<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTER ENDED: MARCH 31, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number: 0-28556
---------------------------
BOREALIS TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 88-0238203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4070 Silver Sage Drive
Carson City, NV 89701
(address of principal executive offices)
Registrant's telephone number, including area code: (702) 888-3200
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 ("Common Stock"), as of the latest practicable date.
CLASS OUTSTANDING AT
Common Stock - par value $0.001 March 31, 1997: 3,184,506
<PAGE> 2
BOREALIS TECHNOLOGY CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited):
Condensed Balance Sheets
December 31, 1996 and March 31, 1997 (unaudited) 3
Condensed Statements of Operations (unaudited)
three months ended March 31, 1996 and 1997 4
Condensed Statements of Cash Flows (unaudited)
three months ended March 31, 1996 and 1997 5
Notes to Condensed Financial Statements (unaudited) 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Risk Factors 9
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 12
</TABLE>
Page 2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
BOREALIS TECHNOLOGY CORPORATION
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,921,506 $ 1,837,105
Accounts receivable 2,000 --
Other current assets 136,073 868,217
------------ ------------
Total current assets 4,059,579 2,705,322
Property and equipment, net 856,653 955,228
Long term investment 650,000 --
Other assets 40,850 46,708
------------ ------------
Total assets $ 5,607,082 $ 3,707,258
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 258,377 $ 212,555
Accrued employee compensation 298,492 321,526
Promissory note -- 650,000
Other current liabilities 320,739 335,647
------------ ------------
Total current liabilities 877,608 1,519,728
Long-term obligations 738,800 59,735
------------ ------------
Total liabilities 1,616,408 1,579,463
------------ ------------
Stockholders' equity:
Preferred stock, $.001 par value:
Authorized shares - 5,000,000
Issued and outstanding - none
Common stock, $.001 par value:
Authorized shares - 10,000,000
Issued and outstanding shares - 3,184,506
at December 31, 1996, and March 31, 1997 3,185 3,185
Additional paid-in capital 10,777,241 10,825,421
Accumulated deficit (6,789,752) (8,700,811)
------------ ------------
Total stockholders' equity 3,990,674 2,127,795
------------ ------------
Total liabilities and stockholders' equity $ 5,607,082 $ 3,707,258
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
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BOREALIS TECHNOLOGY CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1997
---- ----
<S> <C> <C>
Total revenues $ 90,586 $ 22,349
Cost of revenues 33,524 11,020
--------- -----------
Gross profit 57,062 11,329
Operating expenses:
Sales and marketing 178,493 816,586
Research and development 333,648 617,509
General and administrative 173,831 506,403
--------- -----------
Total operating expenses 685,972 1,940,498
--------- -----------
Loss from operations (628,910) (1,929,169)
Interest income (expense), net (17,306) 18,110
--------- -----------
Net loss $(646,216) $(1,911,059)
========= ===========
Net loss per common and
common share equivalent $ (0.69) $ (0.60)
========= ===========
Weighted average common and common
equivalent shares outstanding 931,758 3,184,506
========= ===========
</TABLE>
See accompanying notes to condensed financial statements.
Page 4
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BOREALIS TECHNOLOGY CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1996 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(646,216) $(1,911,059)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 15,954 80,511
Compensation expense related to
stock options -- 48,180
Changes in assets and liabilities:
Accounts receivable 8,388 2,000
Other assets (150) (88,002)
Accounts payable 90,383 (45,822)
Other liabilities 53,312 73,743
--------- -----------
Net cash used in operating activities (478,329) (1,840,449)
INVESTING ACTIVITIES
Purchases of property and equipment (16,645) (179,086)
--------- -----------
Net cash used in investing activities (16,645) (179,086)
FINANCING ACTIVITIES
Payments under capital lease obligations (22,102) (64,866)
Proceeds from issuance of convertible promissory notes 675,570 --
--------- -----------
Net cash (used in) provided by financing activities 653,468 (64,866)
--------- -----------
Net increase (decrease) in cash and cash equivalents 158,494 (2,084,401)
Cash and cash equivalents at beginning of period 158,840 3,921,506
--------- -----------
Cash and cash equivalents at end of period $ 317,334 $ 1,837,105
========= ===========
</TABLE>
See accompanying notes to condensed financial statements.
