<PAGE>
Registration Statement No. 333-42026
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INDIGO ENERGY, INC.
(Formerly Q Power, Inc.)
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
Delaware 3629 13-4105842
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
Incorporation) Classification Code Number) Number)
</TABLE>
Indigo Energy, Inc.
535 Westgate Drive
Napa, California 94558
(707) 254-9302
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Christopher Gabrys
President
Indigo Energy, Inc.
535 Westgate Drive
Napa, California 94558
(707) 254-9302
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Stanley Moskowitz, Esquire
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
(212) 940-8800
--------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement is effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================
Title of Each Class Proposed Maximum Proposed Maximum
of Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered registered Unit(1) Price(1) Registration Fee(2)
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<S> <C> <C> <C> <C>
Common Stock, par value 1,000,000 $0.25 $250,000 $66.00
$0.001 per share
==============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) of the Securities Act of 1933, as amended.
(2) The registration fee was previously paid on July 21, 2000.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant files
a further amendment which specifically states that this registration statement
will become effective in accordance with section 8(a) of the Securities Act of
1933 or on such date as the Securities and Exchange Commission, acting pursuant
to said section 8(a), may determine.
==============================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell securities and we are not soliciting offers to buy these securities in
any state where the offer or sale is not permitted.
Subject to Completion. Dated December ___, 2000
PROSPECTUS
INDIGO ENERGY, INC.
1,000,000 SHARES
COMMON STOCK
----------------
This is an initial public offering of 1,000,000 shares (the "shares") of
common stock of Indigo Energy, Inc. We are offering the shares of our common
stock for sale on a "any and all best efforts" basis (the "offering") of up to
$250,000. The offering price will be $0.25 per share.
The offering expires 90 days from the date of this prospectus and we may
extend the offering for an additional 90 days, in our sole discretion. There are
no minimum purchase requirements in this offering. An "any and all best efforts"
offering means that we will use our best efforts to sell the stock offered by
this prospectus but that we are not required to sell a particular amount of
shares in order to complete the offering.
Shares in this offering will be offered by our directors and executive
officers, who will not receive commissions for any sales they may make. In
addition, we may reject all or part of any subscription to purchase shares of
common stock for any reason. Further, because there are no escrow arrangements
in this offering, money we receive for shares will be deposited directly with us
and will be immediately available for our use. In the event this offering is
oversubscribed, we will immediately return all subscriptions in excess of the
maximum offering.
Prior to this offering, there has been no public market for our common
stock. We will be applying to list our common stock on the Over the Counter
Bulletin Board Market.
----------------
The purchase of the securities offered through this prospectus involves a
high degree of risk. See section entitled "Risk Factors" on pages --.
Maximum Offering Price Per Share
---------------- ---------------
Public Offering Price $250,000 $0.25
Underwriting Discounts and Commissions $0 $0.00
-------- -----
Proceeds, before expenses, to the Company $250,000 $0.25
======== =====
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
----------------
The Date Of This Prospectus Is ___, 2000
<PAGE>
PROSPECTUS SUMMARY
All references in this prospectus to "we", "us", "ours" and "Indigo" are
intended to refer to Indigo Energy, Inc.
This summary highlights selected information from this registration
statement. It does not contain all of the information that may be important to
you. You should carefully read the entire document and the other documents
referred to in this registration statement. Together, these documents will give
you all the information that investors should consider before investing in our
common stock.
Our Business
We are a development stage company that is designing and developing, and
intend to manufacture and market a reliable electrical backup power supply for
the telecommunication industry. Our uninterruptible power supply ("UPS") system
will employ a flywheel to store energy for retrieval on demand.
Flywheel based UPS systems use electrical energy from a primary power
source, such as the electric grid or a generator, to store energy within a
spinning flywheel. When the primary power source fails or is disrupted, the
flywheel system converts the stored energy into an immediate source of
electricity.
Corporate Information
We were founded as a Delaware corporation in March 2000 under the name
"Alternate Energy Corp." In March 2000, we changed our name from Alternate
Energy Corp. to Q Power Inc. In October 2000, we changed our name from Q Power,
Inc. to Indigo Energy, Inc. Our corporate offices are located at 535 Westgate
Drive, Napa, California 94558. Our telephone number is (707) 254-9302.
Offering Summary
Offering Price: $0.25 per share of common stock.
Securities Being Offered: Up to 1,000,000 shares of common stock.
Securities Outstanding
Prior to the Offering: 10,486,800 shares of common stock were
issued and outstanding as of the date of
this prospectus.
Use of Proceeds: We intend to use the net proceeds for
research and development of our flywheel
system and working capital purposes.
1
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and the other information in
this prospectus and any other filings we may make with the United States
Securities and Exchange Commission in the future before investing in our common
stock. If any of the following risks occur, our business, operating results and
financial condition could be seriously harmed. The trading price of our common
stock could decline due to any of these risks, and you may lose all or part of
your investment. This prospectus also contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result of specific
factors, including the risks described below and elsewhere in this prospectus.
An investment in our common stock may involve additional risks and uncertainties
not described below.
We Are a Development Stage Company With No Operating History To Evaluate Our
Future Prospects.
We were incorporated on March 8, 2000 and have limited operating history
upon which prospective investors can evaluate our performance. Prospective
investors should understand that an investment in our company is significantly
riskier than an investment in a business with more extensive operating history.
There can be no assurances that we will ever operate profitably. Our operations
are subject to all of the risks inherent in the establishment of a new business
enterprise. The likelihood of our success must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with a development stage company, particularly a
company developing new products for the telecommunication market. Our strategy
is based upon a number of projections and assumptions, including, without
limitation, projections and assumptions relating to:
o the size of the UPS market.
o our ability to design and develop a commercially feasible product.
o the need for our product.
o the price sensitivity of the marketplace.
o the cost to acquire customers.
o the viability of the intellectual property used to develop our
flywheel system.
If We Do Not Obtain Additional Financing To Fund Our Research and Development,
Manufacturing And Marketing of Our Flywheel System, Our Business May Fail.
2
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Our business plan calls for significant expenses in connection with the
development and manufacturing of our intended product, and if we can not obtain
such additional financing our business may fail. In addition, we anticipate that
revenues from operations will not be realized until sometime after the
development and successful testing of our flywheel system has been completed. We
will require additional financing in order to complete the development,
manufacturing and marketing of our flywheel system. We do not currently have any
arrangements for financing and we can provide no assurance that we will be able
to find such financing when needed. Obtaining additional financing will be
subject to a number of factors, including:
(i) market conditions;
(ii) investor acceptance of our business plan; and
(iii) investor sentiment.
These factors may make the timing, amount, terms or conditions of
additional financing unavailable to us. If we are unsuccessful in obtaining
financing in an amount necessary to complete development, manufacturing and
marketing of our product, then we will not be able to earn revenues and our
business will fail.
This Offering Is Made On A Best Efforts Basis, Failure To Obtain The Maximum
Offering Proceeds Could Adversely Affect Our Ability To Develop Our Flywheel
System.
This offering is made on an "any and all best efforts" basis. Because the
offering is made on an "any and all best efforts" basis, there can be no
assurance that all or any of the shares offered hereunder will be sold. If the
maximum offering amount (the "maximum offering") is not sold, we may experience
additional financial pressures that will involve such risks as the failure to
develop our product for commercial use.
We May Never Complete The Development Of A Commercially Viable Flywheel Based
UPS System.
We do not know when or whether we will successfully complete the
development of a commercially viable flywheel based UPS system. We are currently
engaged in development to test our proprietary designs and evaluate the product.
We must complete substantial additional development of our system before we may
have a commercially viable product. We will need sufficient additional funding
to complete such development. There are no assurances that we will be able to
obtain such additional sufficient funding.
3
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Our Business Is Dependent On The Uncertain Market Acceptance Of Our Initial
Flywheel System And If This Market Does Not Expand As We Anticipate, Or If
Alternatives To Our Flywheel System Are Successful, Our Business Will Suffer.
The market for uninterruptible power supply products for the
telecommunication industry is rapidly evolving and it is difficult to predict
its potential size or future growth rate. Most of the organizations that may
purchase our products have invested substantial resources in their existing
power systems and, as a result, may be reluctant or slow to adopt a new
approach. Moreover, our product is an alternative to existing UPS defined
systems and may never be accepted by our customers, may be too cost prohibitive
or may be made obsolete by other advances in power quality technologies.
