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As filed with the Securities and Exchange Commission on July 21, 1998
Registration No. 333-52983
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BOREALIS TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 88-0238203
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
4070 SILVER SAGE DRIVE
CARSON CITY, NEVADA 89701
(702) 888-3200
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
PATRICK GRADY
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN
BOREALIS TECHNOLOGY CORPORATION
4070 SILVER SAGE DRIVE
CARSON CITY, NEVADA 89701
(702) 888-3200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copy to:
STEVEN E. BOCHNER
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement become effective.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
1,501,500 SHARES
BOREALIS TECHNOLOGY CORPORATION
COMMON STOCK
($0.001 PAR VALUE PER SHARE)
This Prospectus relates to 1,501,500 shares (the "Shares") of Common
Stock, $0.001 par value per share (the "Common Stock"), of Borealis Technology
Corporation, a Delaware corporation (the "Company"). The Shares may be offered
by certain shareholders of the Company (the "Selling Shareholders") from time to
time in transactions on the Nasdaq SmallCap Market, in privately negotiated
transactions or otherwise at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such market prices or at
negotiated prices. 500,500 of the Shares are issuable upon exercise of certain
warrants held by the Selling Shareholders (the "Warrants"). The Shares and the
Warrants were issued or will be issued in a private placement transaction exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to Section 4(2) thereof (the "Private
Offering"). See "Selling Shareholders" and "Plan of Distribution."
The Company will receive no part of the proceeds of sales made hereunder.
All expenses of registration incurred in connection with this offering are being
borne by the Company, but all selling and other expenses incurred by the Selling
Shareholders will be borne by such Selling Shareholders. The Company and the
Selling Shareholders have each agreed to indemnify each other against certain
liabilities, including certain liabilities under the Securities Act.
The Common Stock is traded on the Nasdaq SmallCap Market under the symbol
"BRLSC." On July 16, 1998, the closing price of the Common Stock on the Nasdaq
SmallCap Market was $1.1875.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
The Selling Shareholders and any broker executing selling orders on behalf
of the Selling Shareholders may be deemed to be underwriters within the meaning
of the Securities Act. Commissions received by any such broker may be deemed to
be underwriting commissions under the Securities Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 20, 1998.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY SELLING SHAREHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE
SHARES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON
TO MAKE SUCH OFFER, SOLICITATION OR SALE. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational reporting 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 can be inspected and copied at the Public
Reference Room of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's regional offices at Seven World Trade Center, 13th
Floor, New York, New York, 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding issuers such as the Company that file electronically with the
Commission at www.sec.gov.
The Company has filed with the Commission a Registration Statement (which
term shall include all amendments, exhibits and schedules thereto) on Form S-3
under the Securities Act, with respect to the Shares offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and to which reference is hereby made. Statements
made in this Prospectus as to the contents of any document referred to are not
necessarily complete. With respect to each such document filed as an exhibit to
the Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement may be
inspected at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W. Washington, D.C. 20549, at prescribed
rates or from the Commission's Web site at www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the
following documents and information heretofore filed with the Commission:
(1) the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997;
(2) the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998; and
(3) the description of the Company's Common Stock offered hereby
contained in the Company's Registration Statement on Form 8-A
dated June 11, 1996
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, after the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Prospectus and
to be part hereof from the date of filing such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for all purposes to the extent that a statement contained
in this Prospectus or in any other subsequently filed documents which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement contained herein shall be deemed to be modified or
superseded for all purposes to the extent that a statement contained in a
subsequently filed document which is deemed to be incorporated by reference
herein modifies or supersedes such statement.
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The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered, upon written or oral request of any
such person, a copy of any and all of the information that has been or may be
incorporated by reference in this Prospectus, other than exhibits to such
documents. Requests for such copies should be directed to the Company at 4070
Silver Sage Drive, Carson City, Nevada 89701, Attn: Chief Financial Officer The
Company's telephone number at that location is (702) 888-3200.
THE COMPANY
Businesses more and more have realized that collecting, retaining,
analyzing and disseminating customer information quickly and efficiently
throughout their organizations is important to attracting new and retaining
existing customers. At most companies, the closest point of contact between the
customer and the vendor is through field personnel, mobile employees who
historically have been the least connected to the flow of customer information.
