8) In August 1995 Freedom Ventures exercised an option to purchase
33,333 shares of Series D Preferred Stock at an exercise price of $6.00 per
share. Freedom Ventures transferred those shares to Ms. Marguerite M. Paul
in consideration of $6.00 per share.
(9) In January 1996, the Registrant sold to RM Holdings, Inc., 16,666
shares of Series D Preferred Stock (convertible into the same number of
shares of Common Stock) at $6.00 per share for consideration of $100,000 in
cash.
(10) In March 1996, the Registrant issued to Phoenix pursuant to the
Loan Agreement warrants to purchase 8,625 shares of Series C Preferred
Stock (convertible into the same number of shares of Common Stock) at an
exercise price of $6.00 per share in consideration for certain loan
commitments pursuant to the Loan Agreement. The warrant specifies that an
additional 8,625 shares of Series C Preferred Stock shall be purchasable at
a purchase price of $6.00 per share under the warrant as of the date the
Registrant borrows above a specified amount pursuant to the Loan Agreement.
(11) In April and May 1996, certain stockholders of the Company
exercised warrants to purchase Common Stock in the following amounts and at
the following exercise prices: (i) 308,666 shares at an exercise price of
$6.00 per share; (ii) 166,666 shares at an exercise price of $1.50 per
share; (iii) 145,128 shares at an exercise price of $0.75 per share
(including 63,270 shares issued to certain stockholders pursuant to
cashless exercises of warrants to purchase 68,138 shares).
(12) In May 1996, in connection with the closing of the Company's
initial public offering, 5,243,425 shares of the Company's Mandatorily
Redeemable Preferred Stock automatically converted into an equal number of
shares of Common Stock.
With respect to the grant of stock options described in paragraphs 1 and 2
above, exemption from registration under the Securities Act was unnecessary in
that none of such transactions involved a "sale" of securities as such term is
used in Section 2(3) of the Securities Act.
The sales and issuances of securities in the transactions described in
paragraphs (1) and (2) above were issued in transactions that were deemed to be
exempt from registration under the Securities Act by virtue of Rule 701
promulgated thereunder in that they were offered and sold either pursuant to
written compensatory benefit plans or pursuant to a written contract relating to
compensation, as provided by Rule 701, or were deemed to be exempt pursuant to
Section 4(2) thereof.
The shares and warrants issued in the transactions described in paragraphs
(4), (5), (7) and (9) above were issued in transactions that were exempt from
registration under the Securities Act pursuant to Section 4(2) thereof.
The sales and issuances of securities in the transactions described in
paragraphs (1) through (3) and (5) through (9) above were deemed to be exempt
from registration under the Securities Act by virtue of Section 4(2) and/or
Regulation D promulgated under the Securities Act. The purchasers in each case
represented their intention to acquire the securities for investment only and
not with a view to the distribution thereof. Appropriate legends are affixed to
the stock certificates issued in such transactions. Similar legends were imposed
in connection with any subsequent sales
II-3
<PAGE> 89
of any such securities. All recipients either received adequate information
about the Registrant or had access, through employment or other relationships,
to such information.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1 -- Form of Underwriting Agreement.
3(i).1** -- Restated Certificate of Incorporation.
3(i).2** -- Form of Restated Certificate of Incorporation to be filed
upon the closing of the offering to which this
Registration Statement relates.
3(ii).1** -- Bylaws of the Registrant, as amended.
3(ii).2** -- Form of Restated Bylaws to be filed upon the closing of
the offering to which this Registration Statement
relates.
4.1** -- Reference is made to Exhibits 3(i).1 through 3(ii).2.
4.2** -- Specimen Stock Certificate.
5.1* -- Opinion of Cooley Godward LLP.
10.1** -- Form of Indemnity Agreement to be entered into between
the Registrant and its Directors and officers, with
related schedule.
10.2** -- Registrant's 1996 Equity Incentive Plan (the "Option
Plan"), including forms of Options granted to employees
under the Option Plan and Options granted to non employee
Directors under the Option Plan.
10.3** -- Registrant's 1996 Employee Stock Purchase Plan.
10.4** -- Employment Agreement between Registrant and Daniel S.
Lankford, dated July 11, 1994.
10.5** -- Employment Agreement between Registrant and William E.
Younkes, dated April 1, 1993.
10.6** -- Employment Agreement Amendment between Registrant and
William E. Younkes, dated October 1, 1995.
10.7** -- Letter Agreement between Registrant and Joseph F.
Fojtasek, dated February 13, 1996.
10.8** -- Promissory Note executed by Tristan E. Juergens, dated
November 1, 1995.
10.9** -- Promissory Note executed by Tristan E. Juergens, dated
August 29, 1995.
10.10** -- Stock Purchase Agreement between Registrant and Tristan
E. Juergens, dated August 29, 1995.
10.11** -- Stock Award Agreement between Registrant and Tristan E.
Juergens, dated August 31, 1995.
10.12** -- Stock Award Agreement between Registrant and Robert F.
Nelson, dated August 31, 1995.
10.13** -- Stock Award Agreement between Registrant and Sandra
Schreiber, dated August 31, 1995.
10.14** -- Stock Award Agreement between Registrant and William E.
Younkes, dated August 31, 1995.
10.15** -- Note Purchase Agreement between Registrant and certain
parties named therein, dated April 19, 1994.
</TABLE>
II-4
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.16** -- Series C Preferred Stock Purchase Agreement, dated July
19, 1994.
10.17** -- Supplemental Agreement to Series C Preferred Stock
Purchase Agreement between Registrant and certain parties
named therein, dated September 30, 1994.
10.18** -- Note and Warrant Purchase Agreement between Registrant
and certain parties named therein, dated March 14, 1995,
including forms of Convertible Promissory Note issued to
the parties and Stock Purchase Warrant issued to the
parties.
10.19** -- Series D Preferred Stock Purchase Agreement between
Registrant and certain parties named therein, dated May
24, 1995.
10.20** -- Guaranty Agreement between Registrant and Steven Paul,
dated May 24, 1995.
10.21** -- Stock Purchase Warrant issued to Freedom Ventures
Incorporated, dated May 24, 1995.
10.22** -- Letter Agreement between Registrant, Harold Scott and
certain parties named therein, dated January 18, 1996.
10.23** -- Series E Preferred Stock Purchase Agreement between
Registrant, Johnson Controls Battery Group, Inc. and
certain parties named therein, dated June 26, 1995.
10.24** -- Purchasers and Principal Stockholder Agreement between
Registrant, Tristan E. Juergens and certain parties named
therein, dated June 26, 1995.
10.25** -- Warrant to Purchase Shares of Series E Preferred Stock
issued to Johnson Controls Battery Group, Inc., dated
June 26, 1995.
10.26** -- Joint Venture Agreement between Registrant and Johnson
Controls Battery Group, Inc., dated June 26, 1995.
10.27** -- Johnson Controls/Bolder LLC Operating Agreement between
Registrant and Johnson Controls Battery Group, Inc.,
dated June 26, 1995.
10.28** -- BTC Johnson Controls License Agreement between Registrant
and Johnson Controls Battery Group, Inc., dated June 26,
1995.
10.29** -- BTC JV License Agreement between Registrant and Johnson
Controls/Bolder LLC, dated June 26, 1995.
10.30** -- Johnson Controls JV Trade Name License Agreement between
Registrant, Johnson Controls/Bolder LLC and Johnson
Controls Battery Group, Inc., dated June 26, 1995.
10.31** -- JV BTC/Johnson Controls License Agreement between
Registrant, Johnson Controls Battery Group, Inc. and
Johnson Controls/Bolder LLC, dated June 26, 1995.
10.32** -- JV BTC/Johnson Controls Manufacturing and Supply
Agreement between Registrant, Johnson Controls Battery
Group, Inc. and Johnson/Bolder LLC, dated June 26, 1995.