Improvements may also be made to existing alternatives to our product
as well as the emergence of newer, more competitive technologies and products,
which could render our product less desirable or obsolete. If the market fails
to develop or develops more slowly than we anticipate, we may be unable to
recover the losses we will have incurred to develop our product and may never be
able to achieve profitability.
We Are Dependent On Third Party Suppliers For The Development And Supply Of Key
Components For Our Products. If Those Suppliers Are Unable To Provide Sufficient
Components, Our Business Will Suffer.
We have formed a relationship with two suppliers for key components. We
do not know when or whether we will secure relationships with suppliers for the
remainder of the required components for our product. We do not know whether we
will be able to develop such relationships on terms that will allow us to
achieve our objectives. Our business, prospects, results of operations, or
financial condition could be harmed if we fail to secure relationships with
entities that will supply the required components for our product. Once we
establish relationships with third party suppliers, we will rely on them to
provide components for our product.
A current or future supplier's failure to develop and supply components
to us, or the quantity needed, will harm our ability to manufacture our product.
In addition, to the extent the processes that our suppliers use to manufacture
components are proprietary, we may be unable to obtain comparable components
from alternative suppliers.
4
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We May Be Unable To Raise Additional Capital Or Generate The Capital Necessary
To Support Our Planned Level Of Development Activities And Manufacture And
Market Our Product.
We will require substantial expenditures to complete our development
activities and to initiate the manufacturing and marketing of our product. Over
the next twelve months, we project expenditures of $1 million in operating
capital for development and marketing. Many factors will determine our future
capital requirements, including:
o the extent and progress of our development programs;
o the progress of component test and prototype tests;
o the costs of filing, protecting and enforcing patent claims;
o market acceptance of our product;
o competing technological developments and market developments;
o the cost of developing and/or operating production facilities for our
potential product; and
o the costs of commercializing our products.
We will need to raise additional funds to achieve commercialization of
our product. However, additional financing may not be available on favorable
terms, if at all. If we do not have adequate funds, we may have to curtail
operations significantly. In addition, we may have to enter into unfavorable
agreements that could force us to relinquish certain technology or product
rights, including patent and other intellectual property rights.
We Face Intense Competition From Larger Competitors And May Be Unable To Compete
Successfully With Our Competitors.
The market for uninterruptible power supplies is intensely competitive.
There are many companies in the United States and in Canada engaged in
uninterruptible power supply development and production, including flywheel UPS
systems. All of these entities have substantially greater financial, research
and development, manufacturing and marketing resources than we do.
We Depend On Our Intellectual Property, And If We Are Unable To Protect Our
Intellectual Property, We May Be Unable To Compete And Our Business May Fail.
Our products rely on our proprietary technology, and we expect that
future technological advancements made by us will be critical to sustain market
acceptance of our products. Therefore, we believe that the protection of our
intellectual property rights is, and will continue to be, important to the
success of our business. Consequently, our ability to compete effectively will
depend, in part, on our ability to protect our proprietary technology, system
designs and manufacturing processes. Unauthorized parties may attempt to copy or
otherwise obtain and use our products or technology. Monitoring unauthorized use
of our intellectual property is difficult, and we cannot be certain that the
steps we may take will prevent unauthorized use of our technology. In addition,
the measures we undertake may not be sufficient to adequately protect our
proprietary technology and may not preclude competitors from independently
developing products with functionality or features similar to those of our
product.
5
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Our Efforts To Protect Our Intellectual Property May Cause Us To Become Involved
In Costly And Lengthy Litigation Which Could Seriously Harm Our Business.
In recent years, there has been significant litigation in the United States
involving patents, trademarks and other intellectual property rights. Although
we have not been involved in intellectual property litigation, we may become
involved in litigation in the future to protect our intellectual property or
defend allegations of infringement asserted by others. Legal proceedings could
subject us to significant liability for damages or invalidate our intellectual
property rights. Any litigation, regardless of its outcome, would likely be time
consuming and expensive to resolve and would divert management's time and
attention. Any potential intellectual property litigation also could force us to
take specific actions, including:
o the cessation of selling our products that use the challenged
intellectual property;
o obtain from the owner of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not
be available on reasonable terms, or at all; or
o the redesign of those product elements that use infringing
intellectual property.
Our Future Plans Could Be Harmed If We Are Unable To Attract Or Retain Key
Personnel.
If we develop a prototype that we believe is marketable, we will require a
significant increase in the number of employees. Our future success, therefore,
will depend, in part, on attracting and retaining additional qualified
management and technical personnel. We do not know whether we will be successful
in hiring or retaining qualified personnel. Our inability to hire qualified
personnel on a timely basis, or the departure of key employees, could harm our
expansion and commercialization plans.
We Depend On Our Executive Officers To Develop Our Flywheel System, And If We
Are Unable To Retain Our Executive Officers Our Business May Be Adversely
Affected.
Our future performance depends upon the continued service of executive
officers, in particular, the services of Dr. Christopher Gabrys, our President,
and Mr. Joel Bloomer, our Chairman of the Board of Directors. The loss of
services of one or more of these executive officers, could have a materially
adverse effect on our business, operating results and financial condition.
6
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Insiders Will Continue To Have Substantial Control Over Us After This Offering
And Can Exert Significant Influence Over Us.
Upon completion of this offering, assuming the maximum offering is
completed, our executive officers and directors, and their respective
affiliates, will beneficially own, in the aggregate, approximately 88% of our
outstanding common stock. As a result, these stockholders will be able to exert
significant control over all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
You May Not Be Able To Resell Your Shares At Or Above The Offering Price.
Prior to this offering, there has been no public market for our common
stock. Although we intend to apply to have our common stock quoted on the Over
the Counter Bulletin Board market, a trading market for our shares may never
develop or be sustained following this offering. The initial public offering
price for our common stock has been determined by us and may not be indicative
of the market price for our shares following this offering. If you purchase
shares of common stock, you may not be able to resell those shares at or above
the initial public offering price. If a market develops, the market price of our
common stock may fluctuate significantly in response to numerous factors, some
of which are beyond our control, including the following:
o actual or anticipated fluctuations in our operating results;
o changes in market valuations of other technology companies,
particularly those that sell products used in UPS systems;
o announcements by us or our competitors of significant technical
innovations, acquisitions, strategic partnerships, joint ventures or
capital commitments;
o introduction of technologies or product enhancements that reduce the
need for flywheel systems;
o the loss of one or more key suppliers; and
o departures of key personnel.
Our Stock Price May Become Volatile Due To A Number Of Factors, Subjecting Us To
Litigation That May Be Costly And Drain Our Resources.
Our stock price may be volatile due to numerous factors, including those
listed above. In addition, the stock market has recently experienced extreme
volatility that often has been unrelated to the performance of particular
companies. These market fluctuations may cause our stock price to fall
regardless of our performance. In the past, companies that have experienced
volatility in the market price of their stock have been the subject of
securities class action litigation. We may be involved in a securities class
action litigation in the future. Such litigation often results in substantial
costs and a diversion of management's attention and resources and could harm our
business, prospects, and results of operations or financial condition.
7
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Provisions Of Delaware Law And Of Our Charter And By-Laws May Make A Takeover
More Difficult.
Provisions in our certificate of incorporation and by-laws and in the
Delaware corporate law may make it difficult and expensive for a third party to
pursue a tender offer, change in control or takeover attempt which is opposed by
our management and board of directors. Public stockholders who might desire to
participate in such a transaction may not have an opportunity to do so. These
anti-takeover provisions could substantially impede the ability of public
stockholders to benefit from a change in control or change in our management and
board of directors.
Future Sales Of Our Common Stock Could Adversely Affect Our Stock Price And
Dilute Your Ownership Interest.
Substantial sales of our common stock in the public market following this
offering, or the perception by the market that such sales could occur, could
lower our stock price or make it difficult for us to raise additional equity
capital in the future. After this offering, assuming the maximum offering, we
will have 11,486,800 shares of common stock outstanding. Of these shares,
1,000,000 shares sold in this offering will be freely tradable. All of the
remaining 10,486,800 shares are subject to Rule 144 under the Act, which governs
the resale of restricted securities. Sales of securities in reliance upon Rule
144 can only be made in accordance with the terms of that rule, which permits
limited resale of securities that have been held for one year and essentially
unlimited resales after two years for non-affiliates of the Company under
certain conditions. However, unless and until we register our securities under
the Act and file the required reports under the Securities Exchange Act of 1934,
as amended, resale under Rule 144 of securities held for one year is not
permitted.