Page 5
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BOREALIS TECHNOLOGY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. For further information, refer to the 1996 financial
statements and footnotes thereto included in the Company's 10-KSB filed with the
Securities and Exchange Commission.
NOTE B - LOSS PER COMMON SHARE
Loss per share was computed by dividing the net loss by the weighted average
number of shares of common stock outstanding. Common stock equivalents from
stock options and warrants are excluded from the computation because their
effect is anti-dilutive. The weighted average number of shares of common stock
and common stock equivalents has been computed in accordance with Securities and
Exchange Commission's Staff Accounting Bulletin No. 83, pursuant to which "cheap
stock," as defined, is considered outstanding even if the effect is
anti-dilutive. Fully diluted earnings per share are considered equal to primary
earnings per share in all periods presented.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. A restatement of prior periods will not be necessary as common
equivalent shares from common stock options and warrants have been excluded
from the computation of net loss per share because their effect is
antidilutive. The impact of Statement 128 on the calculation of fully diluted
"earnings per share" for these quarters is not expected to be material.
Page 6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussions and analyses contain forward-looking
statements regarding future events and the future financial performance of
Borealis Technology Corporation (the "Company") that involve risks and
uncertainties including, but not limited to, statements related to the market
acceptance of Arsenal and the adequacy of the Company's cash reserves. The
Company's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth herein under "Risk Factors" and elsewhere in the report.
The Company has experienced a significant decrease in revenues
and significant operating losses for the three month period ended March 31,
1997. In mid 1995, the Company ceased sales and marketing of its entire product
line and shifted its focus to the development of Arsenal and the establishment
of a third party integrator channel. The Company's revenues in past periods have
been generated almost entirely from the sale of consulting services and products
which the Company no longer sells and are not meaningful in predicting future
performance. Although the Company continues to provide product support for the
products it no longer sells, this activity is not expected to be meaningful to
future operating results. Due to the shift to the development and sale of
Arsenal, the Company will derive substantially all of its revenues from
licensing Arsenal as well as maintenance contracts for Arsenal.
The Company's future operating results will depend on many
factors, including demand for the Company's Arsenal product, which has only
recently been introduced, the level of product and price competition, the
ability of the Company to develop and market new products and to control costs,
the ability of the Company to expand its direct sales force and indirect
distribution channels and the ability of the Company to attract and retain key
personnel. In particular, the ability of the Company to achieve revenue growth
in the future will depend on its success in adding a substantial number of
direct sales personnel and in attracting third party integrators in 1997 and
future periods. Competition for such personnel is intense, and there can be no
assurance that the Company can retain its existing sales personnel or that it
can attract, assimilate or retain additional highly qualified sales personnel in
the future. Further, the Company believes, based on interactions with its
customers and potential customers, that the purchase of its products is
relatively discretionary and generally involves a significant commitment of
capital. As a result, in the event of any downturn in any potential customer's
business or the economy in general, purchases of the Company's products may be
deferred or canceled, which could have a material adverse effect on the
Company's business, results of operations and financial condition.
The Company has generally recognized product license revenues not
subject to significant future obligations upon execution of a licensing
agreement and delivery of the software and when collection is deemed probable.
Services revenues are recognized as services are performed while maintenance
revenues are recognized ratably over the term of the support period.
REVENUES:
Net revenues historically have primarily consisted of revenue
from the licensing and sale of products, revenue from service and maintenance
agreements and revenue from consulting services. Net revenues decreased from
$90,586 for the three months ended March 31, 1996 to $22,349 for the three
months ended March 31, 1997. This decrease was the result of the cessation of
sales of the Company's previous products. The majority of the revenues in the
three months ended March 31, 1997 are attributable to the recognition of revenue
related to maintenance contracts, and are not indicative of any new product
sales. The Company anticipates that revenues will continue to decrease until the
Company begins to recognize revenues from sales of Arsenal.