Borealis provides a software solution that allows businesses to receive critical
customer information from various contact points, including field personnel, and
to disseminate that critical customer information across the business enterprise
to all users. Using the Company's Arsenal software, field personnel can input
critical customer information they gather into laptop computers and
"synchronize" the new data with a central information system for distribution to
other users. Corporate users in turn can distribute new customer information to
the field with Arsenal to provide field personnel with up-to-date customer
information. Arsenal allows any change in information to be quickly synchronized
and distributed across the business enterprise, allowing businesses to better
leverage their customer relationships.
The Company was incorporated in the State of Nevada in June 1988 and
reincorporated in the State of Delaware prior to the completion of its initial
public offering in June 1996. The Company's headquarters are located at 4070
Silver Sage Drive, Carson City, Nevada 89701, and its phone number is (702)
888-3200. The Common Stock of the Company is traded on the Nasdaq SmallCap
Market under the symbol BRLSC.
SUBSEQUENT EVENT
The Company was notified on May 18, 1998 by the Nasdaq SmallCap Market
that Nasdaq had determined to delist the Company's Common Stock effective with
the close of business on Thursday, May 21, 1998. The Company requested a hearing
in connection with this determination which was held on June 24, 1998. On May
21, 1998, the Company issued a press release announcing Nasdaq's determination
and separately announced that its cash and short-term investments as of May 15,
1998 totaled approximately $50,000, noting that, unless the Company obtained
funding or generated significant revenue in the very near future, it would
likely cease operations. Beginning in June 1998, the Company commenced a private
placement of Common Stock, raising, as of June 24, 1998, a total of $2,693,000
and issuing 2,693,000 shares of Common Stock. The $2,693,000 was raised at
closings occurring on June 3, 1998, June 4, 1998, June 5, 1998 and June 11,
1998. The Company did not use an underwriter in connection with the private
placement and sold the shares pursuant to Section 4(2) of the Securities Act to
investors that the Company reasonably believed were accredited within the
meaning of Regulation D promulgated under the Securities Act. On July 14, 1998,
the Company issued a press release announcing that, although the Company had
failed to meet certain Nasdaq requirements for continued listing, the Company's
Common Stock would continue to be listed on the Nasdaq SmallCap Market through
August 14, 1998 pursuant to an exception granted by Nasdaq. Continued listing
after August 14, 1998 will require that the Company comply with certain Nasdaq
requirements of which there can be no assurance.
RISK FACTORS
In addition to the other information contained in or incorporated by reference
in this Prospectus, each prospective investor should carefully consider the
following factors in evaluating the Company and its business before purchasing
the shares of Common Stock offered hereby. No investor should purchase such
shares unless such investor can afford a complete loss of his or her investment.
This Prospectus contains or incorporates by reference certain forward-looking
statements that involve risks and uncertainties. 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 in the
following risk factors and elsewhere in this Prospectus or the documents
incorporated by reference herein.
GOING CONCERN ASSUMPTION; FUTURE CAPITAL NEEDS UNCERTAIN; NO ASSURANCE OF FUTURE
FINANCING
The Company's cash and short-term investments as of May 15, 1998 totaled
approximately $50,000. In light of its cash position and historical cash
requirements, in the event the Company does not obtain funding in the very near
future, the Company will likely cease operations. In the absence of receiving
additional funding, 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 for the next few weeks at its anticipated level
of operations. The Company's future capital requirements will depend upon
numerous 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 intends to seek additional funding during the next
twelve months and will most likely seek additional funding after such time.
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 experienced 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 have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company's independent auditors' report on the Company's financial
statements at December 31, 1997 and for the years ended December 31, 1996 and
1997 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
$14,152,719 at December 31, 1997. The Company may require substantial additional
funds in the future,
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and there can be no assurance that any independent auditors' 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.
