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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
------- -------
Commission File Number 0-28060
BOLDER TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 84-1166231
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(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
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4403 Table Mountain Drive, Golden, CO 80403
(Address of principal executive offices including zip code)
(303) 215-7200
(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock $.001 par Value 11,907,860
---------------------------- ---------------------------------
(Class) (Outstanding at November 1, 1999)
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BOLDER TECHNOLOGIES CORPORATION
TABLE OF CONTENTS
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PAGE NUMBER
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COVER PAGE 1
TABLE OF CONTENTS 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheets as of September 30, 1999 and December 31, 1998 3
Condensed Statements of Operations for the three and nine-month periods
ended September 30, 1999 and 1998; and the period from inception (March 22,
1991) through September 30, 1999 4
Condensed Statements of Cash Flows for the nine-month periods
ended September 30, 1999 and 1998; and the period from inception
(March 22, 1991) through September 30, 1999 5
Notes to Condensed Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 2. CHANGES IN SECURITIES 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
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2
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BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(UNAUDITED)
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SEPTEMBER 30, DECEMBER 31,
1999 1998
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ASSETS
Current assets:
Cash and cash equivalents $ 5,616,506 $ 962,453
Available-for-sale securities 4,005,548 10,157,281
Inventory 1,332,334 129,887
Other current assets 441,909 155,191
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TOTAL CURRENT ASSETS 11,396,297 11,404,812
Property and equipment, at cost, net 22,462,199 20,815,000
Other assets, net 560,124 371,935
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TOTAL ASSETS $ 34,418,620 $ 32,591,747
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 3,656,537 $ 1,787,364
Deferred revenue 35,000 35,000
Notes and capital leases, current portion 1,924,746 1,521,842
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TOTAL CURRENT LIABILITIES 5,616,283 3,344,206
Notes and capital leases, less current portion 7,292,506 8,859,203
Commitments and contingencies
Stockholders' equity:
Convertible, redeemable preferred stock, $0.001 par value, 336,200
authorized and outstanding at September 30, 1999 and December 31, 1998,
with a liquidation and redemption value of $16,810,000 16,538,395 15,998,863
Common Stock, $.001 par value, 25,000,000 shares authorized; 11,906,861
and 9,713,376 shares issued at September 30, 1999 and December 31,
1998, respectively 11,907 9,713
Treasury stock, $.001 par common stock, 33,333
shares at September 30, 1999 and December 31, 1998 (50,000) (50,000)
Additional paid-in capital 49,103,734 36,773,529
Deficit accumulated during the development stage (44,094,205) (32,343,767)
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TOTAL STOCKHOLDERS' EQUITY 21,509,831 20,388,338
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 34,418,620 $ 32,591,747
============= =============
</TABLE>
See accompanying notes.
3
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BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
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THREE MONTHS ENDED NINE MONTHS ENDED FOR THE PERIOD
SEPTEMBER 30, SEPTEMBER 30, FROM INCEPTION
---------------------------- ---------------------------- (MARCH 22,1991) TO
1999 1998 1999 1998 SEPTEMBER 30, 1999
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REVENUES
Product sales $ 20,803 $ 11,824 $ 91,485 $ 43,905 $ 409,430
Research and development services 35,001 672,267 134,326 1,753,212 5,451,632
------------ ------------ ------------ ------------ ------------
55,804 684,091 225,811 1,797,117 5,861,062
COST OF REVENUES 1,413,901 71,184 1,609,040 274,710 2,891,652
------------ ------------ ------------ ------------ ------------
(1,358,097) 612,907 (1,383,229) 1,522,407 2,969,410
============ ============ ============ ============ ============
OPERATING EXPENSES
Research and development 1,190,486 1,825,302 5,509,059 5,437,694 29,655,211
General and administrative 914,904 913,887 2,610,562 2,595,587 14,352,953
Selling and marketing 652,193 207,365 1,585,470 415,385 2,985,490
------------ ------------ ------------ ------------ ------------
2,757,583 2,946,554 9,705,091 8,448,666 46,993,654
============ ============ ============ ============ ============
LOSS FROM OPERATIONS (4,115,680) (2,333,647) (11,088,320) (6,926,259) (44,024,244)
OTHER INCOME (EXPENSE)
Interest income 142,399 226,623 351,827 733,408 3,110,700
Interest expense (334,191) (372,308) (1,013,945) (985,830) (3,180,661)
------------ ------------ ------------ ------------ ------------
NET LOSS (4,307,472) (2,479,332) (11,750,438) (7,178,681) $(44,094,205)
============ ============ ============ ============ ============
Dividends on preferred stock (378,225) (379,261) (1,134,675) (1,134,675)
Accretion of preferred stock offering costs (53,769) (53,769) (161,307) (160,448)
------------ ------------ ------------ ------------
NET LOSS ALLOCABLE TO COMMON STOCKHOLDERS $ (4,739,466) $ (2,912,362) $(13,046,420) $ (8,473,804)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.40) $ (0.30) $ (1.23) $ (0.89)
============ ============ ============ ============
Shares used in computing basic and diluted
net loss per share 11,790,507 9,598,009 10,614,280 9,547,692
============ ============ ============ ============
</TABLE>
See accompanying notes.