10.33** -- Senior Loan and Security Agreement between Registrant and
Phoenix Leasing Incorporated, dated July 29, 1994
including forms of Warrant to Purchase Shares of Series C
Preferred Stock issued by Registrant to Phoenix Leasing
Incorporated and Promissory Notes issued to Phoenix
Leasing.
10.34** -- First Amendment to Purchase Agreement between Registrant
and Phoenix Leasing Incorporated, dated July 29, 1994.
</TABLE>
II-5
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.35** -- Service Agreement between Registrant and Chemical Waste
Management, Inc., dated October 19, 1993.
10.36** -- Lease Agreement between Registrant and Jefferson Park
West, dated December 13, 1993.
10.37** -- Lease Agreement between Registrant and Jefferson Park
West, dated November 14, 1994.
10.38** -- Agreement between Registrant and Wright Industries, dated
March 5, 1996.
10.39** -- Amendment to Purchase Agreement between Registrant,
certain stockholders of Registrant and Phoenix Leasing
Incorporated, dated March 21, 1996.
10.40** -- Warrant issued to Phoenix Leasing Incorporated, dated
March 25, 1996.
10.41+*** -- Agreement by and among the Registrant, Johnson Controls
Battery Group, Inc. and Johnson Controls/Bolder LLC dated
as of July 31, 1996.
10.42+*** -- Cross Supply Agreement between the Registrant and Johnson
Controls Battery Group, Inc. dated as of January 22,
1997.
11.1** -- Statement regarding calculation of net income (loss) per
share.
23.1 -- Consent of Arthur Andersen LLP, Independent Auditors.
23.2* -- Consent of Cooley Godward LLP. Reference is made to
Exhibit 5.1.
23.3* -- Consent of Davis, Graham & Stubbs LLP.
24.1** -- Power of Attorney. Reference is made to page II-7.
27.1 -- Financial Data Schedule.
99.1**** -- Amendments to 1996 Equity Incentive Plan, dated December
11, 1996.
99.2**** -- Amendments to 1996 Equity Incentive Plan, dated January
30, 1997.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed with the Commission as an exhibit to the Company's
Registration Statement on Form SB-2 (File No. 333-2500-D) and incorporated
herein by reference.
*** Previously filed with the Commission as an exhibit to the Company's
February 5, 1997 Form 8-K (Commission File No. 0-28060) and incorporated
herein by reference.
**** Previously filed with the Commission as an exhibit to the Company's
February 3, 1997 Form S-8 (file No. 333-20989) and incorporated herein by
reference.
+ The Company has applied for confidential treatment with respect to
certain portions of these exhibits.
(b) Financial Statement Schedules.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <C>
None
</TABLE>
All other schedules are omitted because they are not required, are not
applicable, or the information is included in the consolidated financial
statements or notes thereto.
II-6
<PAGE> 92
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to Directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus as filed as part of the registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement as of the time it was declared
effective, and (2) for the purpose of determining any liability under the
Securities Act of 1933, each post effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 93
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Wheat
Ridge, State of Colorado, on the 13th day of February, 1997.
BOLDER TECHNOLOGIES CORPORATION
By: /s/ DANIEL S. LANKFORD
----------------------------------
Daniel S. Lankford
Chief Executive Officer, President
and Chairman of the Board
The undersigned directors and/or officers of the Registrant, by virtue of
their signatures to this Registration Statement appearing below, hereby
constitute and appoint Daniel S. Lankford and Joseph F. Fojtasek, and each of
them, with full power of substitution, as attorneys-in-fact in their names,
places and steads to execute any and all amendments to this Registration
Statement in the capacities set forth opposite their names and hereby ratify all
that said attorneys-in-fact may do by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DANIEL S. LANKFORD Chief Executive Officer, President February 13, 1997
- ----------------------------------------------------- and Chairman of the Board
Daniel S. Lankford (Principal Executive Officer)
/s/ JOSEPH F. FOJTASEK Chief Financial Officer, Vice February 13, 1997
- ----------------------------------------------------- President of Finance and
Joseph F. Fojtasek Administration, Treasurer and
Secretary (Principal Financial
Officer)
/s/ WILMER R. BOTTOMS Director February 13, 1997
- -----------------------------------------------------
Wilmer R. Bottoms
/s/ TRISTAN E. JUERGENS Director February 13, 1997
- -----------------------------------------------------
Tristan E. Juergens
/s/ DAVID L. RIEGEL Director February 13, 1997
- -----------------------------------------------------
David L. Riegel
/s/ CARL S. STUTTS Director February 13, 1997
- -----------------------------------------------------
Carl S. Stutts
</TABLE>
II-8
<PAGE> 94
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1 -- Form of Underwriting Agreement.
3(i).1** -- Restated Certificate of Incorporation.
3(i).2** -- Form of Restated Certificate of Incorporation to be filed
upon the closing of the offering to which this
Registration Statement relates.
3(ii).1** -- Bylaws of the Registrant, as amended.
3(ii).2** -- Form of Restated Bylaws to be filed upon the closing of
the offering to which this Registration Statement
relates.
4.1** -- Reference is made to Exhibits 3(i).1 through 3(ii).2.
4.2** -- Specimen Stock Certificate.
5.1* -- Opinion of Cooley Godward LLP.
10.1** -- Form of Indemnity Agreement to be entered into between
the Registrant and its Directors and officers, with
related schedule.
10.2** -- Registrant's 1996 Equity Incentive Plan (the "Option
Plan"), including forms of Options granted to employees
under the Option Plan and Options granted to non employee
Directors under the Option Plan.
10.3** -- Registrant's 1996 Employee Stock Purchase Plan.
10.4** -- Employment Agreement between Registrant and Daniel S.
Lankford, dated July 11, 1994.
10.5** -- Employment Agreement between Registrant and William E.
Younkes, dated April 1, 1993.
10.6** -- Employment Agreement Amendment between Registrant and
William E. Younkes, dated October 1, 1995.
10.7** -- Letter Agreement between Registrant and Joseph F.
Fojtasek, dated February 13, 1996.
10.8** -- Promissory Note executed by Tristan E. Juergens, dated
November 1, 1995.
10.9** -- Promissory Note executed by Tristan E. Juergens, dated
August 29, 1995.
10.10** -- Stock Purchase Agreement between Registrant and Tristan
E. Juergens, dated August 29, 1995.
10.11** -- Stock Award Agreement between Registrant and Tristan E.
Juergens, dated August 31, 1995.
10.12** -- Stock Award Agreement between Registrant and Robert F.
Nelson, dated August 31, 1995.
10.13** -- Stock Award Agreement between Registrant and Sandra
Schreiber, dated August 31, 1995.
10.14** -- Stock Award Agreement between Registrant and William E.
Younkes, dated August 31, 1995.
10.15** -- Note Purchase Agreement between Registrant and certain
parties named therein, dated April 19, 1994.
10.16** -- Series C Preferred Stock Purchase Agreement, dated July
19, 1994.
10.17** -- Supplemental Agreement to Series C Preferred Stock
Purchase Agreement between Registrant and certain parties
named therein, dated September 30, 1994.
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.18** -- Note and Warrant Purchase Agreement between Registrant
and certain parties named therein, dated March 14, 1995,
including forms of Convertible Promissory Note issued to
the parties and Stock Purchase Warrant issued to the
parties.
10.19** -- Series D Preferred Stock Purchase Agreement between
Registrant and certain parties named therein, dated May
24, 1995.
10.20** -- Guaranty Agreement between Registrant and Steven Paul,
dated May 24, 1995.
10.21** -- Stock Purchase Warrant issued to Freedom Ventures
Incorporated, dated May 24, 1995.
10.22** -- Letter Agreement between Registrant, Harold Scott and
certain parties named therein, dated January 18, 1996.