EXPECTED ILLIQUIDITY OF TRADING MARKET; PENNY STOCK
The Company's shares of Common Stock are quoted on the Nasdaq SmallCap
Market. As of March 31, 1998, the Company was out of compliance with the
standards for continued listing on the Nasdaq SmallCap Market. However, the
Nasdaq SmallCap Market has granted an exception allowing the Company's Common
Stock to continue to trade on such market through August 14, 1998. Nonetheless,
in order for the Common Stock to remain listed after such time, the Company will
need to comply with certain Nasdaq requirements. As a result, the Company's
shares of Common Stock will be subject to removal from the Nasdaq SmallCap
Market if the Company is unable to obtain additional financing or generate
sufficient revenue in the next several weeks to satisfy listing requirements. If
the Company is delisted, trading, if any, in the Common Stock would be conducted
in the over-the-counter market on an electronic bulletin board established for
securities that do not meet the Nasdaq SmallCap Market Listing requirements, or
in what are commonly referred to as the "pink sheets." As a result, an investor
would find it more difficult to dispose of, or to obtain accurate quotations as
to the price of the Company's Common Stock. In addition, if the Company's Common
Stock were removed from the Nasdaq SmallCap Market, the Common Stock would be
subject to so-called "penny stock" rules that impose additional sales practice
and market making requirements on broker-dealers who sell and/or make a market
in such securities. Consequently, removal from the Nasdaq SmallCap Market could
affect the ability or willingness of broker-dealers to sell and/or make a market
in the Common Stock and the ability of purchasers of the Company's Common Stock
to sell their securities in the secondary market.
COMPLETE DEPENDENCE ON RECENT PRODUCT INTRODUCTION
The Company derives substantially all of its revenues from the sale of
licenses and maintenance contracts for Arsenal. Consequently, the Company is
entirely dependent on the market 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 market acceptance and sales 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. Market acceptance of Arsenal will require the Company to
successfully hire and retain sales personnel in a timely manner, 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 will have a material adverse
effect on the Company's business, financial condition and results of operations.
RECENT HIRES OF KEY EXECUTIVES; NEED TO FILL KEY EXECUTIVE POSITION; DEPENDENCE
ON LIMITED NUMBER OF KEY PERSONNEL
The Company's Chairman of the Board assumed the positions of President and
Chief Executive Officer following the resignation of the Company's then
President and Chief Executive Officer in March 1998. 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. In particular, the Company's Senior Vice President of World Wide Sales
and Services and its Vice President of Business Development joined the Company
in November 1997 and the Company's Vice President of Engineering joined the
Company in February 1998. Additionally, the Company is currently seeking to hire
a Vice President of Marketing. The Company's future success will require it to
recruit additional key personnel, including additional sales and marketing
personnel. The Company has not entered into employment agreements nor does it
have key man life insurance. The Company believes that its future success
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 THIRD PARTY INTEGRATORS
Software products that address the customer relationship management needs
of medium- to large-size businesses are typically highly complex and require
significant customization that often results in an extensive implementation
process. The Company's strategy for implementing Arsenal is dependent on the
utilization of third-party integrators to install, customize and service it.
Consequently, third-party integrators are required to undergo 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
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the Company will be able to attract and retain personnel necessary to train such
integrators. In addition, 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 postdelivery 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 of 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.
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 may materially and
adversely affect the Company's sales of Arsenal which could 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 the
years beginning with 1994 and expects to incur significant operating losses for
the foreseeable future. The Company's sole product, Arsenal, is designed for the
customer relationship management market. As a result, the Company will derive
substantially all of its revenues from the sales of licenses and maintenance
contracts for Arsenal. There can be no assurance that Arsenal will ever achieve
significant market acceptance or that the Company will ever achieve
profitability.
The Company's operating and other expenses are relatively fixed in the
short term. As a result, variation in the timing of revenues will cause
significant variations in quarterly operating results. Notwithstanding the
difficulty in forecasting future sales, 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.
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 sale personnel to supplement such channel, announcements by the
Company and its competitors, the timing of commercial introduction of
enhancements to Arsenal, if any, 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 customer resource management software
market, the Company's failure to introduce any Arsenal enhancements in a timely
manner could have a material adverse effect on the Company's business, financial
condition and results of operations.
RAPID TECHNOLOGICAL CHANGE; RISK OF PRODUCT DELAYS OR DEFECTS
The customer relationship management software market is characterized by
ongoing technological developments, frequent new product announcements and
introductions, evolving industry standards and changing 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 in a timely,
cost-effective manner. There can be no assurance that the Company will be
successful in marketing
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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 and 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 revenues.
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. Any delays in the development or introduction of
enhancements to Arsenal or failure to respond to market requirements could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Software products such as Arsenal often contain errors or "bugs" that can
adversely affect the performance of the product or damage a user's data. There
can be no assurance that, despite testing by the Company and by potential
customers, errors will not be found in Arsenal, or any new versions of 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.