COST OF REVENUES:
Cost of revenues represents primarily amounts incurred pursuant
to royalty obligations and maintenance agreements on certain technology. The
cost of revenues decreased from $33,524 to $11,020 during the three months
ended March 31, 1996 and 1997, respectively, primarily due to the cessation of
sales of the Company's previous products. The Company believes that the ratio of
cost of revenues to revenues is not meaningful in this period or indicative of
future results.
Page 7
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OPERATING EXPENSES:
Total operating expenses, which are comprised of sales and
marketing, research and development, and general and administrative expenses
increased from $685,972 to $1,940,498 during the three months ended March 31,
1996 and 1997, respectively. Sales and marketing expenses increased from
$178,493 to $816,586 between the three months ended March 31, 1996 and 1997,
respectively. This increase was the result of increased staffing as well as
costs associated with the Company's attendance at trade shows, print advertising
and public relations. Research and development expenses increased from $333,648
to $617,509 during the three months ended March 31, 1996 and 1997, respectively.
This increase was the result of additional staffing and expenditures related to
the development of Arsenal. General and administrative expenses increased from
$173,831 to $506,403 during the three months ended March 31, 1996 and 1997,
respectively. This increase was due primarily to increased staffing. The Company
anticipates that total operating expenses will continue to increase for the
foreseeable future as the Company: (i) expands its sales and marketing functions
in order to facilitate the market acceptance and sales of Arsenal; (ii) expands
its technical services organization to support customer needs, if and when the
Company realizes sales from Arsenal; (iii) adds additional software engineers to
fund the development of enhancements to Arsenal and to develop new products.
LIQUIDITY AND CAPITAL RESOURCES
In June 1996, the Company completed an initial public offering of
2,000,000 shares of Common Stock. In July 1996, the Company completed the public
sale of an additional 291,050 shares of Common Stock pursuant to the exercise of
an over-allotment option granted by the Company to the Underwriter of the
Company's initial public offering. As a result of these sales, the Company
recorded proceeds of $9.6 million, net of related underwriting discounts and
offering expenses. The Company has invested the proceeds from these sales in
investment grade, interest-bearing securities, and has not invested in any
derivative securities or other financial instruments that involve a high level
of risk.
The Company's cash and short-term investments totaled $2.5
million at March 31, 1997, representing 67% of total assets. The Company used
$1.8 million of cash to fund operations for the first quarter of 1997. Net cash
used in operating activities was primarily for the development, sales and
marketing costs associated with Arsenal. The Company's principal investing
activities consisted of expenditures for computers, computer related equipment,
office furniture and leasehold improvements associated with a new office
facility the Company began occupying in February 1997. Financing activities for
the three months ended March 31, 1997 consisted of scheduled lease payments.
The Company's future capital requirements will depend upon many
factors, including the amount of revenues generated from operations, the cost of
the Company's sales and marketing activities and the progress of the Company's
research and development activities, none of which can be predicted with
certainty. The Company anticipates that its existing capital resources and cash
generated from operations, if any, will be sufficient to meet the Company's cash
requirements only through the end of June 1997 at its anticipated level of
operations. As a result, the Company is presently seeking funding. There can be
no assurance that any additional financing will be available on acceptable
terms, or at all, when required by the Company. Moreover, if additional
financing is not available, the Company could be required to reduce or suspend
its operations, seek an acquisition partner or sell securities on terms that may
be highly dilutive or otherwise disadvantageous to investors. The Company has in
the past, and may continue to experience, operational difficulties and delays in
its product development due to working capital constraints. Any such
difficulties or delays could have a material adverse effect on the Company's
business, financial condition and results of operations.
Page 8
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RISK FACTORS
Going Concern Assumption; Future Capital Needs; No assurance of Future
Financing
The Company's independent auditors' report on the Company's
financial statements at December 31, 1996 and for the years ended December 31,
1995 and 1996 contains an explanatory paragraph indicating that the Company had
recurring operating losses that raise substantial doubt about its ability to
continue as a going concern. In addition, the Company had an accumulated deficit
of $8,700,811 at March 31, 1997. The Company currently requires substantial
additional funds and there can be no assurance that any independent auditor's
report on the Company's future financial statements will not include a similar
explanatory paragraph if the Company is unable to raise sufficient funds or
generate sufficient cash from operations to cover the cost of its operations.