10.23** -- Series E Preferred Stock Purchase Agreement between
Registrant, Johnson Controls Battery Group, Inc. and
certain parties named therein, dated June 26, 1995.
10.24** -- Purchasers and Principal Stockholder Agreement between
Registrant, Tristan E. Juergens and certain parties named
therein, dated June 26, 1995.
10.25** -- Warrant to Purchase Shares of Series E Preferred Stock
issued to Johnson Controls Battery Group, Inc., dated
June 26, 1995.
10.26** -- Joint Venture Agreement between Registrant and Johnson
Controls Battery Group, Inc., dated June 26, 1995.
10.27** -- Johnson Controls/Bolder LLC Operating Agreement between
Registrant and Johnson Controls Battery Group, Inc.,
dated June 26, 1995.
10.28** -- BTC Johnson Controls License Agreement between Registrant
and Johnson Controls Battery Group, Inc., dated June 26,
1995.
10.29** -- BTC JV License Agreement between Registrant and Johnson
Controls/Bolder LLC, dated June 26, 1995.
10.30** -- Johnson Controls JV Trade Name License Agreement between
Registrant, Johnson Controls/Bolder LLC and Johnson
Controls Battery Group, Inc., dated June 26, 1995.
10.31** -- JV BTC/Johnson Controls License Agreement between
Registrant, Johnson Controls Battery Group, Inc. and
Johnson Controls/Bolder LLC, dated June 26, 1995.
10.32** -- JV BTC/Johnson Controls Manufacturing and Supply
Agreement between Registrant, Johnson Controls Battery
Group, Inc. and Johnson/Bolder LLC, dated June 26, 1995.
10.33** -- Senior Loan and Security Agreement between Registrant and
Phoenix Leasing Incorporated, dated July 29, 1994
including forms of Warrant to Purchase Shares of Series C
Preferred Stock issued by Registrant to Phoenix Leasing
Incorporated and Promissory Notes issued to Phoenix
Leasing.
10.34** -- First Amendment to Purchase Agreement between Registrant
and Phoenix Leasing Incorporated, dated July 29, 1994.
10.35** -- Service Agreement between Registrant and Chemical Waste
Management, Inc., dated October 19, 1993.
10.36** -- Lease Agreement between Registrant and Jefferson Park
West, dated December 13, 1993.
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.37** -- Lease Agreement between Registrant and Jefferson Park
West, dated November 14, 1994.
10.38** -- Agreement between Registrant and Wright Industries, dated
March 5, 1996.
10.39** -- Amendment to Purchase Agreement between Registrant,
certain stockholders of Registrant and Phoenix Leasing
Incorporated, dated March 21, 1996.
10.40** -- Warrant issued to Phoenix Leasing Incorporated, dated
March 25, 1996.
10.41+*** -- Agreement by and among the Registrant, Johnson Controls
Battery Group, Inc. and Johnson Controls/Bolder LLC dated
as of July 31, 1996.
10.42+*** -- Cross Supply Agreement between the Registrant and Johnson
Controls Battery Group, Inc. dated as of January 22,
1997.
11.1** -- Statement regarding calculation of net income (loss) per
share.
23.1 -- Consent of Arthur Andersen LLP, Independent Auditors.
23.2* -- Consent of Cooley Godward LLP. Reference is made to
Exhibit 5.1.
23.3* -- Consent of Davis, Graham & Stubbs LLP.
24.1** -- Power of Attorney. Reference is made to page II-7.
27.1 -- Financial Data Schedule.
99.1**** -- Amendments to 1996 Equity Incentive Plan, dated December
11, 1996.
99.2**** -- Amendments to 1996 Equity Incentive Plan, dated January
30, 1997.
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed with the Commission as an exhibit to the Company's
Registration Statement on Form SB-2 (File No. 333-2500-D) and incorporated
herein by reference.
*** Previously filed with the Commission as an exhibit to the Company's
February 5, 1997 Form 8-K (Commission File No. 0-28060) and incorporated
herein by reference.
**** Previously filed with the Commission as an exhibit to the Company's
February 3, 1997 Form S-8 (file No. 333-20989) and incorporated herein by
reference.
+ The Company has applied for confidential treatment with respect to
certain portions of these exhibits.
<PAGE> 1
2,600,000 SHARES
BOLDER TECHNOLOGIES CORPORATION
COMMON STOCK
($.001 Par Value)
UNDERWRITING AGREEMENT
, 1997
Alex. Brown & Sons Incorporated
Dain Bosworth Incorporated
c/o Alex. Brown & Sons Incorporated
One South Street
Baltimore, Maryland 21202
Gentlemen:
Bolder Technologies Corporation, a Delaware corporation (the "Company"),
and certain shareholders of the Company (the "Selling Shareholders") propose to
sell to the several underwriters (the "Underwriters") named in Schedule I hereto
an aggregate of 2,600,000 shares of the Company's Common Stock, $.001 par value
(the "Firm Shares"), of which 2,000,000 shares will be sold by the Company and
600,000 shares will be sold by the Selling Shareholders. The respective amounts
of the Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto, and the respective amounts of the
Firm Shares to be sold by the Selling Shareholders are set forth opposite their
names in Schedule II hereto. The Company and the Selling Shareholders are
sometimes referred to herein collectively as the "Sellers." The Company and the
Selling Shareholders also propose to sell at the Underwriters' option an
aggregate of up to 390,000 additional shares of the Company's Common Stock (the
"Option Shares") as set forth below. The respective amounts of the Option Shares
to be sold by the Sellers are set forth opposite their names in Schedule III
hereto.
As the Underwriters, you have advised the Company and the Selling
Shareholders that the Underwriters are willing, acting severally and not
jointly, to purchase the numbers of Firm Shares set forth opposite their
respective names in Schedule I, plus their pro rata portion of the Option Shares
if you elect to exercise the over-allotment option in whole or in part for the
accounts of the Underwriters. The Firm Shares and the Option Shares (to the
extent the aforementioned option is exercised) are herein collectively called
the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING
SHAREHOLDERS.
(a) The Company represents and warrants to each of the Underwriters as
follows:
(i) A registration statement on Form SB-2 (File No. 333- ) with
respect to the Shares has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the Rules and Regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder and
has been filed with the Commission. Copies of such registration statement,
including any amendments thereto, the preliminary prospectuses (meeting the
requirements of the Rules and Regulations) contained therein and the
exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Company to you. Such
registration statement, together with any registration statement filed by
the Company pursuant to
<PAGE> 2
Rule 462(b) of the Act, herein referred to as the "Registration Statement,"
which shall be deemed to include all information omitted therefrom in
reliance upon Rule 430A and contained in the Prospectus referred to below,
has become effective under the Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement.
"Prospectus" means (a) the form of prospectus first filed with the
Commission pursuant to Rule 424(b) or (b) the last preliminary prospectus
included in the Registration Statement filed prior to the time it becomes
effective or filed pursuant to Rule 424(a) under the Act that is delivered
by the Company to the Underwriters for delivery to purchasers of the
Shares. Each preliminary prospectus included in the Registration Statement
prior to the time it becomes effective is herein referred to as a
"Preliminary Prospectus."
(ii) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own or lease its properties and conduct
its business as described in the Registration Statement. The Company is
duly qualified to transact business in all jurisdictions in which the
conduct of its business requires such qualification except for
jurisdictions in which the failure to so qualify would not have a material
adverse effect upon the Company's business, operations or financial
condition.
(iii) The outstanding shares of Common Stock of the Company, including
all shares to be sold by the Selling Shareholders, have been duly
authorized and validly issued and are fully paid and non-assessable; the
portion of the Shares to be issued and sold by the Company have been duly
authorized and when issued and paid for as contemplated herein will be
validly issued, fully paid and non-assessable; and no preemptive rights of
stockholders exist with respect to any of the Shares or the issue and sale
thereof. Neither the filing of the Registration Statement nor the offering
or sale of the Shares as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock.