COMPETITION
The customer relationship management software market is
highly-competitive, highly-fragmented and characterized by rapid technology
change, frequent new product introductions, short product life cycles and
evolving industry standards, and is expected in the future, to be characterized
by significant price erosion over the life of a product. Within specific ranges
of functionality, the Company experiences competition from many sources,
including: (i) companies that directly address the customer relationship
management market; (ii) third party integrators that design, develop and
implement custom customer relationship management solutions; (iii) the internal
information technology departments of potential customers that develop
proprietary applications; and (iv) pre-packaged products, including Personal
Information Managers ("PIMs"). In addition, the Company may experience
competition from additional companies to the extent such companies enter the
market, such as "groupware" vendors, LAN-based application development tools
vendors, remote LANaccess communication vendors and communications and systems
management software vendors. Among the Company's potential competitors are also
a number of large hardware and software companies that may develop or acquire
products that compete in the market.
Currently and potential competitors have established and may establish
cooperative relationships with third parties to increase the ability of their
products to address the needs of the Company's current and prospective
customers. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. Many of the
Company's current and potential competitors have significantly greater
financial, technical, marketing, name recognition and other resources than the
Company. As a result, they may be able to respond more quickly to new or
emerging technologies and to changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products than
can the Company. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competitive
pressures will not materially adversely affect the Company's business, financial
condition and results of operations.
PENDING SEC INVESTIGATION OF MARKET MAKER; RECENTLY SETTLED NASD INVESTIGATION
REGARDING MARKET MAKER
The Chicago office of the Securities and Exchange Commission is conducting
a private, nonpublic investigation of H.J. Meyers & Co., Inc. ("Meyers"), the
principal market maker in the Company's Common Stock, pursuant to a Formal Order
of Investigation issued by the Commission. The Staff is investigating whether
Meyers may have violated Section 17(a) of the Securities Act of 1933 and
Sections 10(b), 15(c) and 17(a) of the Securities Exchange Act of 1934, and the
rules and regulations thereunder, with respect to sales of certain securities
including those of the Company. The Company has received a subpoena for the
production of documents pursuant to this investigation. Specifically, the
subpoena requests that the Company provide documents relating to the following:
loans received by the Company, sales of the Company's securities by employees,
officers and directors of the Company, information relating to Meyers,
information relating to any other underwriter whether or not retained by the
Company, communications with the Company's stockholders, sales materials
pertaining to the Company's stock, documents filed with the Commission or any
other regulatory agency, self-regulatory organization or securities exchange,
sales or shipments of Arsenal, minutes to Board of Director and stockholder
meetings, audits conducted for the Company, documents pertaining to any due
diligence conducted as part of a stock issuance and a list of employees,
officers and directors of the Company.
The Company is currently unable to assess the potential impact of the
outcome of the Staff's investigation on trading in the Company's securities.
Any limitation on the ability of Meyers to make a market in the Company's
Common Stock as a result of this investigation, or for any other reason, could
adversely impact the liquidity or trading price of the Company's Common Stock,
which could have a material adverse impact on the market price of the Company's
Common Stock. In addition, any adverse impact on the Company as a result of
this investigation, or for any other reason, could have a material adverse
effect on the market value and liquidity of the Company's Common Stock.
On July 16, 1996, the National Association of Securities Dealers, Inc.
(the "NASD") issued a notice of Acceptance, Waiver and Consent (the "AWC")
whereby Meyers was censured and ordered to pay fines and restitution to retail
customers in the amount of $250,000 and approximately $1.025 million,
respectively. The AWC was issued in connection with claims by the NASD that
Meyers charged excessive markups and markdowns in connection with the trading of
four certain securities originally underwritten by Meyers; the activities in
question occurred during periods between December 1990 and October 1993.
IMPACT OF YEAR 2000
Many computer systems were not designed to handle any dates beyond the
year 1999, and therefore computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is still
assessing the impact the year 2000 issue will have on its internal information
systems and has begun corrective efforts in these areas. The Company does not
anticipate that addressing the year 2000 problem for its internal information
systems will have a material impact on its operations or financial results.
However, there can be no guarantee that these costs will not be greater than
anticipated, or that corrective actions undertaken will be completed before the
year 2000 problems could occur.