We cannot predict if future sales of our common stock, or the availability
of our common stock for sale, will harm the market price for our common stock or
our ability to raise capital by offering equity securities.
Your Ability to Resell Our Shares May Be Limited By Our Limited State
Registration Of This Offering.
You may only resell our shares within the states where we have registered.
Initially, our shares may be resold only in the following states: California,
New York, Illinois, Nevada and the District of Columbia (although we are
considering registering the shares in other states.) Unless a resale exemption
is available in other states or we register in other states, shares may be sold
only in the aforementioned states. Therefore, if you are unable to find a buyer
within one of the states we have registered, or a resale exemption is not
available in another state, you may not be able to sell your shares.
8
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We Maybe Subject To The "Penny Stock" Rules Which May Negatively Affect Your
Ability To Sell Our Securities Or The Price You Could Receive.
If we are subject to penny stock rules, your ability to sell our securities
or the price you receive may be adversely affected. The Securities and Exchange
Commission has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks." Penny stocks generally are equity
securities with a price of less than $5.00 per share (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that the system which provides current price and volume
information with respect to transactions in such securities). The penny stock
rules require broker-dealers to deliver, prior to any transaction in a penny
stock, certain information to their customers and to comply with other
requirements which may have the effect of reducing the level of trading activity
in a penny stock and make it more difficult to sell such stock.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are not historical facts, but
rather are based on our current expectations, estimates and projections about
our industry, our beliefs and assumptions. Words including "may," "could,"
"would," "will," "anticipates," "expects," "intends," "plans," "projects,"
"believes," "seeks," "estimates" and similar expressions are intended to
identify forward-looking statements. These statements are not guarantees of
future performance and are subject to certain risks, uncertainties and other
factors, some of which are beyond our control, are difficult to predict and
could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements. These risks and uncertainties are
described in "Risk Factors" and elsewhere in this prospectus. We caution you not
to place undue reliance on these forward-looking statements, which reflect our
management's view only as of the date of this prospectus. We are not obligated
to update these statements or publicly release the result of any revisions to
them to reflect events or circumstances after the date of this prospectus or to
reflect the occurrence of unanticipated events.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for our common
stock. The offering price of $0.25 per share in this offering has been
determined by our management and board of directors, based on a number of
factors, including prevailing market conditions, our historical performance,
estimates of the business potential, our earnings prospects and each of the
above factors in relation to the market valuation of other similar companies in
the United States. In the event a market should develop for our common stock
after completion of this offering, there can be no assurance that the market
price for our common stock will not be lower than the offering price in this
offering.
LIMITED STATE REGISTRATION
Initially, we have registered the shares of common stock covered by this
offering for sale by us or resold by you only in the following states:
California, New York, Illinois, Nevada and the District of Columbia (although we
are considering registering the shares in other states). A person who is
interested in purchasing shares of common stock in the offering but is not a
resident of one of the aforementioned states may request that we register shares
in his/her state of residence. However, we are not obligated to register shares
in any states other than those listed above. We will amend this prospectus to
disclose any additional states in which we may register shares. See "Risk
Factors" for a discussion of the resale limitations that result from this
limited state registration.
9
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USE OF PROCEEDS
The net proceeds to us from the sale of the 1,000,000 shares offered hereby
at the offering price of $0.25 per share will vary depending upon the total
number of shares sold. Regardless of the number of shares sold, we expect to
incur offering expenses estimated at $79,800 for legal, accounting, printing and
other costs in connection with this offering. Assuming the sale of all 1,000,000
shares, the gross proceeds we will receive from this offering will be $250,000,
before the deduction of our estimated offering expenses. Other than the
reimbursement of actual expenses incurred by our officers in connection with
this offering, we will not pay any commission or compensation to any promoter,
officer, shareholder or other party for their participation in selling the
share.
Pending the use of the proceeds, we expect that the net proceeds of this
offering will be invested in a variety of short and intermediate-term
interest-bearing assets, such as obligations of the United States government and
its agencies, and other permitted investments.
We anticipate that if the maximum offering of 1,000,000 shares is sold, we
will have sufficient cash resources to support our anticipated research and
development and working capital requirements for a period of six months.
However, it is possible that no proceeds may be raised from this offering. It is
also possible that some, but not all, of the 1,000,000 shares offered will be
sold. If fewer than all of the shares are sold, we will have to either delay
implementation of or modify our business plan. There can be no assurance that
any implementation delay or modification of our business plan will not adversely
affect our development of a flywheel system. If we require additional funds
because we were unable to sell the maximum offering, such funds may not be
available to us on acceptable terms.
We expect to use the net proceeds from this offering , based on the various
levels of participation, as follows:
<TABLE>
<CAPTION>
Use of Proceeds
---------------------------------------------------------------
20% 40% 60% 80% 100%
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Gross Proceeds $50,000 $100,000 $150,000 $200,000 $250,000
Gross Proceeds less Offering Expenses (1) $25,000 $50,000 $100,000 $150,000 $200,000
------- ------- -------- -------- --------
Salaries (2) --- --- $15,000 $30,000 $45,000
General & Administrative Expenses --- --- $10,000 $29,000 $39,000
Purchase Equipment --- --- --- $10,000 $13,000
Build and Test Components $25,000 $50,000 $75,000 $81,000 $103,000
------- ------- ------- ------- --------
Total $25,000 $50,000 $100,000 $150,000 $200,000
======= ======= ======== ======== ========
</TABLE>
(1) A portion of the offering expenses have been paid using monies received
from the earlier private placement.
(2) Reflects salaries to be paid to our three officers from the proceeds
received from the offering. The payment of any salary will be subject to
the requirement that at least 60% percent or more of the shares are sold,
and, in any event, such salary would be allocated over a period of six
months.
10
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CAPITALIZATION
The following table sets forth our capitalization as derived from our
audited balance sheet at August 31, 2000:
Debt:
Short Term Debt $ 1,327
---------
Total Debt $ 1,327
---------
Shareholders' Equity:
Preferred Stock ($0.001 par value) --
Common Stock ($0.001 par value) $ 10,487
Additional Paid In Capital 273,313
Deficit Accumulated During Development Stage (94,916)
---------
Total Shareholders' Equity 188,884
---------
Total Capitalization $ 188,884
=========
MARKET FOR OUR COMMON STOCK
There is presently no public market for our common stock. We anticipate
applying for trading of our common stock with the Over the Counter Bulletin
Board (OTC:BB) upon the effectiveness of the registration statement, of which
this prospectus forms a part of. However, we can provide no assurance that our
common stock will be traded on the OTC:BB market or if traded, that a public
market will materialize.
11
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SELECTED FINANCIAL INFORMATION
The following summary of our financial data for the period March 8,
2000 (inception) to August 31, 2000, has been prepared by our management and is
qualified in its entirety by, and should be read in conjunction with our audited
financial statements contained elsewhere in this prospectus.
FOR THE PERIOD
MARCH 8, 2000 (INCEPTION)
TO AUGUST 31, 2000
-------------------------
STATEMENT OF OPERATIONS:
Revenue $ --
Expenses (94,916)
--------
Loss from Operations (94,916)
--------
Net Loss $(94,916)
========
AUGUST 31,
2000
-------------------------
BALANCE SHEET:
Current Assets $158,777
Working Capital $156,850
Total Assets $190,211
Total Liabilities $ 1,327
Total Shareholders' Equity $188,884
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our financial
statements, the notes to the financial statements and the other financial
information contained elsewhere in this prospectus.
We commenced operations in March 2000. We are a development stage company
and have generated no revenues. Since inception, we have focused our efforts on
raising funds, developing our management team, research and development of our
flywheel system and establishing strategic relationships with key suppliers and
expenses of this offering. As of August 31, 2000, we have incurred a cumulative
net loss of $94,916. We have a calendar year end of December 31.
REVENUE. We intend to derive revenue from the sale of our flywheel system.
To date, we have not generated any revenues from the sale of our flywheel
system. Our ability to generate revenues depends upon our successful development
and commercialization of a flywheel system. We intend to begin selling our
flywheel system during the first or second quarter of 2002. Until such time, we
are unable to internally generate funds to operate.