4
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BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
NINE MONTHS ENDED FOR THE PERIOD
SEPTEMBER 30, FROM INCEPTION
-------------------------------- (MARCH 22, 1991) TO
1999 1998 SEPTEMBER 30, 1999
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OPERATING ACTIVITIES
Net Loss $ (11,750,438) $ (7,178,681) $ (44,094,205)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,022,536 807,934 3,768,097
Change in deferred revenue -- (1,223,719) 35,000
Other -- -- 104,956
Inventory (1,202,449) 40,240 (1,332,334)
Changes in other operating assets and liabilities 1,556,980 (319,363) 3,169,267
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (10,373,371) (7,873,589) (38,349,219)
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INVESTING ACTIVITIES
Purchase of short term investments (2,922,116) (7,091,027) (68,759,947)
Sale of short term investments 9,073,850 8,861,709 64,754,400
Purchases of property and equipment (2,635,937) (1,190,648) (26,117,819)
Increase (decrease) in construction-in-process payable -- (559,711) --
Patent costs (196,513) (154,105) (591,573)
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,319,284 (133,782) (30,714,939)
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FINANCING ACTIVITIES
Proceeds from issuance of preferred stock -- -- 25,869,062
Proceeds from issuance of common stock 13,221,444 113,658 38,941,231
Proceeds from issuance of notes payable -- 5,043,064 16,500,347
Purchase of treasury stock from founder -- (50,000)
Payments on notes payable and capital leases payable (1,163,791) (911,061) (3,803,166)
Payments on issuance of dividends (26) (67) (112)
Stock issuance costs (349,487) (68,079) (2,779,661)
Issuance of warrants to purchase common or preferred stock -- -- 2,963
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NET CASH PROVIDED BY FINANCING ACTIVITIES 11,708,140 4,177,515 74,680,664
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,654,053 (3,829,856) 5,616,506
Cash and cash equivalents, beginning of period 962,453 5,414,330 --
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,616,506 $ 1,584,474 $ 5,616,506
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 1,017,362 $ 945,594 $ 2,964,620
============= ============= =============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Accretion of preferred stock offering costs $ 161,307 $ 160,448 $ 425,524
============= ============= =============
Preferred stock dividend accrual $ 1,134,675 $ 1,134,675 $ 2,999,895
============= ============= =============
Preferred stock dividends paid in common stock $ 756,450 $ 1,092,132 $ 2,621,670
============= ============= =============
Conversion of notes payable and related accrued interest to
preferred stock $ -- $ -- $ 3,585,820
============= ============= =============
</TABLE>
See accompanying notes.
5
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BOLDER TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 (UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The interim financial information of BOLDER Technologies Corporation (the
"Company" or "BOLDER") as of and for the three- and nine-month periods ended
September 30, 1999 is unaudited, but includes all adjustments (consisting only
of normal recurring entries) which the Company's management believes to be
necessary for the fair presentation of financial position, results of operations
and cash flows for the periods presented. The accompanying interim financial
statements should be read in conjunction with the financial statements and notes
thereto for the year ended December 31, 1998 included in the Company's Annual
Report on Form 10-K. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the Securities
and Exchange Commission rules and regulations. Interim results of operations for
the three- and nine-month periods ended September 30, 1999 are not necessarily
indicative of operating results to be expected for the full year. Among other
reasons, we believe the total of our costs of revenues and selling and
marketing expenses will continue to increase materially as we continue to
transition to commercial operations.