The Company has certain key relationships with suppliers. If these
suppliers fail to adequately address the year 2000 issue for the products they
provide the Company, this could have a material adverse impact on the Company's
operations and financial results. The Company is still assessing the effect the
year 2000 issue will have on its suppliers and, at this time, cannot determine
the impact it will have.
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<PAGE> 8
SELLING SHAREHOLDERS
The following table sets forth the name of each Selling Shareholder and
the number of Shares being offered hereby. Upon completion of the offering,
assuming all Shares being offered are sold, except as set forth below, each
Selling Shareholder will not own any shares of Common Stock. The Shares are
being registered to permit secondary trading of the Shares, and the Selling
Stockholders may offer Shares for resale from time to time. See "Plan of
Distribution."
The Shares being offered by the Selling Shareholders were acquired from
the Company in transactions exempt from the registration requirements of the
Securities Act provided by Section 4(2) thereof pursuant to a Unit Purchase
Agreement (the "Unit Purchase Agreement") or a Warrant by and between the
Company and the Selling Shareholder. These transactions occurred on three
separate occasions, once on December 18, 1997, again on December 29, 1997 and
finally on February 20, 1998. Each Selling Stockholder represented to the
Company that, and the Company had reasonable basis to believe that, such
Selling Stockholder was an accredited investor as defined under Regulation D
promulgated under the Securities Act in connection with the transactions.
Each Selling Shareholder that purchased Common Stock pursuant to the Unit
Purchase Agreement further represented to the Company that it was acquiring the
Shares for investment and not with the present intention of distributing such
Shares. In lieu of granting the Selling Shareholders demand registration rights,
the Company has filed with the Commission, under the Act, a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Shares.
<TABLE>
<CAPTION>
Shares
Beneficially Owned
Prior to Offering(1) Number of
------------------- Shares Being
Shareholders Number Percent Offered
------------ ------ ------- -------
<S> <C> <C> <C>
John Webley 738,000(2) 12.10% 600,000(2)
The Peter W.J. Stonebridge Revocable Trust U.A.D 400,000(3) 6.67% 300,000(3)
10/17/95
Peter B. Pitsker and Polly D. Pitsker Revocable Living 209,731(4) 3.52% 45,000(5)
Trust Dated September 11, 1985
Ed Esber 146,777(6) 2.47% 75,000(7)
Richard Timmins 120,000(8) 2.04% 120,000(8)
James R. Perkins 80,000(9) 1.36% 60,000(9)
Steven Sheck 60,000(10) 1.02% 60,000(10)
Michael D'Eath 46,631(11) * 15,000(12)
Barry John Houlihan & Heather Valma Houlihan 30,000(13) * 30,000(13)
Charles McLaughlin 30,000(14) * 30,000(14)
Deborah Salzman 30,000(15) * 30,000(15)
Robert W. Wiedenhorn 30,000(16) * 30,000(16)
David R. and Theresa W. Hebrank 29,500(17) * 22,500(17)
Daniel Pereyra 26,500(18) * 15,000(18)
Phillip F. Frink Jr. Trustee First Washington Corp. PSP 24,000(19) * 24,000(19)
DTD 7/1/84 FBO Phillip F. Frink Jr
Wallace G. Dempsey 16,000(20) * 15,000(20)
Paul Caruso and Barbara Caruso, JTWROS 15,000(21) * 15,000(21)
David R. Bouchard 15,000(22) * 15,000(23)
TOTAL 2,047,139(24) 31.30% 1,501,500(25)
</TABLE>
-7-
<PAGE> 9
- --------------------
(1) Based on 5,899,148 Shares issued and outstanding as of May 15, 1998.
Individual ownership numbers are based upon representations made to the
Company by each Selling Shareholder, unless otherwise indicated.
(2) Includes 200,000 Shares issuable upon exercise of Warrants; based on
information provided in the Form 13D filed by Mr. Webley on March 18,
1998.
(3) Includes 100,000 Shares issuable upon exercise of Warrants; based on
information provided in the Form 13D filed by Mr. Stonebridge on March 18,
1998.
(4) Includes 17,000 Shares issuable upon exercise of Warrants and 42,441
Shares issuable upon exercise of Stock Options within 60 days of the date
of this Prospectus.
(5) Includes 15,000 Shares issuable upon exercise of Warrants. Peter Pitsker
has served as a Director and as interim President of the Company.
