Fallbrook Details Risk Factors in Amended IPO Filing

5/17/10Follow @bvbigelow

San Diego’s Fallbrook Technologies amended its IPO filing with securities regulators Friday—providing additional details about the company’s risk factors, including its lack of profitability and need to raise more capital to stay afloat.

As we reported, Fallbrook filed for its initial public offering in February. The cleantech company, which has 56 employees, has been developing a continuously variable transmission as a more energy-efficient design for bicycles, wind power turbines, electric vehicles, and other uses.

Fallbrook Technologies' continuously variable transmission designThe company says it has received 168 domestic and foreign patents protecting its technology, and has submitted another 209 patents here and abroad. To finance its technology development over the past decade, Fallbrook has raised a total of $55 million from angel investors and in recent years, from NGEN Capital Partners, Robeco, a subsidiary of Rabobank Group, and other venture investors.

Among other things, the revised filing shows:

—Fallbrook lost $2.97 million in the three months ended March 31. The company said its net losses increased to $17.2 million last year from $10.56 million in 2008, and it expects to incur a loss in 2010 as well. Increased investment in commercializing its technology, along with escalating salaries and related expenses, “will make it harder for us to achieve and maintain future profitability,” the company says.

—Fallbrook says it has been expensive to raise private capital. In its amended filing, the company says: “If we are unable to raise capital from this public offering, in order to continue to expand our operations and invest in our products and manufacturing facilities, we believe we would need to raise approximately $18 million within the next twelve months through a private equity offering. We would also draw on any remaining amounts available under our existing revolving line of credit.” The company says it does not currently have other abilities to borrow.

—The company’s estimated cash burn rate is about $1.5 million a month. At the end of March, Fallbrook says it had about $5.4 million in available cash, with another $1 million left on a $3 million line of credit.

— Fallbrook said it signed a non-binding memorandum of understanding with Chengdu Bus Co. of Chengdu, China, last month, and the company could eventually sign a deal that would provide Fallbrook’s transmission technology for the accessory drives of Chengdu buses.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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