Prior to 1999, the Company received certain payments in connection with its
strategic agreement with Johnson Controls, Inc. ("JCI"). These payments were
consideration to the Company for certain services provided to JCI to transfer
appropriate technical information to JCI as specified in the agreement. The
Company recorded these payments as deferred revenue and recognized the revenue
as services were performed, using the percentage of completion method. These
services were completed in 1998. These revenues totaled approximately 88% and
80% of total research and development services revenues for the three- and
nine-months ended September 30, 1998, respectively.
At September 30, 1999, securities that have been excluded from basic and diluted
net loss per share because they would be antidilutive include outstanding
options to purchase 2,417,116 shares of the Company's common stock, outstanding
warrants to purchase 49,766 shares of the Company's common stock and 336,200
shares of Convertible, Redeemable Preferred Stock, which are convertible into
1,120,666 shares of the Company's common stock.
Effective January 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting comprehensive income
and its components in financial statements. Comprehensive income, as defined,
includes all changes in equity (net assets) during a period from non-owner
sources. From Inception, the Company has not had any transactions that are
required to be reported in comprehensive income as compared to its net loss.
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for the way companies report information about
operating segments in annual financial statements. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. In accordance with the provisions of SFAS No. 131, the Company has
determined that it does not have separately reportable operating segments.
In March 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position ("SOP") No. 98-1, "Software for Internal Use,"
which provides guidance on accounting for the cost of computer software
developed or obtained for internal use. SOP No. 98-1 is effective for fiscal
years beginning after December 15, 1998. The adoption of SOP No. 98-1 did not
have a material impact on the Company's financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Company is required to adopt SFAS in
fiscal 2001. SFAS No. 133 established methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. To date, the Company has not entered into any
derivative financial instruments or hedging activities.
6
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BOLDER TECHNOLOGIES CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for the historical information contained herein, this report may contain
forward-looking statements that involve risks and uncertainties, including
manufacturing risks associated with implementing new process technology,
achieving commercial-scale manufacturing levels, achieving consistent yields and
quality, uncertainty of market acceptance and the timing of market acceptance,
as well as other risks discussed in our prospectus supplement dated November 8,
1999 to our prospectus dated September 17, 1999 and our Form 10-K for the period
ended December 31, 1998, each of which has been filed with the Securities and
Exchange Commission. These risks have materially and adversely affected, and may
in the future materially and adversely affect, the Company's results of
operations and the Company. Forward-looking statements are based on assumptions
of future events, some of which will not occur. Actual results may vary from
those set forth or implied in the forward-looking statements and the variances
may be material.
OVERVIEW
Since our inception in March 1991, we have been a development stage company,
principally engaged in the research and development of our TMF(R) battery
technology, to which we have devoted significant resources. In May 1997, we
moved to a new 127,000 square foot leased manufacturing facility and corporate
headquarters in Golden, Colorado. We believe this facility will accommodate
multiple production lines, two research and development ("R&D") lines, and all
of our other operations. In the third quarter of 1997, we installed our first
high-volume manufacturing line, designed to annually produce approximately four
million 1 Ah cells (previously referred to as our sub-C cell). For approximately
the next year, we focused most of our resources on qualifying the line for
commercial production. In the fourth quarter of 1998, we qualified our
production line and introduced our 1 Ah cell, which can be a modular building
block for various battery packs. We are currently producing an average of 20,000
to 25,000 1 Ah cells per week, substantially all of which are for the
manufacture of SECURESTART(TM) and the balance of which are for sampling to
limited OEM customers.
Upon qualifying the production line and introducing our 1 Ah cell, our focus
shifted to the design, manufacture, and introduction of products based on our
TMF technology. On August 5, 1999, we introduced SECURESTART(TM), an instant
engine starter which employs our TMF technology and, specifically, the 1 Ah
cell. In August 1999, we entered into an agreement with Sears, Roebuck to supply
SECURESTART(TM) to approximately 2,000 Sears' stores. We began commercial
shipments of SECURESTART(TM) in October 1999 and have shipped over 10,000
SECURESTART(TM) units to date, substantially all on consignment. SECURESTART(TM)
is currently available in Sears stores and Orchard Supply Hardware stores, as
well as through the Sears Craftsman holiday catalog and the Neiman Marcus
catalog. We believe that the majority of our near-term revenues will be
generated from sales of SECURESTART(TM).
We are working with potential OEM customers who are testing and evaluating our
TMF batteries for potential design into their products.