OPERATING EXPENSES. Total operating expenses for the period March 8, 2000
(inception) to August 31, 2000 was $94,916 and consisted of general
administrative expenses, depreciation and costs related to the research and
development of our product and raising funds.
LIQUIDITY AND CAPITAL RESOURCES. As of August 31, 2000, we had current
assets of approximately $158,177. These assets are attributable to proceeds from
private equity financing aggregating approximately $240,000. We will be
dependent upon proceeds from the continued sale of our securities to continue
operating and funding research and development until we commercialize our
flywheel system.
We believe our current cash resources are sufficient to fund development
activities relating to the flywheel system for the next 3 months. If we receive
less than the maximum proceeds from this offering, it will be necessary to raise
additional funds to complete component testing, build an operational prototype
and conduct field trials of the flywheel system. However, should the development
or testing of the prototype take more time than anticipated, or if the test
results necessitate significant modifications to the flywheel system, additional
funding may be required. These funds may not be available on terms favorable to
us. If we do not have sufficient funds to complete our development, we will have
to cease activities until additional funds become available (see "Risk
Factors"). We have no preliminary agreements or understandings with any party,
including our officers, directors and shareholder, with respect to any debt
financing.
We anticipate that if the maximum offering is raised our available cash
resources will be sufficient to meet anticipated research and development and
working capital requirements through Q2 2001. Upon the successful development of
an operational prototype, we will need additional funds of approximately $1
million to construct and test field trial units, conduct customer site testing
of the field trial units and commence initial marketing activities. Since we are
in the process of designing the components of the flywheel system, we can not
say with any certainty, when, if at all, the initial prototype will be
completed. We can not assure you that any additional financing that may be
required will be available on terms favorable to us.
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BUSINESS
Company Background
Indigo Energy, Inc. has its principal offices at 535 Westgate Drive, Napa,
California and was incorporated in Delaware in March 2000.
We are a development stage company, incorporated for the express purpose of
developing, designing, manufacturing and marketing a 2,000 Watt-hour flywheel
UPS system. We have no revenues. Since inception, we have been engaged in
developing a corporate structure, planning operations, capital raising
activities and developing our flywheel system. We are not and have no intentions
of becoming a blank check company as defined by Rule 419 of the Securities Act
of 1933, as amended.
We are presently continuing research and development activities related to
the design, development and testing of a flywheel UPS system. Our flywheel
system will be based upon proprietary designs developed by Christopher Gabrys,
our President. Flywheel UPS systems draw electrical energy from a primary power
source, such as an electric grid or a generator, and stores the energy for
future use. When the primary power source fails or is disrupted, the flywheel
system converts the stored energy into an immediate supply of usable energy.
Market Overview
The worldwide demand for high quality electricity has been increasing
rapidly in recent years, driven in large part by the growth in the use of
computers, the Internet and telecommunication products. In a study conducted by
the University of Texas, they projected that the U.S. Internet economy would
grow to $507 billion by 1999, an increase of 68% over 1998. Electricity
customers are far less tolerant today of voltage disturbances from sags and
surges, and power outages because such disturbances disrupt business operations
and reduce employee productivity. Therefore, to ensure uninterrupted electrical
power, corporations will need to add a reliable, high-quality power supplies to
protect their communication equipment.
Flywheel Systems In General
Flywheel energy storage systems (FESS) represent an alternative to more
conventional chemical-based battery UPS systems which are currently used in
telecommunication applications. Flywheel UPS systems operate in the following
manner:
o When commercial electrical power is available, the FESS operates as an
electric motor which causes the rotor (flywheel) to spin or to
continue spinning.
o The spinning flywheel stores a certain amount of kinetic energy. The
amount of energy stored is dependent on the speed of revolution and
upon the inertia, i.e., the higher the speed and the higher the
inertia, the greater the kinetic energy.
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o If commercial power is interrupted, the motor generator converts the
kinetic energy of the flywheel back into usable electrical energy.
o The amount of power that is generated depends upon the design of the
motor generator. The length of the time that the power is available is
a function of the kinetic energy storage capacity of the flywheel.
FESS units have recently emerged as a feasible technology due to:
o new advances in high strength, low weight (composite) materials for
rotor construction;
o low friction bearings (e.g., magnetic); and
o low cost, high quality electronics.
We believe that FESS units offer users the following advantages over
chemical-based battery UPS systems:
o lower maintenance requirements;
o less sensitivity to outdoor temperatures;
o the ability to readily determine the existing storage capacity; and
o minimal environmental disposal problems.
The following is a detailed description of the components of a flywheel
based UPS system:
A flywheel (rotor) is the mechanical component that stores energy in
the form of kinetic energy. Rotors may be constructed of metal or
advanced composites, including graphite or glass fiber. The geometry,
mass, and rotational speed determine the amount of stored energy.
Although the rotor axis is typically oriented vertically, in some FESS
designs the axis may be oriented in other directions, including
horizontal.
The motor generator is used for converting electrical energy to
mechanical and for reconverting the mechanical energy to electrical
energy upon loss of primary power. The size of the motor generator
determines the power input and output capability.
The power electronics are the electrical components that perform the
required AC, DC, and variable frequency AC conversions to control the
speed of the motor and extract the flywheel energy when required.
The bearings are the low-friction support system for the rotor.
Bearings may be mechanical or magnetic, or a combination.
The containment is the physical housing for the flywheel and other
mechanical components. The housing not only contains the basic
mechanical components, but also maintains a vacuum and serves as a
barrier in case of a failure.
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A FESS primary unit includes the flywheel, motor generator, bearings and
containment.
A FESS control unit houses the power electronics and electrical monitoring
and alarm system. These components are located in a housing (equipment
shelf or closure) separate from the FESS primary unit. The control unit may
be installed within a cabinet indoors or outdoors, above or below-ground.
Limitations of Non-Flywheel UPS Systems
Non-flywheel, or conventional, UPS devices have evolved out of a
combination of diesel engines, generators, automobile batteries and UPS
electronics. We believe that this has resulted in less efficient, less reliable
and more expensive UPS systems. Chemical-based battery UPS systems have several
limitations, including:
COST
o Batteries must be regularly inspected, generally every three months,
to detect problems. Batteries also require periodic testing to
determine their power output capacity, which degrades over time.
o Regardless of usage, batteries have a limited useful life and must be
replaced every 2 to 7 years, depending upon the amount of use,
environmental conditions and other factors.
o Unless cooled by a costly air conditioning system, a battery's
capacity will rapidly degrade when used in hot weather climates.
RELIABILITY
o Batteries are prone to heat buildup and corrosion which leads to a
high rate of battery failure.
o When batteries are repeatedly used at or near their maximum power
output, power output capacity rapidly decreases, reducing the
batteries' effectiveness over time.
ENVIRONMENTAL
o Batteries contain toxic materials such as lead and sulfuric acid.
State and federal environmental regulations make battery disposal a
costly proposition.
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Beyond the specific problems associated with chemical-based batteries,
existing UPS systems contain inefficiencies inherent in any system that was not
designed as an integrated solution. Specifically, the major components of these
systems do not come from a single reliable source. Separate companies
manufacture, market and service the generators, UPS electronics and batteries.
This lack of a single-source supplier makes installation, maintenance and
failure analysis more difficult, costly and complex. Therefore, the end user
must assume the responsibility to integrate and monitor the system.
Telecommunication Network Overview
Any communication, voice or data, (excluding wireless networks) travels
over communication lines that are connected by both "inside" and "outside"
stations. An "inside" station refers to the equipment that handles the switching
and routing functions and is housed within a structure or building with a
controlled environment ("Central Office"). The "outside" stations are used to
connect customers to the switching and routing equipment in the Central Office
and are subject to the elements, making them far more susceptible to power
interruptions and much more difficult to maintain. An outside station is any one
of the following: (i) a remote terminal, which is a small cabinet located by the
curb of a street ("RT"), (ii) a utility pole or (iii) a unit connected directly
to a customer's home. Each station needs back-up power to keep all the
electronics installed, within the station, running continuously so that the
lines of communications do not break down.
Market Analysis
The worldwide demand for high quality electricity has been increasing
rapidly in recent years, driven in large part by the growth in the use of the
Internet and telecommunication products. The Electric Power Research Institute,
from a 1999 study, estimates that power disturbances cost U.S. businesses more
than $30 billion each year. The Huber-Mills Digital Power Report estimates that
sales for power reliability products will grow at a rate of 30% per year for the
next 15 years. Our products will initially target the telecommunication UPS
market.