The existence of the explanatory paragraph may materially adversely affect the
Company's relationship with prospective customers, third party integrators and
suppliers, and therefore could have a material adverse effect on the Company's
business financial condition and results of operations.
The Company's future capital requirements will depend upon many
factors, including the amount of revenues generated from operations, the cost of
the Company's sales and marketing activities and the progress of the Company's
research and development activities, none of which can be predicted with
certainty. The Company anticipates that its existing capital resources and cash
generated from operations, if any, will be sufficient to meet the Company's cash
requirements only through the end of June 1997 at its anticipated level of
operations. As a result, the Company is seeking additional funding. There can be
no assurance that any additional financing will be available on acceptable
terms, or at all, when required by the Company. Moreover, if additional
financing is not available, the Company could be required to reduce or suspend
its operations, seek an acquisition partner or sell securities on terms that may
be highly dilutive or otherwise disadvantageous to investors. The Company has in
the past, and may continue to experience, operational difficulties and delays in
its product development due to working capital constraints. Any such
difficulties or delays could have a material adverse effect on the Company's
business, financial condition and results of operations.
Complete Dependence on Recent Product Introduction
The Company commenced sales of Arsenal, currently the Company's
only product, in April 1997. As a result, the Company will derive substantially
all of its revenues from the sale of Arsenal licenses and maintenance contracts
for Arsenal. Consequently, the Company will depend entirely on the successful
introduction and commercial acceptance of Arsenal. Unless and until arsenal
receives market acceptance the Company will have no material source of revenue.
There can be no assurance that Arsenal will achieve market acceptance. The
Company's ability to effectuate the introduction of Arsenal will be
substantially dependent on the hiring and training of additional personnel and
there can be no assurance that the Company will be able to successfully hire and
train such personnel. Although the Company has begun to establish distribution
channels for Arsenal, commercial acceptance of Arsenal will require the Company
to successfully establish additional sales and distribution channels, of which
there can be no assurance. Any such failure will have a material adverse effect
on the Company's business, financial condition and results of operations.
Failure of Arsenal to achieve significant market acceptance and for the Company
to achieve profitability will have a material adverse effect on the Company's
business, financial condition and results of operations.
Need to Fill Key Executive Positions; Dependence on Limited Number of Key
Personnel
In January 1997, Curtis Faith, the Company's founder and then
President, Chief Executive Officer and Chairman of the board resigned from the
positions of President and Chief Executive Officer, retaining his role as the
Company's Chairman. Consequently, the Company is presently seeking to hire an
individual to serve as its Chief Executive Officer. Peter Pitsker, a member of
the Company's Board of Directors, is currently serving as the Company's Interim
President and Chief Operating officer. In addition, in May 1997, the Company's
Vice President of Sales resigned from that position and is now managing the
Company's strategic partnership program. As a result the Company is also seeking
to hire a new Vice President of Sales.
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There can be no assurance that the Company will timely locate and hire either a
new Chief Executive Officer or Vice President of Sales, if at all, or that any
such new Chief Executive Officer or Vice President of Sales will possess the
leadership and other skills to effectively manage the Company. Highly
skilled candidates are in great demand and the Company will be required to
provide substantial compensation to any new Chief Executive Officer and Vice
President of Sales and, any failure by the Company to timely find and hire
either of these positions will have a material adverse effect on the Company's
business, financial condition and results of operations.
In addition, the Company's future success substantially depends
on the efforts of certain of its officers and key technical and other employees,
many of whom have only recently joined the Company. The Company's future success
will require it to recruit additional key personnel, in addition to a Chief
Executive Officer and a Vice President of Sales, including sales and marketing
personnel, product support personnel, and product development personnel. The
Company has not entered into employment agreements nor does it have key man life
insurance. The Company believes that its future success also substantially
depends on its ability to attract, retain and motivate highly skilled employees,
who are in great demand. There can be no assurance that the Company will be
successful in doing so.