(iv) The information set forth under the caption "Capitalization" in
the Prospectus is true and correct as of the date set forth therein. All of
the Shares conform to the description thereof contained in the Registration
Statement. The form of certificates for the Shares conforms to the
requirements of Delaware corporate law.
(v) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the Shares
nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and
will conform to, the requirements of the Act and the Rules and Regulations.
The Registration Statement and any amendment thereto do not contain, and
will not contain, any untrue statement of a material fact and do not omit,
and will not omit, to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Prospectus
and any amendments and supplements thereto do not contain, and will not
contain, any untrue statement of material fact; and do not omit, and will
not omit, to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to information contained
in or omitted from the Registration Statement or the Prospectus, or any
such amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any
Underwriter through the Representatives, specifically for use in the
preparation thereof.
(vi) The financial statements of the Company, together with related
notes and schedules as set forth in the Registration Statement, present
fairly the financial position and the results of operations and cash flows
of the Company, at the indicated dates and for the indicated periods. Such
financial statements and related schedules have been prepared in accordance
with
2
<PAGE> 3
generally accepted principles of accounting, consistently applied
throughout the periods involved, except as disclosed herein, and all
adjustments necessary for a fair presentation of results for such periods
have been made. The summary financial and statistical data included in the
Registration Statement presents fairly the information shown therein and
such data has been compiled on a basis consistent with the financial
statements presented therein and the books and records of the Company.
(vii) Arthur Andersen LLP, who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement,
are independent public accountants as required by the Act and the Rules and
Regulations.
(viii) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company before any
court or administrative agency or otherwise which if determined adversely
to the Company might result in any material adverse change in the earnings,
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company or to prevent the
consummation of the transactions contemplated hereby, except as set forth
in the Registration Statement.
(ix) The Company has good and marketable title to all of the
properties and assets reflected in the financial statements (or as
described in the Registration Statement) hereinabove described, subject to
no lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The Company occupies its
leased properties under valid and binding leases conforming in all material
respects to the description thereof set forth in the Registration
Statement.
(x) The Company has filed all Federal, State, local and foreign income
tax returns which have been required to be filed and have paid all taxes
indicated by said returns and all assessments received by them or any of
them to the extent that such taxes have become due and are not being
contested in good faith. All tax liabilities have been adequately provided
for in the financial statements of the Company.
(xi) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has
not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company, whether or not occurring in the
ordinary course of business, and there has not been any material
transaction entered into or any material transaction that is probable of
being entered into by the Company, other than transactions in the ordinary
course of business and changes and transactions described in the
Registration Statement, as it may be amended or supplemented. The Company
has no material contingent obligations which are not disclosed in the
Company's financial statements which are included in the Registration
Statement.
(xii) The Company is not, nor with the giving of notice or lapse of
time or both, will be, in violation of or in default under its Charter or
By-Laws or under any agreement, lease, contract, indenture or other
instrument or obligation to which it is a party or by which it, or any of
its properties, is bound and which default is of material significance in
respect of the condition, financial or otherwise of the Company or the
business, management, properties, assets, rights, operations, condition
(financial or otherwise) or prospects of the Company. The execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated and the fulfillment of the terms hereof will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company is a party, or of the Charter or by-laws of
the Company or any order, rule or regulation applicable to the Company of
any court or of any regulatory body or administrative agency or other
governmental body having jurisdiction.
3
<PAGE> 4
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions
herein contemplated (except such additional steps as may be required by the
Commission, the National Association of Securities Dealers, Inc. (the
"NASD") or such additional steps as may be necessary to qualify the Shares
for public offering by the Underwriters under state securities or Blue Sky
laws) has been obtained or made and is in full force and effect.
(xiv) The Company holds all material licenses, certificates and
permits from governmental authorities which are necessary to the conduct of
its business; and the Company has not infringed any patents, patent rights,
trade names, trademarks or copyrights, which infringement is material to
the business of the Company. The Company knows of no material infringement
by others of patents, patent rights, trade names, trademarks or copyrights
owned by or licensed to the Company.
(xv) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of
the price of the shares of Common Stock to facilitate the sale or resale of
the Shares. The Company acknowledges that the Underwriters may engage in
passive market making transactions in the Shares on The Nasdaq Stock Market
in accordance with Rule 10b-6A under the Exchange Act.
(xvi) The Company is not an "investment company" within the meaning of
such term under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
(xvii) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(xviii) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties as is customary for companies
engaged in similar industries.
(xix) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(xx) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, An Act Relating to Disclosure of
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doing Business with Cuba, and the Company further agrees that if it
commences engaging in business with the government of Cuba or with any
person or affiliate located in Cuba after the date the Registration
Statement becomes or has become effective with the Commission or with the
Florida Department of Banking and Finance (the "Department"), whichever
date is later, or if the information reported or incorporated by reference
in the Prospectus, if any, concerning the Company's business with Cuba or
with any person or affiliate located in Cuba changes in any material way,
the Company will provide the Department notice of such business or change,
as appropriate, in a form acceptable to the Department.
(b) Each of the Selling Shareholders severally represents and warrants
as follows:
(i) Such Selling Shareholder now has and at the Closing Date (as such
date is hereinafter defined) will have good and marketable title to the
Firm Shares to be sold by such Selling Shareholder, free and clear of any
liens, encumbrances, equities and claims, and full right, power and
authority to effect the sale and delivery of such Firm Shares; and upon the
delivery of, against payment for, such Firm Shares pursuant to this
Agreement, the Underwriters will acquire good and marketable title thereto,
free and clear of any liens, encumbrances, equities and claims.
(ii) Such Selling Shareholder has full right, power and authority to
execute and deliver this Agreement, the Power of Attorney, and the
Custodian Agreement referred to below and to perform its obligations under
such Agreements. The execution and delivery of this Agreement and the
consummation by such Selling Shareholder of the transactions herein
contemplated and the fulfillment by such Selling Shareholder of the terms
hereof will not require any consent, approval, authorization, or other
order of any court, regulatory body, administrative agency or other
governmental body (except as may be required under the Act) and will not
result in a breach of any of the terms and provisions of, or constitute a
default under, organizational documents of such Selling Shareholder, if not
an individual, or any indenture, mortgage, deed of trust or other agreement
or instrument to which such Selling Shareholder is a party, or of any
order, rule or regulation applicable to such Selling Shareholder of any
court or of any regulatory body or administrative agency or other
governmental body having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has constituted,
or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock of the
Company and, other than as permitted by the Act, the Selling Shareholder
will not distribute any prospectus or other offering material in connection
with the offering of the Shares.
(iv) Without having undertaken to determine independently the accuracy
or completeness of either the representations and warranties of the Company
contained herein or the information contained in the Registration
Statement, such Selling Shareholder has no reason to believe that the
representations and warranties of the Company contained in this Section 1
are not true and correct, is familiar with the Registration Statement and
has no knowledge of any material fact, condition or information not
disclosed in the Registration Statement which has adversely affected or may
adversely affect the business of the Company or the Subsidiary; and the
sale of the Firm Shares by such Selling Shareholder pursuant hereto is not
prompted by any information concerning the Company which is not set forth
in the Registration Statement. The information pertaining to such Selling
Shareholder under the caption "Principal and Selling Stockholders" in the
Prospectus is complete and accurate in all material respects.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the
Sellers agree to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $ per share, the
number of Firm Shares set forth opposite the name of each Underwriter in
Schedule I hereof,
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subject to adjustments in accordance with Section 9 hereof. The number of
Firm Shares to be purchased by each Underwriter from each Seller shall be
as nearly as practicable in the same proportion to the total number of Firm
Shares being sold by each Seller as the number of Firm Shares being
purchased by each Underwriter bears to the total number of Firm Shares to
be sold hereunder. The obligations of the Company and of each of the
Selling Shareholders shall be several and not joint.