Telecommunication Market
Traditionally, a string of chemical-based batteries have served the UPS
power needs of the telecommunication industry. However, new, more reliable
alternatives are increasingly being reviewed to replace such systems. Most
telecommunication companies strive to meet a goal of 100% reliability, but are
unable to meet such goals due to the reliability of chemical-based batteries.
These companies are looking for alternatives to meet their goals. This market is
made up of five distinct segments:
The cable television market (CATV) in the United States, which is
dominated by four operators, AT&T, AOL/Time Warner, Comcast and Cox
Communications.
Computer Telephony Integration (CTI) technology, which allows an
individual to use a telephone line simultaneously for voice and
computer data communication and allows individual office personnel to
manage telephone calls from a personal computer.
Local Multipoint Distribution Service (LMDS) companies, which provides
two-way wireless broadband technology that enables communication
providers to quickly and inexpensively provide high margin bandwidth
services to businesses and homes. Competitive Local Exchange Carriers
(CLECs), such as Convergent Communications, cellular companies, such as
Sprint PCS, and Internet service providers, such as Earthlink, are
potential customers of our flywheel system.
Digital subscriber lines (DSL), which allows high-speed/broadband
Internet connections over existing copper telephone wires. DSL is
offered by such companies as SBC Communications, Qwest, Bell South and
Verizon (formerly Bell Atlantic).
Internet telephony (IT) technology, which allows companies such as
Qwest, ICG and Cincinnati Bell, to use the Internet to offer
communication services such as voice, facsimile and voice-messaging
applications.
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Our Products
We have designed and intend to develop and market a high performance
uninterruptible power supply for the telecommunication industry that employs a
flywheel and magnetic bearings. We intend to provide a highly reliable and
non-toxic alternative to chemical-based battery UPS systems that are currently
used in the telecommunication industry. In addition, over the estimated 20-year
life (based on the initial design characteristics of our first product) of our
flywheel system, its cost, including initial cost and maintenance expenses,
would be per watt-hour less than a chemical-based battery system over the same
time period.
We intend to develop and offer a 2,000 watt-hour UPS flywheel system. The
eBattery 2/2 is intended to provide the uninterruptible power requirements for
remote stations within a telecommunication network. Units will be installed
underground at remote stations requiring UPS backup. The eBattery 2/2 has seven
main components:
(i) a high-strength composite flywheel;
(ii) a magnetic bearing system;
(iii) a high-efficiency motor/generator;
(iv) power electronics;
(v) a vacuum system;
(vi) a containment structure; and
(vii) a system monitor.
We believe that our flywheel system will have the following competitive
advantages over traditional chemical-based battery powered UPS systems:
o 100% protection from power fluctuations.
o Estimated 20 year service life (based on our initial design
characteristics).
o Very low maintenance costs.
o Impervious to high power draws.
o Wide operating temperature range (Climate control often needed for
batteries).
o Estimated 4 times faster recharge rate than batteries.
o Lifetime energy efficiency - greater than 90%.
o Environmentally benign (Used batteries are considered hazardous
waste).
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Research and Development
Components of the flywheel system will be tested individually within the
next 6 to 12 months. Unless the maximum amount of capital is raised in this
public offering, only limited individual component testing will be undertaken.
The rotor is intended to be built and tested in the first quarter of 2001 and
the vacuum system is intended to be built and tested late in the second quarter
of 2001. Each proprietary component will be tested to determine working
parameters and physical limitations. Upon the successful testing of each
component and obtaining additional sufficient funding, we intend to assemble and
field test a prototype unit. This testing is scheduled to last several months.
Once the prototype unit has successfully passed rigorous testing, additional
field trial units will be assembled for distribution to several customers for
site testing. Site testing is scheduled to commence in late 2001. Actual sales
of production units are anticipated to begin in 2002 after successful
demonstration of the field trial units. However, there can be no assurance that
we will complete the development of a commercially viable flywheel system.
Sales and Marketing Strategy
When and if we complete our product's development, our marketing strategy
will focus on establishing recognition of our flywheel system's cost and
performance benefits. Initially, we will focus on the computer telephony
integration (CTI) and cable television (CATV) providers. Achieving the desired
level of market penetration may involve providing customers with trial units on
a reduced, or no cost, basis. However, there can be no assurance that we will
complete the development of a commercially viable flywheel system.
Intellectual Property
We have filed a number of patent applications and intend to file more
applications relating to our flywheel system with the United States Patent and
Trademark Office. If granted, a patent gives the owner the right to exclude
others from making, using, and selling the invention described in the patent for
a period of twenty years from the filing date. During the course of developing
the eBattery, we will continue to file patent applications to protect our
intellectual property.
We have entered into confidentiality agreements with all employees to
protect our intellectual property, including any copyrights, patents and trade
secrets that we currently possess and may possess in the future. There can be no
assurances that we will be issued any patents for any part of the UPS flywheel
system we intend to develop. Our failure to secure any patent or protect our
intellectual property may have a materially adverse effect on our business,
financial position and operations.
Manufacturing
We intend to rely on subcontractors to manufacture proprietary components
of our flywheel system, based on our designs and processes. We will also use
non-proprietary components based on our performance requirements. Our flywheel
system's design is intended to standardize the manufacturing process. We intend
to assemble and test our flywheel system internally. In addition, we intend to
build an assembly plant for such purposes upon sufficient additional funding and
the successful development and testing of our flywheel system. However, there
can be no assurance that we will complete the development of a commercially
viable flywheel system.
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We have entered into strategic relationships with two technology suppliers:
CalNetix, to manufacture and supply bearings and Toray Composites (America), to
manufacture and supply the composite flywheel rims.
CalNetix, a privately held company located in Torrance, California, will
develop and manufacture the bearings for the eBattery. The CalNetix agreement
provides that our company and CalNetix will work together to test and develop
the bearings for our flywheel system. Upon the successful development of a
flywheel system, CalNetix will be our exclusive supplier of the proprietary
bearings. In addition, we will be the exclusive buyer of the proprietary
bearings from CalNetix. There can be no assurance that the companies will
develop a marketable product.
Toray Composites (America) Inc. of Tacoma, Washington, will develop and
manufacture composite rims for our rotor. We will work with Toray to test and
develop the composite rim for our flywheel system. Upon the successful
development of the flywheel rotor, Toray will be our exclusive supplier of the
proprietary rims. In addition, we will be the exclusive buyer of the proprietary
rims from Toray. There can be no assurance that the companies will develop a
marketable product.
Our inability to find other manufacturers and suppliers for additional
components of the flywheel system would have a materially adverse effect on our
financial position and operations.
Competition
The power quality and reliability market is extremely competitive. When and
if we are in a position to offer a product to the marketplace, we will be
competing with other flywheel based UPS manufacturers and chemical-based battery
UPS manufacturers. Our direct competitors in developing and manufacturing
flywheel based UPS systems will include Active Power, Inc., Beacon Power
Corporation and Trinity Flywheel Power, all of which are much larger, and have
significantly more resources than we do. Our direct competitors amongst
chemical-based battery UPS manufacturers will include Exide Corporation and
Yuasa, Inc. Both of these companies are well established in the market and have
significantly more resources than we do.
We have limited financial, marketing, technical and other resources that
are necessary to implement our business plan. Our success will depend upon our
ability to obtain financing for the development of a UPS product that will
compete on the basis of performance, reliability and price. There can be no
assurance that we will be able to obtain the necessary funding to compete
successfully in the UPS market. Even if funding is obtained, we may not be able
to compete successfully in the UPS market.
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Employees
Currently we do not have any full-time employees, except for our current
officers. Upon sufficient additional funding and the completion of an
operational prototype flywheel, we intend to hire approximately 7 people. These
people will be comprised of sales, business development, assembly and office
administration. Labor costs will be minimized by outsourcing functions when
practical. The specific contractors, criteria for choosing said contractors and
specific contracting functions have not been determined at this time. We will
use reasonable standards to hire competent and capable contractors.
Christopher Gabrys, our President, Joel Bloomer, our Chairman and Rick
Campbell, our Vice President, are currently designing the flywheel system on a
full-time basis. None of these officers are currently paid a salary. We intend
to commence paying a salary to our 4 officers and directors officers upon
successful completion of the maximum offering of $250,000 together with the
subsequent receipt of additional funding after the completion of this offering.