We believe that the task of improving the yield of our first production line,
the efficiency of the overall manufacturing process and the performance of our
TMF products will be an ongoing activity. Additional modifications will be
required from time to time to improve the production capability of our
production line. Similarly, changes in the design of our products will be
required from time to time in order to improve product performance.
In June 1995, we established a joint venture with JCI (the "Joint Venture") to
develop high-volume manufacturing technology for TMF batteries, manufacture TMF
batteries for sale by both JCI and ourselves, and pursue hybrid
7
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electric vehicle battery development opportunities for TMF batteries. In 1997,
having substantially completed the primary objective of developing the
high-volume manufacturing technology, the Joint Venture was terminated and we
entered into a new relationship with JCI. Under the new relationship, JCI and we
are separately developing TMF battery-manufacturing facilities. We granted
royalty-bearing licenses to JCI, certain of which are subject to minimum
royalties and minimum performance criteria. These licenses give JCI the sole and
exclusive right to sell TMF batteries for use as primary starting batteries in
automobiles and trucks until July 2001. We have also entered into a cross supply
agreement with JCI pursuant to which each of us has committed to supply the
other with minimum quantities of TMF battery products for several years.
The Company believes that its results of operations to date are not necessarily
indicative of results in future periods. Future operating results may be
affected by a wide range of factors and may fluctuate significantly from period
to period.
RESULTS OF OPERATIONS
As the Company transitions from primarily development activities to
manufacturing and sales activities, the classification of certain costs have
changed or will change in the Company's statement of operations. For example,
activities which were previously performed in support of the Company's research
and development ("R&D") efforts (and therefore classified as R&D expense) now
support the Company's manufacturing efforts and are classified as cost of
revenues. Additionally, because the Company's production volume of batteries and
other products is not yet sufficient to allow absorption of the manufacturing
overhead, the Company has incurred a loss on gross margin, which can be expected
to continue until production volumes are at significantly higher levels.
Revenues from product sales increased to $20,803 and $91,485 for the three- and
nine-months ended September 30, 1999, respectively, from $11,824 and $43,905 for
the same periods in 1998. Product sales are small and are expected to remain
small until significant shipments of SECURESTART(TM), the instant engine starter
product, have been completed to Sears and have been sold by Sears. Since the
year to date shipments to Sears are on consignment, BOLDER will recognize
revenues based on sales of SECURESTART(TM) by Sears to its customers.
R&D services revenues declined to $35,001 and $134,326 for the three- and
nine-months ended September 30, 1999, respectively, from $672,267 and $1,753,212
for the same periods in 1998. The three- and nine-months ended September 30,
1998 included $524,000 and $1,224,000 of R&D services revenues, respectively,
recognized by BOLDER for services provided in connection with its technology
transfer arrangement with JCI, which was completed at the end of 1998. R&D
services revenues from a customer-funded product development program decreased
to zero and $29,000 for the three- and nine-month periods ended September 30,
1999, respectively, from $74,000 and $308,000 for the same periods in the prior
year. This program was completed in the first quarter 1999. The Company
considers R&D services revenues as insignificant to the future of the business.
Cost of revenues increased to $1,413,901 and $1,609,040 from $71,184 and
$274,710 for the three- and nine-month periods ended September 30, 1999 and
1998, respectively. Certain production line functions and associated expenses
that were previously related to R&D activities in the third quarter 1998 became
substantially involved during the third quarter 1999 in supporting the
commercial manufacture of the 1 Ah cell. The 1 Ah cells produced in the third
quarter 1999 were primarily used for assembly into SECURESTART(TM) units, which
were shipped on a consignment basis and are classified at September 30, 1999 as
inventory.
R&D expenses decreased to $1,190,486 from $1,825,302 for the three-month periods
ended September 30, 1999 and 1998, respectively. The decrease was due to the
change in classification of certain production line functions and associated
expenses from R&D expenses to cost of revenues. Of the $1,825,302 of R&D
expenses for the three-month period ended September 30, 1998, only $966,661
would have been treated as R&D expenses were they incurred in the three-month
period ended September 30, 1999. The increase in R&D expenses for the
three-month period ended September 30, 1999, compared to the expenses in the
three-month period ended September 30, 1998 that would have been treated as R&D
expenses were they incurred in the three-month period ended September 30, 1999,
was primarily due to additional technical staff and related expenses.