(b) Certificates in negotiable form for the total number of the Shares
to be sold hereunder by the Selling Shareholders have been placed in
custody with American Stock Transfer & Trust Company as custodian (the
"Custodian") pursuant to the Custodian Agreement executed by the Selling
Shareholder for delivery of all Firm Shares to be sold hereunder by the
Selling Shareholder. Each of the Selling Shareholders specifically agrees
that the Firm Shares represented by the certificates held in custody for
such Selling Shareholder under the Custodian Agreement are subject to the
interests of the Underwriters hereunder, that the arrangements made by such
Selling Shareholder for such custody are to that extent irrevocable, and
that the obligations of such Selling Shareholder hereunder shall not be
terminable by any act or deed of such Selling Shareholder (or by any other
person, firm or corporation including the Company, the Custodian or the
Underwriters) or by operation of law (including the death or dissolution of
a Selling Shareholder) or by the occurrence of any other event or events,
except as set forth in the Custodian Agreement. If any such event should
occur prior to the delivery to the Underwriters of the Firm Shares
hereunder, certificates for the Firm Shares shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as
if such event has not occurred. The Custodian is authorized to receive and
acknowledge receipt of the proceeds of sale of the Shares held by it
against delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in
same day funds via wire transfer to the order of the Company for the shares
to be sold by it and to the order of "American Stock Transfer & Trust
Company as Custodian" for the shares to be sold by the Selling
Shareholders, in each case against delivery of certificates therefor to the
Underwriters. Such payment and delivery are to be made at the offices of
Alex. Brown & Sons Incorporated, One South Street, Baltimore, Maryland, at
10:00 a.m., Baltimore time, on the third business day after the date of
this Agreement or at such other time and date not later than five business
days thereafter as you and the Company shall agree upon, such time and date
being herein referred to as the "Closing Date." (As used herein, "business
day" means a day on which the New York Stock Exchange is open for trading
and on which banks in New York are open for business and not permitted by
law or executive order to be closed.) The certificates for the Firm Shares
will be delivered in such denominations and in such registrations as the
Underwriters request in writing not later than the second full business day
prior to the Closing Date, and will be made available for inspection by the
Underwriters at least one business day prior to the Closing Date.
(d) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth,
the Company hereby grants an option to the several Underwriters to purchase
the Option Shares at the price per share as set forth in the first
paragraph of this Section 2. The option granted hereby may be exercised in
whole or in part by giving written notice (i) at any time before the
Closing Date and (ii) only once thereafter within 30 days after the date of
this Agreement, by the Underwriters, to the Company, setting forth the
number of Option Shares as to which the several Underwriters are exercising
the option, the names and denominations in which the Option Shares are to
be registered and the time and date at which such certificates are to be
delivered. The time and date at which certificates for Option Shares are to
be delivered shall be determined by the Underwriters but shall not be
earlier than three nor later than 10 full business days after the exercise
of such option, nor in any event prior to the Closing Date (such time and
date being herein referred to as the "Option Closing Date"). If the date of
exercise of the option is three or more days before the Closing Date, the
notice of exercise shall set the Closing Date as the Option Closing Date.
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<PAGE> 7
The number of Option Shares to be purchased by each Underwriter shall be in
the same proportion to the total number of Option Shares being purchased as
the number of Firm Shares being purchased by such Underwriter bears to the
total number of Firm Shares, adjusted by you in such manner as to avoid
fractional shares. The option with respect to the Option Shares granted
hereunder may be exercised only to cover over-allotments in the sale of the
Firm Shares by the Underwriters. You, as the Underwriters, may cancel such
option at any time prior to its expiration by giving written notice of such
cancellation to the Company. To the extent, if any, that the option is
exercised, payment for the Option Shares shall be made on the Option
Closing Date in same day funds by wire transfer to the order of the Company
against delivery of certificates therefor at the offices of Alex. Brown &
Sons Incorporated, One South Street, Baltimore, Maryland.
(e) If on the Closing Date, the Selling Shareholders fail to sell the
Firm Shares which the Selling Shareholders have agreed to sell on such
date, the Company agrees that it will sell or arrange for the sale of that
number of shares of Common Stock to the Underwriters which represents Firm
Shares which such Selling Shareholders have failed to so sell or such
lesser number as may be requested by the Underwriters.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the Underwriters are to make a public offering
of the Firm Shares as soon as they deem it advisable to do so. The Firm
Shares are to be initially offered to the public at the public offering
price set forth in the Prospectus. The Underwriters may from time to time
thereafter change the public offering price and other selling terms. To the
extent, if at all, that any Option Shares are purchased pursuant to Section
2 hereof, the Underwriters will offer them to the public on the foregoing
terms.
It is further understood that you will act as Underwriters in the
offering and sale of the Shares in accordance with a Master Agreement Among
Underwriters entered into by you.
4. COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
(a) The Company covenants and agrees with the Underwriters that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely file
with the Commission under Rule 424(b) of the Rules and Regulations a
Prospectus in a form approved by the Underwriters containing information
previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A of the Rules and Regulations, and (B)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Underwriters shall not previously have been advised
and furnished with a copy or to which the Underwriters shall have
reasonably objected in writing or which is not in compliance with the Rules
and Regulations.
(ii) The Company will advise the Underwriters promptly (A) when the
Registration Statement or any post-effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C)
of any request of the Commission for amendment of the Registration
Statement or for supplement to the Prospectus or for any additional
information, and (D) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of
the Prospectus or of the institution of any proceedings for that purpose.
The Company will use its best efforts to prevent the issuance of any such
stop order preventing or suspending the use of the Prospectus and to obtain
as soon as possible the lifting thereof, if issued.
(iii) The Company will deliver to, or upon the order of, the
Underwriters, from time to time, as many copies of any Preliminary
Prospectus as the Underwriters may reasonably request.
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<PAGE> 8
The Company will deliver to, or upon the order of, the Underwriters during
the period when delivery of a Prospectus is required under the Act, as many
copies of the Prospectus in final form, or as thereafter amended or
supplemented, as the Underwriters may reasonably request. The Company will
deliver to the Underwriters at or before the Closing Date, four signed
copies of the Registration Statement and all amendments thereto including
all exhibits filed therewith, and will deliver to the Underwriters such
number of copies of the Registration Statement (including such number of
copies of the exhibits filed therewith that may reasonably be requested),
and of all amendments thereto, as the Underwriters may reasonably request.
(iv) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange Act"),
and the rules and regulations of the Commission thereunder, so as to permit
the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event
shall occur as a result of which, in the judgment of the Company or in the
reasonable opinion of the Underwriters, it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the
light of the circumstances existing at the time the Prospectus is delivered
to a purchaser, not misleading, or, if it is necessary at any time to amend
or supplement the Prospectus to comply with any law, the Company promptly
will prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with the law.
(v) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15
months after the effective date of the Registration Statement, an earnings
statement (which need not be audited) in reasonable detail, covering a
period of at least 12 consecutive months beginning after the effective date
of the Registration Statement, which earning statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise you in writing when such statement has been so
made available.
(vi) The Company will, for a period of five years from the Closing
Date, deliver to the Underwriters copies of annual reports and copies of
all other documents, reports and information furnished by the Company to
its stockholders or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Act or
the Securities Exchange Act of 1934, as amended.
(vii) No offering, sale, short sale or other disposition of any shares
of Common Stock of the Company or other securities convertible into or
exchangeable or exercisable for shares of Common Stock or derivative of
Common Stock (or agreement for such) will be made for a period of 120 days
after the date of this Agreement, directly or indirectly, by the Company
otherwise than hereunder, pursuant to the Company's 1992 Stock Option Plan
or 1996 Equity Incentive Plan, or with the prior written consent of Alex.