(6) Includes 25,000 Shares issuable upon exercise of Warrants and 17,777
shares issuable upon exercise of stock options within 60 days of the date
of this Prospectus. Mr. Esber is currently a Director of the Company.
(7) Includes 25,000 Shares issuable upon exercise of Warrants.
(8) Includes 40,000 Shares issuable upon exercise of Warrants.
(9) Includes 20,000 Shares issuable upon exercise of Warrants.
(10) Includes 20,000 Shares issuable upon exercise of Warrants.
(11) Includes 5,000 Shares issuable upon exercise of Warrants and 28,631 Shares
issuable upon exercise of Stock Options within 60 days of the date of this
Prospectus. Mr. D'Eath holds options to purchase an additional 100,000
Shares not exercisable within 60 days of this Prospectus. Mr. D'Eath is
currently the Vice President of Business Development and Product Marketing
of the Company.
(12) Includes 5,000 Shares issuable upon exercise of Warrants.
(13) Includes 10,000 Shares issuable upon exercise of Warrants.
(14) Includes 10,000 Shares issuable upon exercise of Warrants.
(15) Includes 10,000 Shares issuable upon exercise of Warrants.
(16) Includes 10,000 Shares issuable upon exercise of Warrants.
(17) Includes 7,500 Shares issuable upon exercise of Warrants.
(18) Includes 5,000 Shares issuable upon exercise of Warrants.
(19) Includes 8,000 Shares issuable upon exercise of Warrants.
(20) Includes 5,000 Shares issuable upon exercise of Warrants.
(21) Includes 5,000 Shares issuable upon exercise of Warrants.
(22) Includes 5,000 Shares issuable upon exercise of Warrants. Mr. Bouchard
holds options to purchase 200,000 Shares not exercisable within 60 days of
this Prospectus. Mr. Bouchard is currently the Senior Vice President of
Worldwide Sales and Services of the Company.
(23) Includes 5,000 Shares issuable upon exercise of Warrants.
(24) Includes 552,500 Shares issuable upon exercise of Warrants and 88,849
Shares issuable upon exercise of Stock Options within 60 days of the date
of this Prospectus.
(25) Includes 500,500 Shares issuable upon exercise of Warrants.
PLAN OF DISTRIBUTION
The Company has been advised by each Selling Shareholder that it or its
donees or transferees intend to sell all or a portion of the Shares offered
hereby from time to time on the Nasdaq SmallCap Market, in privately negotiated
transactions or otherwise, and that sales will be made at fixed prices that may
be changed, at market prices prevailing at the times of such sales, at prices
related to such market prices or at negotiated prices. Such Selling Shareholder
or its donees or transferees may also make private sales directly or through a
broker or brokers, who may act as agent or as principal. In connection with any
sales, such Selling Shareholder or its donees or transferees and any brokers
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act. The Company will receive no part of the proceeds of sales
made hereunder.
Any broker-dealer participating in such transactions as agent may receive
commissions from a Selling Shareholder or its donees or transferees (and, if
they act as agent for the purchaser of such Shares, from such purchaser).
Brokerage fees may be
-8-
<PAGE> 10
paid by the Selling Shareholder or its donees or transferees, which may be in
excess of usual and customary brokerage fees. Broker-dealers may agree with a
Selling Shareholder or its donees or transferees to sell a specified number of
Shares at a stipulated price, and, to the extent such a broker-dealer is unable
to do so acting as agent for a Selling Shareholder or its donees or transferees,
to purchase as principal any unsold Shares at the price required to fulfill the
broker-dealer's commitment to such Selling Shareholders or its donees or
transferees. Broker-dealers who acquire Shares as principal may thereafter
resell such Shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) on the
Nasdaq SmallCap Market in negotiated transactions or otherwise at market prices
prevailing at the time of sale or at negotiated prices, and in connection with
such resales may pay to or receive from the purchasers of such Shares
commissions computed as described above.
The Company and each Selling Shareholder have agreed to indemnify each other
against certain liabilities, including certain liabilities under the Securities
Act. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
Any Shares covered by this Prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under that Rule rather than
pursuant to this Prospectus.
There can be no assurance that any Selling Shareholder will sell any or all
of the Shares offered by it hereunder.