We believe that Messrs. Gabrys, Bloomer and Campbell's experience and
engineering expertise in the flywheel industry will enable them to be successful
in developing our flywheel system. We rely heavily on these officers to complete
an operational and commercially viable flywheel system. Each officer has signed
a confidentiality and non-disclosure agreement with us. The unavailability of
either Messrs. Gabrys, Bloomer or Campbell would set back the developmental time
frame of our flywheel system and would have a materially adverse effect on our
business, financial position and proposed operations.
Legal Proceedings
We are not involved in any pending, or to our knowledge, threatened
legal proceedings. We may from time to time become a party to various legal
proceedings arising in the ordinary course of business.
DESCRIPTION OF PROPERTY
Our offices are at the home of Mr. Bloomer, our Chairman, and we currently pay
no rent:
535 Westgate Drive
Napa, California 94558
Upon the completion of this offering, we intend to commence looking for office
space that is suitable for our current engineering needs. We intend to rent a
2,000 square foot space in the Seattle, Washington area.
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MANAGEMENT
The following table sets forth the names, ages (as of August 31, 2000) and
positions of our directors and executive officers.
Name Age Position
---- --- ---------
Joel Bloomer 60 Chairman of the Board of Directors
Christopher Gabrys 30 President, Director
Rick Campbell 30 Vice President
Scott Kostiuk 29 Secretary, Treasurer
JOEL BLOOMER, CHAIRMAN OF THE BOARD
Mr. Bloomer has served as our Chairman of the Board since inception. He has
worked as a business consultant to Toray Composites (America) Inc. since 1994.
Mr. Bloomer has 35 years experience in the aerospace industry in composite
materials, structural design, dynamic analysis, manufacturing process
development and business development activities. He is a graduate of the
University of Washington with a M.S. in Aeronautical Engineering.
CHRISTOPHER GABRYS, PRESIDENT
Dr. Gabrys has served as our President since inception. From 1996 to 2000, Dr.
Gabrys worked as both a consultant and as a senior engineer of composite
development at Toray Composites (America) Inc. (TCA). At TCA, Dr. Gabrys
commercialized a composite manufacturing process and devised several
patent-pending flywheel designs. Dr. Gabrys earned a Ph.D. in Engineering
Science and Mechanics from The Pennsylvania State University in 1996.
RICK CAMPBELL, VICE PRESIDENT
Dr. Campbell has served as our Vice President since inception. Prior to joining
Indigo Energy, Dr. Campbell was a project leader in the research and development
efforts of Accuride Corporation from 1999 to 2000. From 1997 to 1999, Dr.
Campbell was a senior engineer at Lockheed Martin. Dr. Campbell earned a Ph.D.
in Engineering Science and Mechanics from The Pennsylvania State University in
1997.
SCOTT KOSTIUK, SECRETARY AND TREASURER
Mr. Kostiuk has been our Secretary and Treasurer since inception. From October
1998 to February 2000, Mr. Kostiuk has served as the Secretary and Treasurer of
Zeppelin Software Inc, a wireless communications company. From November 1994 to
1999, Mr. Kostiuk served as the Secretary and Treasurer of The Plant Software
Inc., a computer software development and publishing company. Mr. Kostiuk
attended the University of Toronto, graduating with a B.A. degree in 1993.
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EXECUTIVE COMPENSATION
From March 8, 2000 (inception) through August 31, 2000, there was no
cash compensation paid to any of our officers or directors. Directors are
reimbursed for their expenses in attending board meetings. The following table
sets forth the compensation we intend to pay our 4 officers and directors for
the fiscal year 2001 in the event of the successful completion of the maximum
offering of $250,000 together with the subsequent receipt of additional funding
after the completion of this offering. If we fail to receive such funding, then
we will not be able to pay the salaries set forth in the table.
EXPECTED
NAME AND 1999 1999 TOTAL COMPENSATION FOR
PRINCIPAL POSITION SALARY COMPENSATION 2001
------------------ ------ ------------ ----------------
Joel Bloomer $0 $0 $30,000 (1)
Chairman
Dr. Christopher Gabrys $0 $0 $30,000 (2)
President & Director
Dr. Rick Campbell $0 $0 $30,000 (2)
Vice President
Scott Kostiuk $0 $0 $30,000 (2)
Secretary, Treasurer
(1) Assumes the successful completion of the maximum offering of $250,000 and
the subsequent receipt of additional funding of a minimum of $500,000 after
the completion of this offering.
(2) Assumes the successful completion of the maximum offering of $250,000 and
the subsequent receipt of any additional funding after the completion of
this offering.
Stock Option Grants
We have not granted any stock options.
Employment Agreements
We have no employment agreements, written or oral, with any of our officers or
employees.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 31, 2000, information as to:
(a) the beneficial ownership of our common stock by (i) each person serving as
our director on such date, (ii) each person who qualifies as a "named executive
officer" as defined in Item 402(a)(2) of Regulation S-B under the Exchange Act,
and (iii) all of our directors and executive officers as a group; and (b) each
person known to us as having beneficial ownership of more than ten percent (10%)
of our common stock.
As of August 31, 2000, we had 10,486,800 shares of common stock issued and
outstanding.
<TABLE>
<CAPTION>
Beneficial Ownership Percent of Assuming the
of Capital Stock (1) Common Stock Maximum Offering
-------------------- ------------ ----------------
<S> <C> <C> <C>
Name and Address of Beneficial Owner
Joel K. Bloomer(2) 3,400,000(5) 32.4% 29.6%
Christopher Gabrys(2) 3,104,000(6) 29.6% 27%
Rick Campbell (2) 640,000(7) 6.1% 5.6%
Scott Kostiuk(2) 3,000,000(8) 28.6% 26.1%
Elaine Collins(3) 3,400,000 32.4% 29.6%
Richebourg, Inc.(4) 3,000,000 28.6% 26.1%
All directors and executive officers as a group (4
persons) 10,144,000 96.7% 88.3%
</TABLE>
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definitions of "beneficial ownership" set forth in the
rules of the Securities and Exchange Commission and may include securities
owned by or for the individual's spouse and minor children and any other
relative who has the same home, as well as securities to which the
individual has voting rights or investment power or had the right to
acquire beneficial ownership within sixty (60) days after August 31, 2000.
Beneficial ownership may be disclaimed as to certain of the securities.
(2) Except as otherwise noted, the address of each person is c/o Indigo Energy,
Inc., 535 Westgate Drive, Napa, California 94558.
(3) Ms. Collins has an address at 535 Westgate Drive, Napa, California 94558.
(4) Richebourg, Inc. has an address at Fort Nassau Centre, Marlborough Street,
PO Box N-4875, Nassau, Bahamas.
(5) All of such shares are held by Mr. Bloomer's spouse, Elaine L. Collins, and
includes shares purchased in a private placement conducted by the Company
in 2000.
(6) Includes shares purchased in a private placement conducted by the Company
in 2000.
(7) Includes 140,000 shares owned by Dr. Campbell's parents, David R. and
Bonnie D. Campbell.
(8) All of such shares are owned by Richebourg, Inc., a corporation in which
Mr. Kostiuk is the principal.
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RELATED TRANSACTIONS
None of our directors or officers, or any person who beneficially owns,
directly or indirectly, shares carrying more than 10% of the voting rights
attached to our outstanding shares of common stock has, since our date of
incorporation, had any material interest, direct or indirect, in any transaction
with us or in any presently proposed transaction that has or will materially
affect us.
DESCRIPTION OF SECURITIES
General
Upon the closing of this offering, we will have authorized capital
stock of 100 million shares, of which 90 million shares will be designated as
common stock, $0.001 par value and 10 million shares will be designated as
preferred stock, $0.001 par value. As of the date of this prospectus, we have
10,486,800 shares of common stock issued and 16 shareholders.
COMMON STOCK
All shares are fully paid and non-assessable. All shares are equal to
each other with respect to voting, liquidation, and dividend rights. Special
shareholder meetings may be called by our officers or directors, or upon the
request of holders of at least one-tenth (1/10) of the outstanding shares.