8
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R&D expenses increased to $5,509,059 from $5,437,694 for the nine-month periods
ended September 30, 1999 and 1998, respectively. The decrease in the 1999 third
quarter noted above was more than offset by increases in the first two quarters
of 1999 compared to 1998. The increases in the first half of 1999 compared to
1998 were primarily due to additional technical staff and associated expenses,
as well as new manufacturing, facility, and production line expenses related to
the Company's efforts to provide high-volume production capability in support of
the Company's commercialization efforts.
General and administrative expenses increased modestly to $914,904 and
$2,610,562 for the three- and nine-month periods ended September 30, 1999,
respectively, from $913,887 and $2,595,587 for the same periods in the prior
year. Most of the increase in 1999 resulted from small increases in legal fees
and insurance compared to the prior year.
Selling and marketing expenses increased to $652,193 and $1,585,470 for the
three- and nine-month periods ended September 30, 1999, respectively, from
$207,365 and $415,385 for the same periods in the prior year. The increases in
1999 were primarily due to increased staffing levels and business development
activities associated with the commercial introduction of the Company's
products.
Interest income decreased to $142,399 from $226,623 for the three-month periods
ended September 30, 1999 and 1998, respectively. For the nine-month periods
ended September 30, 1999 and 1998, respectively, interest income decreased to
$351,827 from $733,408. The decreases were due to smaller average invested cash
balances in 1999 than in 1998.
Interest expense decreased to $334,191 from $372,308 for the three-month periods
ended September 30, 1999 and 1998, respectively. The decrease in 1999 was due to
lower average debt balances in the 1999 period than in the prior year period.
For the nine months ended September 30, 1999 and 1998, respectively, interest
expense increased to $1,013,945 from $985,830. The increase in 1999 was due to
higher average debt balances in the first quarter 1999 as compared to the prior
year quarter, which more than offset lower debt balances in the 1999 second and
third quarters compared to the prior period.
LIQUIDITY AND CAPITAL RESOURCES
From our inception, we have financed our operations and met our capital
requirements primarily through private and public offerings of our equity
securities, raising net proceeds of approximately $65 million from sales of
these securities. Included in this amount are net proceeds of approximately
$12.8 million received from private offerings of equity securities on May
18,1999 and July 9, 1999. In 1997 and 1998, we received net proceeds of
approximately $12.3 million from a loan agreement with Transamerica Business
Credit Corporation ("TBCC"). The remaining loan balance was approximately $9.2
million as of September 30, 1999. At September 30, 1999, our balances of cash,
cash equivalents, and available-for-sale securities totaled approximately $9.6
million, compared to approximately $11.1 million at December 31, 1998. We
anticipate that we will complete an underwritten public offering of 2.2 million
shares of our common stock on November 15, 1999. We will receive estimated net
proceeds of $18.4 million upon completion of the offering. We have granted the
underwriters an over-allotment option, exercisable up to 45 days from November
8, 1999, to purchase up to a maximum of 330,000 additional shares of common
stock to cover over-allotments made in connection with the offering.
If the offering is completed, we expect to have adequate capital resources
through at least December 2000. If the offering is not completed, we expect to
have adequate capital resources through the first quarter of 2000. We will
require substantial capital resources in the future. We have no additional
availability under the TBCC loan agreement or other capital resources. Our
inability to obtain required capital resources when needed would have a material
adverse effect on our business, results of operations and financial condition.
9
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YEAR 2000
We rely on software in our information systems and manufacturing equipment, most
of which was installed and written within the past three years. We have
completed an inventory of our critical control systems, computers and
application software, and have validated our internal systems for Year 2000
compliance. The validation of our internal systems was implemented through a
combination of written vendor confirmations and specific validation testing. We
have tested our equipment and software and found it to be Year 2000 compliant,
applied supplier fixes or replaced the equipment. In addition, we have
implemented processes to identify and evaluate the Year 2000 status of newly
acquired equipment and to evaluate supplier and customer Year 2000 compliance.
These programs will continue through the end of 1999. The cost of testing and
validation is not expected to exceed $50,000, including consulting and internal
resources.
Due to the fact that our information and embedded systems are new, generally
off-the-shelf, and vendor relationships still exist for the subject equipment
and software, Year 2000 remediation costs have been minimal and are expected to
remain so. We have replaced relatively low-cost personal computers and installed
low or no-cost bug-fixes from manufacturers of equipment and software. These
costs, including hardware replacements accelerated by the Year 2000 situation,
and other contingency plan activities are not expected to exceed $40,000.