EXPERTS
The financial statements of Borealis Technology Corporation at December 31,
1997 and 1996, and for each of the two years in the period ended December 31,
1997, incorporated by reference in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein (which contains an explanatory paragraph
describing conditions that raise substantial doubt about the Company's ability
to continue as a going concern as described in Note 1 to the financial
statements) and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Counsel for the Company, Wilson Sonsini Goodrich & Rosati, Professional
Corporation, 650 Page Mill Road, Palo Alto, California 94304-1050, has rendered
an opinion to the effect that the Common Stock offered hereby is duly and
validly issued, fully paid and nonassessable.
-9-
<PAGE> 11
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
<TABLE>
<S> <C>
SEC Registration Fee $968.94
Nasdaq listing fee $828.45
Accountant's fees and expenses $2,500.00
Legal fees and expenses $3,000.00
Miscellaneous $2,000.00
---------
Total $9,297.39
=========
</TABLE>
* Represents expenses relating to the distribution by the Selling Stockholder
pursuant to the Prospectus prepared in accordance with the requirements of
Form S-3. These expenses will be borne by the Company on behalf of the
Selling Stockholder. All amounts are estimates except for the SEC
Registration Fee and the Nasdaq listing fee.
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. The Registrant's Certificate of
Incorporation and Bylaws provide that the Registrant shall indemnify its
directors and officers to the fullest extent permitted by Delaware law,
including circumstances in which indemnification is otherwise discretionary
under Delaware law.
The Registrant currently carries indemnity insurance pursuant to which its
directors and officers are insured under certain circumstances against certain
liabilities or losses, including liabilities under the Securities Act. The
Registrant has entered into indemnity agreements with certain directors and
executive officers. These agreements, among other things, indemnify the
directors and executive officers for certain expenses (including attorneys'
fees), judgments, fines, and settlement payments incurred by such persons in any
action, including any action by or in the right of the Registrant, in connection
with the good faith performance of their duties as a director or officer. The
indemnification agreements also provide for the advance payment by the
Registrant of defense expenses incurred by the director or officer; however, the
affected director or officer must undertake to repay such amounts advanced if it
is ultimately determined that such director or officer is not entitled to be
indemnified.
At present, there is no pending litigation involving a director or officer
of the Registrant in which indemnification is required or permitted, and the
Registrant is not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
Item 16. Exhibits.
Exhibit
Number
------
5.1* Opinion of Wilson Sonsini Goodrich & Rosati
10.1* Form of Unit Purchase Agreement
10.2* Form of Warrant to Purchase Shares of Common Stock
II-1
<PAGE> 12
23.1 Consent of Independent Auditors
23.2* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit
5.1)
24.1* Power of Attorney (contained on Page II-3)
* Previously Filed.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be an initial bona
fide offering thereof.
(c) Insofar, as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the California General Corporations Code, the
Certificate of Incorporation of the Registrant, the Bylaws of the Registrant,
Indemnification Agreements entered into between the Registrant and it officers
and directors, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by the
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of the such issue.
II-2
<PAGE> 13
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirement for filing on Form S-3 and has duly caused the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Carson, State of Nevada, on this 20th day of July,
1998.
BOREALIS TECHNOLOGY CORPORATION
By: *
----------------------------------------
Patrick Grady
President, Chief Executive Officer and Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
Signature Title
--------- -----
* President, Chief Executive Officer and Chairman
- -----------------------
Patrick Grady
* Chief Financial Officer (principal financial and
- ----------------------- accounting officer)
Elizabeth Gasper
Director
- -----------------------
Ed Esber
* Director
- -----------------------
Curtis Faith
* Director
- -----------------------
Joseph Marengi
Director
- -----------------------
Peter Pitsker
* /s/Elizabeth Gasper
-------------------
Elizabeth Gasper, Attorney-in-Fact
II-3
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
------ ----------- -------------
<S> <C> <C>
23.1 Consent of Independent Auditors II-19
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 2 to the Registration Statement (Form S-3) and related Prospectus of
Borealis Technology Corporation for the registration of 1,501,500 shares of its
common stock and to the incorporation by reference therein of our report dated
January 16, 1998, with respect to the financial statements of Borealis
Technology Corporation included in its Annual Report (Form 10-KSB) for the year
ended December 31, 1997, filed with the Securities and Exchange Commission.
/s/Ernst & Young LLP
Reno, Nevada
July 20, 1998
II-19