Holders of shares are entitled to one vote at any shareholder's meeting for each
share they own as of the record date set by the board of directors. Holders of
shares are entitled to receive such dividends as may be declared by the board of
directors out of funds legally available therefore, and upon liquidation are
entitled to participate in a distribution of assets available for such
distribution to shareholders. There are no conversion, preemptive or other
subscription rights or privileges with respect to any share, except for
registration rights granted to a certain number of shareholders. Reference is
made to our Certificate of Incorporation and bylaws as well as to the applicable
Statutes of the State of Delaware for a more complete description of the rights
and liabilities of holders of shares. It should be noted that our bylaws may be
amended by the board of directors without notice to the shareholders. Our shares
do not have cumulative voting rights, which means that the holders of more than
fifty percent (50%) of the shares voting for election of directors may elect all
the directors if they choose to do so. In such event, the holders of the
remaining shares aggregating less than fifty percent (50%) will not be able to
elect directors. Holders of our common stock have no pre-emptive rights, no
conversion rights and there are no redemption provisions applicable to our
common stock.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock.
We currently intend to retain future earnings, if any, to finance the expansion
of our business. As a result, we do not anticipate paying any cash dividends in
the foreseeable future.
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PLAN OF DISTRIBUTION
General
The following discussion addresses the material terms of the plan of
distribution. We are offering up to 1,000,000 shares of our common stock at a
price of $0.25 per share on a first come first serve, "any and all best efforts"
basis, through certain of our executive officers and directors, so no
compensation will be paid with respect to those sales, except for reimbursement
of expenses actually incurred on our behalf in connection with such activities.
Since this offering is conducted as an "any and all" basis, there can be no
assurance that any of the shares will be sold. If we fail to sell all the shares
we are trying to sell, our ability to implement our business plan will be
materially affected, and you may lose all or substantially all of your
investment.
A subscription agreement, the form of which is attached to this
prospectus, will be required to be submitted by all purchasers of the shares. As
soon as practicable, but no more than 30 business days after receipt of a
subscription to purchase shares of common stock, we will accept or reject such
subscription. Subscriptions that we do not reject within this 30 day period
shall be deemed accepted. Once we accept a subscription, the subscriber cannot
withdraw it. Full payment of the purchase price must accompany the subscription.
Failure to pay the full subscription price shall entitle us to disregard the
subscription. No subscription agreement is binding until we accept it, which we
may, in our sole discretion, refuse to accept for shares, in whole or in part,
for any reason whatsoever. Unless we agree otherwise all subscription amounts
must be paid in United States currency by check, bank draft or money order
payable to "Indigo Energy, Inc." We will accept a subscription in writing in the
form of acceptance attached to the subscription agreement and made part of this
prospectus.
There is currently no market for any of our shares and no assurances
are given that a public market for such securities will develop after the
closing of this offering or be sustained if developed. While we plan, following
the closing of this offering, to take affirmative steps to request or encourage
one or more broker/dealers to act as a market maker for our securities, no such
efforts have yet been undertaken and no assurances are given that any such
efforts will prove successful. As such, investors may not be able to readily
dispose of any shares purchased hereby.
The offering shall be conducted by our directors and officers,
namely, Joel Bloomer, Christopher Gabrys, Rick Campbell, and Scott Kostiuk.
Although each person is an associated person of us as that term is defined in
Rule 3a4-1 under the Exchange Act, they are deemed not to be a broker for the
following reasons:
1. Each person is not subject to a statutory disqualification as
that term is defined in Section 3(a)(39) of the Exchange Act at
the time of their participation in the sale of our securities.
2. Each person will not be compensated for there participation in
the sale of our securities by the payment of commission or
other remuneration based either directly or indirectly on
transactions in securities.
3. Each person is not an associated person of a broker or dealer
at the time of their participation in the sale of our
securities.
26
<PAGE>
Each person will restrict their participation to the following activities:
1. Preparing any written communication or delivering any communication
through the mails or other means that does not involve oral
solicitation by him of a potential purchaser;
2. Responding to inquiries of potential purchasers in a communication
initiated by the potential purchasers, provided however, that the
content of responses are limited to information contained in the
registration statement filed under the Securities Act or other
offering document; and
3. Performing ministerial and clerical work involved in effecting any
transaction.
As of the date of this prospectus, we have retained no broker for
the sale of securities being offered. In the event we retain a broker who may be
deemed an underwriter, an amendment to our registration statement will be filed.
In the event we engage sales agents who are members of the National Association
of Securities Dealers Inc. to sell shares on a best efforts basis, we anticipate
that such persons would be paid sales commissions not exceeding 10% of the
aggregate dollar amount of common stock sold by the sales agents as well as
certain other marketing-related expenses.
The offering will remain open for a period of 90 days from the date
of this prospectus or an additional 90 days in our sole discretion, unless the
entire gross proceeds are earlier received or we decide, in our sole discretion,
to cease selling efforts. Our officers, directors and stockholders and their
affiliates may purchase shares in this offering. We may terminate this offering
for any reason at any time during its pendency for any reason whatsoever.
No Escrow of Proceeds
There is no escrow of any of the proceeds of this offering.
Accordingly, we will have use of such funds once we accept a subscription and
funds have cleared. Such funds shall be non-refundable to subscribers except as
may be required by applicable law.
If This Offering is Oversubscribed
If we are able to sell the maximum offering of shares before this
offering ends, and subsequently we receive funds in excess of the maximum
offering, we will immediately return all subscriptions, and with the funds
(without interest) without deduction for commissions or expenses to such
subscriber.
27
<PAGE>
Investor Suitability Standards for Residents of the State of California
The offering of the shares to residents of the State of California will
be limited to only suitable investors who represent in writing in the
Subscription Agreement attached as Exhibit 99.1 hereto, that they: (i) have a
minimum liquid net worth of at least $75,000 and had a minimum gross income of
$50,000 during the last tax year and will have (based on a good faith estimate)
a minimum gross income of $50,000 during the current tax year; or in the
alternative (ii) has a minimum liquid net worth of $150,000, provided however,
in either case of (i) or (ii) above, will be exclusive of their home, home
furnishings and automobile, and the investment in the shares shall not exceed
10% percent of the net worth of the investor.
We reserve the right to make our own judgment on whether any
prospective investor residing in the State of California meets the suitability
standards. In addition, a prospective investor residing in the State of
California will be required to provide such evidence as may be deemed necessary
to substantiate the accuracy of representations. The above suitability standards
are minimum requirements for prospective investors residing in the State of
California, and the satisfaction of these standards does not mean that the
shares are a suitable investment for such prospective investor.
28
<PAGE>
LEGAL MATTERS
The validity of our shares of common stock offered hereunder will be
passed upon for us by Rosenman & Colin LLP, New York, New York.
EXPERTS
Our balance sheet as of August 31, 2000 and the related statements of
operations, cash flows and stockholders' equity for the period March 8, 2000
(inception) to August 31, 2000, appearing elsewhere in this prospectus, have
been included herein in reliance on the report of Freeman & Davis LLP, given on
the authority of said firm as experts in accounting and auditing.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have had no changes in or disagreements with our accountants since
our incorporation in 2000.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 under the
Securities Act of 1933 with the Securities and Exchange Commission with respect
to the shares of our common stock offered by this prospectus. This prospectus is
filed as a part of the registration statement and does not contain all of the
information contained in the registration statement and exhibits and reference
is hereby made to such omitted information. Statements made in this registration
statement are summaries of the terms of these referenced contracts, agreements
or documents and are not necessarily complete. Reference is made to each exhibit
for a more complete description of the matters involved and these statements
shall be deemed qualified in their entirety by the reference.
You may inspect the registration statement and exhibits and schedules
filed with the Securities and Exchange Commission at the Securities and Exchange
Commission's principle office in Washington, D.C. Copies of all or any part of
the registration statement may be obtained from the Public Reference Section of
the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. The Securities and Exchange Commission also maintains a web site
(http://www.sec.gov) that contains reports, proxy statements and information
regarding registrants that file electronically with the Commission. For further
information pertaining to us and our common stock offered by this prospectus,
reference is made to the registration statement.
You should rely only on the information contained in this prospectus.
We have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. The information in
this document may only be accurate on the date of this document.