The remaining risks of Year 2000 issues are primarily external, due to the
difficulty of validating key third parties' readiness for Year 2000 issues. We
have sought confirmation of such compliance and seek relationships with third
parties that are compliant. However, even if we obtain Year 2000 compliance
assurances from third parties, there is still a risk that a major supplier of
raw materials or an OEM customer could become unreliable due to Year 2000
problems. Therefore, we intend to maintain contingency plans for each of these
key relationships as they arise, such as second sourcing, purchasing additional
inventory and creating joint contingency plans for Year 2000 situations with
each relationship.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable because the Company has only fixed rate debt and no derivatives.
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BOLDER TECHNOLOGIES CORPORATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In September 1999, Century Mfg. Co., an affiliate of Pentair, Inc.
filed a complaint against us in the United States District Court for
the District of Minnesota. Century manufactures a line of portable
power and jump starting products and held discussions with us in 1996
regarding the possible incorporation of our TMF batteries into its
potential products. Century alleges that the concept of using a
charging battery to charge and prolong the shelf life of our TMF cells
in a jump starting product is proprietary to Century and that, among
other things, we have misappropriated Century's trade secrets and
breached a confidentiality agreement in producing and manufacturing
SECURESTART. The complaint seeks injunctive relief and unspecified
damages.
In October 1999, the Federal District Court Judge hearing the case
denied Century's request for a preliminary injunction, stating that
Century had not shown either a probability of prevailing on the merits
or irrevocable injury, both of which must be established to obtain a
preliminary injunction. This determination does not dispose of the
case, which remains pending trial. We believe that Century's claims are
without merit and intend to defend against them vigorously.
Century informed us that it has a United States patent application
pending in which certain claims have been allowed that cover the
SECURESTART product. If the patent claims have indeed been allowed, the
patent will issue, possibly as early as November 1999. Because patent
applications are maintained in secrecy by the United States Patent
Office pending issuance and because Century refuses to provide copies
of any portion of its purported patent application, we are not
currently able to fully evaluate Century's patent position or its
effect on us.
Defending against Century's claims, with or without merit, could be
time consuming and result in costly litigation. An adverse outcome in
the Century litigation or a valid patent infringed by SECURESTART(TM)
could have a material adverse effect on our business, results of
operations and financial condition.
ITEM 2. CHANGES IN SECURITIES.
In July 1999, the Company issued 763,215 shares of common stock in a
private placement to a group of unaffiliated, accredited investors at a
price per share of $7.00, payable in cash. The sale and issuance of
these shares were exempt from registration pursuant to Rule 506 of
Regulation D promulgated under the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
11
<PAGE> 12
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBIT DESCRIPTIONS OF DOCUMENTS
27 -- Financial Data Schedule.
(b) There were no reports on Form 8-K for the three months ended
September 30, 1999.
12
<PAGE> 13
BOLDER TECHNOLOGIES CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has caused this report to be signed in its behalf by the undersigned
thereunto duly authorized.
BOLDER Technologies Corporation
Date: November 12, 1999 By: /s/ Daniel S. Lankford
------------------------- ----------------------------------------
Daniel S. Lankford
Chairman of the Board
By: /s/ Joseph F. Fojtasek
----------------------------------------
Joseph F. Fojtasek
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
13
<PAGE> 14
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTIONS OF DOCUMENTS
- ----------- -------------------------
27 -- Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,616,506
<SECURITIES> 4,005,598
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,332,334
<CURRENT-ASSETS> 11,396,297
<PP&E> 25,763,892
<DEPRECIATION> (3,301,693)
<TOTAL-ASSETS> 34,418,620
<CURRENT-LIABILITIES> 5,616,283
<BONDS> 9,217,252
0
16,538,395
<COMMON> 11,907
<OTHER-SE> 4,959,529
<TOTAL-LIABILITY-AND-EQUITY> 34,418,620
<SALES> 20,803
<TOTAL-REVENUES> 55,804
<CGS> 1,413,901
<TOTAL-COSTS> 1,413,901
<OTHER-EXPENSES> 2,757,583
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (334,191)
<INCOME-PRETAX> (4,307,472)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,307,472)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,307,472)
<EPS-BASIC> (.40)
<EPS-DILUTED> (.40)
</TABLE>