Brown & Sons Incorporated.
(viii) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on the Nasdaq Stock Market.
(ix) The Company has caused each officer and director and specific
shareholders of the Company to furnish to you, on or prior to the date of
this agreement, a letter or letters, in form and substance satisfactory to
the Underwriters, pursuant to which each such person shall agree not to
offer, sell, sell short or otherwise dispose of any shares of Common Stock
of the Company or other capital stock of the Company, or any other
securities convertible, exchangeable or exercisable for Common Shares or
derivative of Common Shares owned by such person or request the
registration for the offer or sale of any of the foregoing (or as to which
such person has the right to direct the disposition of) for a period of 120
days after the date of this
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Agreement, directly or indirectly, except with the prior written consent of
Alex. Brown & Sons Incorporated ("Lockup Agreements").
(x) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company or the Subsidiary to register as an investment
company under the Investment Company Act of 1940, as amended (the "1940
Act").
(xi) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for the
Common Stock.
(xii) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably
be expected to constitute, the stabilization or manipulation of the price
of any securities of the Company.
(b) Each of the Selling Shareholders covenants and agrees with the
Underwriters that:
(i) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other capital stock of the
Company or other securities convertible, exchangeable or exercisable for
Common Stock or derivative of Common Stock owned by such Selling
Shareholder or request the registration for the offer or sale of any of
the foregoing (or as to which such Selling Shareholder has the right to
direct the disposition of) will be made for a period of 120 days after
the date of this Agreement, directly or indirectly, by such Selling
Shareholder otherwise than hereunder or with the prior written consent
of Alex. Brown & Sons Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 and the Interest and Dividend Tax Compliance
Act of 1983 with respect to the transactions herein contemplated, such
Selling Shareholder agrees to deliver to you prior to or at the Closing
Date a properly completed and executed United States Treasury Department
Form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
(iii) Such Selling Shareholder will not take, directly or
indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any securities of the
Company .
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement,
including, without limiting the generality of the foregoing, the following:
accounting fees of the Company; the fees and disbursements of counsel for
the Company and the Selling Shareholders; the cost of printing and
delivering to, or as requested by, the Underwriters' copies of the
Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Underwriters' Invitation Letter; the filing fees of the
Commission; the filing fees of the NASD; and the Listing Fee of the Nasdaq
Stock Market. To the extent, if at all, that the Selling Shareholders
engage special legal counsel to represent them in connection with this
offering, the fees and expenses of such counsel shall be borne by such
Selling Shareholders. Any transfer taxes imposed on the sale of the Shares
to the several Underwriters will be paid by the Sellers pro rata. The
Company agrees to pay all costs and expenses of the Underwriters, including
the fees and disbursements of counsel for the Underwriters, incident to the
offer and sale of directed shares of the Common Stock by the Underwriters
to employees and persons having business relationships with the Company and
the Subsidiary. The Sellers shall not, however, be required to pay for any
of the Underwriters' expenses except that, if this Agreement shall not be
consummated because the conditions in Section 6 hereof are not satisfied,
or because this Agreement is terminated by the Underwriters
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<PAGE> 10
pursuant to Section 11 hereof, or by reason of any failure, refusal or
inability on the part of the Company or the Selling Shareholders to perform
any undertaking or satisfy any condition of this Agreement or to comply
with any of the terms hereof on their part to be performed, unless such
failure to satisfy said condition or to comply with said terms is due to
the default or omission of any Underwriter, then the Company shall
reimburse the several Underwriters for reasonable out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in
connection with investigating, marketing and proposing to market the Shares
or in contemplation of performing their obligations hereunder; but the
Company and the Selling Shareholder shall not in any event be liable to any
of the Underwriters for damages on account of loss of anticipated profits
from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on the Option
Closing Date are subject to the accuracy, as of the Closing Date or the
Option Closing Date, as the case may be, of the representations and
warranties of the Company and the Selling Shareholders contained herein,
and to the performance by the Company and the Selling Shareholders of their
covenants and obligations hereunder and to the following additional
conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations shall have been made,
and any request of the Commission for additional information (to be
included in the Registration Statement or otherwise) shall have been
disclosed to the Underwriters and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been
issued and no proceedings for that purpose shall have been taken or, to the
knowledge of the Company or the Selling Shareholders, shall be contemplated
by the Commission and no injunction, restraining order, or order of any
nature by a Federal or state court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the issuance of the
Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Cooley Godward LLP,
dated the Closing Date or the Option Closing Date, as the case may be,
addressed to the Underwriters (and stating that it may be relied upon by
counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; to the
best knowledge of such counsel, the Company is duly qualified to
transact business in all jurisdictions in which the conduct of its
business requires such qualification, or in which the failure to qualify
would have a materially adverse effect upon the business of the Company.
(ii) The Company had authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus as of the
date set forth therein; the authorized shares of the Company's Common
Stock and Preferred Stock have been duly authorized; the outstanding
shares of the Company's Common Stock, including the Shares to be sold by
the Selling Shareholders, have been duly authorized and validly issued
and are fully paid and non-assessable; all of the Shares conform to the
description thereof contained in the Prospectus under the caption
"Description of Capital Stock"; the shares of Common Stock, including
the portion of the Option Shares, if any, to be sold by the Company
pursuant to this Agreement have been duly authorized and will be validly
issued, fully paid and non-assessable when issued and paid for as
contemplated by this Agreement; and no preemptive rights of stockholders
exist with respect to any of the Shares or the issue or sale thereof.
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(iii) Except as described in or contemplated by the Prospectus, to
the knowledge of such counsel, (a) there are no outstanding securities
of the Company convertible or exchangeable into or evidencing the right
to purchase or subscribe for any shares of capital stock of the Company
and (b) there are no outstanding or authorized options, warrants or
rights of any character obligating the Company to issue any shares of
its capital stock or any securities convertible or exchangeable into or
evidencing the right to purchase or subscribe for any shares of such
stock; and except as described in the Prospectus, to the knowledge of
such counsel, no holder of any securities of the Company or any other
person has the contractual right, which has not been satisfied or
effectively waived, to cause the Company to permit them to underwrite
the sale of, any of the Shares or the right to have any Common Shares or
other securities of the Company included in the Registration Statement
or the right, as a result of the filing of the Registration Statement,
to require registration under the Act of any shares of Common Stock or
other securities of the Company.
(iv) The Registration Statement has become effective under the Act
and, to the best of the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending or
threatened under the Act.
(v) The Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects with
the requirements of the Act and the applicable rules and regulations
thereunder (except that such counsel need express no opinion as to the
financial statements and related schedules therein).
(vi) The statements under the captions "Management -- Equity
Incentive Plans," "--Limitation of Liability and Indemnification
Matters," "Certain Transactions," "Description of Capital Stock" and
"Shares Eligible for Future Sale" in the Prospectus, insofar as such
statements constitute a summary of documents referred to therein or
matters of law, fairly summarize in all material respects the
information called for with respect to such documents and matters to the
extent required under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (the "Act and Rules").
(vii) Such counsel does not know of any contracts or documents
required under the Act and Rules to be filed as exhibits to the
Registration Statement or described in the Registration Statement or the
Prospectus which are not so filed or described as required, and such
contracts and documents as are summarized in the Registration Statement
or the Prospectus are fairly summarized in all material respects to the
extent required under the Act and Rules.
(viii) Such counsel knows of no material legal or governmental
proceedings against the Company required to be described in the
Prospectus under the Act and Rules except as set forth in the
Prospectus.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, the Certificate of Incorporation or
By-Laws of the Company, or any agreement or instrument filed as an
exhibit to the Registration Statement.
(x) This Agreement has been duly authorized, executed and delivered
by the Company.
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions
herein contemplated (other than as may be required by the NASD as to
which such counsel need express no opinion) except such as have been
obtained or made, specifying the same.