29
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants....................................... F-
Audited Financial Statements:
Balance Sheet as of August 31, 2000..................................... F-
Statement of Operations for the period March 8, 2000 (inception)
to August 31, 2000..................................................... F-
Statement of Cash Flows for the period March 8, 2000 (inception)
to August 31, 2000.................................................... F-
Statement of Stockholders' Equity for the period March 8, 2000
(inception) to August 31, 2000......................................... F-
Notes to Audited Financial Statements................................... F-
<PAGE>
-----------------------
1,000,000 Shares
Common Stock
Indigo Energy, Inc.
-----------------------
Prospectus
------------------------
TABLE OF CONTENTS
PAGE
Summary.......................................................
Risk Factors..................................................
Determination of Offering Price...............................
Limited State Registration....................................
Use of Proceeds...............................................
Capitalization................................................
Market for Common Equity......................................
Selected Financial Data.......................................
Management's Discussion and...................................
Analysis of Financial Condition...............................
Business......................................................
Description of Property.......................................
Management....................................................
Executive Compensation........................................
Security Ownership of Certain.................................
Beneficial Owners and Management..............................
Related Transactions..........................................
Description of Securities.....................................
Dividend Policy...............................................
Plan of Distribution..........................................
Legal Matters.................................................
Experts.......................................................
Changes in and Disagreements with Accountants.................
Where You Can Find More Information...........................
Index to Financial Statements.................................
------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. LIMITATION ON LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation includes certain provisions
permitted pursuant to the Delaware General Corporation Law ("DGCL") whereby
officers and directors of the Company shall be indemnified against certain
liabilities to the Company or its shareholders. The Certificate of Incorporation
also limits to the fullest extent permitted by the DGCL a director's liability
to the Company or its stockholders for monetary damages for breach of fiduciary
duty of care as a director, including gross negligence, except liability for (i)
breach of the director's duty of loyalty to the Company or its shareholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of the laws, (iii) under Section 174 of the DGCL (relating
to unlawful payments of dividends or unlawful stock repurchases or redemptions)
or (iv) any transaction from which the director derives an improper personal
benefit. This provision of the Company's Certificate of Incorporation has no
effect on the availability of equitable remedies, such as injunction or
rescission. The Company believes that these provisions will facilitate the
Company's ability to continue to attract and retain qualified individuals to
serve as directors and officers of the Company.
Limitations on Liability of Directors.
Under Section 145 of the Delaware General Corporation Law, a
corporation may indemnify a director, officer, employee or agent of the
corporation (or a person who is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise) against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. In the case of an action brought by or in the
right of a corporation, the corporation may indemnify a director, officer,
employee or agent of the corporation (or a person who is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise) against
expenses (including attorneys' fees) actually and reasonably incurred by him if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent a court finds that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper.
Indemnification for Directors and Officers.
Under Delaware law, a corporation may indemnify its present and former
directors and officers for a variety of court or administrative proceedings. We
have adopted a provision which requires us to indemnify and hold harmless any
person involved in any action, suit or proceeding because that person is or was
a director or officer of ours. This provision does not, however, require us to
indemnify an officer or director in a proceeding they initiate without the
authorization of our directors.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
ours pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission indemnification
for liabilities is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
II-1
<PAGE>
Insurance for Directors and Officers.
Under Delaware law, a corporation may obtain insurance on behalf of its
directors and officers against liabilities incurred by them in those capacities.
We have adopted a provision which permits us to maintain insurance to protect us
and our directors and officers against expenses, liabilities and losses whether
or not we would have the power to indemnify these persons under Delaware law. We
intend to have in place at or promptly after the closing of this offering a
directors' and officers' liability and company reimbursement liability insurance
policy.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated costs of this offering are as follows:
Securities and Exchange Commission registration fee.......... $ 300
Transfer Agent Fees.......................................... 2,000
Accounting fees and expenses................................. 7,000
Legal fees and expenses...................................... 65,000
Blue Sky fees and expenses................................... 3,500
Miscellaneous................................................ 2,000
-------
Total ......... $79,800
=======
We will pay all expenses of this offering listed above.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, the Company has issued unregistered securities to a
limited number of persons as described below.
(1) In connection with its organization in March 2000, the 4
founders of the Company were issued 9,500,000 shares of common stock. This
transaction was not registered under the Act in reliance on the exemption from
registration in Section 4(2) of the Act, as a transaction not involving any
public offering. These securities were issued as restricted securities and the
certificates were stamped with restrictive legends to prevent any resale without
registration under the Act or in compliance with an exemption.
(2) The Company commenced on offering in reliance on Rule 506 of
Regulation D of the Securities Act of 1933, for the sale of the Company's common
stock. The 506 private placement began in late March 2000 and was completed as
of May 31, 2000. The offering was for up to 1,000,000 shares at an offering
price of $0.25 per share. The Company had sold 986,800 shares of common stock
raising aggregate gross proceeds of $246,700, before deduction of offering
expenses totaling $17,400. The shares were sold to 14 "accredited investors",
including officers of the Company. Christopher Gabrys and Rick Campbell,
officers of the Company, solicited shareholders, and no documentation was given
to any person solicited in the offering. These transactions were not registered
under the Act in reliance on the exemption from registration in Section 4(2) of
the Act, and Rule 506 of Regulation D promulgated thereunder. Form D was filed
with the Securities and Exchange Commission. The following persons purchased
shares in the 506 private placement:
II-2
<PAGE>
<TABLE>
<CAPTION>
Name of Shareholder Number of Shares Purchased Price Per Share
------------------- -------------------------- ---------------
<S> <C> <C>
Christopher Gabrys 104,000 $0.25
Elaine Collins 400,000 $0.25
David and Bonnie Campbell 140,000 $0.25
Robert and Tamitha McFarland 20,000 $0.25
Danny and Mary Tucker 120,000 $0.25
Jeffrey and Tracy Bartel 10,800 $0.25
Martha Gabrys 20,000 $0.25
Jon Gabrys 40,000 $0.25
Richard Coker 20,000 $0.25
Wayne Gabrys 40,000 $0.25
Charles and Gaila Triggs 60,000 $0.25
Mandy Triggs 4,000 $0.25
Derek and Susan Triggs 4,000 $0.25
Charles Triggs 4,000 $0.25
------- -----
TOTAL 986,800
</TABLE>
II-3
<PAGE>
ITEM 27. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
3.1 Certificate of Incorporation of Indigo Energy, Inc.
3.2 Amendment to Certificate of Incorporation of Indigo Energy, Inc.
3.3 Amendment to Certificate of Incorporation to Indigo Energy, Inc.
3.4 By-Laws of Indigo Energy, Inc.
4.1 Specimen of Common Stock Certificate
5.1 Opinion of Rosenman & Colin LLP
10.1 Product Purchase Agreement, dated May 24, 2000, by and between
the Company and CalNetix.
10.2 Supply Agreement, dated September 18, 2000, by and between
the Company and Toray Composites (America)
23.1 Consent of Freeman & Davis LLP
23.2 Consent of Rosenman & Colin LLP (included in Exhibit 5.1)
99.1 Form of Subscription Agreement
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement to (i) include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) reflect in the prospectus any facts
or events arising after the effective date of this registration statement, or
most recent post-effective amendment, which, individually or in the aggregate,
represent a fundamental change in the information set forth in this registration
statement; and (iii) include any material information with respect to the plan
of distribution not previously disclosed in this registration statement or any
material change to such information in the registration statement.
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 herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) of (4), or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
To remove from registration by means of a post-effective amendment any
of the securities being registered hereby which remain unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons pursuant
to the provisions above, or otherwise, we have 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 us of expenses incurred or paid by one of our directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act, and
we will be governed by the final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and have duly caused
this Pre-Effective Amendment No. 2 to Form SB-2 to be signed on its behalf by
the undersigned in the City of Napa, State of California on December 15, 2000.
INDIGO ENERGY, INC.
By: /s/ Christopher Gabrys
--------------------------
Christopher Gabrys
President
KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears
below constitutes and appoints Christopher Gabrys, his true and lawful
attorney-in-fact, as agent with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments to this Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting to such attorney-in-fact and agent
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons and in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Christopher Gabrys President and Director December 15, 2000
------------------------------------
Christopher Gabrys
* December 15, 2000
------------------------------------
Joel Bloomer Chairman of the Board of
Directors
* December 15, 2000
------------------------------------
Scott Kostiuk Secretary and Treasurer
By: /s/ Christopher Gabrys December 15, 2000
----------------------
Christopher Gabrys
President
(Attorney-In-Fact)
</TABLE>