Dependence on Systems Integrators and Third Party Consultants
Sales automation software products that address the needs of
medium- to large-size businesses are typically highly complex and require
significant customization that often results in an extensive implementation
process. The Company's strategy for implementing Arsenal is dependent on the
utilization of third-party integrators to install, customize and service the
product. Consequently, third-party integrators are required to undergo a
substantial amount of training to be able to apply the Company's products to the
varied needs of the Company's current and prospective customers. There can be no
assurance that the Company's training will be sufficient or that such
integrators will be able to provide the level or quality of service required to
meet the needs of the Company's current and prospective customers. The Company
will likely be dependent on third-party integrators to complete certain
post-delivery obligations prior to the Company's recognition of revenue. Any
failure of such integrators to complete such obligations could prevent the
Company from recognizing revenue and the failure to so recognize revenue could
have a material adverse effect on the Company's business, financial condition
and results of operations. If the Company is unable to maintain effective,
long-term relationships with these integrators, or if such integrators fail to
meet the needs of the Company's current and prospective customers in a timely
fashion, or at all, such failure would result in a loss of, or delay in, market
acceptance or sales and could result in increased product support costs and an
injury to the Company's reputation, which would have a material adverse effect
on the Company's business, financial condition and results of operations.
In addition, the Company uses its third-party integrators as a
source for sales leads and, to some extent as part of its sales and distribution
channels. To the Company's knowledge, such use of third-party integrators by
other companies has been limited and there can be no assurance that such
third-party integrators will contribute meaningfully to the Company's sales
efforts.
The Company has not and does not plan to enter into or maintain
exclusive relationships with third-party integrators and, consequently, such
integrators may have existing relationships with, or may undertake new
relationships with, the Company's direct competitors. There can be no assurance
that such integrators will promote Arsenal effectively, or at all. The failure
of the Company to provide sufficient incentive for such integrators will
materially and adversely affect the Company's sales of Arsenal which will have a
material adverse effect on the Company's business, financial condition and
results of operations.
Recent Losses; Quarterly Fluctuations in Performance
The Company has experienced significant operating losses in each
of fiscal 1994, 1995, 1996 and for the three months ended March 31, 1997 and
expects to incur significant operating losses for the foreseeable future. In mid
1995, the Company ceased sales and marketing of its entire product line and
shifted its focus to the development of Arsenal and the establishment of a
third-party integrator channel. As a result, the Company will derive
substantially all of its revenues, from the sale of licenses and
maintenance contracts for Arsenal. There can be no assurance that the Company
will ever achieve profitability.
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In the past, the Company experienced significant fluctuations in
its quarterly operating results, and it anticipates that such fluctuations will
continue and could intensify in the future. In addition, the price of the
Company's Common Stock has fluctuated significantly since the Company's initial
public offering and is expected to continue to do so. Fluctuations in operating
results may contribute to volatility in the price of the Company's Common Stock.
Operating results may fluctuate as a result of many factors, including volume
and timing of orders received, the extent to which the Company is required to
establish and support a third-party integrator channel or hire additional sales
personnel to supplement such channel, announcements by the Company and its
competitors, the timing of commercial introduction of enhancements or
competitive products, the impact of price competition on the Company's average
selling prices, and the level of research and development required to
complete any future product enhancements. Almost all of these factors are beyond
the Company's control. In addition, due to the short product life cycles that
characterize the sales automation software market, the Company's failure to
introduce any Arsenal enhancements in a timely manner will have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company's operating and other expenses are relatively fixed
in the short term. As a result, variations in the timing of revenues will cause
significant variations in quarterly operating results. Notwithstanding the
difficulty in forecasting future sales, the Company generally must undertake its
development, sales and marketing activities and other commitments months in
advance. Accordingly, any shortfall in revenues in a given quarter may
materially adversely affect the Company's business, financial condition and
results of operations due to the inability to adjust expenses during the quarter
to match the level of revenues for the quarter. Once commitments for such
expenditures are undertaken, the Company may be unable to reduce them quickly if
revenue is less than expected. In addition, the Company's sales expectations are
based entirely on its internal estimates of future demand. Due to these and
other factors, the Company believes that quarter-to-quarter comparisons of its
results of operations are not necessarily meaningful and should not be relied
upon as indications of future performance.
Rapid Technological Change; Risk of Product Delays or Defects
The sales automation software market is characterized by ongoing
technological developments, frequent new product announcements and
introductions, evolving industry standards and changing customer requirements.