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(xii) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the
Prospectus, an investment company, as defined under the Investment
Company Act of 1940, as amended.
(xiii) This Agreement has been duly authorized, executed and
delivered on behalf of the Selling Shareholders.
(xiv) Each of the Selling Shareholders has any approval required by
law to sell, assign, transfer and deliver the portion of the Shares to
be sold by such Selling Shareholder.
(xv) The Custodian Agreement and the Power of Attorney executed and
delivered by the Selling Shareholders have been duly executed and
delivered by the Selling Shareholders.
(xvi) Good and marketable title to the Shares being sold by the
Selling Shareholders has been transferred to the Underwriters (assuming
that they are bona fide purchasers within the meaning of the Uniform
Commercial Code) on the Closing Date, and the Option Closing Date, as
the case may be, free and clear of all liens, encumbrances, equities and
claims.
In rendering such opinion, Cooley Godward LLP may rely as to matters
governed by the laws of states other than Delaware or Federal laws on local
counsel in such jurisdictions, provided that in each case Cooley Godward
LLP shall state that they believe that they and the Underwriters are
justified in relying on such other counsel. In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to
believe that (i) the Registration Statement, at the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the
Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and (ii) the Prospectus, or any supplement thereto, on the
date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules, and
statistical information in the Registration Statement and Prospectus). With
respect to such statement, Cooley Godward may state that their belief is
based upon the procedures set forth therein, but is without independent
check and verification.
(c) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Davis, Graham &
Stubbs, special patent counsel for the Company, dated the Closing Date or
the Option Closing Date, as the case may be, addressed to the Underwriters
to the effect that:
(i) Based on an examination of the appropriate documents, except for
rights reserved to the United States government, the Company has clear
title or exclusive right or license to use the patents, patent applications
and technology embodied therein, and any other technology proprietary to
the Company, and its trademarks, service marks, tradenames, copyrights,
trade secrets and other proprietary rights referenced in the Registration
Statement or the Prospectus (collectively, the "Technology") necessary to
conduct the business as described in the Prospectus.
(ii) Based on an examination of the appropriate documents, neither the
Company nor any of its officers or directors have received any notice of
infringement of or conflict with rights or claims of others with respect to
any of the Technology or any patent, trademark, service mark, trade name,
copyright, trade secret or other proprietary right, and such counsel has no
reason to
12
<PAGE> 13
believe that the Company's use of the Technology and its patents,
trademarks, service marks, trade names, copyrights, trade secrets and other
proprietary rights would infringe the rights of third parties.
(iii) Such counsel has no reason to believe that patent protection
will not be obtainable for the products and methods claimed in the patent
applications referenced in the Registration Statement or the Prospectus.
(iv) The statements under the captions "Risk Factors -- Patents and
Proprietary Rights" and "Business -- Patents, Trade Secrets and Trademarks"
in the Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of patent law, are accurate
summaries and fairly and correctly present the information called for with
respect to such documents and matters.
(d) The Underwriters shall have received from Piper & Marbury L.L.P.,
counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (ii), (iii), (iv), (ix) and (x) of Paragraph (b)
of this Section 6, and that the Company is a duly organized and validly
existing corporation under the laws of the State of Delaware. In rendering
such opinion Piper & Marbury L.L.P. may rely as to all matters governed
other than by the laws of Maryland, Delaware or Federal laws on the opinion
of counsel referred to in Paragraph (b) of this Section 6. In addition to
the matters set forth above, such opinion shall also include a statement to
the effect that nothing has come to the attention of such counsel which
leads them to believe that (i) the Registration Statement, or any amendment
thereto, as of the time it became effective under the Act (but after giving
effect to any modifications incorporated therein pursuant to Rule 430A
under the Act) as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (ii) the Prospectus, or any
supplement thereto, on the date it was filed pursuant to the Rules and
Regulations and as of the Closing Date or the Option Closing Date, as the
case may be, contained an untrue statement of a material fact or omitted to
state a material fact, necessary in order to make the statements, in the
light of the circumstances under which they are made, not misleading
(except that such counsel need express no view as to financial statements,
schedules and statistical information therein). With respect to such
statement, Piper & Marbury L.L.P. may state that their belief is based upon
the procedures set forth therein, but is without independent check and
verification.
(e) You shall have received, on each of the date hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the
date hereof, the Closing Date or the Option Closing Date, as the case may
be, in form and substance satisfactory to you, of Arthur Andersen LLP
confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder
and stating that in their opinion the financial statements and schedules
examined by them and included in the Registration Statement comply in form
in all material respects with the applicable accounting requirements of the
Act and the related published Rules and Regulations; and containing such
other statements and information as is ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements
and certain financial and statistical information contained in the
Registration Statement and Prospectus.
(f) The Underwriters shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of
the President and Chief Executive Officer and the Chief Financial Officer,
Vice President -- Finance and Administration, Secretary and Trea-
13
<PAGE> 14
surer of the Company to the effect that, as of the Closing Date or the
Option Closing Date, as the case may be, each of them severally represents
as follows:
(i) The Registration Statement has become effective under the Act and
no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or
are, to his knowledge, contemplated by the Commission;
(ii) The representations and warranties of the Company contained in
Section 1 hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to Rules 424 or
430A under the Act have been made;
(iv) He or she has carefully examined the Registration Statement and
the Prospectus and, in his or her opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration
Statement were true and correct, and such Registration Statement and
Prospectus did not omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not
misleading, and since the effective date of the Registration Statement, no
event has occurred which should have been set forth in a supplement to or
an amendment of the Prospectus which has not been so set forth in such
supplement or amendment; and
(v) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the
Company or the earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the Company,
whether or not arising in the ordinary course of business.
(g) The Company and the Selling Shareholders shall have furnished to
the Underwriters such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein
and related matters as the Underwriters may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq Stock Market.
(i) The Lockup Agreements described in Section 4(x) are in full force
and effect.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in
all material respects satisfactory to the Underwriters and to Piper &
Marbury L.L.P., counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated
by the Underwriters by notifying the Company and the Custodian of such
termination in writing or by telegram at or prior to the Closing Date or
the Option Closing Date, as the case may be.
In such event, the Selling Shareholders, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing
