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AONEQ > SEC Filings for AONEQ > Form 10-Q on 28-Jun-2013All Recent SEC Filings

Show all filings for B456 SYSTEMS, INC.

Form 10-Q for B456 SYSTEMS, INC.


28-Jun-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto for the year ended December 31, 2011 included in the Form 8-K filed with the Securities and Exchange Commission, or SEC, on May 30, 2012 and management's discussion and analysis of financial condition and results of operations for the year ended December 31, 2011 included in our Annual Report on Form 10-K filed with the SEC, on March 12, 2012. This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as "may," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue," and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled "Risk Factors," set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and elsewhere in this Quarterly Report. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

Overview

Prior to the sale of substantially all of our assets in January, 2013, we designed, developed, manufactured and sold advanced, rechargeable lithium-ion batteries and battery systems. Our target markets were the transportation, electric grid services, commercial and government markets.

We have incurred significant net losses and negative operating cash flows since inception. At September 30, 2012, we had an accumulated deficit of $939.4 million including a $290.5 million net losses incurred for the nine months ended September 30, 2012. We had $31.3 million in cash and cash equivalents at September 30, 2012, down from $186.9 million at December 31, 2011.

On October 16, 2012, we (including all of our domestic subsidiaries) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware. Our intent under the Chapter 11 filing was to, among other things, obtain access to new financing and facilitate one or more transactions, including the sale of certain of its automotive business assets. We continued operating our businesses in the ordinary course as we attempted to complete the sale of the automotive assets and continued to actively pursue strategic alternatives for our other businesses.

On November 5, 2012, we entered into an agreement with Wanxiang regarding debtor in possession financing (the "Wanxiang DIP Loan Agreement") pursuant to which Wanxiang provided us with $50.0 million in financing to support our continued operations during the pendency of our bankruptcy case. As a result of the execution of the Wanxiang DIP Loan Agreement, the JCI DIP Loan Agreement was terminated and all amounts borrowed from JCI were repaid.

On December 6, 7 and 8, 2012, we conducted, pursuant to bid procedures approved by the Bankruptcy Court, an auction under Section 363 of the federal Bankruptcy Code for the sale of our assets (the "Auction"), and announced on December 9, 2012 that we had reached an agreement on the terms of an asset purchase agreement with Wanxiang through which Wanxiang would acquire substantially all of our assets for $256.6 million and an additional asset purchase agreement with Navitas Systems LLC ("Navitas") through which Navitas would acquire our Ann Arbor Michigan-based government business, including all U.S. Military contracts, for $2.25 million (together, the "Proposed Sales").

On December 11, 2012, the Bankruptcy Court issued an order approving the Proposed Sales, and asset purchase agreements between us and Wanxiang (the "Wanxiang APA") and between us and Navitas (the "Navitas APA" and together with the Wanxiang APA, the "Asset Purchase Agreements") were executed. Under the Wanxiang APA, Wanxiang agreed to acquire our automotive, grid and commercial business assets, including technology, products, contracts and U.S. facilities in Michigan, Massachusetts and Missouri; our operations in China; and our equity interest in Shanghai Advanced Traction Battery Systems Co., our joint venture with Shanghai Automotive. The sale was subject to certain closing conditions, including approval from the Committee on Foreign Investment in the United States. Under the Navitas APA, Navitas agreed


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to acquire our U.S. government business assets, including our technology, products, intellectual property and contracts, as well as the lease for our facility in Ann Arbor, Michigan. The sale was subject to certain closing conditions, including the completion of the transactions contemplated by the Wanxiang APA as well as Navitas and Wanxiang entering into certain agreements related to the provision of transition services or the license of intellectual property between the companies. As a result of Wanxiang being the successful bidder at the Auction, the JCI Asset Purchase Agreement was terminated, and on December 11, 2012, the Company paid JCI an aggregate of $5.5 million, representing a "Breakup Fee" fee of $2.5 million, as well as expenses of up to $3.0 million required to be reimbursed by us.

On January 29, 2013, the Proposed Sales were closed with Wanxiang and Navitas. We received $258.6 million of net proceeds in conjunction with this sale, of which $50.0 million was used to repay the funds received under the Wanxiang DIP financing agreement executed November 5, 2012.

On February 6, 2013, we filed with the Bankruptcy Court a proposed Joint Plan of Liquidation (as may be amended, modified or supplemented from time to time, the "Proposed Plan") and related disclosure statement (as may be amended, modified or supplemented from time to time, the "Disclosure Statement") for the resolution and satisfaction of all Claims against and Interests in us. The Plan provides for the liquidation of assets of the Estate, including the investigation and prosecution of Estate Causes of Action, by a Liquidation Trust to be formed pursuant to the proposed Plan and a Liquidation Trust Agreement. The Liquidation Trust is to be managed by a Liquidation Trustee as well as by a Liquidation Trust Oversight Committee selected by the Official Creditors' Committee. The Liquidation Trust shall be responsible for making distributions to holders of claims and, if applicable, interests, as well as all other administrative tasks necessary for ultimate resolution of the Chapter 11 cases, pursuant to the terms of the proposed Plan and the Liquidation Trust Agreement.

On May 20, 2013 the Proposed Liquidation Plan was approved by the Bankruptcy Court to be effective in June/July 2013.

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