The introduction of products embodying new technologies and the emergence of new
industry standards and practices can render existing products obsolete and
unmarketable. The Company's future success depends in large part upon its
ability to obtain market acceptance of Arsenal, develop enhancements to Arsenal
to address the changing requirements of its customers, educate third-party
integrators regarding Arsenal and anticipate or respond to technological
advances, competitive products and emerging industry standards and practices in
a timely, cost-effective manner. There can be no assurance that the Company will
be successful in marketing and supporting Arsenal or enhancements to Arsenal, if
any, or will not experience difficulties that could delay or prevent the
successful marketing and support of these products, or that Arsenal or any such
product enhancements will adequately meet the requirements of the marketplace
and achieve any significant degree of commercial acceptance. The Company has in
the past experienced delays in product development, including significant delays
in the development of Arsenal. Delays in enhancements to Arsenal, if any, may
result in customer dissatisfaction and delay or loss of product and maintenance
revenue. in addition, there can be no assurance that Arsenal or other future
products will meet the requirements of the marketplace or will conform to
industry standards and requirements.
Software products such as Arsenal often contain errors or "bugs"
that can adversely affect the performance of the product or damage a user's
data. As a result, such software defects can have a materially adverse effect on
the financial condition and operating results of the Company. The Company has in
the past discovered software defects in its past products that have materially
adversely affected its business, financial conditions and results of operations.
There can be no assurance that, despite testing by the Company and by potential
customers, errors will not be found in Arsenal, resulting in a loss of, or delay
in, market acceptance and sales, diversion of development resources, injury to
the Company's reputation, or increased service and warranty costs, any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2.1 (1) Agreement and Plan of Merger between Borealis
Corporation, a Nevada corporation, and Borealis
Technology Corporation, a Delaware corporation, dated
June 7, 1996.
3.1 (1) Registrant's Certificate of Incorporation, as currently
in effect.
3.2 (1) Registrant's Bylaws, as currently in effect.
10.1 (1) Real Property Lease between Registrant and Incline
Investors Group, dated June 15, 1995.
10.2 (1) Real Property Sublease between Registrant and U.S. Bank
of Nevada, dated November 7, 1995.
10.3 (1) 1994 Stock Plan.
10.4 (1) 1996 Stock Plan.
10.5 (1) 1996 Director Option Plan.
10.6 (1) Form of Indemnification Agreement.
10.7 (3) 1997 Employee Stock Purchase Plan.
10.8 (1) Asset License and Purchase Agreement between the
Registrant and Sales Technologies, Inc., dated April 15,
1994.
10.9 (1) Lease between the Registrant and DBB Holdings, Inc.,
dated June 11, 1996.
10.10(2) Promissory Note between the Registrant and US Bank dated
July 11, 1996.
27.1 Financial Data Schedule.
</TABLE>
-------------------------
(1) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form SB-2 which became effective on
June 20, 1996.
(2) Incorporated by reference to exhibits filed with Registrant's
Quarterly Report on Form 10-QSB filed August 13, 1996.
(3) Incorporated by reference to annex filed with the Registrant's
Proxy Statement on Schedule 14A filed in connection with
Registrant's Annual Meeting of Stockholders to be held on
May 27, 1997.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the quarter ended
March 31, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOREALIS TECHNOLOGY CORPORATION
Registrant
BY: /s/ Pete Pitsker
----------------------------
Pete Pitsker
President
Chief Operating Officer
Dated: March 15, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------ -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,837,105
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,705,322
<PP&E> 1,288,309
<DEPRECIATION> 333,081
<TOTAL-ASSETS> 3,707,258
<CURRENT-LIABILITIES> 1,519,728
<BONDS> 0
0
0
<COMMON> 3,185
<OTHER-SE> 2,124,610
<TOTAL-LIABILITY-AND-EQUITY> 3,707,258
<SALES> 0
<TOTAL-REVENUES> 22,349
<CGS> 0
<TOTAL-COSTS> 1,951,518
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,665
<INCOME-PRETAX> (1,911,059)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,929,168)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,911,059)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