Date, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
14
<PAGE> 15
8. INDEMNIFICATION.
(a) The Company and the Selling Shareholders, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of the Act, against
any losses, claims, damages or liabilities to which such Underwriter or any
such controlling person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto, or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; and will reimburse
each Underwriter and each such controlling person upon demand for any legal
or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such
loss, claim, damage or liability, action or proceeding or in responding to
a subpoena or governmental inquiry related to the offering of the Shares,
whether or not such Underwriter or controlling person is a party to any
action or proceeding; provided, however, that the Company and the Selling
Shareholders will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through
the Underwriters specifically for use in the preparation thereof. In no
event, however, shall the liability of the Selling Shareholders for
indemnification under this Section 8(a) exceed the proceeds received by
such Selling Shareholders from the Underwriters in the offering. This
indemnity agreement will be in addition to any liability which the Company
or the Selling Shareholders may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Shareholders, and each
person, if any, who controls the Company or the Selling Shareholders within
the meaning of the Act, against any losses, claims, damages or liabilities
to which the Company or any such director, officer, Selling Shareholders or
controlling person may become subject under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made; and will reimburse any legal or
other expenses reasonably incurred by the Company or any such director,
officer, Selling Shareholders or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that each Underwriter will be liable in
each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission has been made
in the Registration Statement, any Preliminary Prospectus, the Prospectus
or such amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by or through the Underwriters
specifically for use in the preparation thereof. This indemnity agreement
will be in addition to any liability which such Underwriter may otherwise
have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to this Section 8, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought
(the "indemnifying party") in writing. No indemnification provided for in
Section 8(a) or (b) shall be available to any party who shall fail to give
notice as provided
15
<PAGE> 16
in this Section 8(c) if the party to whom notice was not given was unaware
of the proceeding to which such notice would have related and was
materially prejudiced by the failure to give such notice, but the failure
to give such notice shall not relieve the indemnifying party or parties
from any liability which it or they may have to the indemnified party for
contribution or otherwise than on account of the provisions of Section 8(a)
or (b). In case any such proceeding shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party and shall pay as
incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred (or within 30 days
of presentation) the fees and expenses of the counsel retained by the
indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them
or (iii) the indemnifying party shall have failed to assume the defense and
employ counsel acceptable to the indemnified party within a reasonable
period of time after notice of commencement of the action. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees and expenses of more than one separate firm for all such indemnified
parties. Such firm shall be designated in writing by you in the case of
parties indemnified pursuant to Section 8(a) and by the Company and the
Selling Shareholders in the case of parties indemnified pursuant to Section
8(b). The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss
or liability by reason of such settlement or judgment. In addition, the
indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified
party is an actual or potential party to such claim, action or proceeding)
unless such settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising out of such
claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Shareholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted
by applicable law then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of the Company and the Selling Shareholders on the one hand
and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities,
(or actions or proceedings in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Selling Shareholders on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
16
<PAGE> 17
Company and the Selling Shareholders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Selling Shareholders on the one hand or the Underwriters on
the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this
Section 8(d) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 8(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) referred to
above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation, and (iii) the
Selling Shareholders shall not be required to contribute any amount in
excess of the lesser of (A) that proportion of the total of such losses,
claims, damages or liabilities indemnified or contributed against equal to
the proportion of the total Shares sold hereunder which is being sold by
such Selling Shareholders, or (B) the proceeds received by such Selling
Shareholder from the Underwriters in the offering. The Underwriters'
obligations in this Section 8(d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may join him or it as an additional defendant in any
such proceeding in which such other contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A
successor to any Underwriter, or to the Company, its directors or officers,
or any person controlling the Company, shall be entitled to the benefits of
the indemnity, contribution and reimbursement agreements contained in this
Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such
date (otherwise than by reason of any default on the part of the
17
<PAGE> 18
Company or the Selling Shareholder), you, as the non-defaulting
Underwriter, shall use your reasonable efforts to procure within 36 hours
thereafter one or more of the other Underwriters, or any others, to
purchase from the Company and the Selling Shareholders such amounts as may
be agreed upon and upon the terms set forth herein, the Firm Shares or
Option Shares, as the case may be, which the defaulting Underwriter or
Underwriters failed to purchase. If during such 36 hours you, as such
non-defaulting Underwriter, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares,
as the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to
which such default shall occur does not exceed 10% of the Firm Shares or
Option Shares, as the case may be, covered hereby, the other Underwriters
shall be obligated, severally, in proportion to the respective numbers of
Firm Shares or Option Shares, as the case may be, which they are obligated
to purchase hereunder, to purchase the Firm Shares or Option Shares, as the
case may be, which such defaulting Underwriter or Underwriters failed to
purchase, or (b) if the aggregate number of shares of Firm Shares or Option
Shares, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Shares or Option Shares, as the case may be,
covered hereby, the Company and the Selling Shareholders or you as the
non-defaulting Underwriter will have the right, by written notice given
within the next 36-hour period to the parties to this Agreement, to
terminate this Agreement without liability on the part of the
non-defaulting Underwriter or of the Company or of the Selling Shareholders
except to the extent provided in Section 8 hereof. In the event of a
default by any Underwriter or Underwriters, as set forth in this Section 9,
the Closing Date or Option Closing Date, as the case may be, may be
postponed for such period, not exceeding seven days, as you, as
non-defaulting Underwriter, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes
any person substituted for a defaulting Underwriter. Any action taken under
this Section 9 shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: if to the Underwriters, to Alex.
Brown & Sons Incorporated, One South Street, Baltimore, Maryland 21202,
Attention: David H. Gray, Managing Director; with a copy to Alex. Brown &
Sons Incorporated, One South Street, Baltimore, Maryland 21202. Attention:
General Counsel; if to the Company or the Selling Shareholders, to Bolder
Technologies Corporation, 5181 Ward Road, Wheat Ridge, Colorado 80033,
Attn: Daniel S. Lankford, President and Chief Executive Officer.
11. TERMINATION.
This Agreement may be terminated by you by notice to the Sellers as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change
in or affecting the condition, financial or otherwise, of the Company or
the earnings, business, management, properties, assets, rights, operations,
condition (financial or otherwise) or prospects of the Company, whether or
not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or
other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation,
declaration, emergency, calamity,
18
<PAGE> 19
crisis or change on the financial markets of the United States would, in
your reasonable judgment, make it impracticable to market the Shares or to
enforce contracts for the sale of the Shares, or (iii) suspension of
trading in securities generally on the New York Stock Exchange or the
American Stock Exchange or limitation on prices (other than limitations on
hours or numbers of days of trading) for securities on either such
Exchange, (iv) the enactment, publication, decree or other promulgation of
any statute, regulation, rule or order of any court or other governmental
authority which in your opinion materially and adversely affects or may
materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading in the rating of the Company's debt
securities by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Exchange Act); (vii) the
suspension of trading of the Company's Common Stock by the Commission on
the Nasdaq Stock Market or (viii) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs
which in your reasonable opinion has a material adverse effect on the
securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person
will have any right or obligation hereunder. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign merely
because of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company, the Selling Shareholders and the Underwriters acknowledge
and agree that the only information furnished or to be furnished by any
Underwriter to the Company for inclusion in any Prospectus or the
Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to
the Underwriters), legends required by Item 502(d) of Regulation S-K under
the Act and the information under the caption "Underwriting" in the
Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation
made by or on behalf of any Underwriter or controlling person thereof, or
by or on behalf of the Company or its directors or officers and (c)
delivery of and payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Shareholder, the
Company and the Underwriters in accordance with its terms.
19
<PAGE> 20
Any person executing and delivering this Agreement as Attorney-in-Fact for
the Selling Shareholders represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Shareholders pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
BOLDER TECHNOLOGIES CORPORATION
By:
----------------------------------
Daniel S. Lankford
President and Chief Executive
Officer
Selling Shareholders
By:
----------------------------------
Joseph F. Fojtasek
Attorney-in-Fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. BROWN & SONS INCORPORATED
DAIN BOSWORTH INCORPORATED
By: Alex. Brown & Sons Incorporated
By:
--------------------------------
Authorized Officer
20
<PAGE> 21
SCHEDULE I
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
----------- ---------------------
<S> <C>
Alex. Brown & Sons Incorporated............................. 1,300,000
Dain Bosworth Incorporated.................................. 1,300,000
---------
Total............................................. 2,600,000
=========
</TABLE>
21
<PAGE> 22
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
SELLING SHAREHOLDER TO BE SOLD
------------------- ---------------------
<S> <C>
-------
Total............................................. 600,000
=======
</TABLE>
22
<PAGE> 23
SCHEDULE III
SCHEDULE OF OPTION SHARES
<TABLE>
<CAPTION>
MAXIMUM PERCENTAGE OF
NUMBER OF OPTION OPTION SHARES
SELLER SHARES TO BE SOLD TO BE SOLD
------ ----------------- -------------
<S> <C> <C>
Bolder Technologies Corporation............................. %
%
%
%
%
------- ----
Total............................................. 100%
======= ====
</TABLE>
23
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
February 13, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FEBRUARY 13, 1997 FORM SB-2 OF BOLDER TECHNOLOGIES CORPORATION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 968,297
<SECURITIES> 15,102,380
<RECEIVABLES> 91,716
<ALLOWANCES> 0
<INVENTORY> 35,796
<CURRENT-ASSETS> 16,264,394
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0
0
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